Focus on Small Industries - Best Model for India

Giriraj Singh, Minister of State for MSMEs
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The best model of economic development for India is to focus on small industries. The kind of jobs that we require can be created only in the MSMEs. These can be the engine of growth and socio-economic development, says Giriraj Singh

Nearly 80 per cent of the country’s capital is in big industries, while they provide just around 20 per cent employment. Investment in small industries is just around 20 per cent, while it provide jobs to 80 per cent of the people employed in industries. India is a capital scarce country. There is huge unemployment. Providing gainful employment to the growing population is one of the biggest challenges facing the country today.

Micro, Small and Medium Enterprises (MSMEs) play a critical role in the economy. It provides employment to over 10.6 crore people, accounts for 45 per cent of the country’s industrial output and 40 per cent of exports. There are 4.6 crore MSMEs in India and these contribute 8 per cent to the country’s GDP.

There is huge potential to expand MSMEs in the country. Globally, MSMEs have been the engine of growth. Small industries have played a pivotal role in development of most of the economies globally. Contribution of MSMEs to major global economies range between 25- 60 per cent. Compare this with India, where it is just 8 per cent. So the potential is huge.

Realising this fully well Prime Minister Narendra Modi has taken a number of initiatives to expand small industries. Initiatives like Make in India, Startup India, Standup India, Digital India and Skill India are targeted at supporting small businesses. Through these initiatives the government provides all kinds of support, be it financial or technical to help expand small enterprises. There is a lot of emphasis on modern technology to make system more transparent.

Ease-of-Doing Business

Doing business in India used to be really tough. It was especially very difficult for small entrepreneurs. We have taken a number of initiatives to cut red tape and make the process transparent.

Starting a new business requires multiple licences/clearances from different departments and government agencies. Just getting registration was cumbersome. Now the registration process has been made very easy through Udyog Aadhaar Memorandum. There is a simple one-page registration form that a prospective entrepreneur needs to fill in to get his/her business registered. This one-page registration form was made after consultations with the states and different stakeholders on recommendations made by the Kamath Committee.

We have removed red tape by allowing self-declaration. Now an MSME can self-certify its existence, bank account details, promoter/owner Aadhaar details and other minimum basic information. Udyog Aadhaar can be filed online at Udyog Aadhaar web portal maintained by the Ministry of MSME. There is no fee for filing Udyog Aadhaar Memorandum.

In order to provide a simpler and faster mechanism to address the stress in the accounts of MSMEs and to facilitate their development, we have notified a ‘Framework for Revival and Rehabilitation of MSMEs’. Under this framework, any enterprise can seek revival and rehabilitation benefit through a Committee constituted by the banks with representatives of state governments, experts, regional or zonal head of the bank and the officer in charge of MSMEs credit department of the bank. RBI has issued the revised Framework in consultation with the Ministry of MSME on 17 March 2016 to the banks.

Government has decided to relax the norms for Startup MSMEs. According to the decision, if the MSMEs can deliver the goods and services as per prescribed technical and quality specifications, the norms on prior experience and prior turnover will be relaxed for them. This will help the Startup MSMEs to take part in the mandatory 20 per cent public procurement from MSMEs. The relaxation has been made to create a conducive environment for the startups in India, which is high on the agenda of the government.

Technology

Generally small industries are not able to compete with big industries because of outdated technology. Technology requires heavy investments. Big industries keep upgrading their technology, while the smaller one are not able to do so. With a view to allow access to modern technology to the MSMEs we have established 18 Technology Centres across the country. These include Tool Rooms and Technology Development Centres. We have also started Technology Centre Systems Programme (TCSP) for setting up 15 new Technology Centres (TCs) and up-gradation of existing TCs for technological support to MSMEs.

In order to enhance the global competitiveness of the MSME sector, we are implementing credit linked capital subsidy scheme under which, MSME units are given 15 per cent capital subsidy on institutional credit up to Rs.1 crore to acquire approved machinery/technology. Assistance under National Manufacturing Competitiveness Programme (NMCP) is also being provided to encourage MSMEs through different components like Technology and Quality Up-gradation Programme, Design Clinic Scheme, Lean Manufacturing Competitiveness Scheme, Quality Management System & Quality Technology Tools schemes and Intellectual Property Rights (IPR) scheme.

Solar Charkhas

Khadi played very important role in India’s freedom struggle. Charkha, which is used for making Khadi clothes, was considered a change agent. Today, the conventional Charkhas have become outdated. It requires a lot of hard work and the output is very low. This led to exodus of artisans from the sector. We are now using solar technology to power Charkhas. Solar Charkha is a big technological innovation. It will revolutionise the Khadi sector. The output of Solar Charkhas is at least three times higher than the conventional Charkhas. This means, with the same effort and time an artisan can earn three times more.

However, there were resistances. Initially, when I talked of introducing Solar Charkhas, our bureaucrats said it can’t happen because it is contrary to Manatma Gandhi’s idea. But we have to update technology. Had Gandhi ji been alive today, he would have also used modern technology. I am sure he would have used mobile phones and computers to bring changes to the wider section of the society.

charkha pushed forward by Gandhi ji was a tool of empowerment. Solar charkha is a technology innovation. It enhances the relevance of that tool of empowerment. If we manage to provide Rs.6000-9000 income in villages, it will be a big revolution. Solar charkhas have the capability to do that.

our target is to provide employment to five crore people through Solar charkhas. We are pushing for the use of Solar charkhas across the country. The objective is to employ one lakh women in each Parliamentary constituency and cover them under social security schemes. We also target to increase khadi sales to Rs.1 lakh crore in near future from the current around Rs.26,000 crore.

Solar charkha technology is very cost effective. To employ one person at textile mill with 25,000 spindles, the capital cost is around Rs.60 lakh, whereas a Solar charkha costs around Rs.60,000 to Rs.70,000.

Prime Minister Narendra Modi mentioned the success of Solar charkha in his radio programme ‘Maan ki Baat’ in January. In fact, he gave an example of Sadhna Devi from my Parliamentary constituency Nawada in Bihar. “Those using a solar charkha have been sending me lots of letters. Geeta Devi and komal Devi of Rajasthan and Sadhna Devi of Nawada in Bihar have written to me saying that their lives have changed drastically because of the Solar charkha. They say their income has doubled,” Prime Minister said in the ‘Mann ki Baat’ programme. The Prime Minister pointed out that due to use of solar technology in charkha the physical labour has gone down and production has increased brining a qualitative change in the lives of artisans. The mention of Solar charkha by the Prime Minister in ‘Mann ki Baat’ programme has given a big boost to the initiative and we are hoping that we will achieve our targets sooner than expected.

Credit Facilitation

Getting credit is a big problem for small industries. While banks lend to big corporates easily, they often show reluctance in lending to small businesses. credit is crucially important for expansion of any business. We have taken a number of measures in the past two years to ensure adequate credit facilitation to small businesses. Upto Rs.1 crore collateral free loan is being provided to small businesses. The government provides the credit guarantee. If the money is not recovered, the government is responsible for that. During the financial year 2015-16, loan worth nearly Rs.1.5 lakh crore was distributed to small industries. This is the highest ever credit facilities to small businesses. In the year 2013- 14, the loan to small businesses amounted to just around Rs.15,000 crore. This rose to Rs.84,000 crore in 2014-15, the first year of our government.

Micro Units Development Refinance Agency (MUDRA) has given a boost to refinance operations for small business in the country. Pradhan Mantri MUDRA Yojana (PMMY) was launched in April 2015. In January this year, the government created a credit Guarantee Fund for Micro Units Development Refinance Agency (MUDRA) loans. MUDRA Ltd, which was set up as a corporate subsidiary of SIDBI in March 2015, has been converted into MUDRA Small Industries Development Bank of India (SIDBI) Bank as a wholly owned subsidiary of SIDBI.

The MUDRA (SIDBI) Bank is involved in refinance operations and provide support services with focus on portal management, data analysis etc apart from any other activity entrusted/advised by the Government of India. The Fund is expected to guarantee more than Rs.100,000 crore worth of loans to micro and small units in the first instance.

The major schemes, which provide credit-linked subsidy to MSMEs, include credit Linked capital Subsidy Scheme (cLcSS) and Prime Minister’s Employment Generation Programme (PMEGP). credit Guarantee Scheme provides guarantee cover for collateral free loans upto Rs.1 crore. Micro and Small Enterprises-cluster Development Programme aims at holistic development of Micro and Small Enterprises in clusters through soft interventions, hard interventions (setting up of common Facility centres) and infrastructure up-gradation.

Way Forward

In the past two years several initiatives have been taken to promote MSMEs. however, the challenges are huge. We have taken a number of steps towards easeof- doing business. The success of Make in India initiative also depends heavily on the MSME sector. Several of the challenges are related to states. We are engaging with the state governments to address those challenges.

Expectations are high! Make in India programme talks of promoting Brand India. It seeks to boost manufacturing, especially the MSME sector. It will make India a global manufacturing hub. Manufacturing is the only sector that can absorb the growing workforce in the country. The government is working tirelessly to boost investments in manufacturing by making doing business easier. Gandhi ji was a votary of village and small industry. The initiatives like Make in India, Digital India, Startup India, Standup India and Skill India are targeted to help small industries. All these initiatives have one underlying theme—to make India a manufacturing hub driven by innovation. These initiatives would help create India of Gandhi ji’s dream.

Giriraj Singh is Minister of State for MSMEs

(The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of INCLUSION. Comments are welcome at info@skoch.in)

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