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(GIST OF YOJANA) CHALLENGES AND OPPORTUNITIES FOR MSMES -JANUARY-2018

CHALLENGES AND OPPORTUNITIES FOR MSMES

Global Investment and Enterprise Scene Today

Public policy, in any country, is influenced by global developments, so are public programmes. And understanding of this emerging scene is critical for policy making in India today. A dynamic mix of re-shorting, intra-regional trade and hubanomics, form the emerging global business model today. Large knowledge companies like Google, Apple, Facebook and Amazon have created a technology wave competitive landscape, which forms the next evolution of the industrial revolution.

India’s industralisation perspective, since independence, has been focused on a two-pronged approach: (1) providing employment opportunities; and (2) taking such opportunities, to the extent possible,to the villages, as a regional development tool. This kind of an approach has significantly contributed to the growth of a large number of semi-urban centres that
provides a significant space of MSMEs in the country.

‘Make in India’ is a highly visible national campaign-mode initiative which needs to be translated into action at two levels: First, there is need for attracting large foreign and domestic investments.Secondly, these large enterprises also need MSMEs for subcontracting linkages and service delivery. It is important to have a prior knowledge of the MSMEs and their
capabilities, in order to foster such linkages.

Study Material for IAS (UPSC) Pre 2018

Challenges and Opportunities

There are both vertical and horizontal problems. On the one hand, the aspirations of the people at the local level are a mix of co-operation and conflict. While some of the aspirations such as local infrastructure are less prone to conflicts, in the case of most of the goods and services produced, there is a conflict of interests. Therefore, the term ‘development’ in the local context, cannot be a ‘one-stitch-for all’. This demands a new approach to defining and practicing ‘development’ is to ensure and maximize human welfare. Even the concept of
‘welfare’ is not a uniform pack. Therefore,it is necessary to have concrete steps on the following lines: (1) Placing man at the centre stage of ‘development’; and (2) Defining ‘welfare’ in relation to some bottom- line criteria.

Considering the emerging complexities of the economy, there is need for an integrated development approach on MSMEs. The various opportunities and critical constraints need to be pin-jointed. New research and evidences should lead to a review and restatement of existing policies, with a thrust on the following:

Political and Administrative Powers: Under the 56th amendment of the constitution, village and small scale industries is a subject of the local governments. In India’s bottom-heavy
industrial structure, a large number of small and tiny enterprises often located in small towns and villages, contribute to the small enterprise output of the country. This also implies that the breeding of entrepreneurship and shaping of entrepreneurship resources in the country is a local phenomenon. However, paradoxical enough, the local government are either ignorant, or are reluctant to exercise their powers; or that these powers are usurped by the higher tires of the government.

Capabilities: It is also important to understand, whether these lower tiers of government, and their administrative machinery are objectively, capable of exercising such powers. In the case of local economic development programs, and especially enterprise development programs, the current state of these capabilities need to be examined. The component that is often missing is advisory services at various stages of planning and education of an entrepreneurial activity (which is today lacing both at the local and state level). By the term ‘capability’, the priority should go to such services, rather than the array of administrative tires from the district down to the Panchayat level. In fact, it is necessary to have a coordinating and hand holding mechanism at the level of local governments.

Resources: Under the existing formula of resource sharing between the state governments and the local governments, the necessary resources for coordinating several of the base level promotion activities relating to enterprise development are available with the local governments. While some of the promotional activities being performed by the District industries Centres today can be handed over to the local governments, the corresponding funds also should flow along with that. This will also help to equip the local governments with the necessary financial resources.