Opinion: What Telangana MSME policy missed

Five ideas to make Telangana the best State for MSMEs

On September 18, the Congress-led Telangana government launched the State’s first MSME policy. This is different from the regular industrial policy which normally focuses on MNCs and large investors. A policy for only MSMEs is a revolutionary move.

According to the new policy, to accelerate the growth of MSMEs, the State government has identified six trust areas for improvement – improving availability, accessibility and affordability of land, facilitating access to finance, ensuring easy access to raw materials, improving flexibility in fresh talent and labour, encouraging adoption of technology and enhancing access to markets.

Key initiatives include industrial parks, special incentives for marginalised groups, technology funds and improved market access funds. The Department of Industries and Commerce will, within three months of notification of the procurement policy, create a mechanism to monitor the implementation of the preferential procurement scheme. The government has allocated Rs 4,000 crore over five years to support the establishment of 25,000 new MSMEs in the State.

This policy is seen as a major step in empowering small businesses and generating employment opportunities in Telangana. For the first time, the government also unveiled a set of metrics to measure the health and growth of MSMEs in the State. This is laudable.

Go Beyond Telangana

I feel that the State is promoting the policy to entrepreneurs mainly from Telangana and this is restrictive. In my view, the policy must encourage all successful small and medium units in other States to expand into Telangana, as employment and economic benefits will accrue to the State.

The policy must attract entrepreneurs from Gujarat, Tamil Nadu and Maharashtra in addition to neighbouring States. This means creating a policy in multiple languages and launching in multiple cities. Are we doing that? I don’t think so.

Five Proposals

I am proposing five ideas not done to date. My five-year experience on the National Board of MSMEs and five years as the MSME adviser to the Governor of Rajasthan have given me insights into the gap between MSME policy and its implementation, and the key policies which are normally missed out.

? Ministry of MSME & Employment Generation

The Modi government announced a new ministry of MSME with Mr. Kalraj Mishra as its first Cabinet Minister. Tamil Nadu launched an independent Ministry of MSME in 2021. The State has the third-largest number of MSMEs in the country with a share of 8% and around five million enterprises. It also accounts for nearly 15.24% of India’s micro-enterprises and has the highest number of non-farm units. We can understand why Tamil Nadu is ahead in the MSME sector. We need a separate independent Ministry of MSME in Telangana with a cabinet minister at the helm. This is not because the Industry ministry is not doing its best. But we need a special focus on MSMEs like Tamil Nadu. But with one important twist. It should be the Ministry of MSME and Employment Generation.

Why? The economic contribution of MSMEs is not their biggest asset and it is not comparable with the economic contribution of large industries. The export contribution is also much smaller. But in one area MSMEs beat the large industries hands down and that is in employment generation per crore of investment. Typically, one new job is created per multiple crores of investment in large industry but in the micro sector, an investment of Rs 1 crore can create hundreds of jobs.

Employment is the best way to distribute wealth. We know the gap between rich and poor is very high. How do the poor move up? Only through a permanent and regular job which pays the right wages. Increasing the GDP is not enough. Per capita GDP growth is not enough. The GDP of the bottom 25% of the population must go up. The only way to do that is through the employment of ordinary citizens in ordinary jobs. And MSME growth and employment go together. That is why we need a Ministry of MSME and Employment Generation.

? CM Advisory Council on MSME

We have a PM Economic Advisory Council — an independent Institution — to advise the Prime Minister and provide an independent viewpoint. We need a similar independent CM Advisory Council. It will have MSME entrepreneurs along with government representatives on the council. They should publish quarterly reports on MSME health, growth and employment generation. This council will review the implementation of MSME policies and also co-create new policies with the government.

? Bigger vote bank than farmers

There are over 120 million farmers (declining) but there are already 132 million MSME entrepreneurs and this is growing. The MSME entrepreneur group is a bigger vote bank than even farmers. The large entrepreneurs are organised through industry bodies. But micro and small entrepreneurs are not. The party which builds a special connect first will benefit.

? Separate payment track

State governments’ payment dues are significant. State government payments treat MSME dues on a par with dues of large enterprises. MSMEs are not supported by banks while large enterprises are. This will help in the ease of doing business for MSMEs.

? MSME dues

Crores of subsidies are overdue from the Telangana government. If only MSME dues can be adjusted against state payments, it will make a huge difference to MSMEs.

All the above are dream ideas. But if Telangana adopts these ideas, it can become the best State for MSMEs in India. MSMEs from other States will look at Telangana for their expansion plans.

Source: Telangana Today, https://telanganatoday.com/opinion-what-telangana-msme-policy-missed