{"id":4884,"date":"2019-11-11T17:28:03","date_gmt":"2019-11-11T11:58:03","guid":{"rendered":"https:\/\/triumphias.com\/blog\/?p=4884"},"modified":"2019-11-11T17:28:03","modified_gmt":"2019-11-11T11:58:03","slug":"boosting-msmes","status":"publish","type":"post","link":"https:\/\/triumphias.com\/blog\/boosting-msmes\/","title":{"rendered":"Boosting MSMEs"},"content":{"rendered":"

Relevance: Mains: G.S paper III: Indian Economy<\/strong><\/p>\n

Context<\/h3>\n

\u2022 Getting MSMEs employ 92 per cent of the workforce, to grow more rapidly should be one of the pillars of any strategy for job creation.<\/p>\n

\u2022 Compliance with the over 40 labour laws becomes mandatory once the number of workers employed by a firm crosses the prescribed threshold.<\/p>\n

Different thresholds under different laws:<\/h3>\n

\u2022 Small firms find the costs of compliance too high and so often prefer to remain small or open a few more units in other names.<\/p>\n

\u2022 They lose the gains that flow from the economies of scale.<\/p>\n

\u2022 It is with scale that technological modernisation, marketing and advertising, which are necessary for
\ngrowth, make commercial sense.<\/p>\n

\u2022 Converting the over 40 labour laws into the proposed four codes is an overdue reform.<\/p>\n

\u2022 Putting in place a social safety net would make the provision of labour market flexibility easier in the new codes.<\/p>\n

\u2022 Such flexibility reduces the risk perception in expanding the workforce.<\/p>\n

Regulatory burden<\/h3>\n

\u2022 Regulation of enterprises for human safety, health and the environment and ensuring compliance with prescribed standards is naturally essential. But the regulatory burden for enterprises is still too high.<\/p>\n

\u2022 Overlapping and redundant regulatory requirements need to be scrapped. Detailed work and micro decisions need to be taken across regulatory regimes in the Centre as well as the States. To illustrate, a good question to ask would be why any permission, once granted, should need renewal.<\/p>\n

\u2022 Government inspections for compliance with standards could also be gradually replaced by a credible system of third-party certification.<\/p>\n

\u2022 This would go a long way in reducing the transaction costs of compliance, and at the same time lead to better compliance.<\/p>\n

\u2022 A good beginning has been made with third-party boiler inspection and certification. This approach can easily be extended to all certification.<\/p>\n

\u2022 As with chartered accountancy firms, an effective system of oversight over certifying firms can also be put in place.<\/p>\n

\u2022 The key is to improve a firm\u2019s perception of the costs of compliance and their associated risks, which need to be brought down to the level of competitive locations overseas.<\/p>\n

Labour productivity<\/h3>\n

\u2022 Progress is also needed in lowering the factor costs of production for MSMEs.<\/p>\n

\u2022 Wages in India are low; they need to rise for poverty to decline.<\/p>\n

\u2022 But when it comes to wage costs per unit of production, MSMEs lose on account of the low productivity of their labour.<\/p>\n

\u2022 Labour productivity in the modern organised sector with large plants is not an issue, as these firms train their workers and supervisors.<\/p>\n

\u2022 MSMEs are, by and large, not able to provide adequate training.<\/p>\n

Skill upgradation is needed:<\/h3>\n

\u2022 The National Skill Mission should accord as much, if not more, priority to training and skill upgradation of the existing workforce vis-a-vis imparting skills to the young people who are entering the workforce.<\/p>\n

\u2022 Skill upgradation would need to be designed and implemented creatively in a way that factors in the natural inclination of the employer and worker, respectively, to not lose any production, or wages.<\/p>\n

\u2022 The programme would need to be designed for industry segments and implemented across industrial clusters after testing and tinkering it for one unit.<\/p>\n

\u2022 Spending public money for such skill upgradation would be well worth it.<\/p>\n

\u2022 It would increase competitiveness, facilitate growth and create more jobs.<\/p>\n

\u2022 Success of existing enterprises is the key to getting new entrants in that area of that industry.<\/p>\n

Industrial land usage<\/h3>\n

\u2022 Land for MSMEs is a major constraint. It needs to be recalled that, across the world, structural transformation through industrialisation has taken place in cities.<\/p>\n

\u2022 Mumbai and Kolkata grew into major commercial and industrial cities over a period of 100 years prior to Independence, with flexible and pragmatic land-use regulations to facilitate growth.<\/p>\n

\u2022 Rigidities have gradually crept into the system to such an extent that recently, in Delhi, the closure of hundreds of gyms that had come up in residential areas to cater to demand has been ordered.<\/p>\n

\u2022 Many micro enterprises emerge in non-conforming areas and then try to stay in the non-formal economy.<\/p>\n

\u2022 Growing into a small and then medium enterprise is difficult for them. Land is not available and prices are too high.<\/p>\n

\u2022 A \u2018plug and play\u2019 system is being talked about but needs to be made a reality soon across the country.<\/p>\n

Way ahead<\/h3>\n

\u2022 There is need for a functional system which can quickly identify this need and provide developed land in new industrial parks, with the development done by a state agency directly, or in a PPP mode.<\/p>\n

\u2022 Further, there are a large number of usable plots lying idle for years in industrial parks across the country, where units have become sick and gone into bankruptcy.<\/p>\n

\u2022 An efficient, quick system for releasing these lands for industrial use by new units should be put in place by the Central government.<\/p>\n

\u2022 Technological modernisation and competitiveness are essential not only for growth but also for survival.<\/p>\n

\u2022 PPPs for such modernisation are worth attempting; this can be done by getting the best technological capability for an industrial segment and taking up one cluster for a turnaround.<\/p>\n

\u2022 Bulk procurement of capital goods and leasing them may be easier than trying to get individual enterprises to make major investments.<\/p>\n

\u2022 A much lower GST rate for such leasing would be amply justified.<\/p>\n

Conclusion<\/h3>\n

\u2022 MSMEs can be made to achieve their full potential and create an increasing number of jobs.<\/p>\n

\u2022 But this needs focussed attention with policy changes, additional State interventions and more public funding.<\/p>\n","protected":false},"excerpt":{"rendered":"

Relevance: Mains: G.S paper III: Indian Economy Context \u2022 Getting MSMEs employ 92 per cent of the workforce, to grow<\/p>\n","protected":false},"author":1,"featured_media":3247,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[123,42,43],"tags":[392],"class_list":["post-4884","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-current-affairs","category-general-studies-iii-technology-economic-development-bio-diversity-environment-security-and-disaster-management","category-indian-economy","tag-union-public-service-commission-upsc"],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/posts\/4884","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/comments?post=4884"}],"version-history":[{"count":1,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/posts\/4884\/revisions"}],"predecessor-version":[{"id":4885,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/posts\/4884\/revisions\/4885"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/media\/3247"}],"wp:attachment":[{"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/media?parent=4884"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/categories?post=4884"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/tags?post=4884"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}