This is the key to a self-reliant MSME sector
Finance Minister Nirmala Sitharaman, in Budget, 2021–22, said the MSME sector is being redefined for manufacturing and services in terms of sales turnover and networth and would accelerate the implementation of the ‘Atmaniirbhar’ package. She allocated ₹15,700 crore and asserted that this was exactly double what the previous Budget had provided.
The MSME sector acts as a pivot of India’s informal economy. In 2019-20, the sectoral contribution to GDP was 30 per cent and to total exports is 48 per cent and employs more than 11 crore. The workers in the sector pool in their skills and enhance productivity through joint action. This creates a cluster. In 2001, OECD reported that the cluster development promotes the capacity of innovation of regional firms and improves economic growth.
Among various plans of the Ministry of MSME, the Scheme of Funds for Regeneration of Traditional Industries (SFURTI) took a new avatar in 2013–14 with activity-based budget allocation, project approval, sanction, and monitoring, (implementing) agency’s contribution to cluster development, formation of Special Purpose Vehicle (SPV) and functional upgrading of clusters.
Until 2019-20, under SFURTI, 298 clusters had been approved by the Scheme’s Steering Committee, in consultation with the nodal agencies, with a project grant of ₹673.09 crore, benefiting 1,76,877 artisans.
As part of an evaluation study of the SFURTI Scheme, we examined the performance of clusters, the role of agencies and artisans’ livelihoods and welfare.
We visited eleven clusters covering three States — Uttar Pradesh, Madhya Pradesh and Assam. We studied 30 odd agencies and more than 100 artisans, both wage earners and self-employed.
In the UP cluster, 36 per cent artisans were women and 64 per cent men. It is the opposite in Assam, with more than 60 per cent of artisans are women and in Madhya Pradesh, the proportion of women artisans is less than 20 per cent.
The average daily wage rate varies State-wise. In UP, the daily average wage is about ₹240 while in Madhya Pradesh and Assam, it is ₹162 and ₹179, respectively. In other words, a few artisans could meet their daily expenses going by these wage rates in these clusters.
The level of awareness of artisans about cluster functioning, governance, and value chains is rather dismal. More than 50 per cent artisans are unaware about the working of their clusters and 19 per cent only partially aware in UP and MP. However, the level of awareness of Assam artisans is relatively higher. Two clusters from Assam, and one each from UP and Madhya Pradesh have formed Special Purpose Vehicles to for credit, technology, processing, and marketing of artisanal produce; some have even offered artisans equity in the SPVs.
n their living conditions, 4 per cent of artisans in UP do not have access to electricity, and 20 per cent depend on the public hand-pumps for drinking water. The artisans from Assam and UP have access to the banking system but not those in Madhya Pradesh where they receive wages in cash.
In Assam, more than 73 per cent have benefited from the Ujjwala scheme, while it is 39 per cent and 20 per cent in Madhya Pradesh and UP, respectively. Only 40 per cent artisans are associated with a Self-help Group (SHG) and 25 per cent have benefited from health insurance scheme in Madhya Pradesh and UP. However, in Assam, more than 87 per cent artisans are the members of an SHG, and 37 per cent have subscribed to the universal health insurance scheme.
So, what is the way forward for MSME clusters?
Besides availability of raw materials and other production aids, perpetual capacity building of artisans is the key.
For this, convergence of government schemes, fund management, and functional upgrading of clusters are critical to make the MSME sector self-reliant for an Aspirational India.
Dey is Chairman of CFAM, IIM Lucknow, and Banerjee is research associate of the Ministry of MSME-funded SFURTI evaluation project at IIM Lucknow. Views are personal.