As infection rates rise, in what is being termed as a second Covid-19 wave across the country, the MSME sector is primed to essay a significant role in exports and bringing home valuable foreign exchange.
In the midst of a second Covid-19 wave, that is threatening to engulf certain parts of the country, the role of the micro, small and medium enterprises (MSME) assume great significance, particularly when it comes to tracking its impact on India’s GDP which must not show any signs of flagging.
The concept of Atmanirbhar Bharat, propagated by Indian prime minister Narendra Modi, has become a national mantra and this garnered greater traction during the pandemic and government imposed national lockdown to lower infection rates across the country. The MSME stood out with its powerplay.
The MSME stands to assert a significant portion of its influence, in the face of renewed Covid-19 infection rates, towards exports. The logic is simple: bringing home valuable foreign exchange reduces the trade deficit and this will have a direct bearing on India’s GDP leading to economic upswing.
The changing face of the MSME sector in India is thanks largely due to the government’s influence via valuable assistance through pathbreaking reforms and this has brought about a transformation of sorts through the adoption of new technologies, systems and processes, and aggressively adopted digital sales channels. The adoption of digital processes has stood the MSME sector in good stead.
Referring to an analysis by CRISIL, the Indian arm of global ratings agency Standard & Poor’s, in November last year and which was quoted by India Global Business, “digital processes have helped a large number (60 per cent) of small and medium companies in the country not only to weather the Covid-induced storm and reduce the stress of their systems but also, the remainder of cases (40 per cent), actually increase their sales significantly.”
The focus on exports will generate significant employment opportunities across the country and this is needed when one assesses the unemployment rate of 6.9%. The upcoming 2021-2026 Foreign Trade Policy (FTP) is primed to provide short-term relief from the pandemic while stabilising India’s journey towards realising a $5 trillion economy by 2025. The MSME can chip in with an impressive $1 trillion through the digital economy.
Companies that adopt new technologies faster can improve the effectiveness and efficiency of their marketing activities. The foreign exchange brought home is recycled into the domestic economy and acts as a stimulus to creating demand which in turn impacts the GDP. Given the right opportunities these businesses can venture out the country and endeavour to further the value of Indian brands.
E-commerce and digital marketing tools have assumed a greater value during the pandemic and they are a key driver for the movement and visibility of Indian products manufactured by the MSMEs. Collaborations and deployment of campaigns are done quicker and effectively through apps. Budgets are also optimised. Thanks to this, the availability of goods from anywhere in the world has opened. A recent NASSCOM report states that e-commerce exports is expected to reach US $125 billion by 2030.
With local manufacturing – handicrafts, gems and jewellery - receiving a shot in the arm employment is set to rise in the manufacturing sector. The same applies to digital services. Demand for services in software, education, wellness, market research, etc. is on the rise with a double-digit growth projection annually.
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The quick and seamless adoption of technology will stand the sector in good stead in the long run. It would also find traction among foreign buyers and partners. The quicker the MSME sector embraces technology the faster it can change its fortunes given that it accounts for 30 per cent of the country’s GDP, 50 per cent of exports and almost 40 per cent of employment. The pandemic has reversed a few trends which is why it is vital that it prepares itself for an early recovery through sustainable methods as this adds resiliency to the Indian economy.
The government of prime minister Narendra Modi has reached out to the MSME sector and provided valuable reforms to aid its progress. Finance minister Nirmala Sitharaman orchestrated the reforms in May last year stating, “A collateral-free automatic loan for MSMEs is being provided, this will give facility up to $40 billion. There are no guarantee fees; no fresh collaterals required so I guess this will benefit 4.5 million units (businesses) so that they can resume their business activity and also safeguard jobs. Essentially this is to spur growth and to build a very self-reliant India.”
The investment limit for micro industries has been raised five times to $140,000 and a turnover of $700,000; for small industries, the investment limit has gone up by a similar ratio to $1.4 million and a turnover of $7 million; and for medium industries, the investment limit has been increased by a similar proportion to $7 million and a turnover of $33 million. Services sector which had lower thresholds, have been brought at par with manufacturing companies and this enabled access to finance, technology, marketing support and productivity which, in turn, influenced profitability.
The authorities have recognised the value of the MSME. They have also shown intent in aiding its growth and this is the true measure of the current worth of these businesses as they strive to drive the country’s fortunes forward.