Finance Minister Nirmala Sitharaman has declared India’s commitment to spearhead global efforts in unlocking the potential of Micro, Small, and Medium Enterprises (MSMEs).
This initiative aligns with the Jaipur Call for Action issued by G20 Trade Ministers in August, emphasizing improved information access for MSMEs. Sitharaman, ahead of the virtual G20 Leaders’ Summit, expressed India’s intention to drive the Jaipur Call for Action through collaborative efforts with G20 and WTO. The initiative aims to unleash the full potential of MSMEs, recognizing their crucial role not only in India’s but also in the global economy.
“They play a key role in sustaining livelihoods, in particular among the working poor, women, youth, and groups in vulnerable situations. However, MSMEs, particularly in developing nations, often struggle with limited access to information, hindering their international trade involvement,” she said.
“Policy coordination, both global as well as domestic, is critical to ensure that growth comes back on track and remains strong, sustainable, balanced and inclusive,” she said.
The Jaipur Call for Action urged the International Trade Center (ITC) in Geneva to formulate an implementation plan, in consultation with UNCTAD and WTO, to enhance the ITC’s Global Trade Helpdesk. This plan seeks to address information gaps faced by MSMEs. Sitharaman underscored the significance of MSMEs during a webinar on ‘Strong, Sustainable, Balanced, and Inclusive Growth,’ highlighting them as the growth engines of the Indian economy.
Under India’s G20 Presidency, significant attention was dedicated to integrating MSMEs into international trade. These enterprises make substantial contributions, accounting for 90% of businesses, 60 to 70% of employment, and 50% of GDP globally. However, MSMEs in developing nations often face challenges due to limited access to information, impeding their participation in international trade.
Sitharaman shed light on the global economy’s post-pandemic challenges, emphasizing the need for coordinated policy efforts to ensure strong, sustainable, balanced, and inclusive growth. Projections from the International Monetary Fund indicate a slowdown in world economic growth, with India’s GDP growth estimated at 6.3% in 2023-24.
During India’s G20 Presidency, concerted efforts were made to address concerns of the Global South, leverage technology for development, and enhance the effectiveness of multilateral institutions in navigating the complex development financing landscape of the 21st century, as outlined in the New Delhi Leaders’ Declaration.
Poised for growth
India’s micro, small, and medium enterprise (MSME) sector is gearing up for significant expansion, with expectations of the number of enterprises soaring from 6.3 crore to an estimated 7.5 crore. This growth is anticipated to unfold at a steady Compound Annual Growth Rate (CAGR) of 2.5%, underlining the resilience and dynamism of the MSME landscape. The sector witnessed substantial momentum from 2019 to 2020, boasting an impressive 18.5% CAGR in this period. Fiscal Year 2021 marked a remarkable upswing in MSME loan disbursals, reaching Rs. 9.5 trillion (US$ 128.06 billion), signifying a substantial 40% increase compared to the previous fiscal year’s figure of Rs. 6.8 trillion (US$ 91.66 billion).
Underpinning the MSME sector’s support structure are five vital statutory bodies—KVIC, Coir Board, NSIC, NI-MSME, and the MGIRI—overseen by the MSME Ministry. These bodies play instrumental roles in aligning MSMEs with government schemes and policies, ensuring a conducive environment for growth.
The government has rolled out comprehensive initiatives to fortify the MSME ecosystem. The “Vivad se Vishwas I-Relief to MSMEs” scheme, launched in May 2023, stands as a testament to this commitment. Introduced by the Department of Expenditure, Ministry of Finance, the program aims to provide essential relief to MSMEs navigating the challenges posed by the COVID-19 period, with its inception announced in the Union Budget 2023-24 by Union Finance Minister Ms. Nirmala Sitharaman.
Further reinforcing its commitment, the government unveiled transformative policies in the budget for 2023-24. The introduction of a unified Skill India Digital Platform is set to revolutionize skilling, facilitating demand-based formal training and connecting job seekers with employers, including MSMEs. Additionally, the revamping of the credit guarantee scheme for MSMEs, effective from April 1, 2023, injects Rs 9,000 crore (US$ 1.09 billion) into the corpus. This revamped scheme is designed to provide an additional Rs 2 lakh crore (US$ 24.41 billion) in collateral-free guaranteed credit while reducing the overall cost of credit by about 1%. These policy interventions underscore the government’s dedication to fostering a robust and inclusive MSME sector in India.
The developments in India’s MSME sector outlined above carry relevance for Australian businesses on several fronts:
- Global Market Dynamics: As the MSME sector in India experiences growth, it presents potential business opportunities for Australian enterprises looking to expand internationally. Collaborations, partnerships, and trade relations with Indian MSMEs could be avenues for Australian businesses to explore.
- Supply Chain Impacts: Given India’s significant role in the global supply chain, the growth of its MSME sector may impact supply chain dynamics. Australian businesses, particularly those engaged in international trade, may need to assess and adapt their supply chain strategies to account for changes and opportunities in the Indian market.
- Collaborative Ventures: The initiatives introduced by the Indian government to support MSMEs, such as the Skill India Digital Platform and the revamped credit guarantee scheme, present opportunities for collaborative ventures between Australian and Indian businesses. Australian companies specializing in technology, skill development, or financial services could explore partnerships or engagement with Indian MSMEs in these areas.
- Policy Insights: Observing the policy interventions in India’s MSME sector provides insights for Australian policymakers and business leaders. Understanding the strategies employed by India to support and foster MSME growth can offer valuable lessons for designing effective policies to nurture the SME ecosystem in Australia.
- Economic Trends and Opportunities: The overall economic trends in India, including MSME growth and government support, can serve as indicators of the broader economic landscape. Australian businesses can use these trends to assess the economic environment in one of the world’s fastest-growing economies and potentially identify new areas for investment or collaboration.
- Global Economic Interconnectedness: The interconnectedness of the global economy means that developments in one part of the world can have ripple effects elsewhere. Changes in India’s MSME sector may indirectly influence global economic conditions, including factors that impact Australian businesses, such as commodity prices, demand for goods and services, and currency exchange rates.