The Power Of Small

SMES – A DOMINANT FORCE IN THE INDIAN ECONOMY

The growth of India’s economy, much like many economies around the world, is piloted by family-led businesses. From the Ambanis to Adanis, Birlas to Piramals, Godrej to Goenkas - most of the listed companies in India are all family-led or family-managed.

Being the largest asset creators as well as employment generators, they form a dominant force in the Indian Economy – contributing significantly to nation-building. However, the story of family businesses is not limited to these large corporates.

A significant portion of economic value and employment creation is driven by the micro, small and medium enterprises (MSMEs) - most of which are family-led. They play the most crucial role in turning the wheels of the Indian economy today.

The country has a total of 633.9 lakh MSMEs and employs over 11.1 crore people – thus making it a high priority sector and the ‘backbone’ of our economy.

However, over the years, this ‘backbone’ has been showing numerous signs of fragility. Intense competition from MNCs and start-ups, lack of technical-know-how, inability to attract talent, slow pace of technological upgradation and lack of access to formal credit are some of growth-inhibiting factors widely observed among MSMEs. Additionally, new disruptions including demonetization, GST implementation, and the COVID-19 pandemic have also caused constraints to the progress of MSMEs, owing to their inability to adjust and adapt quickly. While the global brands and new-age start-ups are better equipped to catch-up with the ever-evolving markets and expedite their expansion, MSMEs are often found struggling.

UNLOCKING THEIR POTENTIAL

Despite these apparent fragilities, the MSMEs, across sectors - technology, apparel, retail, fashion, food, agribusiness, interiors & home décor, tourism, and fashion - have displayed commendable growth over the past few years.

The power of MSMEs to change the economic landscape of the country is widely recognised and so is their ability to drive innovations and create far-reaching ripples of positive effects on families, communities, and countries. Expert opinions position the sector as one of the most significant sectors that would drive India to achieve its target of becoming a $5 trillion economy.

However, it is evident that their growth would forever remain below-potential without targeted interventions. The government of India has always endeavoured to bolster the sector through various initiatives. While all those endeavours are much appreciated, there remains room for further tailored efforts to truly decode and unlock the wondrous capabilities of MSMEs!

Majority of the MSMEs being family-led, faces a set of unique challenges. For instance, conflicts within the family often affect professional decision-making and lack of succession planning tends to impact the sustained growth of the business. Thus, these businesses require support towards professionalising the business and building cohesion and internal harmony.

The large family-led corporations, as mentioned above, have built strong legacies, and achieved inter-generational success by effectively combating the very same issues that the family-led small businesses are facing today. Therefore, adequate thrust is to be placed on these distinctive challenges to further enable the sector's growth.

Stay tuned as we deep-dive into these challenges, dissect them and brainstorm on plausible solutions to address them!