Sustainability for MSMEs: A bustling powerhouse of innovation and entrepreneurship, MSMEs play a strategic role in India’s economy, contributing nearly 27 per cent to India’s GDP and employing over 111 million people across approximately 63 million enterprises.
Sustainability for MSMEs: When the United Nations designated June 27 as Micro, Small, and Medium-sized Enterprises (MSME) Day in 2017, it was an acknowledgement not just of the significant contribution that MSMEs make to the global economy but also how integral they are to achieving the Sustainable Development Goals (SDGs). A bustling powerhouse of innovation and entrepreneurship, MSMEs play a strategic role in India’s economy, contributing nearly 27 per cent to India’s GDP and employing over 111 million people across approximately 63 million enterprises.
MSMEs are responsible for a significant 33 per cent of the nation’s manufactured goods, they contribute to more than 49 per cent of total exports, and they manufacture over 8,000 products with added value, spanning from traditional to advanced tech items. MSMEs are also pivotal in fostering regional development through the industrialisation of rural and undeveloped areas and reducing socioeconomic disparities.
Development of the MSME sector can support in achieving multiple SDGs including SDG 1 (end poverty), SDG 2 (zero hunger), SDG 3 (good health and well-being), SDG 5 (gender equality), SDG 8 (promote inclusive and sustainable economic growth, employment and decent work), and SDG 9 (improve sustainable industrialisation and fostering innovation).
Enhancing productivity is crucial for fostering higher incomes and ensuring a decent standard of living for all. In India, significant strides have been made in productivity growth over recent decades. However, a substantial segment of the workforce continues to engage in low-productivity and informal work, with agriculture being a prominent sector. Through strategic capital deployment to maximise productivity gains, there has been a notable impact on uplifting incomes in areas where it is most needed.
MSMEs contribute significantly to the employment creation process of the private sector. In emerging markets, 4 out of 5 new positions in the formal sector were created by MSMEs, which is about 90 per cent of total employment. This approach has also facilitated the development of innovative and cost-effective goods, particularly in sectors that align with the SDGs. Moreover, it has stimulated the creation of new markets, contributing to overall economic growth and prosperity.
MSMEs are bridging the healthcare gap
MSMEs are increasingly assuming a pivotal role as innovators of cost-effective and scalable delivery models, driven by intensifying competition within the same customer segment. However, these enterprises encounter numerous challenges, including the absence of stringent regulatory standards and limited resources to hire skilled professionals capable of addressing operational inefficiencies. Facilitating support for small and medium-sized healthcare enterprises in overcoming these obstacles can significantly enhance healthcare provision and contribute to advancements in this field. With over 13,000 registered MSMEs in the pharmaceutical sector, India is witnessing improved health outcomes as a result, promoting good health and overall well-being.
Based on available data, the rate of women’s employment in registered MSMEs stands at 20.45 per cent, while in unregistered enterprises, it is reported at 13.02 per cent. Financial inclusion can play a significant role in promoting gender equality, with evidence indicating that 80 per cent of women-owned businesses facing credit needs are underserved or completely unserved, resulting in a financing gap of approximately $1.7 trillion. Women entrepreneurs, particularly those from rural and economically disadvantaged communities, often face challenges in growing their businesses due to a lack of land deeds or collateral necessary to access formal credit sources.
However, research shows that women are diligent savers, responsible borrowers, and calculated risk-takers. MSMEs, like larger corporations, can be motivated to implement gender-inclusive policies both internally and throughout their value chains. This entails guaranteeing equal pay and benefits for work of equal value, adopting a zero-tolerance approach towards workplace violence, offering flexible work arrangements to support women, providing childcare and dependent care assistance, promoting women to managerial positions, and striving for gender balance within their teams.
Sustainability and environmental consciousness must be ingrained in the DNA of MSMEs. As we chart a path toward a greener future, MSMEs can lead the way by adopting sustainable practices, embracing clean technologies, and minimising their carbon footprint. Investing in renewable energy, waste management, and resource efficiency can not only enhance their competitiveness but also contribute to India’s commitment to a sustainable and resilient future. MSMEs that prioritise environmental, social and governance (ESG) factors can access innovative financial products, which increases their access to much-needed finance for them to grow and play a pivotal role in the transition toward a more sustainable global economy.
Despite the remarkable contributions of the MSME sector, several challenges hinder its full potential. For India’s MSMEs to thrive in a rapidly evolving business landscape and contribute to India’s roadmap to a $20 trillion economy by 2047, it is crucial to address these challenges through the right support and strategic interventions. A healthy and vibrant MSME sector is not just desirable but necessary for India’s economic ambitions.
To fully unleash the power of MSMEs, we must harness the sector’s growth potential effectively by focusing on reducing the cost of credit, providing access to modern technology, streamlining the regulatory environment, and creating a robust infrastructure for skill development. Of course, one must remember that financial innovation is a means to an end and not an end in itself. We must ensure that these advancements reach all MSMEs, especially those in developing economies and remote areas. Investments must be aligned with government priorities. Collaboration and partnerships between investors, government agencies, and industry associations must ensure the effective utilisation of resources.
The resilience, agility, and adaptability displayed by MSMEs have solidified their position as a vital pillar of our economy. We must work towards empowering and equipping our MSMEs, ensuring their readiness for the future, and enabling them to continue as the catalysts for India’s economic growth and innovation as we march towards the vision of India@100!