Sashakt India: A growth roadmap for Indian MSMEs

At a series of high-powered thought leadership sessions titled Sashakt India: Powering the MSME Engine, organised by Network18 and Bandhan Bank, leading policy planners and corporate leaders, reflected on the role of micro, small and medium enterprises (MSMEs) and their ability to push India’s economic revival.

These industry leaders, led by Chandra Shekhar Ghosh, Managing Director and Chief Executive Officer, Bandhan Bank, included top economic planners like Rajiv Kumar, Vice-chairman of NITI Aayog and noted economist Pronab Sen, former Chief Statistician of India and currently Programme Director, IGC India Programme. It also featured senior corporate leaders including R.S. Sodhi, MD, GCMMF (Amul); Suresh Narayanan, Chairman and Managing Director, Nestle India and Chairman of CII’s National Committee on Food Processing; Piruz Khambatta, Chairman and Managing Director, Rasna; and Piyush Patnaik, Managing Director - Oil Business, Cargill India.

The series of panel discussions also brought the chiefs of a diverse set of companies who deal extensively with India’s MSME ecosystem like Arvind Mediratta, Managing Director and Chief Executive Officer, Metro Cash and Carry;  Abhinay Choudhary, Co-founder Big Basket; Sunil Kataria, Chief Executive Officer – India and SAARC, Godrej Consumer Products, Lavanya Nalli, Vice-chairperson, Nalli Sarees and N.K. Chaudhary, Founder of Jaipur Rugs.  

According to NITI Aayog’s Rajiv Kumar, there were around 60 million MSMEs in India, which collectively created around 110 million direct jobs and many more indirect jobs. “The government is facilitating several measures to ensure enough liquidity flows to these enterprises,” he said, and added that Indian MSMEs need to eventually aspire to become the large enterprises of tomorrow, and not stay MSMEs forever.

The current Covid-19 pandemic has taken a toll on all aspects of the Indian economy and the MSME universe (especially the micro and small enterprises) has been no different. But leading economic thinkers believe that India’s MSMEs will bounce back stronger as the country emerges from the current crisis. Ponab Sen said that the MSME sector has an inherent resilience, creativity and energy, which can be unleashed with credit linkage.

India needs many more Bandhan Banks

According to Chandra Shekhar Ghosh of Bandhan Bank, India needs as many as 30 Bandhan Bank-like institutions to address the demand-supply gap to access institutional credit for small businesses. Over two decades, Bandhan Bank (first as an NBFC-MFI and then as a universal bank since 2015) has been affording entrepreneurs at the base of the economic period access to timely, institutional credit. This has helped bring economic prosperity to millions of people residing in India’s rural and semi-urban areas; and helped them create jobs for several others.   

The leadership forum marked the fifth anniversary of Bandhan Bank. Ghosh, who has led the Bank’s transformation from an NGO, focussed on the welfare of poverty-stricken women in 2001, to an NBFC-MFI in 2009 and finally a full-scale commercial bank in 2015, observed that 70% of MSMEs in India were domiciled in rural India and needed better physical and digital connectivity through roads, electricity and broadband to improve their business potential.

Resurgence of kirana stores

The pandemic has also seen the unexpected resurgence of local kirana stores, which continued to remain operational and cater to the needs of their local clientele despite the lockdown. Arvind Mediratta of Metro Cash and Carry said that the resurgence of small mom and pop stores was telling. Before Covid-19, they were growing at 6-7%, but “in the last six months they have grown at a much higher rate compared to modern retail,” he stated.

Abhinay Choudhary of BigBasket added that greater adoption of digitalisation helped the local grocery stores stay competitive during this period. The kiranas saw 30-40% month-on-month growth because lockdown disrupted the traditional supply chain and since “we were present online; customers were able to place orders on the app.’’

India’s FMCG most evolved

Intricately linked with the small retail ecosystem in India is the country’s burgeoning fast moving consumer goods industry (FMCG) industry. Sunil Kataria of Godrej Consumer Products noted that India has one of the world’s most evolved FMCG distribution systems, the backbone of which are the mom-and-pop stores. There is consensus that MSMEs are essential for the food processing sector, which had attracted $4.18 billion of foreign direct investment from April 2014 to March 2020. Suresh Narayanan of Nestle India said that some of these MSMEs are in food and vegetable processing segments while others are in the area of manufacturing foods and snacks.

Viable MSME funding   

On MSME funding, Piruz Khambatta of Rasna said that banks were more than willing to assist viable projects and those in a mega food park can attract NABARD-backed financing. 

Piyush Patnaik Of Cargill India believed that the food processing sector was witnessing a new trend of increased interest from private equity investors. “If 10 years ago someone had told us that every large snack food company would have a private equity investor, no one would have believed it,” Patnaik said.

Agriculture gains big

Industry leaders and economic thinkers also said that with recent reforms, India’s agriculture and allied sector was the only silver lining that continued to exhibit growth in a Covid-hit economy, which can spawn several MSMEs catering to the various requirements of this sector.

According to R.S. Sodhi of Amul, India’s dairy industry, including the food processing component, was pegged at ₹8 lakh crore and growing at 9-10% annually. This has opened the way for several MSMEs to come in and partake in the development of the dairy sector across the value chain – from milk production to providing proper feed for cows, veterinary services, milk chilling, storage and transportation.

In the textile sector, one of the traditional industries India is best known for and an mass-scale employer for artisans, MSMEs will have a big role to play, going forward. Lavanya Nalli of Nalli Sarees said principal macro-economic hurdles that have posed challenges for this sector must be met through product and process innovations.

N.K. Chaudhary of Jaipur Rugs said that it is important that MSMEs connect with the different silos in the carpet industry, including the end consumer.

Disclaimer: The views, suggestions and opinions expressed here are the sole responsibility of the experts. No Forbes India journalist was involved in the writing and production of this article.