Technology key to building MSMEs’ competitiveness; need to identify ‘sectors of excellence’ for growth: Experts

Technology key to building MSMEs’ competitiveness; need to identify ‘sectors of excellence’ for growth: Experts

  • Technology
  • May 22, 2022
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  • 7 minutes read

Ease of doing business for MSMEs: Indian micro, small and medium enterprises (MIPIME) certainly have a long way to go to be globally competitive. The scope for improvement in international markets is wide given its contribution to Indian exports at about 50 per cent and about 30 per cent share in gross domestic product. Therefore, MIPIs are critical to India’s overall ability to be a dominant player in world trade. In 2021, India ranked 43rdrd among 64 nations in the annual Global Competitiveness Index compiled by the Institute for Management Development (IMD). However, the country has been ranked in this position for three consecutive years. To improve the competitiveness of Indian companies, experts believed that technology was the key factor.

During a roundtable discussion on the competitiveness of MIPIs at SMExports 2022 Financial Express Online Summit on Friday, Ajay Sahai, Director General and Director General of the Federation of Export Organizations of India (FIEO) congratulated the government for the reclassification of MIPImes based on turnover instead of investment in the plant. and machinery in an old definition, as it would help the “internationalization” of MSMEs. However, if MSMEs want to increase their share of total GDP, they will have to focus on technology, he said.

“World trade is driven by technology sectors such as machinery, electronics and the automotive sector. The combined share of these three sectors reaches about 35 percent of world imports worth about 7 percent. trillion dollars and here our share is less than 0.9 per cent.So when we talk about MIPIMES, technology is very important.I am glad that some new emerging sectors like high end engineering and electronics they are seeing the arrival of new technologies, “Sahai added. The session was moderated by Soumyadeep Ganguly, a partner at McKinsey & Company.

It is important to note that the government had disrupted the credit-linked capital subsidy scheme for technology upgrade through a circular last year and formulated the SME champion scheme for small businesses to become sustainable, competitive. and innovative through financial assistance.

Among the key reasons for the lack of investment in technology by MIPIMES is, to a large extent, the compliance burden, which, although it has been reduced in recent years, there are still shortcomings such as liquidity. Sahai said that while the banks claim that there is no shortage of funds on their part and that they do not reject any worthy proposal, the MIPImes have always been fighting to get funds from the banks. Therefore, the government should study why there can be no end-to-end digitization of the entire credit process from the filing of the application to the disbursement, he said.

Another reason for the low investment in technology of the MIPImes has been the lack of funds, as a significant part of their funds is used to buy land or buildings. Here, Sahai suggested providing MIPIMES with a plug-and-play facility on land in excess of EEZ and industrial areas. “We must also try to provide marketing platforms to the MSMEs and a planned scheme with a very detailed map of what we have to do in five to ten years (in exports) and a significant fund should be available,” he added. .

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The growth of the MIPI sector in fiscal year 22 is likely to be around 15-17% in revenue due to the recovery in demand after the reactivation of economic activity with the gradual easing of Covid restrictions, an Assocham-Crisil study said in April. this year. The recovery after Covid was reported in sectors with construction, raw materials, exports and consumer services at the forefront. The growth of fiscal year 22 follows the negative growth of the sector in an estimated 10 percent in fiscal year 21 and 6 percent in fiscal year 2020. For the current fiscal year, the study estimated growth of 11 to 13%.

However, in order to grow from 15% to 25%, it is necessary to focus on some key sectors. Tamal Sarkar, senior advisor to the MIME Cluster Development Agency, MIPYMES Cluster Foundation, during the roundtable, suggested adopting the cluster approach to identify key sectors.

“Apart from the craft and loom clusters of the 5,000 or so MIPI clusters we have, there are between 1,400 and 1,500 clusters from 14-15 quite ‘advanced’ sectors such as machine tools, metal products, leather, etc. These are sectors of excellence that are driven by certain leading companies that are SMEs. Therefore, a policy that can identify more areas of excellence of this kind and give them a special advantage of advancing in value chains where yields are much higher will also infiltrate other clusters. ” said Sarkar.

For this to happen, MIPImes need exposure to global leadership clusters and also global technology institutions should come to India to open their centers in these sectors, ”he added.

Along with technology, the overall focus on quality is also important for MSMEs to maintain sustainability at any level of growth. So how do you build that mindset among MIPIMES? Mahesh Desai, Chairman of the Indian Export Promotion Council (EEPC) India, said that more awareness is needed along with the training of MIPImes on quality and also to take them abroad where they have to follow the guarantees of quality.

“For sustainability, the first thing to focus on is the innovation that can be done every day in the store. Then there is the collaboration (which needs to be formed) with larger companies and groups, and finally there is the development of human capital. In addition, there needs to be an industry-institute interface that needs to be improved, “Desai added.

India had upgraded the World Intellectual Property Organization’s (WIPO) Global Innovation Index to 46th ranks 2021 in 1321 out of 48 countriesth in 2020, 52nd in 2019, and 81st in 2015 due to exports of ICT services, diversification of domestic industry and other factors.

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