MSMEs to lead India’s mission to $5 trillion

Sme Growth by Guest Writer

According to a report published by Morgan Stanley, India would become a $5 trillion economy by 2025. Top politicians and industrialists also think that India can achieve the mark of $5 trillion by 2025. As of today, India has a GDP of $2.264 trillion growing at the rate of 6.9% per year (avg. of GDP rate from 2012-2016). With this growth rate, by the end of 2025 India would have become a $3.83 trillion economy. At the current rate, we will be well short of the target by $1.17 trillion.

Push from the government

Given the current gap, it is clear that serious measures are being taken to increase the GDP rate to achieve the target of $5 trillion in coming ten years. Tax reforms, government schemes and initiative, policy reforms, push to B2B e-commerce platforms, promoting alternate lending organizations are such steps which indicate that government is banking upon micro, small and medium enterprises’ (MSMEs) growth to become a $5 trillion economy by 2025.

The realization of many reforms made the MSME sector highly upbeat in 2016 and 2017. These include Pradhan Mantri MUDRA Yojana, Startup India, Make in India, Skill India along with re-implementation of Public Procurement Policy. To increase the growth of manufacturing sector and to increase its share of GDP, the government of India plans to make financial and technical support more accessible for MSMEs. For MSMEs, the monumental decision to implement GST Bill will create more transparency in tax process, eradicate indirect taxes, help draw projections of production cost and allow easy access to trade in new geographies locally and globally.

Learning from global leaders

Past couple of years saw a rise in MSME focused B2B e-commerce. The availability of advanced technology in 2017 has opened new channels for businesses across sectors. This is also true for B2B e-commerce platforms focused on the Indian MSME sector. The presence of innovative platforms has allowed MSMEs to sell products on multiple channels at once. But selling on multiple platforms will not be enough. Expansion of business and increase in profit will be a function of inventory control and up-to-date technology.

We have numerous examples of businesses which grew exponentially because of their superior control over inventory management. Amazon, Walmart, Toyota and Zara are few names that used advanced technology and innovative business processes like just-in-time inventory to reach to the heights they are today contributing heavily to national and global economy. Therefore MSMEs will be adopting technologies to centralize inventory in order to maintain stock accuracy on various channels and to fulfill each order without compromising on speed and quality. A centralized inventory environment will create a win-win situation for all and will help create a trustful relationship between established brands and new enterprises.

Gaining momentum with the help of technology and collaborations

MSMEs commerce is gaining momentum with the advent of many innovative sales channels, majorly online. The decision makers at these MSMEs understand that their decision making needs to be swift and backed by statistics. To achieve the same, MSMEs are mapping their entire business process on cloud-based software to be able to access their data from anywhere and anytime.

Manufacturers are using technology to plan inventory in advance and purchasing the right amount of raw material needed to build desired inventory. The benefits of planning inventory in advance have multifold benefits. The most visible one is a reduction in wastage and avoiding quality related problems such as degradation and possible obsolescence. The biggest disadvantage of holding excess inventory is tying up of funds. A shocking amount of capital is tied up in inventory. Inventory along with accounts receivable and accounts payable could tie up a major chunk of country’s GDP. By pre-planning inventory, these funds are freed and could be used in other areas such as research and development or marketing. Some might argue that excess inventory helps in creating a buffer for a sudden rise in demand but given the vast horizon of Indian enterprises, this problem can be easily targeted by relevant collaborations.

Adopting modern day business practices

Continuous financial and technological support are important to enable MSMEs to lead India’s $5 trillion mission. Non-availability of finance has been a constraint in the growth of MSMEs in the past. Many traditional banks do not find MSMEs suitable when it comes to lending. Several fintech organizations are making it convenient for the MSMEs to get the financial assistance they need. The year 2017 experienced a surge in non-banking financial companies(NBFCs) with a special focus on offering quick and customised loan solutions to MSMEs. These alternative lending companies analyze credit-worthiness using analytics and other metrics like their sales and fulfillment records and disburse loan in less than 48 hours.

MSMEs have come to an understanding that in both traditional banks and present-day fintech companies they will need to prove their credit-worthiness in a lucid and straightforward manner. This becomes a major reason to adopt tech for their entire business process in order to keep things simple and transparent so as to avoid hassles and blockades that may arrive later due to traditional business practices.

Conclusion

The MSME sector is seen as the backbone of Indian economy. India’s road to $5 trillion relies heavily on the success of its MSMEs. The government has realized the need to provide a pathway for MSMEs to gain momentum but in an ordered manner. Having witnessed major reforms in taxes and policies at national level and with the rise of technological and financial support, MSMEs big or small, old or new, have been offered an equal footing to thrive globally. It then becomes the responsibility of MSMEs and its workforce to ditch traditional business methods and adopts contemporary practices to gain frictionless support for their growth and lead India out of poverty into a global superpower.

Guest Writer

Guest Writer