Government Assistance on SMB Skill Development

31/08/2021

SMBs and their Role in the Indian Economy

The Indian economy is reeling amid the COVID-19 pandemic. In the Union Budget 2021, the Central Government announced a massive Rs 3 lakh crore collateral free assistance to micro, small and medium-sized enterprises (SMBs) or MSMEs to revive the sector.

According to the Ministry of Finance, Government of India, the role of the MSMEs or the SMBs in the economy cannot be overlooked. It is the second largest employment provider after agriculture in India. Presently there are 56 million SMBs across industries that employ close to 124 million people. Of these, 14% are women-led enterprises with 60% of these constituting rural industries accounting for 8% of India’s GDP. Additionally, MSMEs accounted for 45% of merchandise exports in 2020.

SMBs and their role in the Indian Economy

Challenges faced by SMBs

Despite the impressive contribution to GDP, the MSMEs have been largely affected by a lack of adequate and timely access to credit and technology, skills and expertise upgrades. In general, SMBs may run their business on obsolete technologies and lack of technological training among the workforce which hampers production efficiency and output. Most international cooperation schemes on skill development and labor training are not enough.

While large-scale manufacturing can invest in the latest state-of-the-art technologies or acquire skilled labor because of adequate funds, small and medium-sized industries can find it hard to compete locally and internationally if there is a lack of credit opportunities. Since the majority of firms in the MSME sector are micro-enterprises, scaling these up is a problem for entrepreneurs. Lack of upgrades in skills and technologies may hampers the growth of these industries.

Government Programs on SMB Skill Development

Since most of the MSMEs operate in the rural areas, the Central Government has announced several schemes to support the development of this sector. Recently, in view of the economic hardship caused by COVID-19, the Central Government reclassified the criterion for defining an MSME. Under the revised criterion, the combined factors of investment in plant machinery and the turnover of business together, designated an enterprise as a MSME. This was a departure from the earlier classification that only took the investment into plant machinery as a consideration.

To address the skills shortage and deficiencies in technology, the Central Government has implemented several schemes in addition to loans, which are expected to generate more employment, increase exports, and improve productivity.

Here are a few of them in no particular order.

Science and Technology Scheme for Development of Khadi, Village, and Coir Industries

This scheme enables small enterprises to implement latest scientific innovations and training in coir production. Specifically, it aims to help the Khadi and coir industries in rural India. This scheme implements the outcomes of scientific research and training at the twin research institutes – The Central Coir Research Institute, Kalavoor and the Central Institute of Coir Technology, Bangalore.
Skill Upgradation and Mahila Coir Yojana (MCY)

This is a key scheme under the Scheme Coir Vikas Yojana, better known as the Coir Plan (General) scheme, which offers development of domestic and export markets, training and skills development, Central Government assistance for small business in coir industry, and trade related services to coir manufacturers. This scheme also enables women to be better entrepreneurs in the coir trade and equips them with expertise and skills to utilize raw materials. It also provides spinning equipment at subsidized rates after appropriate skill training.
A Scheme for Promoting Innovation, Rural Industry and Entrepreneurship (ASPIRE)

In March 2015, the Ministry of MSME launched this scheme to set up a network of technology and incubation centers to promote entrepreneurship and accelerate the pace of up-skilling in the agro industry across India. This scheme catered to rural workers who were looking for employment in the small and medium business segment. The main objective of these business incubators is to train eligible youths in various skills and offer them an opportunity to set up their own businesses in villages. The scheme also sets up technology-based incubators for the agro-industry offering technology commercialization and financial help. So far, 40 technical institutes were set up with Central Government’s assistance for small business under this scheme.
Entrepreneurship Skill Development Program (ESDP)

This marketing assistance scheme alongside a skill improvement program enables youths to be more self-dependent with employment opportunities in the small and medium-sized business segment. This entrepreneurship scheme is conducted by the industrial training institutes, polytechnics, and technical institutes to enhance the capacities of budding entrepreneurs.

Under this scheme, Enterprise Development Centers (EDCS) are established at the district level within the control of the MSME Development Institutes. Each of these centers have two verticals namely the Enterprise Development Vertical and the Skill Development Vertical. These two verticals meet all the aspirations of rural youth by supporting them in creating business opportunities, ideation and mentoring, credit facilitation, and market access. The Skill Development Vertical primarily offers information on market factors and guides potential entrepreneurs to get relevant industry skills for separate sectors in the agro-economy.
Assistance to Training Institutions (ATI) Scheme

This scheme offers financial grants to training institutions so that they can create and strengthen their employment infrastructure. The scheme also enables rural entrepreneurs in the small and medium-sized businesses to grow by offering capital grants. Those training institutions that have enrolled with any one of the three national level Entrepreneurship Development Institutions or EDIs under the Ministry of Skill Development and Entrepreneurship can avail of the assistance.
The State Governments, Union Territories, NGOs, and other developmental agencies are also eligible to apply for the scheme. The training institutions also conduct skill development programs for rural youths to equip them with the expertise in setting up small businesses.
Design Clinic for Design Expertise to MSMEs

This scheme imparts design expertise to manufacturing units in the MSME sector. It aims to create a sustainable design eco-system for the MSME sector through skill improvement and continuous learning for entrepreneurs and manufacturers. The scheme aims to bring the industrial design fraternity closer to the manufacturers in the SMB segment.

It also aims to build the competitiveness of local producers via design, thereby creating business value. MSMEs can avail of independent advice on every aspect of industrial design via these seminars and workshops. Experienced industrial designers who design products from a varied product portfolio of small and medium industrial goods offer specialist advice.
Marketing Assistance Schemes for MSMEs (Barcode)

Under this marketing assistance scheme, small and medium businesses are encouraged to use barcodes for their products after manufacturing. The ministry of MSMEs conducts seminars and reimburses registration fees for the process of barcoding. The idea is to offer marketing expertise and skills to make small and medium businesses more competitive and quality conscious.

With the adaptation of the barcoding system, MSMEs can boost the status of their respective products in the market both nationally and internationally. Since barcodes are a mark of quality and optimum standards, it also makes products more professional and internationally acceptable. Manufacturers also can capture faster and accurate pricing data about the product through barcodes.

Conclusion: The Road Ahead

Under the Atmanirbhar Bharat initiative, the Central Government recognizes the role of small and medium-sized businesses in the economic development of the country. The Union Budget 2021 focuses attention on the skill-based support and technological assistance to MSMEs to help the Indian economy target the $5 trillion GDP mark in the next 5 years. These skill assistance schemes in addition to international cooperation schemes go a long way in realizing the dream of millions of youths who want to contribute to the manufacturing economy and the Make in India campaign.

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