Micro, small and medium enterprises (MSMEs) contribute immensely to India’s economic growth

and development. As per the latest estimates by the ministry of MSMEs there are 26 million units in
this sector, they generate 59 million jobs, contribute 40% to manufacturing output and 45% to the
total exports; 95% of all the enterprises are MSMEs.

However, the sector needs to address many issues to be competitive in the global market.
Strengthening the sector to meet global competition would mean empowering the entire spectrum of
MSMEs, including those in the informal sector, and not just export-oriented ones. What is needed is
a critical institutional mechanism that provides support, mentoring, information & market intelligence,
networking & training opportunities, and a technology dissemination system with a countrywide
network that reaches out to all enterprises. The new mechanism has to enable and facilitate MSMEs
garner social and cultural capital, as that too would be success determinants for enterprises in the
days ahead.

MSMEs have no option but to be more techno-savvy and information & communication technology
(ICT) adopters—by an estimate only 55% of urban enterprises and 45% rural enterprises have
adopted any kind of ICT tools. They must also attempt to adopt the best corporate practices and
learn from corporates and MSMEs in other countries. For instance, in the multicultural global market,
Indian MSME work sites can become more multicultural and diversity friendly, by creating more
space for employees from all communities, both national and foreign. Standard accounting principles
have to be followed; now only 28% MSMEs practice this.

In many parts of the world there are institutional arrangements to reach out to MSMEs in addressing
such challenges. In the US, there are close to 1,000 Small Business Development Centers (SBDCs)
that provide support, especially information. Israel and Canada too have such institutional
arrangement in place.

India, too, needs to create an institutional mechanism to provide such services to MSMEs in a highly
decentralised manner. To effectively reach out to MSMEs in all the regions, states, districts and
villages, a network of such institutions could be set up in each of the community development blocks
(CDBs), around 6,000 of them in India. Such institutions may be called as MSME Resource Centres
(MSMERC)

MSMERCs can address the issue of information lacuna, enable technology transfer create
awareness and provide training & networking and product exposition facilities, facilitate ICT
adoption, and work for the smooth flow of institutional finance to MSMEs. In the urban centers as
well, depending on the need, such centres can be opened.

When it comes to technology transfer, MSMEs and informal enterprises need valuable inputs from
these centres. Often what is needed is a sensible application of available technologies. For instance,
vegetable vendors and enterprises that deal with perishable food products, if provided with finance
to acquire battery-run refrigerated carts/deep freezers, would bring down post-harvest losses of farm
products, estimated at Rs1 trillion annually. Further, MSMERCs can facilitate transition of informal
sector enterprises to formal enterprises and then to micro and small firms.

Building youth-owned enterprises is critical to innovation. Young entrepreneurs can grasp global
market dynamics relatively better and create competitive, efficient and innovative enterprises. Here
comes the role of building strong foundation in human resource development. For it is from this
source that innovators & entrepreneurs emerge. Youth who come out from the academic world need
to be empowered to become self-employed, start new ventures and commercialise their knowledge.
It is critical to direct them to the world of MSMEs to build an innovative, creative and competitive
MSME sector. The youth living in the information economy need an institutional support system
similar to that of business incubators.

A decentralised network of business incubators in each CDBs need to be funded and developed by
the government to exist alongside MSMERCs. Such business incubators should provide mentors,
finance & technology-related support, assistance in setting up and registering a firm, preparing a
business & marketing plan as well as networking and marketing support. They could also offer some
basic training in business management, accounts and marketing, as also impart skill development
training programmes.

Enterprises in the developed countries have already started recognising the virtue of building
multicultural work sites. Customer base of MSMEs is very much multicultural in the global market.
Studies have indicated that multicultural work sites stimulate innovation & creativity and
exponentially increase marketing opportunities. Indian MSMEs should also make their work sites
more diverse and multicultural.

Up to one lakh crore rupees is being spent for rural development in India annually. Earmarking 8% of
that would be sufficient to create MSMERCs and Business Incubators in each CDBs.