A bigger push towards digitalization will enable MSME sector in integrating with global value chains. Discuss (200 Words)
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Manish 3 years
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IAS Parliament 3 years
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IAS Parliament 3 years
KEY POINTS
· Micro, Small and Medium Enterprises (MSMEs) play a fundamental role in India’s economic growth, contributing 30 per cent to its GDP and nearly 50 per cent to its exports.
· With the manufacturing sector’s contribution to GDP hovering around the 15 per cent mark over the past two decades, MSMEs are seen as a way of re-energising the sector that will push its contribution to 25 per cent of GDP.
· MSMEs’ integration into GVCs, however, depends crucially on access to finance, as rightly recognised by the government.
· For example, NITI Aayog’s Export Preparedness Index (2021), released in March, covers access to finance as an important sub-pillar of export preparedness, in which the coastal States have performed better than others.
· A strong impetus towards greater digitalisation in finance is the need of the hour. Doing so will reduce the dependence of MSMEs on informal sources of finance and reduce their operation cost given the latter’s high lending rates.
· Additionally, the contribution of foreign investments in MSMEs also requires substantive consideration, because, for example, in the EU, MSMEs are the leaders in R&D, and their entry into India may also play an important role in addressing the twin challenges of investment and R&D.
