In a sea of growing industries, small-scale ventures are those fish that nibble at your feet in a Thai Spa. Even as Atmanirbhar Bharat becomes the motto of our government, bigger goons may await on the path as Indian MSMEs contribute 29% to national GDP but fear insolvency and indebtedness over supposedly petty problems such as electricity (MSMEs in Maharashtra have complained of exorbitant electricity bills).
Walls have started closing in for small-scale entrepreneurs as adequate funds are unavailable. Entrepreneurs, due to a weak economic base, have lower creditworthiness. Stuck between a ditch and storm, they neither have resources nor can borrow resources. This is causing them to turn to moneylenders and borrow money at extravagant rates of interest.
Meanwhile, large-scale units are using their resources and reputation to corner raw materials in the open market, leaving small-scale units to purchase the same raw material from the open market at extortionate prices. This is leading to an upswing in production cost, rendering functioning unviable.
In small-scale industries, there is a gross underutilisation of capacities — only 40-50% of industries use their installed capacities — while large-scale units work for 24 hours a day. Managerial inadequacies pose another serious problem for smaller, newer businesses. Businesses today demand vision, wisdom, skill, aptitude and devotion. An entrepreneur is a pivot around whom the entire enterprise revolves. The competence of the entrepreneur is vital for the success of any venture — something that is thoroughly absent in many small-scale ventures.
Protectionism, although the seemingly best option for the Indian economy at this point, may end up becoming its hamartia. With the swords of lack of innovation, loss of profits due to tariffs and inflation (that may cause MRP to grow exponentially) hanging over our head, prioritising protectionism (over development of MSMEs) crosses the fine line between bravery and foolishness.