Micro Small & Medium Enterprises (MSMEs) have been an integral part of our state and its industrial and economic growth, although the relevance of these industries has varied from time to time across various stages of growth. A majority of the MSMEs are ancillary clusters grew around large industrial houses. This growth happened as a demand from the mother industry, and the government provided base infrastructure was also benefitting these ancillary units.
Most states have taken serious efforts to attract large industrial investments in the state from both domestic and international manufacturing industries. As a result of this MSMEs could not get the attention required for growth in the last decade or so, wherein large investments caught the eye and focus of the government. Further to this when the global economy was in a recessive state MSME growth suffered even more.
The state government also identified areas for investments in the industrially backwards areas to provide an impetus to growth and to attract investors by offering tax sops and a host of other incentives. This found few takers amongst the large houses that prefer the urbanised zones, despite higher costs.
MSME can be broadly classified into three categories: manufacturing sector, services sector and agro-based sector. During the first quarter-century, post-independence agriculture dominated the country and almost all states. The post-independence second quarter and the last of the millennium witnessed a steady industrial growth in the manufacturing sector and came to a point of global competitiveness hampering further growth. The first quarter of the 21st century saw the emergence and spurt in the services sector across the country and there seems to be no looking back for the services sector. This is evident from the fact that the government also derives revenue by the tax on services.
Entrepreneurship is vital to the growth of the MSME sector and the key players are skilled machinists or technicians who turn into successful employers. They may be less educated and short of capital but they are the dream models of thousands of blue-collared workers who create a source of livelihood and share fortunes by working hands-on in untidy work sheds and factories in need of basic comfort. The second type of entrepreneurs comes from a background of a family business and specialised education. This is the young breed of suave and ambitious executives, who plan and work to make a mark, and they become the visible face of the MSME growth.
Starting in the mid-70s the state government took great initiative to establish industrial estates in and around the adequately populated cities which had the connectivity, manpower and other required resources for the proposed industrial ecosystem. Many business houses and entrepreneurs in those times took advantage of these initiatives and today have grown to large industries or group of companies.
However, as the decades passed by some of the industries have been successful for many years started dwindling and reduced to just surviving if not sick units. These units failed to upgrade their technology and product range. As a result of this, they could not stand up to the international competition when the Indian economy opened up to globalisation. Moreover, the second generation of the entrepreneurs moved away from these industries for better opportunities overseas or in the IT sector which was dominating career prospects in the late 90s. This led to a growing trend in the MSME sector in the existing industrial estates.
We are at the foothills and the turning point of a potential MSME revolution. The right approach and partnership could spur the MSME sector to contribute significantly towards economic growth and empower the state with an internationally competitive edge.
There are various successful technologies available overseas and companies are looking to improve their investments in the region. MSME sector has seen aggressive growth over the years in many countries across South East Asia and Europe. They have been employing at the regional level and have been significant generators of foreign exchange. The few sectors of technology available that have a ready market in the region are:
1. Waste to energy
2. Energy retrofitting, green and smart buildings
3. Electric vehicles and batteries
4. Industrial automation
5. Renewable energy
6. Food processing
The above-mentioned technologies are important as these are the pain points in our industrial environment and there is a great need for indigenous products in these areas. The similarities in the MSME structure in Sri Lanka and India provides a fertile opportunity for partnerships, technical collaborations and joint ventures between companies.
The existing companies in the industrial zones could be revived with modernisation and by adopting new products and technologies. Automated manufacturing practices will also ensure better product finish at competitive prices. The financial support from the government will be a great enabler for these partnerships. The existing demand for the specifically mentioned technologies would provide a boost for ROI to the new ventures.
New clusters can be developed in areas around educational institutes which would provide not only trained manpower to the factories but also employment to the graduate students. Skill development could be provided in the local ITI. Internships within the colleges in partnership with the industries could also improve the employability of the graduates.
The MSME sector coupled with skill development has been a major reason that has transformed many developing countries to developed countries. An all-inclusive progressive approach and an MSME revival policy could play a vital role by improving industrial growth in the country.
S. Bothra is an international business consultant and a scholar pursuing International Relations at the University of Madras, Department of Politics & Public Administration. He can be contacted on
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