MSME sector in Assam in poor shape

The Micro, Small & Medium (MSME) sector has the potential to strengthen the socio-economic growth of the nation by providing the solution to the unemployment problem of the country at the local level. 

MSME takes up a significant portion of businesses in various countries and plays a vital role in boosting the economic growth of a nation as it is functional in creating job opportunities and developing products and services at a lower capital expenditure. 

MSMEs are drivers of economic growth and job creation. Moreover, MSMEs are effective tools for poverty alleviation.

MSME sector in Assam

MSME sector in India contributes 8% of the country's GDP, 45% of manufactured outputs, and 40% of its exports. The MSME sector employs over 6 crore people through 2.5 crore micro-enterprises and creates 13 lakh jobs every year. 

Given that the majority of India's population lives in village and Tier1/Tier2 cities, the MSME sector has also emerged as a key factor to urbanize rural India. MSME sector is the second in terms of growing the economy after agriculture. 

Whereas Assam GDP is 4.09 lakhs and the industry sectors contribute to 39% of the state's GDP. Where Assam has 11.95 lakh units which generate employment of 18.14 lakh jobs while Andhra Pradesh which is top in the list has 30 lakh units which generate employment of 55.9 lakh jobs in 2015-16. It took, on average, 63 days to set up a business in Tamil Nadu and 67 days in Andhra Pradesh whereas, for Kerala and Assam, firms took 214 days and 248 days respectively.

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What needs to be done?

Udyam Registration is an initiative by the central government where Aadhar is linked to the micro-enterprises when the owner registers with it. This has made industry registration possible in a single day. The Udyam registration provides many facilities to the entrepreneur. One can connect and be aware of the procurement notices with other updates and facilities from the government once the entrepreneur registers themselves in the Udyam. The Scheme also offers a 2 % interest subvention for all Udyog Aadhar Number (UAN) and GST registered MSMEs on fresh or incremental loans to the extent of Rs. 100 lakhs. But in Assam, there are more than six lakhs and fifty thousand MSME of which only 10% has Udyam registration. The enterprises without the Udyam registration are withdrawn from the government tenders, subvention on loans interest, tax rebates, getting licenses, approvals and registration, tariff, tax and capital subsidies, and 20% procurement policy by the government which is notified on the government website. There is a complete lack of awareness for the versatile application of the Udyam registration within the owners of the businesses in Assam. In this case, the government and the MSME associations have to play an active role in making awareness among the entrepreneurs. 

The government should play an active role in procuring goods from the MSME sector as it helps micro industries to sell their products. The Assam MSME procurement preference policy 2017 was a complete failure due to the insufficient mechanism for procurement of goods and services. Therefore, The Assam MSME procurement preference policy 2017 was repealed by the new MSME procurement preference policy 2021. The procurement preference policy 2021 should immediately effect after the repealing of the Procurement Preference Policy, Assam, 2017. But till now ASIDC (Assam Small Industries Development Corporation), which is a nodal department for procurement, hadn't a single procurement to date with adherence to the procurement preference policy 2021. 

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An official in ASIDC says that they will put it on the next state financial budget and after that, they will procure 20% from each MSME who has registered on their website. According to the Assam MSME procurement policy 2017 for development of Micro and Small Enterprises of Schedule Caste, Schedule Tribe and women, shall conduct monthly Special Vendor Development Programmes, Buyer-Seller Meets, Entrepreneur Development Programs, for strengthening the distribution channels, promoting innovative methods and marketing. But till now only one program has been conducted in three years. The officials of ASIDC have blamed the covid pandemic for this and they also said they don't have any alternatives. But interestingly at the same time, other Indian states were using mass mediums like radio for broadcasting awareness programs on MSME.

AAASMI (All Assam Association for Small Medium Industries), which has more than 500 members all over Assam informs that the current situation of the MSME sector in Assam is improvised. Due to the pandemic, many units in the micro and small industry of the sector were forced to extinct from the market due to persistent loss of the business. The government has issued an emergency credit line guarantee scheme (ECLGS). Which had provided additional term loans and additional working capital requirements because of the covid-19 pandemic. The central government has also sanctioned 738.44 crores for Abmanirbhar Bharat Abhiyan for 28654 MSME sectors to avail of collateral-free loans up to 3 crores without any processing fee to revive the from the covid pandemic. But in absence of a high credit score or collaterals, most of the banks perceive MSMEs as risky clients. This problem amplifies when the client is any start-up. Even if banks get convinced to disburse the loan, the rate of interest remains higher than normal. There are several cases where banks delay in disbursing loans for which entrepreneurs face loss of time and motivation to start a business.

To promote industrialization in the North-Eastern States and to boost employment and income generation, accelerate economic growth, and boost the process of industrialization in the North-Eastern Region of India a new scheme namely North East Industrial Development Scheme (NEIDS) was introduced in 2017 repealing the North East Industrial & Investment Promotion Policy (NEIIPP) 2007 scheme. The North East Industrial Development Scheme (NEIDS), which started in 2017 is only for five years, this will be the last special subsidy given by the central government to the north-eastern region as a special category status for development. There would be only state subsidies left which won't be enough for the development of MSME in northeastern states. The special subsidy for the north-eastern regions which was given by the central government was closed due to the misuse of subsidies by many industries. The micro industries don't claim their subsidies as they hardly maintain any paperwork. On the other hand, small and medium industries maintain proper paperwork which helps them to claim their subsidies.

The PMEGP (Prime Minister Employment Generation Programme) is a Government of India-backed credit-linked subsidy scheme. Under this scheme, beneficiaries can get a subsidy amounting to 15-35% of the project cost from the government. But the number of beneficiaries has decreased from 8255 in 2013-14 to 2587 in 2020-21.

When an entrepreneur tries to open an enterprise in Assam, he faces a high cost to hire skilled laborers, due to an insufficient number of skilled laborers in the state, if the entrepreneur hires couldn't make much profit out of the business. To remove this problem there should be more and more skills training centres in the state.

There is a lack of infrastructure facilities in MSME in Assam. To upgrade the technical capabilities of MSME and to meet the quality standards and delivery schedules there should be infrastructural facilities set up such as new incubation centres, eligible private institutions including Industry Associations, along with the Academic Institutions, R&D laboratories, Universities, Government Entities, and Technology Parks and Technical institutions with the promotion of innovative/technology-based entrepreneurship.

There is a lack of an entrepreneurial mindset among the people of Assam. The youth of Assam is more focused on getting a job. But the main problem is there are not many jobs available which leads to migration from the state. Government should create awareness among the students for setting up new enterprises after completion of their studies instead of searching for jobs only. Government should create awareness about entrepreneurship among the youth aspiring for building their career and hand-holding them to create their small business ventures. The Assam government has taken an initiative namely Advantage Assam in 2017 which aims at providing 1 lakhs jobs and a minimum of 1000 enterprises in under 5 years. But how successful the initiative will be known in the coming years.

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The entrepreneurs should take initiative for commercial processing of local resources like bamboo, agarwood, turmeric, ginger among other products for value-added exports. Government should issue limitations of goods from outside which are machined made and could not compete with the homemade or handloom industry. A fall in the domestic demand and supply chain constraints is the main reason declined growth rate of the sector. 

Ancillary industries play an important role by manufacturing parts, components, sub-assemblies, tools, intermediates, machines, etc. Any heavy industry depends on the machinery for its work to progress; the heavy industry always requires the support of the ancillary industry. There are limited ancillary industries in Assam which made the dependence of the big heavy machinery to export from outside. The government has to play an important role to promote and protect ancillary industries.

What has been done?

A strong digital ecosystem to increase the outreach among buyers and suppliers in the market. The government has made efforts e MSMEs registered under UAM, efforts have been made by the government under the Digital India campaign to spread awareness on the ease and benefits of different modes of digital payments such as BHIM, UPI, and Bharat QR code.

The KVI (khadi and village industries) which are mostly in the village provide an important ingredient for the local economic ecosystem. Khadi and Village Industries activities are the key source of livelihood for rural and urban people who largely include spinners, weavers, and other artisans spread across the country. In a significant number, they also are inter-related and inter-dependent on the agricultural/horticultural/other forest and non-forest produce. It adds wealth to the local economy and at the same time provides major employment. The ISEC Scheme is applicable for all registered Khadi Institutions under KVIC / KVIB implementing Khadi and Polyvastra programme. Under the scheme, credit at the concessional rate of Interest @ 4% per annum is given for Capital Expenditure (CE) as well as for Working Capital (WC) by Khadi and Village Industries Commission (KVIC).

National Small Industries Corporation (NSIC) provides credit support for raw material procurement by making the payment to suppliers in the Raw Material Assistance scheme against Bank Guarantee. NSIC also facilitates financing by assisting MSMEs under schemes such as the Tender Marketing Scheme fulfilling the requirement of steady and timely delivery of their raw materials in requisite quantities at the most affordable and competitive prices. This not only enhances the competence of MSMEs but also contributes to increasing their business volumes. The state-wise assistance under the RMA scheme in FY21 assisted entrepreneurs in Assam with Rs 8.42 crore.

The Technical Centre offers testing services to MSME through NABL accredited Laboratories. There are 1579 units facilitated under common facility services.

The government has taken steps like MSME registered in Assam shall have 50% of the goods required for making a finished product shall be from Assam, MSME/other enterprise and unit must have engaged 90% local people in employment.

Assam is the largest state in the NER both in terms of geographic spread and the size of the state economy. It shares borders with seven states and two neighbouring countries, i.e., Bangladesh and Bhutan. Assam is the gateway to Southeast Asia. There is an ample number of opportunities for Assam to grow. But it needs to aggressively promote industrial and infrastructural growth. MSME plays a vital role in the development of Assam as it contributes 39 % to state GDP. MSME in Assam has a huge potential and also to triple the Assam economy with employment generation. To make Assam a prosperous state MSME sector has to be supreme.