World Colleges Information

The Confederation of Indian Industry (CII) has been advocating for changes in existing policies and regulations to create an enabling environment for micro small and medium enterprises (MSMEs). For a long time now, the CII, one of the country’s leading trade associations, has been making concerted efforts to facilitate policies for reviving the vital engines of growth. In an interview with IBJ, K Nandakumar, the chairman of the CII’s SME Sub-Committee(Western Region) and CMD of Chemtrols Industries, talks about the industry body’s initiatives in bringing MSMEs to the centrestage of economic growth.

What is the present status of MSMEs in the country?

MSMEs hold a pivotal position in growth of the Indian economy by contributing around 37 percent to the country’s GDP (including services), about 45 per cent to its industrial production, over 40 per cent to its exports and account around 15 per cent of the total employment. But according to a World Bank study, as many as 60 per cent of Indian SMEs shut shop within seven years of establishment, 35 per cent remain stagnant and only 5 per cent survive the challenge of doing business in India. Therefore, the government must address the issues and concerns of the sector to make a scalable improvement in the ease of doing business in the country.

Despite a deluge of government schemes, why are small businesses languishing?
 
Most of these schemes are growth enablers. However, many critical issues which affect sustainability of MSMEs need to be addressed and resolved in an expeditious manner. The CII has been regularly interacting with both Central and State governments to get many of the issues addressed. Besides, we have put forward our suggestions on some of the critical issues.

Would you highlight some of the CII’s suggestions?

The Central government should ensure that its procurement policy for MSMEs is strictly enforced and see that its various ministries, departments and Central public sector undertakings adhere to the policy in letter and spirit. The State governments too should formulate and implement their respective, State-level, public procurement policies with grievance redress and monitoring systems. Adequate measures must be taken to address the issue of delayed payments to small enterprises. The clauses of the MSME Development Act,

2006, pertaining to delayed payments, need to be implemented in their entirety. Factoring of receivables should be made mandatory after a delay of say a maximum of 45 days. There should be mandatory disclosure of the amount due to MSMEs in annual reports of companies.

Defaults should be penalised, and timely payments can be incentivised. Apart from these, there should be comprehensive overhaul of labour laws with far-reaching labour reforms. There is  a need for redesigning bankruptcy laws to help viable companies in distress by making it easier for entities to close and restart venture. The norms concerning listing of securities by MSME units should be relaxed so that they don’t act as a disincentive.

How do you see the outlook for MSMEs in the next few years?

India’s GDP growth rate is expected to attain the 8.5 per cent level in the medium term, and by 2025, India is expected to be a $ 4- trillion economy. The share of manufacturing MSMEs in the GDP is targeted to touch 15 per cent by 2020 from the  present level of 7 per cent. The sector’s contribution in creating employment is expected to be over 300 million jobs. Moreover, new opportunities will emerge in sectors as wide as telecommunication, electronics, ICT (information and communication technology), media, wellness, pharmaceutical, automotive, defence and aerospace - to name a few - in fulfilment of the government’s mission of Make In India and Digital India.

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FEBRUARY 2015 ISSUE