Transforming MSMEs to Aid Efficient Production and Manufacturing



Digital transformation is the key to achieve a self-sufficient India and facilitate the growth of MSMEs in manufacturing. 

In the Union Budget speech of 2021, Finance Minister, Nirmala Sitharaman clearly states how India should focus on being Atma Nirbhar. The Budget introduces Production Linked Incentive Schemes (PLI) for creating manufacturing global champions for 13 sectors and the government has committed Rs 1.97 lakh crores over 5 years. The speech says “our manufacturing companies need to become an integral part of global supply chains, possess core competence and cutting-edge technology.”

The MSME sector, which involves the manufacturing, production, and processing of goods is the backbone of our economy. These enterprises contribute towards the GDP  and employment. According to the Confederation of Indian Industry (CII) report, the 63.4 million MSME units throughout the country contribute around 6.11% of the manufacturing GDP and 33.4% of India’s manufacturing outputs. Further, the report mentions that these units have provided employment to around 120 million people and contribute around 45% of the overall exports from India. India needs to equip its MSMEs with maximum digital infrastructure and provide incentives to foster innovation, boost manufacturing, and develop a pool of skilled workforce. Let us look at some methods to facilitate the growth of MSMEs in manufacturing.


Embracing Digital Practices

Industry 4.0 has accelerated digitization across all industries and MSMEs should adopt digitized operations and practices to ensure maximum productivity in less time. The manufacturing units can leverage cutting-edge technologies to boost production efficiency and become agile in the current competitive market. The development of digital infrastructure and tools is the need of the hour for all manufacturing MSMEs. Digitally equipped factories can accelerate manufacturing processes.


Building a Skilled Workforce

According to the Times of India report, the primary challenge in the digital transformation of MSMEs is the availability of tech talents. Further, the report says that MSMEs confront problems related to access to affordable, skilled manpower to build, manage digital infrastructure. MSMEs need to upskill and reskill their workforce to enable smooth digital operations in the manufacturing process. The labourers should be trained in handling new technologies to facilitate digital transformation. The Union Budget 2021 announced that it will spend a considerable amount on skill development. The Financial Express report quotes the budget and says, “Another move that will benefit MSMEs is the amendment of the Apprenticeship Act and the infusion of Rs 3,000 crore for training and skills development.”

Managing Capital Requirements

Manufacturing is capital-intensive and hence requires maximum financial incentives and loans from both private and public services. It is imperative to develop schemes that can fulfill the financial requirements of MSME units in manufacturing within less time. The government had announced the Emergency Credit Line Guarantee Scheme (ECLGS) in 2020 amid the pandemic, which offers a complete guarantee to all financial corporations if they extend credit to meet the capital requirements of MSMEs. The PIL scheme in the current Union Budget will also cater to the financial needs of MSME units. Since manufacturing units have several routine financial requirements, it is vital to offer them simple solutions to seek all the banking needs. The YES MSME solution introduced by YES Bank is a good example. According to YES Bank, this industry-first digital banking solution enables MSMEs to perform usual transactions, avail all banking needs through a single interface, get a consolidated view of all loan relationships, manage cash flow, submit stock statements, track Bank Guarantees, etc.

In Conclusion

MSMEs are crucial in supporting the agenda of ‘Make in India’ policy which aims to build India into a self-sufficient country that can produce and manufacture its own goods. The objectives of elevating India into being a global manufacturing hub has been there in government records for a long time. Reducing the skill gap and digital transformation of manufacturing units can enable this objective.

There is a long way to go. Although, this is the right time to start the journey to achieve success.

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