Challenges to MSME Industries in the Period of Globalization

Globalization is changing the world dramatically and quickly not only in the context of economic activity but also in the context of social, political, and cultural aspects. In the context of business activity, Globalization has eliminated the trade barriers, which fuelled international trade. In the last one decade, India emerged as a crucial player in the sphere of global business activity. Huge Foreign Direct Investments (FDI) and the Government’s industry-friendly policies are widening the path for international business in the country, which led to the creation of new investment opportunities by opening up additional markets, diversification of resources, and sharing of information, knowledge, and expertise. In the context of the Indian Economy, where Globalization is breathing new life in the giant MNCs of the country; the same micro, small and medium enterprises of the country (MSMEs) are struggling to survive in this changing business environment due to which an unequal competition is thriving between the giant MNCs and the Indian Enterprises.

According to the activities, Indian MSMEs are classified in terms of manufacturing, production, and services. MSME boost the economy of the country and also plays a significant role in GDP growth, employment generation, and exports. According to the statistics by the Reserve Bank of India in 2017, in 2015-16, there are more than 51 million enterprises in the country employing 117 million persons. From traditional goods to high-tech items, MSMEs manufacture more than 8000 products. Notable thing is that outside the agriculture sector MSME provides maximum opportunities for self-employment and jobs.

• From 1991-92 to 2010-11, the average contribution of Indian MSME to the GDP of the country was 8%.
• The number of MSMEs units has increased from 105.21 lakh units in 2001-02 to 311.52 lakh units in 2010-11.
• In 2001-02, the total value of investment and production in MSME was Rs.154349 crore, which increased to Rs.1095758 crore in 2010-11.
• In 2001-02, the total value of export in MSME was Rs. Rs.71244 crore, which increased to Rs.202017 crore in 2010-11.
• According to the report by the Ministry of MSME’s in 2017, MSMEs accounted for 30.74% of GDP in 2014-15. The present economic survey interprets that Indian MSMEs will surpass the figure of $5 trillion by 2025.

Despite the Government’s effort, high growth rate, and good prospects, Indian MSMEs are passing through a tremendous crisis. The problem is not only limited to political and administration, rather technology, skilled human resource, and infrastructure are major bottlenecks in the growth of Indian MSMEs. Some of the notable challenges to MSMEs are listed below.

Lack of quality credit infrastructure is a major hindrance to the growth of MSMEs. Some major barriers in the credit infrastructure are long sanction process, high rates, collateral requirements, and delay in disbursements etc.

Due to the financial constraints, MSMEs don’t get raw materials at a competitive price. Apart from that, MSMEs have lack of resources, lack of adequate capital, lack of marketing tools, and lack of awareness of the larger economic environment thereby they struggle to reach the global market to get raw materials at a competitive price.

Lack of skilled Human Resource is one of the major causes for the less success of MSMEs in the country. Due to the lame industrial policy, they failed to hire quality human resources. Thereby it is very difficult for them to work on any project for a long time.

Lack of infrastructure affects the profitability and productivity of the MSMEs negatively. Generally, in India, manufacturing MSMEs have to face the problems of power, water, roads, etc. To ensure the competitiveness of MSMEs in the country it is imperative to ensure high-quality infrastructure, cutting-edge technology, and adroit human resource.

In this era of globalization, the use of new-age technology is mandatory to ensure the growth and sustainability in the market. But, unfortunately, maximum Indian MSMEs still rely on obsolete and outdated technology, which is a threat to their survival.

According to economic perspective, the MSMEs sector has immense potential and they are the backbone of the Indian economy. It not only ensures economic growth but also creates employment opportunities for people. Therefore, to ensure its competitiveness more efforts need to put in the form of higher investment, advanced technology, easy access to finance, and resources. Besides, skilled human resource, political and administrative will power is also mandatory to ensure the growth and sustainability of MSMEs.

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