Make in India; Make for World. A distant dream !

MSME in India: Problems and remedies : The problems of industry parse are many. Some may be specific to the size or type or geographical locations, but it seems more than 60% of problems are common and it is irrespective of the size. When I am emphasizing the size, it is because growing from small to big is a dream for all entrepreneurs but protectionist policy stops one from growing small to medium and then big. The different size of the industry has different advantages. Therefore, the policy should encourage it to grow big instead of doing manipulation to keep the size small for taking advantage of the policies reserved for the sector. We therefore need to make our policies such that it is advantageous to grow for self and for industry. Only then we can be a country which will attract the young entrepreneurs, business houses to come with new plans and will also be lucrative for the foreign companies to come and invest in India.

We plan to discuss general policies which if taken care of, will resolve the first level of the problem. Then we discuss and find solutions to second level problems.

Problem of Mindset:

• Government machinery as a whole is unfriendly to entrepreneur, industrialist and businessman. They do not realize that they are part of the society to which Government officers also belongs to. Most of the people realize it only after they get retired. As a result for any file to move they have attitude like what is there in for me? Since there is no punishment for delay or denial of genuine work so Government officer easily live with it. It is very crucial that this attitude should be broken. Now the bigger question is can be changed? And how? I have some solution as described below:

 

• Let there be a nodal officer in the district. These officers should be Senior IAS officer with 15-20 years of experience and  flair for business having appetite to make money honestly by being part of the business community. The cadre of these officers shall be maintained as it is. These offcials will take responsibility of coordinating with the Govt. machinery at state and central level. A reasonable share of the revenue being collected in the district shall go to the nodal officer in not in lieu of the services but for making things good at ground level. These officials while working as Nodal officer being senior IAS officer can talk to other officers in Electricity , revenue, Tax and other departments where entrepreneurs keep running for months and waste lot of time and need to pay bribe as well. (These people are also capable of talking to Govt. Machinery from District level to the GOI secretary level and give the real picture, instead of the data filled just for achieving the targets.)  This incentive of making money in white will attract many good officers with engineering and commerce background and good intentions looking for opportunities of making money. They will also be responsible for growth planning and development of these officers should not transfer except when there is some compelling reason to do it and cannot avoid. These officers may be given choice of posting once and preference be given to their home town. So that these officials have time to perform and enjoy the benefits of the growth and prosperity for which they have been instrumental. These officials should directly contribute to the growth plan and budgeting of the district.

• Banks which are primarily responsible to provide working capital and other financial needs of the business or industry are not very keen to offer the money for the reason “If I do not finance, I will not be panelized but if one loan got bad my pension and retirement benefits will be in trouble” Therefore growth of industry in the area is not his concern he is just bothered to achieve the target of collection and disbursement. He will therefore have a tie up with few good companies of his area and do the business with them and others will just keep waiting to know why bank will not take risk of financing their business. It is therefore mandatory that bank officers be penalized only for not following the process adopted to give the loan facility not for the failure or recovery of the loan. The reward and penalty both should motivate to do the best decision.

Average rate of failure in MSME around the Globe is 30-40%. The bank officials should be instructed to follow the procedure strictly and be penalized if not being followed for sanction and disbursement of the loan but for making any official personally liable the global average be taken into consideration. This means if a Manager has done 100 cases then minimum 60% should be in healthy condition and making repayments properly .

 

• Infrastructure for the industry is in bad shape. Electricity supply is not regular, interruption due to fault is delayed and makes scope for the bribing for getting it done early. Roads are also in bad shape in most of the industrial area and hardly money being spent to keep it in good shape. In case we begin working on local level it can be improvised. As suggested above planning and execution at local level is the solution. The main reason is the sufferer is in industrial estate and the person responsible to correct is in secretariat who will never come or need to come  and see the bad condition. Secondly he is neither benficairry of good supportive infrastructure be made available to industry nor he is looser. So he works as per rule without bothering for the loss industry doing at micro level and nation at Macro level.

 

• Taxation is another black box for the business man or industrialist the rules should be rationalized and simple like GST. Though lot of debate is still going on for and against  GST but it has at least made the  Trade tax transparent . Again heavy penalty for officer and customer both be there for not following the process. This should not be for the result. Keeping tax structure logical and any change be announce in sufficient advance may be two years or three years so that business may plan a process or policy to cope with it. No tax should  be charged with retrospect .

 

• Government purchase process is one of the biggest sources of corruption. This also part of mindset. Like in every tender floated has clause that tender can be cancelled without assigning any reason. This is absurd condition because before floating tender lot of formalities like budget sanction and product specification etc. are done. Participation in tender requires lot of formalities to be completed by the tenderer. In case of cancellation all efforts put in terms of time and money goes waste. Therefore this should not be allowed. There may be some exception to exercise when very necessary. All tenders have a clause of  EMD and turn over criteria but it is very  heterogeneous and seems to be based on the sweet will of the authorities. Even there are more than 20-25 tender sites by state and central Gov. and finding a tender on it, itself a cumbersome process. The web site of the most of the department are having old and un relevant data which make situation very grim and allows corruption to grow because you need to liaison  with the concerned person who charges for the favor. This needs to be overhauled fully. Even purchase on the Gem portal has many glitches and is emerging as new source of corruption. This needs to be overhauled. Doing so is not very difficult but certainly need the right intentions for making policy and its implementations.

 

• What is the process of selecting a product for being manufactured by a small industry? He come to know about it by word of mouth or some known person doing good in the product line that becomes the source of information for manufacturing the item. Some fake experts and reports also do motivate and their interest is limited to selling their services. NSIC, DIC, DC SSI have not been able to play the role they were supposed to play.

• Marketing of the products is another challenge for the small entrepreneurs. Finding a buyer then getting quality accepted and finally reeving payments have been challenging affair. In most cases it is lacking of coordination between different organizations involved.
• Labour laws are cumbersome. It neither do favor to labour nor to the company owners only few middle men are beneficiary to it. In the past it has been amended many times. After corona effect it has been changed again. This needs to be rationalized in light of today’s circumstance to make it friendly to all stake holders. The problem here is people responsible for doing it are biased and look for personal or organizational interest.
• Billing and payment for MSMEs is a challenge in the present scenario. Many MSME customers, including large corporations and government organizations make payments to MSMEs after long delays. MSMEs are further required to pay GST on their outstanding invoices putting an even greater cash flow burden on them. The government can help by extending the scope of their GST portal system to incorporate MSME billing and payments and charge GST directly on the payments received by MSMEs and additionally charge interest to buyers who make late payments to vendors.
• Technology usage in Operations is greatly lacking for MSMEs. In order to produce high quality goods and services for a global market efficiently, MSMEs need to invest in technology. As software and other technology solutions can be costly and complicated, most MSMEs currently limit their use of technology to basic email and accounting systems or try to repurpose consumer technologies like WhatsApp for their business use. Government can help by providing MSMEs with grants or rebates or allowing MSMEs to gain tax benefits for their technology investments and expenditures.
• Value addition of products and services by incorporating the latest technologies can be another way MSMEs can grow globally. Embedding IoT into manufactured equipment or offering service portals can be some of the many ways MSMEs can increase the value and competitiveness of their products and services on a global scale. The government can help by providing grants, rebates or tax benefits to MSMEs investing in R&D or purchasing technology for value addition of their products and services.
• I conclude it in few words “local coordination for solving the problem in other words let the problem be solved where it is arising is the mantra to provide efficient and effective solution.” It is being said for the years that bureaucrats and system in the country are such that it is difficult to do things in larger interest. We know the solution for the problems is within problem means who creates problem is also best solution provider. Therefore, I am of the opinion that let bureaucrats sitting other side of the table be same side and make them partner in growth and prosperity of the business and industry. Sharing profit in growth will offer the opportunity
• to work with full autonomy and be answerable to it and good work will make them earn money which is otherwise not possible.  We have been talking about SUDH LABH for the years now it is time to make it SUBH LABH (Let all those who does good prosper by sharing the fruits of growth).

More detailing of the concept of how it will be implemented is in the stage of development and with coordination and opinion of other learned friends it can be refined and further elaborated.

Ajay Singh, Phone: 9811113345, Email: ajay9811113345@gmail.com