Micro Small & Medium Enterprises: The Secret Dynamo Of India’s Economy

By October 7, 2016 No Comments

Micro Small and Medium Enterprises (MSME) is “a hidden gem and critical sector for accelerating job growth and also GDP growth” of the country.

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The Wadhwani Foundation is a non-profit organization established by Silicon Valley billionaire, Dr. Ramesh Wadhwani. Their initiative National Entrepreneurship Network (NEN) was launched in 2003 with the purpose of accelerating economic development in India. NEN is currently the largest entrepreneurial community in India and reaches beyond cities to educate aspiring entrepreneurs.

Eshwar K. Vikas was an NEN Mentee as a bachelor in Electrical engineering from SRM University, Chennai. He co-founded Mukunda Foods which has developed the world’s first desktop dosa making machine, “DosaMatic”- currently makes dosas in 15 countries. He has won numerous awards as entrepreneur, innovator & market developer, and is now looking at aggressive expansion.

Dr. Ajay Kela, CEO of Wadhwani Foundation says it’s important to educate and empower those who want to become entrepreneurs because the small businesses they will start are likely to be the key to increasing jobs in India and growing the economy to be on par with international markets.

Why is MSME growth necessary for India’s entrepreneurial growth?

MSME-led growth has the potential to generate far higher employment than corporate-led hiring, unleashing a fresh wave of young and dynamic entrepreneurial talent.

These businesses have a proven business model honed through years of operations. But in India they are limited to a very small employee base. More than 95% of India’s SME employ less than 10 employees. Comparatively, 30% of China’s businesses employ more than 100 employees. We can make a big start by initially tapping into a small percentage of the registered small and medium businesses sector.

How many entrepreneurs operate businesses in MSME sector?

India has a large number of MSME involved in diverse businesses spread across remote geographies. They are mostly engaged in sectors like chemical, textiles, power, real estate, steel and construction. With 46 million MSMEs employing close to 40% of India’s workforce, their current contribution to India’s GDP is only 8%. This contribution to GDP is something Wadhwani Foundation and MSME Ministry initiatives hope to change.

Many startups are now coming from Tier 2 cities. What’s this new phenomena? Is the power shifting away from Bangalore, the IT hub?

Historically, India’s non-metros and small towns have been quiet places to do business, the growth of a startup was difficult due to lack mentors and investors.

But in the age of IT, an increasing number of startups are coming out of smaller Tier2 cities like Jaipur, Chandigarh, Thiruvananthapuram, Indore, Coimbatore and Ludhiana.

Startups are no longer a big city phenomenon.

However, it is important to point out that this emerging trend is not at the cost of big metros such as Bangalore, Mumbai and Delhi’s NCR region which still form the core of growing entrepreneurship ecosystem in India. The Tier-2 cities are witnessing the rise of their own startup culture as they emerge into new economic centers of consumption with rapid urbanization.

What sectors do these tier 2, 3 startup hubs focus on?

Over a period of time, these areas are bound to have non-technology based startups in sectors like construction, agro-based, textiles, printing & packaging, healthcare, and transport and logistics.

How long before these hubs start attracting VC and big investors?

The fact that entrepreneurs from small towns appear to be more charged to succeed and willing to put in the hard yards to make their startups flourish is already making the venture capitalist (VC) community take notice. Take the example of Startup Village, Thiruvananthapuram, which aims to launch 1,000 technology startups over the next ten years and start the search for the next billion-dollar Indian company.

However, this is only the start and I expect this to accelerate over the next 2 years.

And why not? Reduced cost of operation – from human resources to rentals, shorter commutes and higher retention are some of the benefits that will get many investors interested.

How has NEN helped catalyze this culture?

For Young, aspiring entrepreneurs, Wadhwani Foundation’s flagship initiative, National Entrepreneurship Network (NEN) has trained over 3000 faculty across 500 Institutes, who now regularly offer entrepreneurship courses to more than 100,000 students annually. Our work has resulted in over 2000 startups to date.

Take for example, Kishtij. Aged just 20, currently pursuing Bachelors of Technology in Electronics and Communication Engineering from Vellore Institute of Technology, NEN Mentee Kshitij Kumar is founder and CEO of India’s first call based medicine delivery platform, Del Medix. With a vision to bring progressive change, he aims to make Del Medix the largest health sector conglomerate in coming years.

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