The MSME has emerged as a dynamic sector over the years and has shown amplified growth over the last one decade. MSMEs are pivotal to the Indian economy as they provide large employment opportunities (second only to agriculture) and also help in the Industrialization of rural areas. As per the Small and Medium Business Development Chamber of India, there are about 36 million MSMEs in India, creating about 1.3 million jobs every year. Interestingly, this segment contributes to more than 45% of the total industrial output and to 40% of the exports. But ironically, this dynamic sector struggles in various areas like credit & finance, regulations, and lack of access to technology and standards.
A sizable number of the MSMEs in India are part of the unorganized sector as they compete within themselves and are an option to the consumer only on the affordability terms and less on the quality terms. The government’s ‘Make in India’ mission has opened up for the manufacturing sector like never before and it will have bigger players descend onto the Indian market with great aspirations. A country with one billion plus consumers is most certainly a huge opportunity for growth and profitability. In an open economy like India there will be severe competition from key global players who will bring in their expertise and experience.
The question here is how does the tight-budget and loan-dependant MSMEs survive the global rush?
The answer lies in these MSMEs working towards
Standardization helps achieve the above two objectives very effectively for it sets in motion the processes for achieving a higher quality output.
Standards are the key and standardization is the way forward. Lack of standards will affect the MSMEs and leave them handicapped. While there are certain standards being followed in India, not all MSMEs comply with the standards and moreover, there is an immediate need for a change in the Standardization process.
A few observations with respect to MSMEs in a recent survey undertaken by UL India –
a) Lack of Standards would have a negative impact on the businesses of MSMEs
b) The current standards followed by the MSMEs are not on par with global standards, leaving the MSMEs behind in the race to achieve larger
c) While 85% of the industry associations expressed the immediate need for standards in product quality, 75% wanted to have specific standards developed for India
While it is heartening to observe the awareness amongst the several industry associations about the need for Standards, it has now become imperative for all MSMEs to comply with and implement their manufacturing process and products according to the developed standards, to have the competitive edge.
Standardization not only provides the guidelines to make better products, it also acts as a benchmark for quality. Standardization in the manufacturing process –
a) Leads to quality output and opens up global markets
b) Helps compete with global players
c) Helps create brand image and credibility among customers
d) Increases business and profitability
The Way Forward
MSMEs worldwide are accepted as engines of growth for Brand India and they are the crucial link between economic growth and social economic transformation. The MSME business segment needs a lot of support from the government on certain areas like- National Standards strategy supporting MSME growth, set up infrastructure for innovation and support from academia and also enhanced training programmes are required for skill development. The training programmes range from traditional rural industries to high-end, high-tech programmes on machines.
Standardization of product manufacturing is one big way to help MSMEs get more productive and profitable to ensure their survival. It will be a ‘David vs. a Goliath’ scenario and all that is required is a ‘good slingshot’ in the form of Standardization to take on the onslaught of the global players.
Standardization will also help obtain loans and investments, which in turn would fuel the expansion and growth process of the MSMEs. Any bank or investor would be more than happy to bet on and be part of an organization that is synonymous with quality. Another very important benefit of standardization is the change in the perception of the customer – it brings in lot more faith and belief in the product as standardization represents a mark of confidence, assurance and reliability. This leads to customer loyalty which in turn makes it easier for MSMEs to move ahead.
Simply put, standardization is that very important tool which equips an MSME with quality, confidence and credibility to not just survive global competition, but to compete on an equal footing for the market share.