A dawn of hope for MSMEs

Banking Frontiers - - Book Review - mo­[email protected]­ingfron­tiers.com

The Story of In­dian MSMEs: De­spair to Dawn of Hope is an im­pas­sion­ate ac­count of the jour­ney of the Mi­cro, Small and Medium En­ter­prises (MSME) sec­tor in In­dia, nar­rated by a dis­tin­guished banker and econ­o­mist, who has spe­cial in­ter­est in the sec­tor. Dr B. Yer­ram Raju has been with State Bank of In­dia and later with IDRBT and NIRD, and has decades of mul­ti­sec­tor ex­pe­ri­ence, specif­i­cally in MSMEs and agri­cul­ture. In the book, he takes a dis­tinct ap­proach em­phat­i­cally stat­ing that peo­ple start en­ter­prises and put their only dwelling house or other as col­lat­eral se­cu­rity, with the aim of earn­ing profit and mak­ing a re­spectable liv­ing. He vividly nar­rates how MSMEs are de­fined both in In­dia and other coun­tries. One of his rec­om­men­da­tions is to use the twin cri­te­ria of turnover and em­ploy­ment with spe­cific thresh­olds for 2 rea­sons. First, the turnover def­i­ni­tion en­ables sev­eral un­or­ga­nized en­ter­prises in the sec­tor to come into the fold of or­ga­nized. Sec­ond, it paves the way for in­creased di­rect and in­di­rect em­ploy­ment op­por­tu­ni­ties.

How­ever, MSMEs in the coun­try are hand­i­capped by a litany of prob­lems - short­age of capital, redi take, bu­reau­cracy, cor­rup­tion and a lack of sym­pa­thy and un­der­stand­ing at the op­er­a­tional level. Most im­por­tantly, even while in­ten­tions are re­spected and prom­ises are held out, there is no way these ma­te­ri­al­iz­ing. There is no way a small en­tre­pre­neur in dis­tress get­ting any suc­cor. While the gov­ern­ments at the cen­ter and the states for decades have an­nounced a va­ri­ety of poli­cies and ini­tia­tives to pro­mote the MSME sec­tor, there are bot­tle­necks at the op­er­a­tional­iza­tion level and the en­trepreneur­s are left in the lurch.

Raju sup­ple­ments his ar­gu­ments with case stud­ies that un­fold best prac­tices that MSMEs can fol­low and the fail­ures from which they can learn lessons. The book of­fers prac­ti­cal solutions to many is­sues con­fronting the pol­icy mak­ers en­trepreneur­s and reg­u­la­tors.

Raju says in fact, post-lib­er­al­iza­tion, sin­cere ef­forts were ini­ti­ated with the help of bu­reau­crats to mend the laws and this re­sulted in the sin­gle win­dow sys­tem for ap­provals in Ker­ala and Andhra Pradesh. Sub­se­quently ef­forts were made in Andhra Pradesh to es­tab­lish an In­dus­trial Area Lo­cal Author­ity (IALA), which func­tioned on a shared rev­enue ba­sis, col­lected lo­cal taxes and shared a cer­tain pro­por­tion with the mu­nic­i­pal cor­po­ra­tions. They also main­tained the in­fra­struc­ture in the in­dus­trial es­tates. This gamut of op­er­a­tions let to the clean-up of the in­dus­trial cor­ri­dors in for­mer Andhra Pradesh.

The book has given more em­pha­sis on the man­u­fac­tur­ing mi­cro and small en­ter­prises and not the whole seg­ment of MSMEs, es­pe­cially their ac­cess to fi­nance and their drivers. It also dis­cusses the pol­icy ini­tia­tives of both the central and state gov­ern­ment and gives anec­dotes of a few small en­trepreneur­s view­ing fail­ure as a step­ping-stone to suc­cess. In the life­cy­cle of an en­ter­prise, developmen­t and death co-ex­ist at dif­fer­ent times, he says, main­tain­ing that the developmen­t process in­volves strug­gle, walk­ing on rugged roads, and un­wel­com­ing in­fra­struc­ture in some cases.

In the fore­word, D. Sub­barao, for­mer gover­nor of the Re­serve Bank of In­dia, says Raju brings to the book decades of ‘fron­tier’ ex­pe­ri­ence in his di­verse roles as banker, con­sul­tant and men­tor. “The book re­flects that rick ex­pe­ri­ence and ex­per­tise,” he adds.

For­mer gover­nor of the Re­serve Bank of In­dia de­scribes the book as a dis­tilled ac­count of per­sonal and pro­fes­sional ex­pe­ri­ence of the au­thor last­ing over sev­eral decades on the com­plex is­sue of credit to mi­cro and small en­ter­prises. “It is a re­mark­able ac­count of case stud­ies also, giv­ing deep in­sights into the prac­ti­cal prob­lems and solutions. A valu­able ad­di­tion to the lit­er­a­ture on the sub­ject!,” adds Dr Reddy.

The book at­tempts a com­pre­hen­sive re­view of the prob­lems and prospects of MSME sec­tor in In­dia and presents an ob­jec­tive anal­y­sis of its strengths and weak­nesses, opines B.P. Acharya, spe­cial chief sec­re­tary gov­ern­ment of Te­lan­gana, adding: “The au­thor painstak­ingly takes us through the vir­tual mine­field that an en­tre­pre­neur has to sur­vive to stay afloat. Es­pe­cially in­sight­ful are his ob­ser­va­tions on the role the Fi­nan­cial In­sti­tu­tions have to play in this process. All in all, a no­table ad­di­tion to the lit­er­a­ture on the sub­ject.”

For­mer deputy manag­ing di­rec­tor of State Bank of In­dia Amitabha Guha also de­scribes the book as hav­ing com­pre­hen­sively cov­ered the strate­gic need of the sec­tor and the un­re­al­ized po­ten­tials it of­fers. Says he: “The au­thor’s mas­tery over the sub­ject is a prod­uct of his for­mi­da­ble en­gage­ment with the pol­icy and its im­ple­men­ta­tion. This book would very well serve those who are in pol­icy for­mu­la­tion, re­search and aca­demics.

Raju has pub­lished 3 books and over 100 ar­ti­cles on the MSME sec­tor and he says if this book es­pe­cially serves as a wake-up call to some en­trepreneur­s, and a guide to the fu­ture of pol­icy pur­suits in this sec­tor, it would achieve its pur­pose.

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