What is the issue?
Export growth is necessary for sustaining high growth and to create jobs in labour-intensive activities of the Small and Medium Enterprises (SMEs).
What is the importance of SMEs?
- 43% of jobs created in emerging economies are from SMEs.
- They could attract FDI, making India a hub for Global Value Chain (GVC).
- As a result they are likely to play a big role in promoting exports.
What are the issues with Indian SMEs?
- Limited Access - Indian SMEs lag behind due to limited access of information and technology.
- Workforce of Indian SMEs lacks the necessary skills to operate in a high-tech GVC environment.
- Quality Standards - Due to their inability to meet international product quality standards, demanded by an increasingly sophisticated international buyer, they have difficulty to be part of the GVC.
- Location - Unlike the large enterprises, several SMEs operate outside the main cities and suffer from lack of business environment and access to trade services.
- Representation - SMEs are also poorly represented in apex chambers of commerce and industry in India, which are dominated by large enterprises, who receive preferential access to trade services.
- Private sector - There is lack of private sector participation in the supply of trade services.
What needs to be done?
- Institutional reforms in trade policy are urgently required to make SMEs effective in promoting exports directly.
- The Ministry of MSME have no role in export promotion. This should be altered.
- An enlarged Department of Industrial Policy and Promotion could replace the Ministries of Commerce and Industry, Heavy Industry, and MSME, and promote development of industry, especially SMEs.
- Enterprises need to periodically train their workers in new design and packaging that satisfy fast-changing consumer trends.
Source: Business Standard
