Challenges for MSMEs in the Current Economy
Introduction
Micro Small and Medium Enterprises (MSME) forms the backbone of the Indian Business Sector. There are more than 50 Million MSMEs in India which contributes to almost 45% of Indian Gross Domestic Product. Approximately 46 Crore Indians are employed by these MSMEs. This sector is growing by 11.5% every year. Hence this becomes a very important aspect for India to take care of if India wants to become a 5 Trillion Dollar Economy in the near future.
But currently, it is riddled with many challenges. Let’s discuss a few challenges which the Micro Small and Medium Enterprises in India are facing currently.
Loan Accessibility
The MSMEs are mainly started using personal savings and getting funds from relatives and friends. They do not have existing assets generally, to begin with. So getting a loan was always a problem for this sector as they do not have any assets to loan against. The Loan accessibility problem has increased in the recent past as the big loan defaulters have impacted NPA of the Banks and thus banks now are being extra careful in lending loans. The MSMEs are facing the burn from this situation.
Skilled labour
India has an abundance of unskilled labour. But when it comes to skilled labour, it doesn’t come cheap as the demand is high and supply is limited. And this cost hampers the cash flow of MSMEs. India should have a robust skill development system to solve this problem. The NSDC was set up by the current government in 2014 but they have yet not had a great impact on solving this issue thus, time will tell it’s effectiveness.
Technology Adaptation
“The one who adapts will sustain and grow” is the mantra in today’s day and age of business. The MSMEs still has basic issues to solve as discussed above. Thus adaptation to technology doesn’t become a priority to these MSMEs. Which again hampers their growth.
Knowledge
It is critical to empower this sector with current best practices from across India and Globe. The marketing strategies need to be upgraded. All this is possible if the knowledge is free-flowing. Most of the MSMEs are still using old practices.
Expansion Constraints
Many MSME fear failing and hence they do not take risks and expand. If they are backed by strong government policies that will safeguard them, then it can be a great boon for this sector.
