The Indian MSME on the growth path

Terms such as ‘growth engine’ and ‘powerhouse’ have been used to describe the contribution of MSMEs to the Indian economy throughout the year. And rightly so; data speaks for itself. At present, MSMEs contribute approximately 30% of GDP growth; 45% of manufactured production, and 48% of exports. Numbers aside, I believe MSMEs to be the torchbearers of the entrepreneurial mindset among the citizenry, thereby adding fuel to the mass entrepreneurship movement.

The government’s razor-sharp focus on the MSME sector combined with the kind of infrastructural investments in the fray has led economists to project the sector’s contribution to India’s exports to reach ~$1 trillion as soon as 2028. I’d say this is merely the beginning of the journey that has the potential to transform India’s socio-economic landscape.

The agile and adaptable nature of David

Vis-a-vis, the Goliath-like nature of India Inc., the MSME sector’s journey, is very Davidian in nature—one of faith, and bravery combined with agility and adaptability. We have seen MSMEs weather everything from economic downturns to COVID-19, which proves MSMEs to be the hallmark of resilience.

This year, the USA turned out to be the largest source of FDI inflows in the country, with close to INR 8.58 lakh crores being brought in. I see this as a huge opportunity for the MSMEs to ally with the international Goliaths and embrace their expertise. This helps MSMEs to strengthen their own capabilities and participate and contribute to GVCs (Global Value Chains).

The Make in India movement has also bolstered India’s positioning on the world stage as a global manufacturing hub, which in turn presents a huge opportunity for the MSMEs in the ancillary products & services sector. It will not only help boost manufacturing, but also augment the supply chain to generate employment opportunities.

Such opportunities and more, are proof of the pudding that is the power of the MSMEs in India.

Templates for growth

The best path to success is the one that is already tried and tested. The scalability of the MSME lies in the replicable business model approach. This model is proven across businesses across sectors such as F&B, lifestyle, retail, and healthcare, among others. So why not replicate successful business models across MSMEs as well?

For example, something as basic as a solar-driven cold-storage units and food-processing machines, to small women-owned salons are business models can be replicated across districts to empower people to venture out as entrepreneurs. The replicability of small ideas is what makes MSMEs extremely feasible yet a powerful growth engine of India’s economy.

Hunger to grow

One of the core issues faced by MSMEs as of yet is a lack of open credit access and support. Whether it be due to scale, a lack of collateral, or even just credibility, MSMEs have traditionally faced issues with raising funds towards working capital, which can augment growth. In addition, working in silos has often resulted in a lack of support from immediate stakeholders such as family and peers.

It is here that the increased focus on access to finance and community support through incubators will come into the picture. An alliance approach is necessary to resolve the systemic issues faced by MSMEs. 

If the sector is contributing the way it is without easy access to credit, imagine the potential when funds aren’t a challenge anymore and there is unbridled support & encouragement from self & the ecosystem. In my opinion, it is this naked hunger for growth that makes the MSME of today’s India extremely powerful.

The journey of a thousand miles

At the risk of sounding repetitive, I personally have a lot of faith in the power and potential of the MSME sector in India, and if empowered well, the sector has potential that can only be compared to turnaround events in history, such as the industrial revolution of London, or the Y2K.

That, I believe, is the power of the MSME sector in India, and while we have miles to go, the journey of a thousand miles does begin with a single step. We are, I’d say, at least a couple of hundred miles along if not more.

(The article is written by Ketul Acharya, President of Global Alliance for Mass Entrepreneurship (GAME))