Ever since he was tasked with revamping India’s MSMEs and bringing them at par with their global counterparts, Kalraj Mishra, Union Minister for Micro, Small and Medium Enterprises (MSMEs) has introduced many dynamic schemes. In an interaction with The Dollar Business, Mishra shares his plans for enhancing the sustainability and competitiveness of a sector that was largely ignored for long.

Ahmad Shariq Khan | February 2017 Issue | The Dollar Business

TDB: What role do you envisage the MSME sector playing in the overall economic growth of India?

Kalraj Mishra (KM): The world over, micro, small and medium enterprises (MSMEs) have been accepted as the engine of economic growth and equitable development. In India too, I believe the pace of development can be accelerated by promoting MSMEs. Ensuring competitiveness of India’s MSMEs is critical as it will contribute to the overall growth of the manufacturing sector as well as the country’s economy. Towards that goal, we must quickly set the pace right for industrialisation and export-fuelled growth to make a mark internationally.

Going forward, I assure you that MSMEs will get all possible assistance and technological support under central schemes. The country has the potential to emerge as a model nation when it comes to promoting the MSME sector. And, for this, we must continue setting up market mechanisms and intermediaries to develop the capacity of MSMEs to facilitate their technology, marketability, backward and forward linkages, etc.

I must tell you that under the able leadership of Prime Minister Modi, we are proactively working in this direction. I urge our entrepreneurs to contribute their bit to help turn this great nation into a global manufacturing hub.

TDB: Revision of investment caps defining MSMEs, has been pending in the Parliament for quite some time now. Can you share the status with us?

KM: Paying heed to the appeal by the Indian MSME sector, the government is keen to revise the definition of MSMEs. ‘The Micro, Small and Medium Enterprises Development (Amendment) Bill, 2015’, has already been introduced in Lok Sabha. It seeks to increase the allowance for investment in plants and machinery by our MSMEs. The objective of the proposed amendment is to enhance the existing limit for investment in plant and machinery, considering changes in the price index and cost of inputs, consistent with the emerging role of MSMEs in various global value chains. We will also include in this classification tiny enterprises and village enterprises, so as to enable the aforesaid categories to avail the benefits and become more competitive. We believe that as soon as the bill is passed, our MSMEs will be able to gain benefits from the new higher investment ceiling limits.

TDB: You have been in favour of our MSMEs collaborating with their global peers. What benefits do you foresee?

KM: Yes, I am all in for such collaborations. Our MSMEs should forge partnerships with their counterparts in various countries and try to become more competitive by way of exchanging ideas, tools and techniques. We believe such cooperations can open doors to new opportunities for Indian MSMEs. In fact, the Ministry of MSME has already entered into long-term agreements for cooperation in the MSME sector with counterpart ministries and organisations of 17 countries including Tunisia, Romania, Rwanda, Mexico and Uzbekistan.

Last year, we also signed a memorandum of understanding (MoU) with Sweden on cooperation in MSME sector. It provides a structured framework and an enabling environment for MSMEs from two countries to understand each other’s strengths, markets, technologies, policies, etc. It also allows MSMEs from the two countries to participate in each other’s trade fairs and exhibitions as well as exchange business delegations. We are working on more such mutually beneficial arrangements and more such announcements are in the offing.

"It is alarming to note that MSMEs account for close to 45% of total NPAs"

TDB: Lack of transparency in processes remains an area of concern flagged by many MSMEs. What is the Ministry doing about it?

KM: One of the main changes that has been brought by me in the Ministry is transparency and accountability in the implementation of schemes. Now, almost every MSME scheme has been put on the web. In addition, grievances are now being monitored online and efforts are also being made to bring even the MSME census online.

TDB: Demonetisation is said to have hurt the MSME sector. Instances have been found when banks have shown reluctance in disbursing loans even under the ‘Mudra Yojana’. Your take?

KM: I believe there were difficulties initially. But now, wage payment to labourers has started normalising and many migrant labourers who had earlier left for their hometowns are returning. With regards to the reluctance of banks to disburse loans under the Pradhan Mantri Mudra Yojana (PMMY) in the wake of demonetisation, I do acknowledge that there have been some issues faced by the MSME sector. However, I am hopeful that these issues are temporary. Also, the Ministry is fully aware of these issues and is working towards rectifying them. Here, I must tell you that the banks are expected to disburse Rs.1.80 lakh crore loans under PMMY in the current fiscal. In fact, 3.5 crore beneficiaries have availed a total of Rs.1.22 lakh crore in loans under PMMY already.

TDB: Can you share with us your efforts aimed at moving toward a “less-cash” economy at the ministerial level?

KM: We are very proactively encouraging MSMEs, especially micro enterprises, to move towards a “less-cash” economy. Various organisations under the Ministry have already conducted about 1,600 programmes benefitting over 27,000 enterprises to move towards a “less-cash” economy. We have also issued orders that all trainees, trained in organisations under our Ministry, be encouraged to move to cashless payments.

TDB: MSMEs account for a large share of NPAs in the banking system. How do you plan to address this issue?

KM: MSMEs account for close to 45% of the NPAs in the system. The situation is indeed alarming, though the government is taking every step to make things easier for the MSMEs. In India, we know that the existing mechanism for addressing revival, rehabilitation and exit of small enterprises is very weak. We also know that as per the ‘2017 Doing Business (DB) Report by World Bank’, we are ranked 136 out of the 189 economies for resolving insolvencies. I believe, pending a detailed revision of the legal framework for resolving insolvencies and bankruptcies, there is a need for a special dispensation for revival and exit of MSMEs.

The MSMEs facing insolvency/ bankruptcy need to be provided legal opportunities to revive their units. This could be through a scheme for reorganisation and rehabilitation, which balances the interests of creditors and debtors. Under our Revival and Rehabilitation Framework, stressed MSMEs are extended help to stop their loans from turning into NPAs. Under this scheme, before a loan account of an MSME turns into an NPA, banks and other creditors are required to identify the incipient stress in the account. An MSME may also voluntarily initiate proceedings under this framework if the enterprise reasonably apprehends failure of its business or its inability or likely inability to pay debts. The mechanism comes in effect before the accumulated losses of the enterprise equals to half or more of its entire net worth. We have also initiated a committee for distressed MSMEs, tasked with exploring various options, to resolve the stress in any account.

TDB: Your Ministry has initiated the ‘Zero Defect, Zero Effect’ (ZDZE) certification process. Could you please tell us about the idea behind this?

KM: Under the scheme, as the name suggests, the MSME sector is urged to make products with ‘zero defect’ and ‘zero effect’ on the environment, thereby improving the brand image of the country. With this scheme, we have presented a model where the concept of quality has undergone a holistic change from a tool for compliance to a source of competitiveness. I am happy to tell you that ever since we initiated the ‘zero defect, zero effect’ certification process, we have received over 64,000 online applications.

What is important is that alongwith a focus on quality of products and services, there is an equal emphasis on the elimination of impact on the environment through adequate planning of product and process design, pre-production, production, maintenance activities, post-production and outcome of environment performance. The scheme will cover all aspects of the existing schemes of the Ministry of MSME. Hence, the net result is going to be an improvement in sustainable development all around.