The MSME sector is rightly referred to as the “backbone of the Indian economy” as it promotes sustainable economic growth, provides massive jobs and ensures equitable Indian socio-economic development. We face the reality of the global economic disruption caused by the COVID-19 pandemic as we battle the current healthcare crisis.
At this critical stage, an ecosystem that allows the MSME sector to adapt, survive and thrive is needed. Let us look at the four key areas for MSMEs, namely finance, supportive reform, recovery and growth.
The growth of MSMEs in India faces several challenges due to lack of adequate financing. The obstacles are numerous, ranging from traditionally risk averse credit channels, lack of easy access to capital, lack of knowledge of available financial products to high operating costs, etc. Therefore, there is a need to expand access to the various financing options available to MSMEs.
To more easily access funds, MSMEs can:
- Register for the GST to create a verifiable credit history
- Leverage TReDS that connects MSMEs with buyers and financiers
- Alternative financing channels such as NBFC fintech, asset-based financing, alternative debt, hybrid instruments and equity injections
MSMEs should perform careful analysis and evaluate the financial products available in the market for the potential advantages as well as the disadvantages.
India’s MSME sector is not only an engine of economic growth, but it is also the key to achieving the goal of building a self-reliant nation. The Government of India (GoI) has undertaken several efforts, through the Ministry of MSMEs and other agencies, to address the pressing challenges facing the sector, promote the ease of doing business and boost its economic recovery.
Some of the key initiatives undertaken by the government to develop, sustain and sustain the MSME sector are:
- Timely payment to MSMEs and claims against late payments
- Aatmanirbhar Bharat Program – Economic package announced by Government of India, aimed at achieving self-sufficiency with relief measures announced for the development of MSME sector
- MUDRA Program – One of the largest small loan programs in the world, providing working capital to nearly 20 million people
- The government has also launched various programs to help MSMEs switch to more efficient technology and obtain various technology related licenses.
- To boost infrastructure development, the Ministry of MSMEs and the Government of India (GoI) have adopted the cluster development approach as an essential strategy to improve the productivity, competitiveness and capacity building of MSMEs and their collectives in the sector. country.
- TReDS, commercial loans and other measures
While the GoI has introduced a major stimulus package for MSMEs, there are global sources of credit and NGO funding for projects available beyond the government stimulus that an MSME can take advantage of, to finance and support its growth. .
Many foreign suppliers offer extended credit terms at lower financing costs. Several countries have expanded the product listings of their trade agreements with India, particularly in pharmaceutical and health-related products, which is expected to benefit the export-oriented MSME sector.
To transform MSMEs into a stable and financially self-sustaining industry, small businesses must take advantage of available growth opportunities and successfully adapt to changing market needs. Here are some ways that can help strengthen MSMEs by creating an ecosystem of innovation and collaboration.
- Power of the collective to concentrate – The Ministry of MSMEs adopted the cluster development strategy. This allows MSMEs to work together and increases the potential for success
- Internet as equalizer – Data shows that online presence helps MSMEs generate higher incomes, higher profits and increase their customer base than their physical counterparts.
- Building on a niche helps to make the most of the core capabilities of the business in combination with an innovative marketing strategy to achieve greater success and a more sustainable business.
- Small can be mighty – Successful MSMEs know that their size gives them the advantage of being nimble, agile and increases their ability to adapt to changing landscapes and respond more quickly to changing customer needs.
- Power of collaboration – Indian MSMEs should see collaboration with other MSMEs as a strong differentiator and competitive advantage.
- Strong innovation – MSMEs have enormous potential to introduce innovative and out-of-the-box ideas, market them successfully and grow rapidly.
MSMEs must now seek opportunities that go beyond COVID-19 and plan to grow their business by innovating and taking an agile approach. Strategic adoption of technology will be one of the key elements in the growth of MSMEs in India.
During these times, accountants often play the role of trusted advisor to small businesses, guiding them on how to operate financial packages and supporting them with advice on good governance, legal and ethical practices to ensure profitable and long-term growth.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)