Understanding the foundational strengths and limitations of Micro, Small and Medium Enterprises
Shrikant Pangarkar
Sr Partner, SIL
The MSME sector manufactures more than 80,000 diverse products, ranging from low-tech items to technologically advanced products. It can be observed from the pie chart on the earlier page that 97.7% of the total MSMEs are Micro enterprises. These are run by proprietors or their families as their means of earning livelihood.
They have many weaknesses which preclude their advance from becoming big. Their weaknesses include:
Therefore, this book should provide them with at least the vision and knowledge about what they need to embark on, to sustain and grow, and NOT fail. The success rate should grow. If the success rate grows by 1%, nearly 600000 more units will survive.
One of the potential ways to increase survival and sustenance rates is by adding to the capabilities of their leaders to face and win over the challenges encountered in the market forces like the volatility of demand, technological difficulties, facing clients who are bigger and stronger economically, and most important being management of cash.
The problem of fluctuating cash flow is the most daunting of them all. Till their size grows to a minimum threshold level, they are vulnerable, and they find it difficult to manage the vicissitudes of market forces. The MSME sector is recognized as the engine of growth, accounting for about 70% of employment and contributing a significant amount to the growth of GDP. Globally, 99 percent of all enterprises in the world are MSMEs and the remaining 1% percent are large-scale enterprises (by Number of units).
By contrast, the SSI sector in India accounts for 95 percent of all industrial units. These leave them on a weak platform to pursue planned growth and they face starvation of growth capital. This sector targets both domestic as well global markets.
MSMEs are widening their domain across sectors of the economy, producing a diverse range of products and services to meet the demands of domestic as well as global markets. The figures shown on the next page are taken from the Annual Report of the MSME ministry.
The Micro, Small, and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. It contributes significantly to the economic and social development of the country by promoting entrepreneurship and generating large employment opportunities at comparatively lower capital costs, next only to agriculture.
MSMEs are complementary to large industries as ancillary units, and this sector contributes significantly to the inclusive industrial development of the country. MSMEs are widening their domain across sectors of the economy, producing a diverse range of products and services to meet the demands of domestic as well as global markets. Public Procurement Policy makes it mandatory for public sector companies to procure 25% of their total purchases from MSMEs including a special provision of 3% procurement from women entrepreneurs. This policy creates demand for SME products and promotes women's entrepreneurship.
Therefore, this book should provide them with vision and knowledge about what they need to embark on, to sustain and grow, and NOT fail. If the success rate grows by 1%, nearly 600000 more units will survive.
One potential way to increase survival is by adding to the capabilities of leaders to face market challenges such as volatile demand, technological difficulties, stronger clients, and most importantly cash management.
The problem of fluctuating cash flow is the most daunting. Until they grow to a minimum threshold level, they remain vulnerable. The MSME sector accounts for about 70% of employment and contributes significantly to GDP.
Globally, 99% of all enterprises are MSMEs. In India, SSI accounts for 95% of all industrial units, leaving them on a weak platform to pursue planned growth.
MSMEs are widening their domain across sectors, producing diverse products and services. Public Procurement Policy mandates 25% purchase from MSMEs, including 3% from women entrepreneurs, boosting demand.
MSMEs contribute significantly to entrepreneurship, social development, employment, and industrial inclusivity. They complement large industries as ancillary units.
MSMEs produce a diverse range of products and services for both domestic and global markets. Figures shown are from the Annual Report of the MSME ministry.
