The MSME sector accounts for 45% of the manufacturing sector and the government is keen to strengthen it since it is a large employment provider. There are around 3.6 crore such enterprises, employing over 8 crore people. India's share in manufacturing has stagnated at 16% when pitted against neighbours like China (30%), Singapore (22%), Thailand (36%) and Malaysia (25%).
"The proposal of making 30% mandatory procurement from MSMEs seems untenable and unsustainable. Instead, policies should be designed to ease their pain and make MSMEs competitive," said S Gandhikumar, president, Federation of Indian Micro and Small & Medium Enterprises.
The Confederation of Indian Industry supported the proposal, but said sector-specific sensitivities need to be kept in mind before imposing such a condition.
"Mandating 30% sourcing from MSMEs will mean technology transfer and mentoring to enhance manufacturing in smaller units, which will help them grow," said Sujith Haridas, deputy director general, CII.
He further pointed out that already some large enterprises in sectors like textiles are sourcing more than 30% from MSMEs, but it would be difficult for some other sectors involving high strategic items to source from smaller enterprises. "Sector-sensitivity will be important here, and across-the-board mandatory sourcing for all large private enterprises may not work," he added.