Suboptimal &cash-driven, Indian MSMEs are dominated by dwarfs — small, weak enterprises that will never grow.

"Dwarfs" are firms established more than 10 years ago and employing below 100 workers. [Economic Survey]

"Young firms":those under 10 yrs old &employing 100+
workers.

Half of India’s labour force is self-employed, stuck in low-productivity jobs, barely able to make ends meet.

Not surprisingly, on productivity, India scores poorly vis-a-vis countries like the US & Mexico.

Only 3 % of #MSMEs are competitive or have the bandwidth to export.

A slew of structural shifts — GST, digitisation, policy resets, generational change in family enterprises and low-cost technology tools — are changing the #MSME world. These factors could help move it to the next orbit.

"Indian MSMEs are not fit and productive. Let’s accept that. Think of this difficult phase as a churn, a renewal process. It is painful but will help set us on a stronger growth path,”

“The biggest shift is in the owners’ mindset. Young and ambitious, they don’t want to do business old-style,”

Digitisation is helping solve many chronic issues like financing.

CASE STUDY:
Tushar Anand, 24, set up his enterprise Pizza on My Plate in NCR last year. Starting an outlet costs about Rs 10 lakh. He didn’t have that kind of money

So, he didnt whine on Twitter

Instead, he decided to pursue an asset-lite model. He enrolled on Zomato platform & took space in its cloud kitchen on a revenueshare basis.
Getting credit was an enormous challenge. No bank would finance a firm that was under 3 yrs old. NBFCs offered credit at 18% pa

At that time, a fintech startup #Indifi came to Anand’s rescue.

Based on a tripartite agreement b/w Zomato, Pizza on My Plate & Indifi, Anand got a Rs 35 lakh working capital loan at an annual rate of 10-11%.

Anand operates out of 2 kitchens & has 3 outlets in NCR.

“RBI sub-committee’s recent report on MSMEs has some fantastic suggestions. They have thought through issues like financing that #MSMEs face. If implemented, they can be game-changers for the sector,” says Alok Mittal, cofounder, Indifi.

Companies from Amazon, Facebook, Cisco and Google to #KhataBook, Rivigo, Tally and Zoho are offering a range of free or low-cost, or pay-peruse tech tools to #MSMEs

Amazon Internet Services estimates that #MSMEs’ digital adoption offers a $26 billion-plus business opportunity in India today, which will likely cross $80 billion by 2024.

#KHATABOOK app :
Aman Jain,Aman Enterprises, a wholesale lubricant distributor in NCR, began using KhataBook in April this year. Maintaining a physical ledger and keeping track of bills & payments of over 150 customers were difficult even with five dedicated employees.

Now he has all the information he needs realtime on his mobile phone. The app also sends automatic reminders to his customers about payments.

“Earlier, everything was in the bahi in my office and it was a time-consuming process. Now, both my customers and I have the information we need,” he says.

As a result, receivable recovery time has improved from an average of 3 months to 1 month.

#Meesho is pushing #MSME digitisation at another level.

Meesho enables social commerce through platforms like WhatsApp & Facebook and has enabled 2m SMEs to start business on its platform with virtually no capex.

Many of them are first-time entrepreneurs & 80% + are women.

Meesho offers a range of onlineoffline training on how to market, get customers and manage accounts, handholding the entrepreneurs at every step.
#MSMEs

Historically, perverse govt incentives kept #MSMEs small. Firms with over 100 employees need govt nod before shedding staff. A plethora of Labour laws and compliances kick in after a certain threshold of workers. There was products reserved for manufacture by SMEs only

Policy tweaks are underway to tackle some of these. Basis of definition of MSMEs changed from investment to turnover

Old definition made things difficult for services firms with little investment.

RBI set up in 2015 TReDS or Trade Receivables Discounting System to tackle receivables problem of #MSMEs.

Integration of TReDS exchanges with GSTN will improve compliance and tackle receivable problems.

MSME Samadhaan set up as a monitoring system for delayed payments.
The new Labour Code on Industrial Relations, 2019, allows companies to hire workers for a fixed term, tackling labour law rigidities.
Mandatory that 25 % of govt procurement be from MSMEs.

The stifling and difficult norms governing shops and establishments have been amended by many states.
Mudra loan to ease MSME credit, skilling programmes to train unskilled workers and cluster development plans to nurture MSMEs have been rolled out by the Centre & states.

CREDITS: Today's Economic Times