By Pradeep Multani
Ease of Doing Business for MSMEs: The MSME sector in India has been contributing significantly to the country’s economy as a major partner in the socio-economic development process. MSMEs are able to survive in the current competitive environment due to their flexibility and resilience. However, there are many persistent challenges like availability of adequate credit, access to the market, appropriate technologies for achieving scale and quality and other administrative & governance issues which need to be addressed on regular basis.
In order to mitigate the adverse impact of Covid-19 on the operations of the MSME sector, the Government of India has made several announcements to bring changes in policies to promote the interests of MSMEs and make their operations comparatively easier. Recently the government had approved an $808 million (Rs 6062.45 crore) programme on ‘Raising and Accelerating MSME Performance’ (RAMP), a scheme partially funded by the World Bank, which would commence from FY 2022-23. The major objectives of the programme are to improve access to market and credit, strengthen institutions and governance at the centre and state, improve centre-state linkages and partnerships, address issues of delayed payments, and greening of MSMEs.
While the RAMP Program has laudable objectives, but, it is reported to encompass a large number of goals which are quite widespread, requiring too many targeted outcomes. For example, it is stated that the RAMP program will address the generic and Covid-related challenges in the MSME sector by way of the impact enhancement of existing MSME schemes, especially on the competitiveness front. This objective seems unclear for its outcomes as there have been many Covid-induced challenges for MSMEs in areas of finance, marketing, labour, logistics, raw materials and compliances etc.
Hence, clear outcomes expected to be achieved through the implementation of RAMP need to be defined. Further, the programme is reported to bolster the inadequately addressed blocks of capacity building, handholding, skill development, quality enrichment, technological up-gradation, digitization, outreach, and marketing promotion, amongst other things. These are many ambitious goals that can only be achieved with adequate planning and implementation strategy with clear measurable targets under each of these objectives for getting effective results from the RAMP programme.
The programme also envisages enhanced collaboration with states for job creation, marketing promotion, finance facilitation, supporting vulnerable sections of society, and greening initiatives. The states are expected to prepare ‘Strategic Investment Plans’ (SIPs) which would act as the road map for the development of their respective MSME ecosystem. This will require the alignment of states’ promotional policies with such SIPs in view of the fact that states have their own MSME policies and programmes, and they would need to dovetail their promotional programmes with RAMP through SIPs.
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If there is one area that needs more attention in the states, it is the revamping and strengthening of MSMEs’ industrial clusters. Clusters play a big role in the success of MSMEs due to the ecosystem or network effect they create. The current situation of industrial estates/clusters in states is quite dilapidated and the pace of development of new industrial estates is not enough to enable large scale growth of MSMEs. The Ministry of MSME has been operating a ‘Cluster Development Programme’ through which infrastructure for common facilities is created in various industrial clusters with financial subsidy from the central budget.
It would be advisable that under the RAMP programme, rehabilitation of existing industrial estates/clusters and development of new industrial clusters are given prominence in the Strategic Development Plan of the states which can be assisted by the RAMP programme. Further, the programme can be utilised effectively for the development of common infrastructure, testing labs, and establishing marketing cooperatives and information centres in the clusters which would be focused interventions to achieve many of the objectives anticipated in the RAMP programme.
Moreover, one of the requirements for the disbursement of funds from the World Bank towards RAMP is the fulfilment of ‘Disbursement Linked Indicators’ which include many long term goals like implementing the National MSME Reform Agenda, accelerating MSME sector centre-state collaboration, enhancing the effectiveness of Technology Upgradation Scheme (CLCS-TUS), strengthening receivable financing market for MSMEs, enhancing the effectiveness of Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) and “Greening and Gender” delivery etc. As the RAMP implementation is to take place over a period of five years, it is necessary that year-wise measurable targets for each of these indicators are clearly defined in advance which would form the basis for fixing numerical targets of various schemes to be implemented under these disbursement indicators.
One of the objectives of the RAMP programme is technology upgradation in the MSME sector. Since RAMP is a financial assistance programme, it can be translated into reviving and strengthening of ‘Credit linked Capital Subsidy Scheme’ for technology upgradation in the MSME sector. This will also benefit improvement in the quality of products to help achieve the vision of Atmanirbhar Bharat which is one of the key goals of RAMP.
In nutshell, focused and targeted interventions through specific schemes with measurable outcomes and targets would be the key to the success of the RAMP programme. No doubt, RAMP will boost the overall ecosystem in the delivery mechanism of various schemes with improved quality and efficiency and better coordination between the centre and states.
Pradeep Multani is the President of PHD Chamber of Commerce and Industry. Views expressed are the author’s own.