It is a universal fact that the MSMEs sector is a critical component of India's growth story. It is also true that the sector makes significant contributions to GDP creating almost 8000 products employing about 50 million workers in a strong 40-million enterprises even while the full potential of the sprawling sector lies or under-utilized.
Despite its key role in India's economic activity, the sector continues to menacingly face challenges of all kinds.
Easy availability of finance is considered to be a key enabler for economic activity and for strengthening entrepreneurship. Reserve Bank of India in its observations from time to time does show its concern in addressing the challenges faced by the sector. In one of its report the RBI observed. “There is a need for deepening and widening the delivery of credit. Formal financial institutions such as banks face challenges in credit risk assessment of MSMEs, due to absence of financial information including historical cash flows, credit track record and tools to assess credit risk in the absence of the above.”
Of the major challenges which the MSMEs sector faces is problem of delayed payments from their buyers which are mostly large corporate. Non availability of timely payments has a chain effect which not only adversely impacts the working capital but their whole cycle of production affecting their ability to service existing debt.
Simply making a provision in the MSMED Act entertaining complaints from smaller units about delayed payment is of little use as no entrepreneur will put its relations at stake with the large enterprises risking the very flow of business to them. Besides, there are other challenges which require significant handholding initiatives especially in areas like infrastructure, skill development, technology, R&D and above all simplification of rules & regulations as steps towards ease of doing business.
Progressive economies like USA have dedicated bodies like Small Business Administration (SBA) in place for decades which 'aids, counsels, assists and protects, in so far as possible, the interests of small businesses'.
Announcements to benefit the small businesses should not remain on paper only. There must also be a fool-proof implementation and monitoring mechanism. The whole world is now looking at India as a rising economic superpower. If India's entrepreneurial prowess is to be formidable, the role of small businesses sector cannot be ignored. The future of the large enterprises cannot be bright if their very pipelines are blocked.