MSMEs and global value chains

Context: Bringing MSMEs into inclusive and sustainable global value chains

Stats

• MSMEs are the largest employer in India outside of agriculture, employing over 1 crore people, or 45% of all workers.
• It is no exaggeration to call MSMEs – privately owned enterprise with less than ₹50 crore in investments in plant and machinery and turnover below ₹250 crore – the backbone of the Indian economy.

Challenges

• The disruption of the pandemic severely impacted MSMEs
• Their small size and lack of access to resources meant that many were only beginning to mount a fragile recovery just when renewed war, supply shocks and soaring fuel, food and fertilizer prices presented a host of new threats.
• And all of this comes against the backdrop of the ongoing climate crisis, the greatest disruption multiplier of all.
• There is high degree of informality in the sector, with many enterprises unregistered, and both employers and workers are lacking awareness of and commitment to comply with labour and environmental laws.
• As a result, informal enterprises cannot access formal MSME support and financing nor participate in global value chains that require full compliance with all applicable regulations.

The Government of India has rightly identified the development of the country’s MSME ecosystem as a top priority for achieving Atma Nirbhar Bharat

India’s ambitious “Make in India” campaign aims put the country up the manufacturing value chain to position itself as a global manufacturing hub

What’s need to be done?

• Digitalisation concerns: With few exceptions, digitalisation into smart manufacturing operations is still in its infancy.
• Therefore, there is a need for replicable digital solutions adapted for MSMEs, including digital enhancements for machinery and equipment currently in use.
• Government initiatives such as the Digital Saksham and the interlinking of the Udyam, e-Shram, National Career Service (NCS), and Atmanirbhar Skilled Employee-Employer Mapping (ASEEM) portals show the promise of targeted digitalisation schemes.
• Environmental impact: greening reduces the environmental impact of MSME operations and fosters cleantech innovation and entrepreneurship to accelerate the transition to a circular and low carbon economy.
• As a result MSMEs invested themselves during the cash-strapped COVID period ₹157 crore to save 13,105 tonnes of oil equivalent and ₹81 crore in annual operating costs and preventing 83,000 tonnes of greenhouse gas emissions
• Provide credit access for R&D in green technologies
• To increase the resilience of supply in response to recent shocks, production locations for global value chains are increasingly shifting and diversifying across countries and regions.
• This presents a strategic opportunity for India to tap into.
• Supply chain relocation is often accompanied by greater involvement of suppliers in innovation and product development.
• India should utilize this opportunities with carefully framed investment policies like incentives in tax, credit support etc

The compelling vision of India as a world-class manufacturing and services hub for the world, moving towards upper middle-income status and achieving the SDGs, can best be achieved with the widespread and transformational uplifting of the MSME segment.

Government initiatives, supported by international institutions and partners, have helped demonstrate this is doable if further scaled up, with lessons for enhancement being drawn together.

Source: The Hindu