Opportunities for MSMEs
Strong growth of 5.2 percent in the manufacturing sector boosts India’s industrial production to 5 percent in February 2015 from 2.8 percent in January 2015. The tentative revival of the manufacturing sector after three years of subdued growth is welcome news, especially for the MSME sector.
Given the slow year-on-year growth in the manufacturing sector, PM Narendra Modi is aware of the dire need to get our factories roaring back to life, and his “Make in India” initiative is the first step towards this objective with an aim to more than double share of manufacturing to 25 percent of GDP by 2022, from the existing 12 percent.
The ‘Make in India’ initiative would require free flow of raw materials for finished goods, and manufacturing MSMEs can play a huge role in making this vision a reality. It is critical that the recent policy announcements are translated into the value chain requirements. For eg we need to translate the proposed 100 smart cities announcement into the requirements of raw materials, equipment and finished products that it will throw up.
MSMEs – key to becoming a manufacturing hub
MSMEs are critical to making India a manufacturing hub as they represent the “Made in India” section of industrialization. Ensuring that the campaign encourages large-scale manufacturing but takes along the MSMEs to make the growth process more inclusive is a natural outcome. The MSME sector is the backbone of the Indian economy and can help India cut its reliance on imports, spur jobs and raise the income of millions.
Excellent finished goods that can be traded globally in industries such as automobiles, electronics, electrical, paper or plastic are required to transform “Make in India” into a reality. This cannot be achieved unless we have a robust domestic supply chain for natural resources, raw materials, manufacturing facilities, technology and skilled labour.
Need for a robust operating environment
There is a need for strengthening the operating environment for the micro, small and medium enterprises sector. Access to finance, redefining investment limits, encouraging technology adaptation and facilitative regulation could transform MSMEs into a hotbed of entrepreneurial activity.
We at Power2SME for instance, understand the crucial role that manufacturing SMEs will play in making India a top manufacturing hub. Our unique business model, therefore, focusses on enabling key factors like raw material procurement, credit and finance, and promoting favorable government policies for SMEs.
Over the last three years our mantra has been how we make SMEs bankable while providing them access to high quality raw materials at competitive prices.
Power2SME aligned with Make in India objective
The initial effect of ‘Make in India’ is already evident in some sectors. For instance, the ‘Swachh Bharat Abhiyan’ has provided a much needed boost to the sanitary ware industry. Valued currently at Rs. 3,000 crore, with 12 percent growth per anum, it is expected to achieve a healthy 15-16 percent growth. Power2SME is associated with many sanitary ware manufacturers in sourcing the desired quantity and quality of raw material to meet the sudden surge in demand. A few of our SME customers have seen revenues surge to Rs. 30 crore per annum from Rs. 10 crore per annum, within a short span post announcements.
Power2SME is fully aligned with the ‘Make in India’ campaign because we not only enable SMEs to procure raw materials at competitive prices, our other initiatives like ‘Spirit of Manufacturing’ Awards in association with TiE and partnerships with some NBFCs for accelerating credit facility services for SMEs, play an invisible role in making SMEs competitive.
Making SMEs Profitable
Making SMEs profitable is a top priority for the government. Its proposed policies like the Foreign Trade Policy, TReDS, the Public Procurement Policy, GST, MUDRA Bank and “Make in India” are building an ecosystem to provide organic growth to young businesses.
Power2SME understands the important role that manufacturing SMEs play in this space and is uniquely poised to enable SMEs in strategic ways. Our unique business model focusses on raw material procurement as an important strategic business function, not a mere operational function. We are also educating SMEs (our customer base) about how important it is to view the procurement process as a strategic function as it has direct impact on the production.
Making SMEs Bankable
Finance continues to be among the top challenges for SMEs. An internal survey Power2SME conducted in February 2015 among its customers, confirmed this with more than 50 percent of SMEs listing delayed payments and lack of easy access to credit facilities as the top two challenges impacting their growth.
While the government has set up the MUDRA Bank, and is pressurizing PSU Banks to accommodate SMEs with respect to loans, the private sector and NBFCs are equally willing to participate in this process of growth. Power2SME partnered with Vistaar Financial Services last month to provide easy access for Power2SME’s customer base of 30,000 small enterprises to credit of up to Rs. 25 lakh. Through this initiative Power2SME aims to make SMEs bankable and have access to the most important thing required in a business to survive – finance.
Mr. R. Narayan is the Founder and CEO of Power2SME. A cost accountant by education, Narayan is a serial entrepreneur and is currently dedicated to creating a robust ecosystem that help SMEs address major challenges in finance and raw material management. When he is not working, Narayan is an avid golfer and a reader.