Government support can boost global competitiveness of MSMEs

India is a member of the G-20 group of countries, which aims at international coordination of economic policy and governance of the global economy. With 19 of the world’s largest economies and the European Union as its members, it represents over 66% of world population, 75% of global trade and 80% of world GDP.

In order to mitigate the adverse impact of the COVID-19 crisis, these countries have announced stimulus measures equaling over USD 11 trillion. These measures have varied from country to country; however, these broadly include supporting sectors that have been directly impacted by the pandemic such as airlines and hospitality, providing fiscal incentives to sectors such as automobile, real estate etc. that have the potential of generating jobs, social security measures such as putting money in the accounts of the people who have lost their jobs or of the elderly, providing food to the underprivileged and migrant workers and addressing supply-side issues such as providing loan moratorium, equity infusion and government guarantee on loan repayments.

The Indian government has also taken steps to address economic challenges by adopting some of these measures, as also the RBI has infused liquidity into the system by lowering key interest rates. However, we need demand-side measures for speedy recovery from the aftermath of the crisis such as rationalisation of tax rates, as also the government needs to kick start infrastructure projects, especially in the rural areas, to provide employment to the migrant labourers, which can have a multiplier effect on the growth of the rural economy.

Further, government leaders need to uphold the virtues of globalisation as it can improve the lives of the people by enhancing their standard of living. MSMEs in India contribute significantly to exports and are major livelihood providers. While protecting these enterprises against unfair competition and dumping activities is critical, it is also important to provide them access to technology and skill sets necessary to be globally competitive. Indian MSMEs have the potential to scale, albeit with handholding from regulatory organisations.