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SMEs & MSMEs need a strong five-year plan for revival & growth



The SMEs & MSMEs have suffered tremendously due to Covid-19 and needs the strongest support from the Government in coming years like a specific five-year plan for their revival and growth as they are the major contributor to India’s economy and social development. 

In India, the sector has gained significant importance due to its contribution to the Gross Domestic Product (GDP) of the country (approximately 30%) and exports (approximately 49%) the sector has also contributed immensely concerning entrepreneurship development especially in semi-urban and rural areas of India.  Most importantly they generate large-scale employment for an unskilled or semi-skilled workforce of India. 

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The sector faced a major setback due to the COVID-19 pandemic in 2020 and 2021, with the primary challenges being lack of market access, overall productivity improvement, access to more finance, lack of skilled labor, lack of credit score, and disruption in logistic and supply chain owing to lockdowns.

Sectorally, manufacturing and consumer-facing services firms were the most adversely impacted.

The Government of India (GoI) introduced several measures and incentives to combat the above challenges faced, such as including cheaper lending rates, an extension of income tax/goods and service tax filing, financial assistance by prioritizing lending to SMEs, encouraging microloans, relaxing ceiling on working capital, credit support, faster approvals and priority in manufacturing COVID related items.  

Concerning the 2022 outlook, experts are hopeful that there will be an economic recovery in Q1 2022, depending on the healthcare situation arising due to Covid-19. SME/MSME will be vital for employment in the revival and growth phase given their employment-generating potential.

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This will help formalize the economy, creating both higher numbers and a higher quality of jobs.  To achieve this the Government, need to design and implement a strong five-year plan to create an ecosystem that supports such businesses, through district-level platforms and links to both digital and physical infrastructure. 

This five-year plan could include increased stimulus from GoI, training and upskilling programs, continuing tax cuts, and relaxation of compliances in terms of reporting or filing. With investments and granting of loans likely to surge in 2022, the most imperative tool for MSME to bounce back remains digitalization to increase reach and keep up with the competitive buyer demands.  

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E-commerce demand is only going to support the SME/ MSME sector significantly in 2022 due to semi-urban areas requiring online products from small businesses. Needless to state SMEe/ MSMEs need to adopt the use of information technology, artificial intelligence, cloud computing, and data analytics to be globally competitive.  

Most importantly this sector not only needs to be truly freed from the bureaucratic red-tape and regulatory compliances but should be encouraged suitably with an innovative legal regulatory framework for (a) raising funds, (b) consolidation via contractual Mergers & Acquisition, and (c) easy winding up. 

It is high time that Government recognizes the importance of this sector and be obsessed with its growth.


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Nitin Potdar
Nitin Potdar
Nitin Potdar, Partner at J Sagar Associates (JSA).

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