SMEs: AIM BIG, INNOVATE, GO GLOBAL
The SME Growth Summit in Bangalore deliberated on how SMEs can tap emerging opportunities and grow their global footprint
SMEs are the backbone of the Indian economy, contributing about 45 per cent to the industrial output. Then why is it that only a few of them have grown enough to expand globally? Is there a way that this equation can be changed so that more and more SMEs can have a global footprint? A discussion on the same, moderated by Alokesh Bhattacharyya, Senior Editor, The Economic Times, tried to fi nd some real answers. One of the critical issues is that there is no incentive for MSMEs to grow big.
“Our framework is such that as soon as a company crosses the 100 employee mark, it comes under the radar of various regulations and fl exibility decreases. That prompts an entrepreneur to open another company,” said Devesh Agarwal. But, there has been a slight deviation from the earlier trend. MSMEs that have come up in the last fi ve to ten years are more productive than their earlier counterparts. “It needs to be seen how reluctant we are to use the new-age technologies and processes to make it to the next trajectory. It’s not only about paying taxes, it’s about how much one wants to grow,” said Vivek Agarwal. Historically, the government has been concerned about cushioning SMEs and providing them with the factors of production – land, incentives, credit. But today that’s not enough. “We need an ecosystem favourable to SMEs. From reducing cost of compliance to access to information to access to quality and standardisation to access to foreign markets – everything is important,” says Gunjan Krishna. SMEs should also learn to tap the startup ecosystem, which is very powerful and talented. “We leveraged an AR-VR company to create a virtual apartment complex like home staging. People wore the gear and got a feel of how the actual apartment would look like. We sold 30 apartments in two weeks. I urge SMEs to tap that kind of talent,” said Ravi Machani. Is there a way that SMEs can navigate the FTA maze? Even after 50 FTAs and PTAs, our trade balance is negative – we import more than we export.
The US-China trade war presents us with a great opportunity, which we can tap only if we are nimble, flexible and can take decisions faster. “But FTAs on their own won’t help, unless we work on innovation, increasing productivity and specialisation. Cost arbitrage needs to go,” said Vivek Agarwal. SMEs often strive for credit. It still remains one of their biggest constraints. How can things improve in that area? “The 59-minute loan by the government has been a huge success, plus they are giving an interest subsidy of 2 per cent. Post GST, even private banks like us are more comfortable lending to MSMEs,” said Viral Rupani. The Trade Receivable Discounting System (TreDS), an online bill discounting platform that helps cash-starved MSMEs raise funds by selling their trade receivables to corporates, has seen rapid growth and been of great help to the sector. “In the last financial year, all the three TReDS platforms did Rs 7,000 crore worth of invoices for MSMEs. It has opened up all the shackles that existed,” said Sundeep Mohindru.