More than finance, skilling is a major problem of MSMEs, which gives on the job training to lakhs of people, only to be poached by large companies. Renowned economist and National Statistical Commission Chairman Pronab Sen in a wide-ranging interview to Smepost.com Editor K R Sudhaman shares the way forward to tackle various challenges faced by SMEs. Excerpts from the interview follows:
Q : How can government promote Make in India campaign and push manufacturing through SME’s in India ?
A : Basically, one must understand that in SME’s one see huge amount of dynamism. We find new firms coming in and old firms dying so we have to understand that why this happens. SME’s have number of problems .The most obvious one that everybody talk about is finance. That, in a sense, is less of an issue. The bigger issue is on the labour front. The SME typically has to hire unskilled people and provide them on the job training. After that, these people move to organized sector as the pay scales are much higher. So SME’s are in a situation where they are working constantly lower than their potential simply because the skills that they require are not available and constantly getting replenished. This has another implication as the entrepreneurs cannot leave production to somebody else and move on to attend to the issues pertaining to growth of the company and he has to actually spend a lot of time in training and re-training the staff and this goes on continuously. So Make in India is good as a concept but I think the important one is Skill India programme. It is not clear that the Skill India programme is really addressing the needs of SME’s.
Q : Why do you say that ?
A : At the end of the day, Skill India programme is not looking at the sector where SME is predominant and if you look at the statistical data, the SMEs in manufacturing particular are mainly in 8-10 sectors, which are spread all over the country and skill development should look at focusing on these sectors and I am not sure whether that has been done. Skill India at the moment is concentrating only on those areas where the gaps are evident and skill gap becomes evident to government only when it starts hurting large companies whose voices are heard in the government. SME’s voices are rarely heard. The SME sector is very important in the sense it provides apprenticeship for the large companies
Q : How do you see cluster development helping SME’s ?
A : It is potentially good because clusters help in capturing the externalities generated in the processes of learning. The problem of clusters is also the degree of poaching of the workers. Poaching is part of life and it is not bad thing provided you recognize that there is a out-pipe in SME sector and ensure that in-pipe remains open.
Q : Is funding not a big problem for SME’s ?
A Funding is a problem no doubt but one of the characteristics of SME is that SME’s are less capital intensive than larger companies. But beyond a point, unless SME’s have access to organized fund that growth takes a hit. At the moment, SME’s primarily depend on informal source of funding. The cost of the funding may be more but they still survive as they use less capital.
Q : Can SME’s attract FDI’s ?
A : FDI’s are big boys’ game. SME’s can attract investment from venture funds and angel funds but not FDI’s.
Q : Has abolition of reservation helped SME’s ?
A : Reservation never helped SME’s; in fact what has happened with reservation is you allow existing large companies to continue with the production. So reservation actually helps large companies which happen to be physically present in the sector.
So it is more to help a very small group of large companies and certainly befitted SMEs when reservation was there.
Image Courtesy: The Hindu