Need innovative policies targeting growth of MSMEs

Ms Dagmar Walter, Director ILO India, addressed the welcome session of a discussion on Resurgence of MSMEs: Inclusive and Sustainable Recovery in India

Statement | New Delhi, India | 25 June 2021

Namaskar and Good evening to you all,

Today, on the eve of World MSME Day, we all have gathered to appreciate the contributions of MSMEs to the growth and employment generation in India. We know that this sector is the lifeline of India’s economy, but has momentarily weakened due to the functional and economical challenges induced by the COVID-19 pandemic. We strongly believe that with a solid policy framework and technical assistance, MSMEs have the capacity to resurrect not just the economy but also ensure welfare of the workers.

As a co-host, it gives me immense pleasure to welcome all of you to this programme, particularly the speakers representing MSMEs. We will learn and cheer for the perseverance and innovations shown by them and intend to inspire many others in their journey of sustaining despite challenges of these times.

The Indian economy is full of micro and small businesses. Many of them are unregistered or informal. Women are a dominant player in the lower tiers of supply chains, working or running home-based and informal businesses. Investments and productivity are low, keeping units small and holding back growth potentials. Generally, MSMEs are extremely vulnerable to external shocks.

Around 70 per cent of all businesses in India employ fewer than 10 people, while close to 60 per cent are micro-enterprises employing fewer than six. Their struggle to survive is reflected in the management practises and working conditions adopted by them.

A key task for the ILO therefore is to help ensure that MSMEs are productive to generate incomes and livelihoods, and sustain jobs; where a safe workplace and decent working conditions contribute to the company’s success and sustainability.
COVID-19 pandemic has exposed the extreme vulnerability of the MSMEs. ILO’s Rapid Assessment of COVID-19 crisis on employment in India found that MSMEs and their workers are often left out from coverage under various policy measures, lack access to credit and savings, and are deprived of formal training or mentoring support.

Further corroborating this situation, our survey on COVID-19 impact on Indian MSMEs released this month, found that only 40 percent of the 1500 surveyed enterprises were able to access support of any kind. This may be caused by information asymmetry, high transaction costs, and digital barriers. During COVID-19, while many of the benefits of e-commerce and digital technology became apparent, the majority could not tap this potential due to limited digital access and literacy. The ILO report also points at the structural issues such as eligibility for workers and MSMEs to access the available support systems and the need for registration, alongside perceived risks by owners of compliance costs due to registration.
It is our responsibility therefore to support and guide MSMEs to a better and safer future with increased resilience.

The ILO in India is already supporting the entrepreneurship programmes of the Ministry of Micro, Small and Medium Enterprises and States, to improve outreach and success rate of start-ups. ILO’s Start and Improve Your Business programme, a key initiative in this regard, trained 10,000 youths, especially women during the pandemic, who have been economically mainstreamed and integrated in the value chain.

ILO’s Sustaining Competitive and Responsible Enterprises (SCORE) training in partnership with the Federation of Indian Chambers of Commerce & Industry (FICCI) and corporates is currently guiding more than 100 MSME suppliers on business continuity, quality and productivity management through a cooperative relationship with workers and managers.

ILO jointly with All India Organisation of Employers and FICCI has also set-up a MSME helpdesk to support enterprises with registration and business continuity knowledge. In parallel, the ILO is providing capacity building and training services to the cooperatives, collectives and producers groups enabling them to adjust to the ‘New Normal’ of the marketplace.

Today, the ILO fireside chat will present a brief kaleidoscope view of some of these initiatives and the stories of grit by three ILO beneficiaries, tackling the adversities brought by the pandemic. In the next two years, ILO will also focus on the development of value chains in the garment and fisheries sectors in Andhra Pradesh and Odisha in collaboration with South Korea.

In conclusion, I would like to say that COVID-19 presents challenges but also opportunities for MSMEs to reconfigure their products, services and business models in light of the ‘New Normal’. To do this, MSMEs, especially women-owned, require a conducive business environment and a supportive entrepreneurial and innovation ecosystem. One that promotes productivity and better working conditions. Government would need to prioritise reforms and other support measures that promote growth and innovation within MSMEs in order to pull the country out of the economic and social crisis created by the pandemic. It is paramount that the voices of MSME employers and workers are heard when designing, implementing and monitoring policy measures through a process of social dialogue. ILO with its 100 years of experience will extend all possible technical support and advice in shaping this human-centred recovery of the Indian world of work.

Thank you for your attention!