Leveraging MSMEs and Start-ups for Industrial Transformation

Micro, small, and medium enterprises (MSMEs) form the backbone of the Indian economy. With 45 percent share of manufacturing output, more than 40 percent of exports and over 28 percent share of GDP, MSMEs provide jobs to about 111 million people. They are key drivers of inclusive and sustainable economic growth and poverty reduction and are breeding grounds for entrepreneurship. However, they face many constraints and remain vulnerable to external shocks. However, poor availability of data on the MSME sector affects a better understanding of their evolving patterns, opportunities and constraints faced by them. ISID’s work under this theme is addressing some of the data constraints by conducting primary sample surveys and simulations in the economy-wide models to develop a better understanding of their roles. ISID is also exploring the potential of Start-Ups for development.

The G-20 has emerged as an important platform for discussions on global economic and financial architecture. The upcoming Indian presidency of the G-20 from December 2022 presents India an opportunity to shape a more development-friendly global economic and financial architecture that supports the process of the manufacturing sector in India and other late-industrializers by retrieving some of the policy space lost over time in the multilateral trade and financial negotiations. ISID proposes to put together some issues for reform and engage in policy advocacy to facilitate their discussion at the G-20 meetings.

Research Team: Prof Nagesh Kumar ++

Status: [Proposal Stage]

Given that majority of MSMEs are informal, they have been facing several challenges and have been the worst affected from the lockdowns imposed during the COVID-19 pandemic. Many of them had to close their businesses while others have scaled down their operations because of demand and supply constraints. ISID is developing scenarios of the role that MSMEs can play in India’s industrial transformation within the framework of Computable General Equilibrium (CGE) models.

Research Team: Dr Akhilesh Kumar Sharma

Collaboration: ICSSR

Status: [Ongoing] Project launched in 2022-23; time frame: March 2024.

The proposed study aims to understand factors enabling the survival of MSMEs during the COVID-19 pandemic, their coping strategies, major challenges and opportunities, efficacy of government policies in revival of the sector, and to identify factors for the resilient and sustained growth of MSMEs amidst uncertainties. It will be based on both primary and secondary data. Mixed method approach will be used for analysis. Primary data will be collected through a semi-structured questionnaire from around 600 small firms of selected MSME clusters located in different regions of the country. Snowball sampling will be used to identify sample firms for the study. Appropriate statistical methods will be used for the analysis. Findings will add to the understanding of policymakers and researchers about issues pertaining to COVID-19 and MSMEs and help them to design appropriate policies for resilient and sustained growth of the sector.

Research Team: Dr Akhilesh Kumar Sharma

Collaboration: ICSSR

Status: [Ongoing] Project launched in 2022-23; time frame: March 2024.

New technologies such as e-Commerce and digital marketing can be a really powerful tools especially for women-led MSMEs enabling them to conduct their economic activities from the convenience of their homes. ISID collaborated with UNESCAP SSWA Office to organize a roundtable discussion on the role that the new technology can play in empowering women entrepreneurs at a special session of the FIWE-ISID-MSME International Conference on “Women-led MSMEs as Catalysts of Transformation” on March 24, 2022. The distinguished speakers of the session included Mrs. K. Ratnaprabha, Former Chief Secretary, Government of Karnataka & President, UBUNTU; Dr. Rajan Sudesh Ratna, Dy. Head, UNESCAP-SSWA Office; Mr. Anurag Awasthi, COE Manager, GeM; Ms. Shirley Jayawardena, President, Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL); Ms Arundhati Mukherjee, Marketing Consultant. The session was moderated by Prof. Nagesh Kumar, Director, ISID. The roundtable highlighted the potential of women-led MSMEs in the development of the economy in terms of potential contribution to the GDP, and creation of millions of additional jobs and incomes. It discussed the challenges faced by women entrepreneurs in accessing markets and accessing finance and technology on equal terms. In this context reference was made to the Government of India initiative of Government–e-Marketplace (GeM) – an online public procurement platform that is also helping women entrepreneurs participate in government procurement. It also highlighted the UNESCAP-SSWA initiative to build the capacity of women entrepreneurs to leverage new technology such as digital marketing and e-Commerce. The report of the Roundtable has been submitted to UNESCAP-SSWA. Prof Nagesh Kumar was the project coordinator.

This project will address issues pivotal to the fintech revolution. Some of the new initiatives include FinTech/silicon ecologies incubating UK-India firms for innovative financial services; funding conduits for infrastructure and green finance; and regulatory frameworks to ease market access for UK-India FinTech firms. Besides promoting bilateral business in financial services, the project would contribute significantly to the cause of inclusive development addressing financial inclusion, digital empowerment, and start-up ecosystem. It is being undertaken jointly by teams from India and the United Kingdom for three years.

Research Team: India: Prof Sachin Chaturvedi and Dr Priyadarshi Dash (RIS), Prof K J Joseph (GIFT), Dr Reji K Joseph (ISID); UK: Prof T G Arun and Prof Sheri Markose (University of Essex), Prof Victor Murinde (University of London), and Dr Philip (Kostov University of Central Lancashire).

Collaboration: Supported by ICSSR and ESRC

Status: [Ongoing]; time frame: 36 months from March 2021

The study aimed to understand the criticality of flow of funds for robust growth of MSMEs. Through theoretical and empirical underpinnings, the study observed that access to credit is critical for the performance of small firms. Although credit flow to MSMEs has increased over time in the recent decade, it has declined in terms of share of non-food credit and priority sector advances, which indicates increase in credit problems in MSMEs. The major constraints affecting MSME lending include poor entrepreneurial mindset of small entrepreneurs, poor selection of applications under schematic lending, fear of accountability if loan turns NPA, prevalence of corrupt practices in selection of applications, and lack of financial documents/statements, lack of awareness and financial literacy, lack of skilled and sufficient staff at branch level. In order to improve the credit flow to MSMEs, multipronged strategies involving all key stakeholders – banks, firms, and government institutions – are required. The project was sponsored by a consortium of public sector banks, namely State Bank of India, Bank of India, UCO Bank, Canara Bank, Corporation Bank, and United Bank of India. The research team included Mr Pradyuman Singh Rawat (Project Director), Dr Akhilesh Kumar Sharma (Principal Investigator), Prof M R Murty, Dr Sangeeta Ghosh, and Dr Mitali Gupta.

  • Small and Medium Enterprises in India: Infirmities and Asymmetries in Industrial Clusters,, Satyaki Roy, June 2013, Satyaki Roy, June 2013
  • Jaya Prakash Pradhan and Partha Pratim Sahu (2008), Transnationalization of Indian Pharmaceutical SMEs, Bookwell Publishers, New Delhi.,, , August 2008, August 2008