Highlights:
-More than 97% acknowledge or choose to avoid giving direct answer on corruption & bribery
-70 to 80% MSMEs still not aware of various Govt. initiatives
-65% complain of infrastructure and 56% of raw material prices as main issues
The Study focused on the following Government initiatives:
-MSME-DO Facilities
-Credit Linked Capital Subsidy Scheme (CLCSS)
-ISO/HACCF Reimbursement Scheme
-Specialized Training Programs
-Entrepreneurship Development Institutes
-National Small Industries Commission (NSIC)
-National Commission for Enterprises in the Unorganized Sector (NCEUS)
-Apex Industry Bodies (e.g., FICCI, CII, ASSOCHAM)
Policies in place that provide infrastructure and taxation benefits to business engaged in IT and similar services, such as STPI and EXIM, are well known to be reserved for only those particular businesses. Manufacturing MSMEs are neglected by these policies. This study, hence, directed most efforts towards MSMEs in manufacturing.
Bribing and Corruption:
An overwhelming amount of participants, 75.4%, affirmed the existence of corruption and bribery, and 21.1% declined to comment. This leaves only 3.5% of respondents to have denied that bribery and corruption exists in India. Of the 75% who responded affirmatively, most said that bribery was “common knowledge”, or an “open secret” and “everyone knows.”
It is a conclusion of this study that bribery does indeed plague commerce at the lower levels of small business, especially in areas where government service is involved. Respondents referred to the process of obtaining licenses, loans, reduction in taxes, or the like. If we amalgamate the amount of respondents who did not say “no,” then 96.5% disagreed with their answer. This percentage is overwhelming, and certainly says something concrete about corruption.
Issues Concerning MSMEs:
-65% of MSMEs complain of infrastructural failures
-56% of MSMEs complain of price hikes of raw material as a major cause of concern
-51% are concerned with the negative effect of bribery and corruption to their businesses
Perception towards Govt. Initiatives varies with Size of Business:
Business size type did significantly affect perceptions toward government sponsorship of MSMEs. This reiterates the pronounced difference between small- and medium-sized business’ satisfaction with government services, and is yet another testament to the possible preference to larger-sized businesses on the part of government officials at the lower levels of MSME initiatives.
Respondents, who believed that the government had not brought a positive influence to their businesses, number almost 65%, or two-thirds of respondents. If the perception of government service is too negative, MSMEs will be reluctant to take advantage of important initiatives.
This analysis suggests that small businesses are being neglected and are being impacted more negatively than medium-sized businesses. This juxtaposition may manifest itself in a variety of ways. Many respondents from small businesses claimed that financing was only easily available to the bigger players, or that industry and apex associations were only interested in dealing with larger companies.
With regards to financing, small businesses may have needed to wait months to secure financial capital, while larger businesses may have gotten financing within a matter of days. Additionally, some respondents claimed that to come up with the money required to bribe bank officials to speed up the paperwork was a large burden for their business to handle.
By standardizing the opportunities available to MSMEs, the government could have the power to equalize the threshold, and cause commerce to prosper at all levels of the value chain.
Awareness of Govt. Initiatives:
Not one initiative scored above 65%. The top performers were the apex industry associations like FICCI, and CII. Respondents said of the apex bodies that, generally, they kept members informed of events and exhibitions, but were not successfully able to communicate the concerns of MSMEs towards the government.
The lowest performer was MSME-DO, organizer of tool rooms and technology institutes designed to help manufacturing units with technology upgradation and training on machinery. Respondents said that this initiative had very low awareness, and the training offerings needed to improve. Most of the respondents are businesses who were interested in acquiring benefits of the various government initiatives.
Yet, this chart shows that a significant portion of MSMEs simply is not aware of the schemes. Tiny and hard-to-notice government advertisements in the papers are not effectively informing MSME entrepreneurs the benefits of valuable initiatives like EDPs, NCEUS, and MSME-DO.
Suggestions for improving efficacy of Government Initiatives:
In general, there were seven suggestions for change, overall, with respect to government interaction:
1. Improve infrastructure:
a. Build better, longer-lasting roads
b. Set up of a stable power grid
c. Organize SEZ for businesses in manufacturing
2. Corruption:
a. Make it impossible to evade penalties
b. Stricter action against Corrupt Government officials at all levels of the Government
3. On Taxation:
a. Consider setting up Tax structures that favour MSMEs
b. Ensure that tax evasion through bribery is made impossible at all levels
c. Continue to offer tax benefits to export oriented businesses
d. Reduction of import duties causing rise of material costs
e. Provide tax benefits to Manufacturing MSMEs
4. On Loans and Financing:
a. Improve CLCSS scheme by offering better interest rates to MSMEs looking at technology upgrades
b. Standardize, protect and speed up the process
c. Lower lending rates promote self financing or approaching loan sharks
5. On Rising material costs:
a. Set up nationwide initiatives to seek to provide cheaper raw materials
b. Government deals with overseas economies for material acquisitions in large quantity
6. OnLabour laws:
a. Update and modernize labour laws to balance employees and employers
b. Setup fast track courts for quick decisions
7. On Social Infrastructure:
a. Develop a MSME Ombudsman organization
b. Setup methods to electronically register complaints and concerns with local government bodies
c. Continuously monitor policy progress
Approach:
By performing this research, Milagrow wishes to strengthen its public-private partnership, and in the process, provide practical insight into the struggles of small-scale industry in India, and ways in which the government can provide support. This particular study focuses on the microcosm of the capital region, though its findings may, and should, be applied to small business practice across the nation.
Issues that small business entrepreneurs face in the North and South have numerous commonalities, whether the issue is that of infrastructure, overseas competition, gradual and certain profit erosion, or corruption. These very issues plague small industry in all sectors and in all states.
Knowledge that may be extracted from this study is not to be regarded as exemplary only of a unique set of circumstances; duly addressing the concerns it raises can mean survival to hundreds of thousands of struggling small businesses in the entire Indian subcontinent.
