As India moves towards a $ 5 trillion economy with an expected 25 percent contribution from the manufacturing sector, MSMEs will have to step -up and evolve to the next level.
It’s a pre-requisite if small businesses are to play a pivotal role in the process of economic expansion. They are already key growth-engines; MSMEs contribute 30 per cent to the GDP and is all set to be the largest employment provider in the country.
Over the years, a number of governmental programmes have been announced and rolled out to address the multifarious challenges faced by MSMEs - from skilling to access to capital, technology and markets.
These initiatives are doing what they are expected to do in varying degrees but for that quantum leap to happen something more is needed. Managerial skills and management strategies.
Quality managerial skills are beginning to be recognised as vital for MSME growth and survival, especially in these times of high volatility and uncertainty. The pandemic and its aftermath were a revelation. The ability to bounce back in difficult situations or after a prolonged crisis – internal or external- need to absorbed and built-in.
Resilience, innovation and adaptive capacities are some of the key ingredients for MSME success. The need for small businesses to align with societal expectations as large corporations increasingly adopt ESG (environmental, social, governance) mandates is real and on the horizon. Those in corporate value chains have to prepare for supply chain regulations. It is now quite apparent that acquiring a future -ready status is a daunting task.
The role of IIM, Jammu Enhancing the managerial expertise of entrepreneurs and managers is therefore one of the principal focus areas of IIM, Jammu. The newly created Centre for Small Business Development (CSBD) will further this goal and attempt to bridge this gap in the entrepreneurial ecosystem.
An institutional mechanism and network to support- both aspiring and existing- entrepreneurs in this particular space is imperative; for beginners, it will be about learning the basics from ideation, crafting of business plans and for mature entrepreneurs it will be about growth and scaling up.
Small businesses with high innovation quality and clear management strategies and pathways play a significant role in pioneering new products, processes and developing new markets. Innovation support also leads to a rise in production and productivity.
From informal to formal
One of the distinctive characteristics of the Indian economy is the significant contribution of the informal sector in growth and employment. The informal economy in India still accounts for more than 80 percent of non-agricultural employment.
Broadly characterized as unregistered and/or small unincorporated entities engaged in the production of goods and services, the informal business enterprises are, typically, small scale, without contractual arrangements and division between capital and labour, and generate income and employment exclusively for the persons concerned.
They have minimal access to employment protection and external credit, and are vulnerable to shocks of all hues. The informal sector is prone to many hurdles in business operations thereby affecting the overall economic productivity in the country.
A recent report of RBI (2020) signalled a greater shift towards the formalization of the economy. Rising demand results in more economic opportunities, allowing more businesses and workers to move into formal market-based operations. Since the formalization of an economy signifies more effective taxation, government regulations, and social security systems, it should be deemed as a step toward higher levels of economic development.
SBDUs, a new class of entities
However, it requires a multi-dimensional intervention in transforming the informal sector into a formal one. The Centre for Small Business Development at IIM, Jammu is a step in this direction.
A proper mechanism needs to be devised that allows a smooth and supportive transition from informal to the formal sector. Small Business Development Units (SBDUs), a new class of entities, will take on this challenging task.
The SBDUs, anchored by the Ministry of Skill Development and Entrepreneurship (MSDE) in tandem with IIM, Jammu, are envisaged as an impactful, countrywide network, with a special focus on Jammu & Kashmir and the north eastern states.
It’s a high -impact institutional mechanism which will support small informal businesses through outreach and awareness, training, and also one -on-one advisory, on a need basis. The faculty of universities and management institutions are expected to drive the initiative.
This comprehensive approach is expected to usher the required transition that will not only promote formal entrepreneurship in the country but also go a long way in supporting India’s economic growth.