"India's Small Industry Day: Celebrating Innovation and Growth"
Rajveer ??Singh
#Local Economic Development #Strategy and #Policy Advisor #Business Coach #Cluster Expert
National Small Industry Day is commemorated on August 30th every year. On this auspicious MSME Day, it is imperative to underscore the pivotal role that Micro, Small, and Medium Enterprises play in our nation's economic tapestry. These enterprises are the bedrock of innovation, employment generation, and economic growth. In the face of unprecedented challenges, they have demonstrated remarkable resilience, embodying the spirit of entrepreneurship. As we celebrate their achievements, it is crucial to reiterate our commitment to providing the necessary support, infrastructure, and policy framework to bolster their growth.
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The history of National Small Industry Day can be traced back to the early 20th century when the concept of small industries began to gain recognition. Initially, small industries were often overlooked or overshadowed by larger corporations and industries. However, as the global economy became more diverse and competitive, the contribution of small businesses became increasingly evident.
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Governments started realizing the potential of small industries as engines of economic growth. They understood that small businesses have the flexibility and agility to adapt quickly to changes in the market, driving innovation and competition. Thus, steps were taken to promote and support the growth of small industries.
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The small-scale sector in India has played a significant role in the country's economy until 2000. The government established the Small Scale Industries Board (SSIB) in 1955, which provided a formal definition of small-scale industries in India. The MSME sector, along with the agricultural sector, has consistently been the backbone of the Indian economy. MSMEs have contributed significantly to the country's GDP, exports, and employment. The MSME sector in India has grown significantly since 1960, with an average annual growth rate of 4.4% in the number of units and 4.62% in employment. The reservation of products for MSMEs has been a crucial policy for the sector's growth and development. The policy aimed to promote the growth of MSMEs by reserving certain products for exclusive manufacture in the small-scale sector. The policy was introduced to provide MSMEs with a level playing field and to protect them from competition from large-scale industries. However, the objectives of policies stressing the role of MSMEs were not being realized.
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The Micro, Small, and Medium Enterprises (MSME) sector in India has undergone significant development since the 1990s. The Indian government introduced several policy reforms in the 1990s to promote the growth of the MSME sector. The reforms aimed to provide a conducive environment for the sector's growth, including the introduction of the New Industrial Policy of 1991, which aimed to liberalize and deregulate the Indian economy. The policy reforms also included the introduction of the Micro, Small, and Medium Enterprises Development (MSMED) Act of 2006, which aimed to promote the development of the MSME sector by providing various incentives and support measures. Credit lending institutions have a remarkable role in the development of the MSME sector. The partial credit guarantee support provided by institutions has been helpful in providing credit to MSMEs during the pandemic. The government has introduced several schemes to provide financial support to the MSME sector, including the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) and the Pradhan Mantri Mudra Yojana (PMMY).The government has established several technology centers and tool rooms across the country to provide technical support to MSMEs. The government has also introduced several schemes to promote technology upgradation in the sector, including the Credit Linked Capital Subsidy Scheme (CLCSS).The government has taken several initiatives to promote the export of MSME products, including the introduction of the Market Access Initiative (MAI) scheme and the Interest Equalization Scheme (IES).The government has also introduced the Prime Minister's Employment Generation Programme (PMEGP) to promote self-employment among the youth.
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India embarked on mass level cluster development programmes to promote and support MSMEs. There are number of MSME clusters in India. The clusters creates an ecosystem that fosters collaboration, innovation, knowledge sharing, and competitiveness among the participating enterprises. MSMEs, on the other hand, are small-sized businesses that form an integral part of clusters due to their nimble and flexible nature. One of the main ways in which cluster development and MSMEs complement each other is through the formation of value chains. MSMEs often serve as suppliers or subcontractors to larger enterprises within the cluster. They provide specialized products, services, or components that contribute to the overall production process. This symbiotic relationship allows MSMEs to access a larger market, benefit from economies of scale, and learn from best practices shared by larger firms. In turn, MSMEs contribute to the competitiveness and success of the cluster by providing innovative solutions and fulfilling niche markets.
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Cluster development helps MSMEs overcome some of the common challenges they face, such as limited access to resources, technology, finance, and markets. By being part of a cluster, MSMEs can leverage the collective strength of the network to share resources, knowledge, and infrastructure. For example, shared facilities and common training programs can significantly reduce costs for MSMEs, making them more competitive and resilient.
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Global experiences have demonstrated the positive impact of cluster development on MSMEs. For instance, Silicon Valley in the United States is a prime example of a technology cluster that has fostered the growth of numerous MSMEs in the IT and software development sectors. These small businesses have thrived by capitalizing on the innovation-driven ecosystem, access to skilled talent, and the presence of venture capitalists within the cluster.
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Similarly, the automotive cluster in Germany, particularly in regions like Bavaria and Baden-Württemberg, has created an environment conducive to MSME growth. The cluster offers a concentration of research and development institutes, suppliers, and manufacturers, allowing MSMEs to collaborate, access advanced technologies, and become globally competitive.
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Number of cluster development initiatives have been successful in promoting MSME growth and poverty reduction. For example, textile cluster in Tirupur, Tamil Nadu. This cluster has supported the growth of numerous MSMEs in the textile and garment sector. The cluster approach provided economies of scale, enhanced access to markets, and improved productivity for these small businesses.
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Cluster development and MSMEs complement each other by creating a collaborative ecosystem, fostering innovation, and providing resources and market access. MSMEs within clusters can benefit from the shared knowledge, infrastructure, and opportunities, enhancing their growth and competitiveness. Global experiences, such as Silicon Valley and the automotive cluster in Germany, demonstrate the positive impact of cluster development on MSMEs. These examples highlight the importance of establishing supportive cluster ecosystems to unlock the full potential of MSMEs and drive economic growth.
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In addition to economic benefits, small industries also foster social and cultural development. They encourage creativity and preserve traditional craftsmanship, ensuring the preservation of unique cultural heritage. Moreover, small businesses are often deeply rooted in their communities and actively contribute to local social development initiatives.
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However, one of the biggest challenges that MSMEs face in India is the lack of finance. This is often due to the lack of financial literacy among MSME owners, who are often from education-deprived and poverty-hit regions. Banks are also often unsure of the repayment capabilities of MSMEs, as they often do not have any assets in their name. MSME owners should invest some time in getting acquainted with the latest schemes and policies of the government. Private and public sector banks have also come forward to offer financial help to MSMEs, with low-interest rates, flexible repayment policies, and easy processing.
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The lack of managerial, entrepreneurial, and marketing skills is taking a toll on the growth of the MSME sector. MSMEs often lack the right marketing strategies to boost sales and acquire new customers, and are unaware of market trends, consumer preferences, and access to advanced technology. Constraints on expansion and modernisation, improper product development, and poor product promotion are also hindering the growth of MSMEs. MSME owners should take the initiative to improve their stand in the competition. They should also connect with a professional to refine their marketing skills, pricing policies, and network. The government has also launched several exclusive networks like Gems, ONDC etc.
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Skilled manpower is the backbone of a successful manufacturing enterprise. Unfortunately, MSMEs face a lot of inconsistencies when it comes to skilled manpower and labour law compliances. Moreover, the non-availability of a skilled workforce at an affordable cost is adding to the woes of the MSME sector. MSME owners should make efforts to organise things at their end. The entrepreneurs should also try to offer higher wages to the workers. On-the-job training will boost the productivity and morale of the employees. On the other hand, the government should also simplify labour laws in the country. The constitution of structured trade unions will also help in safeguarding the rights of the employees. apprenticeship can address this issue to great extent.
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When it comes to technology, the MSME sector is quite behind in the race. Limited access to IT education, knowledge, and information is restricting the growth of this sector. This challenge has created a huge backlog of unfilled returns, payments, and orders. MSME owners should enrol themselves in government IT development programs. It will help them in understanding the latest technological developments in their sector. It will also increase their access to modern technology. The Indian government should also encourage the MSME owners by opening IT centres in rural and underdeveloped areas.
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It is another challenge that micro, small, and medium enterprises in India are facing right now. A business has to fulfil the needs and exceed the expectations of its consumers to thrive in the competition. MSMEs still follow the traditional methods of marketing and advertising, and are not adopting innovative marketing channels. Poor marketing channels and ineffective advertising leads to very low sales in MSMEs. Solution – MSMEs must be open to welcome changes in business strategies according to the feedback of the consumers. They should also try to identify and analyse the causes of their low sales. Using versatile modes to promote products and services will prove to be a masterstroke for this sector.
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National Small Industry Day holds immense significance as it acknowledges the invaluable contributions of small industries to the economic, social, and cultural development of a nation. It serves as a platform to promote and support the growth of small businesses, creating a conducive environment for their success. By recognizing and nurturing small industries, nations can lay a strong foundation for sustainable and inclusive economic growth.
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Citations:
Small-Scale Industry, Since 1947 | Encyclopedia.com https://www.encyclopedia.com/international/encyclopedias-almanacs-transcripts-and-maps/small-scale-industry-1947
Evolution of Small Scale industries - An overview - SSI Registration Coimbatore https://www.ssiregistrationcoimbatore.in/blog/evolution-of-small-scale-industries-an-overview/
Indian MSMEs: A brief history - LinkedIn https://www.dhirubhai.net/pulse/indian-msmes-brief-history-asim-katiyar
Origin and History of Small Scale Industries | PDF | Capital (Economics) - Scribd https://www.scribd.com/document/271529186/2-Origin-and-History-of-Small-Scale-Industries
The evolution of India's MSME sector—a view from 2023 - HDFC Bank https://www.hdfcbank.com/personal/resources/learning-centre/sme/know-evloution-of-indias-msme-sector
India: the role of small-scale industries in an emerging economy - Research Online https://ro.uow.edu.au/cgi/viewcontent.cgi?article=1780&context=commpapers&httpsredir=1