An Analytical study on MSME’s Exports
enhancing economic development in India
Jia Ravi Makhija
Under the guidance of,
Dr. Preeti Srivastava
AISECT UNIVERSITY, BHOPAL
Indian industries such as food handling, agricultural inputs, chemicals and pharmaceuticals, engineering such as electronics and electrical, textiles and garments, leather and leather goods, meat products, bio-engineering, sports goods, plastic products, computer software, etc, are considered to be vital members within the supply chain widely spread across all the major sectors in India spread over 400 SME clusters and nearby 2000 artisan clusters that have created a positive base for the advancement of inter-firm cooperation to encourage local production, innovation and co-operative learning. Out of total exports, SME’s in India contributes to 60% of the industrial sector. This paper is based on the objective of growing the export attractiveness of Indian MSMEs with an effort to explore the export performance factors, challenges and constraints associated with export of MSMEs. Growth of MSME takes into consideration role of the government, private sector and international sector so as to boost exports. There is still potential to rise Indian share in global small sector exports which is conquered by emerging economies like China, Korea, Taiwan, etc. only by focusing on increasing SME’s Export.
Keywords: MSMEs, export-competitiveness, growth, challenges, sustainability, etc
The Micro, Small and Medium Enterprise (MSME) adds to the country’s industrial production, exports, employ and surge customer base Indian MSMEs also play a significant part for nation growth through great contribution to Domestic Production, Export Earnings, Less Investment Requirements, Flexibility, Low Intensive Imports, Native Technology, Involvement towards Defense Production, Technology – Oriented Industries, Competitiveness in Domestic as well as Export Markets also generate new employment opportunities by promoting innovative activities through knowledge and teaching.
The small & medium enterprise can enter in both domestic as well as the international market. Small & Medium Enterprises (SMEs) with the experience and aid coming from the financial institutions, which plays a dynamic role for the expansion of Indian economy by contributing 45% to industrial output, 40% of exports, creating 1.3 million jobs every year and production of around 8000 quality products for domestic as well as global markets. SME’s total involvement to GDP in 2017 is around 45%. SMEs are the basis of several inventions in manufacturing and tertiary sectors, playing a major part in supply chain of corporate and the PSUs. Across the sectors, SMEs is expected to see greater openings for expansion and diversification. SME sector stands observed as the planned drive for the future and one of the greatest agents of growth.
Indian government has started taking initiatives for the increasing sector’s competitiveness, quality upgradation, finance and technology, by focusing on the production of sophisticated and precision goods thus reflecting progression of the sector. This sector has realized the need for favorable policies from the government, increased credit flow and need for the technological and modernization initiatives. Indian MSMEs face huge rivalry from the foreign companies at the domestic and international levels both. There is still potential to increase Indian share in global small sector exports which is conquered by emerging economies like China, Korea, Taiwan, etc. only by focusing on increasing SME’s Export.
With the emergence of global supply chains, global competitiveness has become rigorous, whereby MSMEs are transforming to a new business environment. India is well known for its perfect competitive market, the domestic market is always flooded with too many low cost, reasonable quality, bulk produced goods giving tough competition to Indian MSMEs. With LPG into effect MSME’s also needs to catch up with the global standards of excellence in direction to remain reasonable and profitable. In event to rectify Balance of payment deficit and to survive in the global market place, MSMEs need to rebound back and make it in form of innovation-which could be technologically, strategically, financially, human behaviourally so as to make them competitive in this emerging world. MSMEs competitiveness aspect they are not properly equipped to face the challenges posed by the exports procedures, neither to find opportunities.
Objective of present study are as follows:
To Study the role of Micro, small and medium enterprises in increasing exports of Indian economy
To study the factors, constraints and challenges faced by MSME to remain export competitive.
To study the role played by the various players in the export growth of the MSMEs.
Tripathi and Dedhia, did study entitle of “Challenges faced by Micro, small and medium enterprises (MSME) sector in India.” In the year of 2016.The objective of this paper is to identify various challenges and constraints faced by MSMEs in India. Out of which the major challenge is dearth of finance. Various references so as to overcome the challenges faced by MSMEs are mentioned in the paper but lack of government support and initiatives is again the biggest limitation.
Ahmed Israr, Dr. Haseen did study entitled “Growth of MSME sector and its contribution to exports of India in post reform period” in the year 2018. Their study focused on contribution of MSMEs especially to a developing country like India contributing maximum to employment generation. Their research analysed the progress of SME’s sector and its role in propelling the economic growth, employment opportunities and exports.
Vandana Meena and Neha Sharma searches on the topic of “The three years of Make in India Campaign” in the year 2018 whereby they compared GDP of India with other rapidly developing countries such as China, Thailand, Malaysia so as to find out the contribution of Industrial sector in GDP. In India 17% of total amount in GDP is added only by the industrial sector. Impact of Make in India initiative implemented in year 2014 on MSME was positive but various challenges are still faced by them.
Chary and Sreenivasain in their research paper of “Challenges of MSMEs in India -Government Initiatives for Enhancing Competitiveness of MSMEs in India”in the year 2016 focused on challenges like Goods and Service Tax (GST), Foreign Direct Investment (FDI),along with the need for transparency, accountability of programs and shortage of funds.
Namita and Ajay in their research “Relationship of exports and MSME in India: an econometric study” conducted in year 2012 examines the relationship the MSMEs and exports in India. Study concludes with reframing various strategies so as to improve the business ability of the MSME sector which helps in improving the competitiveness of their products and enhance exports.
Bebczuk Slotty Balling Irwing; Scott, Yongqian did study entitled “Financial constraints faced by SMEs all over the Globe” in the year 2012. Their study focused on Financing the SME’s constraints, their limit of investment opportunities and had stagnated their growth. Availability of finance is extensively perceived to be an essential factor for firms, and especially SMEs, to maintain their daily business operation as well as to achieve long-term investment opportunities and development targets. Studies point out that in developed and developing economies SMEs contribute on average 60% of formal employment in the engineering sector. An important aspect for SME sector development is access to finance particularly from financial institutions.
Mishu, Saurabh & Rikin did the work entitled “Challenges faced by MSME Sector in India”, in the year 2016. In this paper the major issues are studied pertaining to the financing of MSMEs in the Indian context, like that of the information asymmetry faced by the banks and cash crunch for MSMEs; whether transaction lending would be adequate to address the information issues or would lending have to be based on a relationship with the MSME, using both ‘hard’ and ‘soft’ information; and whether
the size and source of the bank affect the credit availability to MSMEs.
Srinivas in his research paper entitled ” Role of Micro, Small and Medium Enterprises in Inclusive Growth”, in the year 2013, whereby he examined the role of small, micro and medium enterprises in inclusive growth of Indian economy which directly contributes to employment generation opportunities. His study concluded that MSME contributes to a greater extent in financing operations of Indian economy but the support given by the national and the state governments to the MSMEs is not sufficient enough to resolve their problems.
Katyal and Xaviour focused on “A Study on MSMEs’- Role in Propelling Economic Development of India ; a Discussion on current HR issues in MSMEs’ in India ” in 2015 whereby studies on the contributions made by the MSME to the Indian economy and how HR department is making a contribution to the growth and sustainability of MSME is been analysed.
Mohandass and Subrimanyan surveyed on topic of “Impact of globalization on micro, small and medium enterprises in India” 2014 whereby the goal of this paper is to highlight the role of small-scale industrial units in financial development of India and impact of globalization on the performance of MSMEs whereby the period of study is limited to 19 years, i.e. from 1992-93 to 2010-11
S. N. Babar in his study named “Small Scale Industries and Economic Development: Special Reference to India” 2012 whereby the aim is to highlight the role of small-scale industrial units in fiscal development of India. Study for tenure of 15 years is been considered and contribution of SME exports to GDP is been shown.
DATA AND METHODOLOGY
This research work is focused on export competitiveness of small and medium enterprises, facilitating increase in GDP due to its increased contribution in manufacturing sector. The study is based on secondary data, which has been collected from various MSME Annual Reports International Finance Corporation Report on MSME Finance in India etc.
LIMITATIONS OF THE STUDY
The research is only based on secondary research. If we use primary research on MSME so we required structured questionnaire format. Due to the short span of time and busy work schedule, detailed discussions analysis were not possible.
The findings of this research need to be interpreted in the light of the following limitations: First, although we explored the combined study of the various export performing areas and the problems associated with the export effectiveness under the limited number of exporters, further research can be performed on a huge population of exporters which can yield a better preview of the performing factors and problems associated with small commercial exports in India.
The second limitation of the study was the selection of only three sector of exports whereas the MSME sector has several other sectors under its coverage.
The study could have been better if all the sectors of MSMEs could have been covered spanning different states in India which would have exposed the state’s role in the MSME development and its competitiveness. The researcher would then have discussed the role of the state and its efficacy in improving the exports from the small sector.
SCOPE OF THE STUDY
The primary purpose of the study reported in this paper are as follows:
The scope of the present study has been confined to role of SMEs being the main contributor in manufacturing sector to increased cash flows in the country’s economy.
Focus is been made on constraints faced by MSME to become export competitive.
Indian economy open door policy of globalization which has brought intense competition for the MSMEs both in the domestic and overseas market and has made forceful for the Indian MSMEs to overawed the challenges and improve themselves to withstand and compete globally by lower costs, improved quality, adopting various innovative practices and up- gradation of technology.
MSMEs and large corporates also benefitted by simplifying procedures focusing on saving time and improving productivity.
MSMEs need to go for technological upgradation in order to remain competitive in exports.
Ahmed Israr and Dr. Haseen “Growth of MSME sector and its contribution to exports of India in post reform period” 2018 Zenith International Journal of Business and Management Research, ISSN 2249-8826
Government of India, Ministry of MSME (2015), Annual Report-2015-16, New Delhi.
Government of India, Ministry of MSME (2015), Ministry of MSME, New Delhi.
Mishu, Saurabh & Rikin, “Challenges faced by micro, small and medium enterprise (MSME) Sector in India”2016 International Conference on Recent innovations in Science, Engineering and Management, ISBN 978-81-932074-6-8
Mohandass and Subrimanyan,”Impact of globalization on micro, small and medium enterprises in India” 2014 Asia Pacific journal of Research, ISSN 2320-5504, E-ISSN-2347-4793
Mrs. Ashu Katyal and Mrs. Betsy Xaviour, “A Study on MSMEs’- Role in Propelling Economic Development of India ; a Discussion on current HR issues in MSMEs” 2015 International Journal of Scientific and Research Publications, ISSN 2250-3153, Volume 5, Issue 2,
Namita Rajput and Ajay Rajput, “RELATIONSHIP OF EXPORTS AND MSMES IN INDIA: AN ECONOMETRIC STUDY” 2012 Global journal of Arts and Management, ISSN 2249-2658
Srinivas N T, ” Role of Micro, Small and Medium Enterprises in Inclusive Growth”, 2013 International Journal of Engineering and Management Research, Vol.-3, Issue-4, ISSN No.: 2250-0758
S. N. Babar “Small Scale Industries and Economic Development: Special Reference to India” 2012, Indian streams research journal, ISSN:-2230-7850
Tripathi, Tripathi and Dedhia, “Challenges faced by Micro, small and medium enterprises (MSME) sector in India.”, 2016 International Journal of recent innovations in science engineering and Management, ISBN-978-81-932074-6-8
Thiruvengala Chary and Sreenivasa Rao, “Challenges of MSMEs in India – Government Initiatives for Enhancing Competitiveness of MSMEs in India”, 2016 Annual International Research Conference SEUSL.
Vandana Meena and Neha Sharma,”The three years of Make in India Campaign” 2018 Inspira Journal of Modern Management & Entrepreneurship (JMME) 242 ,Vol 8, No. 1, ISSN : 2231–167X