Despite the recent sluggishness in demand, India remains an attractive consumption-oriented market with the growth of the middle class and rising disposable income. However, only 15% of what is consumed in India is made by the domestic manufacturing industry, limiting the country’s ability to create employment opportunities, said NRI Consulting, an affiliate of Nomura Holdings.
“This could be done by following a market-oriented approach for MSMEs, wherein the organised private sector participants invest in capacity building of the MSMEs against a valid for-profit business case with long term benefits,” the research firm said in a note on Indian market, amid the political debate on jobs and joblessness.
The MSME sector remained the highest job creator with the sector contributing about 3.6 crore jobs, which is about 70% in the manufacturing sector in 2017-18, according to official data. “A deep dive into product groups manufactured in various clusters in India suggests that a dedicated focus on developing these MSMEs can create additional 75 lakh -1 crore employment opportunities in the next 4-5 years through partial substitution of imports,” Japan-based NRI Consulting said.
The central and several state governments have been making efforts to enhance the flow of bank funding to make the sector stronger.
For instance, Uttar Pradesh’s BJP government launched ‘One District, One Product’ (ODOP) scheme in January 2018, seeking to revitalise traditional industries and MSMEs in every 75 districts in the state. State government record shows that bank loans worth ?17,500 crore has been disbursed to entrepreneurs under the scheme so far. Telangana launched an MSME networking portal, while the central cabinet approved an earlier MoU between India and Republic of Korea on startup cooperation. Prime Minister Modi has flagged off a 59-minute loans scheme to expedite fund flow to small entrepreneurs.
CARE Ratings signed an MoU with Canara Bank last month for expediting due diligence for MSME borrowers.
“To scale up, the MSME sector needs a market-oriented strategy through business development services which is inclusive and builds on a consensus on the challenges, goal and broad policy direction among the key stakeholders,” the consulting firm said.