Indian MSMEs Need a More Realistic and Long-Term Policy Framework in the 12th Five Year Plan

According to the MSME Report 2011 from ISED (Institute of Small Enterprises and Development) on the growth of MSME sector in India, the MSME sector needs a more practical long-term policy framework within the 12th Five Year Plan.

The report says that, the present situation is very challenging; hence 12th Plan should concentrate on them. Informed interventions should be adopted by the government rather than focusing on stereotypes such as cluster, venture capital, micro finance, etc. At the state level, concentrating only on attracting FDI is not sufficient and the focus should be on IPR, innovations and local economic development. Public-private partnership should involve more NGOs and other similar entities.

Sick units’ marginal growth had increased to 14.47% in 2006-07 from 13.98% in 2001-02. And the death rate of SMEs has declined to 21.6% from 39% in the same period. But, interestingly the growth rate of the SME sector is greater than the overall growth of the economy.

According to the World Bank, there are 500 million entrepreneurs in the world and SMEs entrepreneurs account for 99%. Nearly 60 million entrepreneurs are pushed to losses because of decrease in demand for SME products like energy and food, fall in commodity prices, significant decrease in FDI, and general shortage of liquidity.

According to the report, the effectiveness of the MSME policies depends on the different phases of the enterprise development cycle. The NGOs and Government have an important role in giving meaningful results by intervening at the right time in a correct way.

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