As it combats the coronavirus, India needs to support MSMEs and boost domestic production for ensuring supply chains are not unduly disrupted.
- Dilip Rath
The COVID-19 pandemic has heavily disrupted global supply chains largely dependent on the Dragon Kingdom. Be it telecom supplies, Rare Earth minerals, Active Pharmaceutical Ingredients (APIs) and other key elements, disruptions in supplies have led to shortages of key items. In turn, varied sectors have had to suspend operations while prices soared due to these disruptions.
It is against this backdrop that Honourable Prime Minister Shri Narendra Modi’s recent announcement about being “vocal for local” needs to be viewed. The PM’s emphasis on self-reliance is already a part of our national ethos. Let’s not forget, it was the Swadeshi Movement that rocked the British in the early 20th Century.
Similarly, as the world reels from the devastating repercussions of the COVID-19 outbreak, this is the right moment when India can promote ‘Aatma Nirbhar Bharat’ and ‘Make in India’ mission by incentivising Indian companies as well as foreign companies seeking to relocate their operations from other countries.
Self-reliance and MSMEs
Moreover, there cannot be a better moment than the present when the country has unveiled a slew of economic and policy reforms. The Centre has opened up all the sectors hitherto reserved for the public sector in non-strategic domains, permitting private companies to invest in these industries.[Centre decides to open all public sectors for private companies, to stay in strategic areas, Zee News, 17 May 2020
] As per the Central Government’s vision, a self-reliant India or Aatma Nirbhar Bharat will be created through the new Public Sector Enterprise Policy. In strategic sectors, however, while private investments will be permitted, at least one public sector enterprise will continue to operate to ensure competition and avoid private monopolies.
As the focus shifts to self-reliance as well as domestic production and manufacturing, the Centre is cognizant of the fact that Micro, Small and Medium Enterprises (MSMEs) are India’s largest job creators. A survey by Confederation of Indian Industry (CII) reveals that in the last four years, MSMEs were the nation’s largest job creators. Backed by 13.9% growth during this period, MSMEs will continue being the top job creators for the next three years too.[MSME sector created most jobs in last four years: Survey, The Hindu Business Line, 08 March 2019
] Titled ‘Survey on Jobs Creation and Outlook in MSME Sector’, it noted that MSMEs needed more handholding since they were yet to fully capitalise on certain beneficial government initiatives.
Against this backdrop, the Centre has announced a series of steps to help MSMEs withstand the impact of COVID-19 on the Indian economy. Accordingly, MSMEs are eligible for collateral-free automatic loans with a four-year loan tenure.[ FM Nirmala Sitharaman announces collateral-free automatic loans for MSMEs for 4-year-tenure, Zee News, 13 May 2020
] A variety of subordinate debt-based schemes offering liquidity of Rs20,000 crore will benefit stressed MSMEs. Also, MSMEs that are viable and eligible will qualify for Rs50,000 crore equity infusion. Besides eventual listing, the measures will assist in capacity expansion. Significantly, the same benefits will be permitted for manufacturing as well as service-based MSMEs for economies of scale. This policy will help in creating a level-playing field for the two segments.
Furthering the sharpening of its focus on domestic production, the Centre has paid heed to the MSMEs citing unfair competition from foreign entities in government procurement tenders based on the size and strength advantage of these companies. Therefore, global tenders in such schemes up to Rs200 crore will no longer be allowed. This apart, other incentives to MSMEs – such as doing away with audits for small entities with an annual turnover of Rs5 crore – would also be helpful.
Yet, more often in the past, the discourse in the public domain focussed on supporting big companies or MNCs while MSMEs remained largely forgotten or were mentioned in passing. This paradigm needs to change if the country seeks to promote greater jobs creation and follow the PM’s “vocal for local” call.
This brings us back to the Swadeshi rationale. Quite often we hear about talk on regional asmita (pride, self-respect) in certain circumstances. Apart from simply regional, we should also focus on Bharatiya asmita. It is through the spirit of cooperative federalism that the nation can take faster strides and reach greater heights of prosperity, benefitting all states and Union Territories, big or small.
Remember, it was the concept of dairy cooperatives that made India self-sufficient in milk. Later, this cooperative success led to growth of private sector in the dairy industry, which is doing equally well as they continue adhering to the Indian ethos of cooperation while keeping the societal good in mind.
Finally, it is important to note that, after agriculture, MSMEs are the top job creators, employing 120 million people in various verticals.[ MSME: Growth Driver of the Indian Economy, CII Report, 30 January 2020
] Fortunately, the top leadership is well aware of the role of MSMEs in employment and economic spheres, and the Finance Minister has already announced a series of measures highlighted earlier.
India needs to follow its own and unique model of development, which can be tweaked across states to reflect local aspirations and ground realities. As the world has been witnessing over the past few decades, the western economic model based on unbridled spending and over exploitation of natural resources can have disastrous environmental impact and can create serious social, economic and financial fault lines and volatility that could trigger economic disruptions. When an unexpected pandemic strikes, it only exacerbates any ongoing crises.
The ‘Aatma Nirbhar Bharat Abhiyaan ’ announced by the Honourable Prime Minister would go a long way in rejuvenating our rural sector. The National Dairy Development Board has already demonstrated sustainable business models in promoting scientific dairying and adoption of integrated approach to farming, centred around dairying, to include poultry, horticulture, fisheries, manure management, bee keeping and organic farming practices, which would enhance incomes of farmers and create rural wealth. Gandhiji’s dream of Gram Swaraj re-articulated by the Honourable Prime Minister in his vision for Swachh Bharat Abhiyaan and Adarsh Gram Yojana has the power to transform rural economy and serve as the foundation for building a truly self-reliant India. It is time for all stakeholders to work in coordination to achieve the much cherished goal of “vocal for local”.
(The author is Chairman, National Dairy Development Board & Chairman, Institute of Rural Management Anand)