India
did recover from the crises of 2008 in a very impressive manner but this stint
of speedy recovery didn't last for long. The invariably long stint of India’s
growth story (GDP growth of 8-9%) as perceived by many was not the reality. But
the fact was that the period of 2003-08 was considered now as an aberration and
the real GDP growth forecast is around 5-6% from now on.
Now
macroeconomic and financial stability is being pursued following the global
crisis in India. But recovery from recession following financial crises takes
much longer due to the overhang of debt because high leverage is almost
invariably the cause of all the financial crises. Hence, the pace of recovery
from the current crisis is very slow and uncertain. In this scenario, a
strengthened and more resilient Micro, Small and Medium Enterprises (MSME)
sector would aid in economic recovery and add greater stability to the system.
Inclusive
growth is being accorded very high priority and is being assiduously pursued by
the policy makers through financial inclusion, financial literacy and consumer
protection initiatives. MSMEs are not only envisaged to be major beneficiaries
of these efforts but are also expected to facilitate financial inclusion. MSMEs
have a critical role to play in enhancing our export competitiveness given
their very significant share in exports.
Several
institutions have been structured like Industrial Development Bank of India
(IDBI), Small Industrial Development Bank of India (SIDBI), national Bank for
Agriculture and Rural Development (NABARD), Export Import Bank of India (EXIM
Bank), State Finance Corporation (SFC)s, State Industrial Development
Corporation (SIDC)s, National Small Industries Corporation (NSIC), etc. has
enabled necessary institutional support to MSMEs for meeting their credit
needs. Inclusion of credit to MSMEs as a part of priority sector lending has
increased the scope of this industry to contribute a bigger chunk in the
country’s GDP pie.
The Government of India has taken a
number of measures to revitalize the MSME sector such as:
·
Approval
of the public procurement policy (PPP) that envisages procurement of a minimum
of 20% of annual purchases of goods and services from Micro and Small
enterprises by the Central Ministries/Departments/PSUs
·
Permission to set up stock exchange/ trading
platform for SMEs by recognized stock exchanges
·
Conducting
skill development programmes for development of self employment opportunities
as well as wage employment opportunities in the country and
·
Adoption of cluster approach as a key strategy
for enhancing the productivity and competitiveness as well as capacity building
of MSEs in the country.
In
spite of the Government’s efforts the extent of financial exclusion in the MSME
sector is very high. As only 5 to 10% of MSMEs are covered by institutional
funding, there is a need to bridge the huge gap through enabling policies.
Banks and financial institutions need to support the MSMEs in their need for
finance. Some of them could grow into large corporates and potential MNCs in
future.
If
this sector is provided the right financial support and is entrusted with more
responsibility of providing economic stability then it would play a very
critical role in the economic development given its contribution in employment
generation, export competitiveness and, more importantly, entrepreneurial
development. As MSMEs are spread across the length and breadth of the country
and have a strong presence in rural areas, their growth also leads to more
balanced and sustainable development and eases pressure on urban
infrastructure.
So
I feel that right support at the right time to the right sector would
definitely reap benefits for the nation and this time is absolutely perfect to
provide impetus to this sector which would contribute magnanimously to the
country’s GDP in the near future.
Excerpts from:
- Small is still beautiful and competitive - Reflection on growth of MSMEs in India - Address by Shri Anand Sinha, DD, RBI.
- http://www.sidbi.com
- http://www.nabard.org
