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World MSME Day: Small businesses deserve genuine support to return to vibrancy


By René Van Berkel


The United Nations observes since 2017 Micro, Small and Medium Enterprises (MSME) day on June 27. This year’s global observance reflects on the theme of “MSMEs: first responders to societal needs”. MSMEs across sectors have been hard hit by the COVID-19 pandemic and the lockdown measures have put many on the brink of survival.

MSMEs are part of the economic and social fabric of the country and recovery will only be possible with vibrant MSME sector. Indeed, numerous MSME owners already acted responsibly over the past four months beyond the call of legal responsibility to support their workforce and communities in times of despair and hardship. The United Nations Industrial Development Organization (UNIDO) appeals to governments, buyers and consumers and other stakeholders to line up behind MSMEs to help them to build back their business from crisis.

In India, 6.3 crore MSMEs provide over 12 crores of jobs, contribute to 45% of exports and over 30% of manufacturing value added. MSMEs are an important part of larger national and global value chains and their health has a bearing on supply chains overall and indeed the ability to supply numerous goods and services. MSMEs have been heavily impacted by the COVID-19 crisis, with different surveys indicating that approximately 1/3rd of MSMEs expects to close down within 3 months leading to loss of employment and livelihoods for crores of workers. The prospects are dire, yet how dire only the future can tell. The pandemic and crisis are still with us, locked down or unlocked, and the way we manage now and in coming months will have a lasting impact for many years to come.

Manufacturing sector includes about 2 crore MSMEs, and is the focus for UNIDO. Interactions with clusters around the country revealed the complexities for recovery. The level of uncertainty in policy, regulations, trade and markets is unprecedented. Demands for goods and services had plummeted overnight, whilst workforce changed with large scale return migration of significant sections of lower skilled categories. Standing idle for months during lock down, inventories decayed and equipment degraded, whilst also supply chains have been disrupted. It has all the ingredients for a proverbial perfect storm, set out to run down overnight the already lean cash reserves of several MSMEs.

Most MSMEs need cash resources to replenish working capital to restart business. Any cash injection though will be short lived, and indeed markets and consumer demand need to be rebuilt urgently to restart the economic engine.

COVID-19 laid bare and exacerbated weaknesses that existed beforehand. Undoubtedly, MSMEs deserved accolades as key contributors to economy, trade, and income and employment generation. Overall, MSMEs though were underperforming in regard to productivity and quality, energy and environment, health and safety and conditions of work.

The underlying causes are complex and interrelated, including government policy and regulations, deficiencies in MSME support ecosystem regarding market requirements, technology, product design and innovation, shortfalls in entrepreneurial and manufacturing competencies and systems, and historic conditions, including legacy waste and pollution. As a first step forward, MSMEs deserve to be treated with dignity and respect, and supported in their legitimate aspiration to grow their business. India stands to benefit from more small businesses growing to become medium and indeed large. The recent cabinet decision to modernize and expand the definition of MSMEs is a praiseworthy step in the right direction. So is the CHAMPIONS Initiative: Creation and Harmonious Application of Modern Processes for Increasing the Output and National Strength.

Contrary to common perception, crisis, as we currently experience, is appropriate time for change to ensure that we build back for a better future. There are ample opportunities, starting within the confines of MSMEs themselves. UNIDO with input from India SME Forum, United Nations India Business Forum and Empretec India Foundation therefore put together an online knowledge and collaboration platform: Building Back MSME Business from Crisis (B3C) –
www.b3cmsme.org.

The knowledge resource is structured along a five staged roadmap to restart, recover and revitalize MSME business. This is complemented with practical suggestions to improve key areas of business performance, such as operations, manpower, health and safety, entrepreneurship, financing and supply chains. Practical tutorials are complemented with how to guidance documents and checklists.

We observe everywhere that our daily lives have already changed. Digital or digital enabled solutions are helping the COVID-19 health and humanitarian response, with drones tracking disease and dispatching delivery, online learning and work from home, as just a few of many examples. Further change towards a new normal is widely foreseen – a future that may be characterized by greater circularity, more digitization and enhanced resilience. As we move forward out of crisis, let us stay with our compass to a sustainable, inclusive and resilient world, as all nations had agreed in 2015 with the Sustainable Development Goals. MSMEs are enablers thereto and deserve genuine support to return to vibrant business.

René Van Berkel is Representative of the United Nations Industrial Development Organization (UNIDO), Regional Office in India.





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