MSMEs have the potential to be integrated into the global value chain: MSME secretary

Indian MSMEs need to catch up on the technological front as to increase India’s share in the global value chain says MSME secretary BB Swain

workers in an Indian engineering MSME unit

The Secretary of the Ministry of MSME, BB Swain, expressed that there is tremendous potential for Indian engineering MSMEs to be integrated into the Global Value Chain due to their manufacturing cost advantage.

Speaking at the virtual inaugural session of the MSME Conclave organised by Engineering Export Promotion Council (EEPC) India on January 19, 2022, the secretary also stated that the two most significant interventions required for MSMEs to achieve high growth are credit assistance and technology upgradation.

He also said that the Ministry of MSME has been collaborating with other Ministries and Departments to make it easier for MSMEs to do business. “The Atma Nirbhar announcements have focused on easing access to registering as MSMEs, easing their access to credit and providing them the much-needed protection as far as global tenders are concerned,” said Swain.

Swain informed that MSMEs engaged in the manufacturing of engineering products account for approximately 29 per cent of the 67 lakh MSMEs that have registered on the Udyam registration portal since July 2020.”MSME units are together capable of constituting a complete supply chain and being globally competitive because of their diverse products ranging from intermediate to final products,” Swain highlighted.

The list of speakers included Mahesh Desai, EEPC India Chairman, who expressed that MSMEs need to catch up a lot on the technological front as this is crucial to increase India’s share in the global value chain. “Make-in-India initiative has brought ample scope for the Indian MSMEs to work with the large scale global manufacturing firms and get access to their upgraded technology and efficient marketing techniques. Following the onset of the pandemic, large corporations in the developed world have been looking at India as an alternative destination for manufacturing,” Desai said.

Desai mentioned the crucial role of MSMEs in the economy saying that the sector contributes around 30 per cent to India’s GDP and has a 50 per cent share in the country’s exports. “The significance of the MSME sector in India has long been recognized and its potential has also been identified. In the National Manufacturing Policy, manufacturing output has been targeted to increase to 25 per cent of GDP,” he stated.

“We promise our best endeavour towards higher integration of this sector in the global value chain through the continuation of our strategic activities for the up-gradation of engineering MSMEs and we believe that such summits fully dedicated for MSMEs will help us to achieve our goal,” declared Desai.

With nearly 60 per cent of its members coming from the MSME sector, EEPC India has been instrumental in developing India’s engineering MSMEs. It has been working closely with the government to promote MSMEs producing engineering products and, in line with the Department of Commerce’s initiative for technological up-gradation, has established two technology centres in Bengaluru and Kolkata to address the problem of engineering MSMEs’ technological backwardness.

During the Conclave, a knowledge paper titled ‘Integrating Indian MSMEs to the Global Value Chain’ was also released. According to the paper, India’s trade regime should encourage value addition in the country. “Hence, the general tariff structure should be low on raw and primary goods, slightly higher on intermediaries and the highest on final products,” it stated.

The paper also noted that both direct and indirect tax structures should be neutral and not discriminate between the nature of firms. “Banks and the financial institutions should be more willing to discern genuine exporters and demand less of collateral. Finally, stability in policy measures with less intervention and emphasis on neutrality on behalf of the government will be necessary,” it listed among some of the broad pointers.

On the 20th of January, Union Minister Nitin Gadkari spoke at a virtual international conference organised by the chartered accountants’ apex body ICAI, emphasising the importance of attracting more foreign investments into the MSME sector, as such entities provide excellent viability and income to investors.