The government, in continuation of its earlier efforts, has initiated numerous measures to encourage MSMEs in this year’s Union Budget. The Union minister for MSME has also observed that 5 crore opportunities would be created in the next one year. In fact, MSMEs contribute nearly 8% of national GDP, employing over 11 crore people in six crore enterprises, and account for 45% of manufactured output and 40% of exports of India. The Prime Minister has been making a pitch for Make-in-India and encouraging foreign manufacturers to set up units in the country. MSMEs are important for generating employment in the country, where over 10 lakh people join the workforce every month and nearly 1.5 crore every year. To accommodate such a large population joining the workforce annually, for the next few decades employment opportunities in agriculture, banking, financial services and government jobs cannot increase commensurately. Further, in view of the fact that large industry, to stay competitive, would rigorously pursue automation and artificial intelligence, the burden of job creation and absorption of increasing labour force can only be performed by MSMEs.
In view of the significance of the sector, since 1948, successive governments have been making intense efforts to encourage MSMEs. The Office of Development Commissioner for MSMEs was set up in 1954 and a dedicated ministry for MSMEs was established in 1999. The Small Industries Development Bank of India (SIDBI) was established in 1990 to serve as an apex body for promotion, financing and development of MSMEs. But now, given the demographic pressure, to create an entrepreneurial environment in the country, the government will need to think out of the box. In addition to the recent initiatives, there are a few innovative things that the government can consider, like setting up state-level universities dedicated to entrepreneurship and MSMEs with an outreach through MSME clinics.
A dedicated higher educational institution or a university
To boost employment generation through MSMEs, skill formation can be considered from two angles—labour and entrepreneurs. To skill labour, there are already many skilling centres and more can be established. The challenge is to create and nurture entrepreneurs. Equally important is to undertake R&D for 6,000-odd goods that MSMEs produce. In India, illustratively, each state has a unique or characteristic good, like Rajasthani razai, Punjabi jutti, Kolhapuri chappal, etc, and focused research on each from the viewpoint of production, supply chain, innovation and quality would be useful. Therefore, there is a need to have a network of dedicated institutions, familiar with local conditions, on the pattern of agricultural universities, in every state of India. A dedicated Entrepreneurship and MSME University (EMU) would need to combine academic teaching faculty with practitioners to nurture entrepreneurship. The objective should be to produce self-confident entrepreneurs, and an army of trainers to create an ecosystem for entrepreneurship to not only take roots, but also flourish.
The emphasis in such an EMU would be on teaching entrepreneurship with a focus on psychology and leadership, while also teaching traditional subjects like sociology, accounting, HR, labour laws, operations management, marketing, business finance, innovation, strategy, communication, government and banking policies, planning, and macroeconomic analysis.
The teaching of entrepreneurship, which is significantly different from management courses, cannot be only a classroom phenomenon, but a practical hands-on training, simultaneously, in existing enterprises, preferably MSMEs. Therefore, it would be a different model from management training and more comparable to the style of teaching in agricultural universities. R&D is important for production of specific goods, and most MSMEs do not have resources to undertake research on their specific products. Historically, in the absence of R&D, traditional products of MSMEs are competed out from the market because large firms and foreign companies with extensive research are able to constantly innovate, improve quality and lower costs.
Advantages of such universities
There are many things the government can do through this state-wise dedicated EMU. As in agriculture, state-wise EMU would communicate in local language and, if possible, local entrepreneurs should be encouraged to share their experience and mentor local budding entrepreneurs. Further, sick MSMEs could get expert advice from faculty of EMU, which is familiar with local circumstances. The government could utilise the expertise in these EMUs to build financial schemes for MSMEs in consultation with banks. Most importantly, loan proposal templates could be developed in local language with collaboration of EMUs. To encourage local products, EMU could, illustratively, showcase and promote state-specific products, such as Phulkari of Punjab, bamboo works of Assam and West Bengal, and cotton weaving of Tamil Nadu, via galleries and museums, preferably free of cost to individual MSMEs.
In addition, EMUs could reach entrepreneurs in every industrial cluster across the state through MSME clinics aiming to provide informed advice from experts in local languages. In India, self-reliance in food was achieved with the help of state-wise agricultural universities. Similarly, technical excellence and managerial proficiency was achieved with the help of IITs and IIMs. Now, given the need to create, develop and foster entrepreneurial environment in the country, it would be helpful to follow the time-tested route to produce and saturate the country with entrepreneurs and their trainers. The best place to train the trainers is a university where entrepreneurs and their teachers are created. In this transformative endeavour, the government could consider PPP models to set up EMUs and link them up with MSME clinics, like a hub-and-spoke model in every state.
via Why each state of India needs an MSME university – The Financial Express