What are the key obstacles facing MSMES in India.
Ans. The three key constraints facing the MSMES in India are as follows: (1) Innovation: Innovation at any level of enterprise functioning. as the processes of production, labour and even organisation. not only drives business but also offers the competitive edge to MSMES in higher order markets. It has, however, been established that Indian MSMES are poor investors in in-house R&D and most MSES hardly have incentives to innovate. This is not to convey that there is little institutional base for the same. "Turning to state-promoted R&D activity for the SMES, one acknowledges the elaborate institutional arrangements for the same. These would include Technology Development Board to extend financial assistance in the form of equity, soft loans or. grants, and the state-sponsored variety of sectoral/product research institutions concerning, for instance, leather, gems, rubber, plastics. The launch of technology business incubators in 2001, efforts by the National Research Development Corporation, Bureau of Indian Standards, National Productivity Council, Consultancy Development Centre and Electronics Test and Design Centres are all part of the formal strategy to improve competitiveness of SMES" (Das, 2011b: 87). (2) Credit: Access to adequate loan finance and its availability at a time most required by the MSMES have continuously put serious challenge to entrepreneurs irrespective of several policy mechanisms devised exclusively to ease the process. The formal public sources of credit to MSES, in particular, fall within the purview of what is called the 'Priority Sector' lending. The Reserve Bank of India has been keenly pursuing its adherence by public sector banks. Table 2.19 presents data ọn share of loan for SSIS/SEs in the net bank credit by public sector banks. That there has been a steady shrinking of this share between 1990-91 and 2006-07 points to gaps in policy pronouncements and their functioning or ground. Even as collateral-free loan availability provision exits to support micro-enterprises especially, even their share has declined sharply during since the mid-1990s or so. Much needs to be done in terms of sensitising and possibly, incentivising the concerned banking apparatus to respond favourable to the classic constraint of Indian MSMES. It has been observed that in the absence of a systematic and transparent information base on MSES in particular, bankers would reluctance to arrange to offer a loan. Rather, they might prefer to provide the same to relatively larger of the small enterprises and the medium enterprises. The provision of credit guarantee scheme for MSMES though is extant in certain financial express.
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