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Will the upcoming G20 summit come bearing good news for the MSME sector?

By Siddhant Bery, Managing Partner, KSP INC,

Added 27 April 2023

The article pans into the benefits that Indian MSMEs stand to derive from the ongoing G20 Presidency

The contribution of micro, small and medium enterprises (MSMEs) to India's economic growth is well-documented. A report by consultancy KPMG and industry body - the Confederation of Indian Industry said the entities account for nearly 30 per cent of India's gross domestic product and 45 per cent of its exports.

MSMEs also play a vital role in socio-economic development, such as job generation (at 110 million), reducing inequalities, rectifying regional imbalances, and providing low-cost raw materials to support large industries and allied sectors.

The progress of less-developed regions and bridging the rural-urban divide depends on the robust health of the micro, small and medium enterprises industries.

What is the G20?

The Group of Twenty (G20) is an inter-governmental forum comprising 19 countries, which includes Argentina, the Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Turkey, United Kingdom, United States, and the European Union.

The G20 members represent around 85 per cent of the global Gross domestic product (GDP), over 75 per cent of the global trade and about two-thirds of the world population. It was founded in 1999 after the Asian financial crisis as a forum for finance ministers and Central Bank Governors to discuss global economic and financial issues. G20 was upgraded to the level of Heads of State/Government in the wake of the global economic and financial crisis of 2007. Then in 2009, it was designated the "Premier Forum for International Economic Cooperation".

What can the G20 offer?

The G20 is the main forum for economic cooperation between member countries and other countries. Additionally, the group structure is unique as it consists of various groups and channels of engagement that can provide consolidated and comprehensive support to the industry.

The G20 has a lot to offer the MSME sector due to its broad structure and expertise in areas such as digitalisation, upskilling programs, and start-up ecosystems. Boosting digitalisation, helping the MSMEs sector to acquire new skills, revise their strategies from a global perspective, etc.

India and its large MSME sector comprising over 60 million registered businesses, has made significant progress during and after COVID. Government programmes like Udyami Bharat and the Prime Minister's Employment Generation Programme, among others, are outstanding examples of how India is managing its large MSME sector.

Overall, we need to educate the industry on and prepare for the current digital revolution. In line with India's commitment to the G20 inclusive growth goals, the sector needs to be funded and its expansion facilitated.

Indian MSME sector in numbers

India has over 63 million small, medium and micro enterprises, absorbing the vast majority of the country's workforce, and the room for growth economy is still enormous. With a Gross Value Added (GVA) share of 26.83 per cent in 2020-2021, India's MSME sector can employ 25 per cent of its total workforce, with many businesses headed and vanguard by women.

It plays a crucial role in the Indian economy as it accounts for about 45 per cent of national industrial output, about 70 per cent of industrial employment and about 40 per cent of exports.

According to a 2021 article by McKinsey & Company, MSMEs account for around 99 per cent of businesses and 70 per cent of all jobs in OECD (Organization for Economic Cooperation and Development) countries, and they contribute more than 50 per cent of GDP in low-income countries raised all over the world.

The way forward

Recognising the huge contribution and potential of MSMEs, the Ministry of Finance has allocated a record amount of Rs 22,138 crore to the MSME sector in the Union Budget for FY24. The budget announced several measures to boost the MSME sector, such as extending the emergency line of credit guarantee scheme until March 31st and the RAMP or Raising and accelerating the MSME performance programme with an outlay of Rs 6,000 crore.

Increasing the financial inclusion of MSMEs will not only increase the productivity of MSMEs but will also strengthen the economic growth of the country. To facilitate the Make in India initiative and support MSMEs, the government is implementing various measures to ensure that MSMEs have quick, sufficient, and low-cost credit.

The support measures for MSMEs, such as redefining MSME standards based on lower turnover thresholds in favour of local manufacturers, the introduction of ICT-based portals like CHAMPIONS (Creation and Harmonious Application of Modern Processes for Increasing the Output and National Strength), and the promotion of new schemes like Pradhan Mantri MUDRA Yojana, Udyog Aadhaar, MSME Samadhaan, ZED Scheme, Make in India, and Stand up India is helping these businesses to find financial footing.

Some time back, the Central government started its e-marketplace (GeM) to increase the share of MSMEs in government procurement. This will help reduce costs, increase efficiency, and increase sales.

However, MSMEs need to take full advantage of technology to facilitate and grow their businesses to remain competitive in the digital age. A development strategy to address these challenges must have an inclusive and responsive governance system - one that governs justly invests in people and fosters the growth of small and medium enterprises. Indian MSMEs stand to benefit from the G20 Presidency.

The G20 slogan "Recover together, recover stronger" applies not only to large companies but also to smaller ones such as SMEs. The presidency should and must enable India to benefit from the potential of a $10 trillion economy by 2030.

While gender equality is at the centre of the B20 the official G20 forum for dialogue with the global business community - the role of women in MSMEs is important. According to the Ministry of Small and Medium Enterprises, Government of India, Annual Report 2021-22, at least 20.37 per cent of MSMEs are headed by women. In addition, the proportion of businesses owned by women in rural areas is 77.76 per cent, which is higher than that of urban areas, and overall, 51 per cent.

India's G20 Presidency

India holds the G20 Presidency from 1 December 2022 to 30 November 2023. Forty-three heads of delegation - the largest ever to the G20 - will attend the final New Delhi summit in September of the 'next year.

The G20 logo is inspired by the bright colours of the Indian flag - saffron, white, green, and blue. It places the Earth next to the lotus, the national flower of India which represents growth in the face of challenges. The Earth reflects the Indian way of life that protects the planet, a way of life in perfect harmony with nature. Below the G20 logo is "Bharat" written in the Devanagari script.

The theme of India's G20 Presidency - "Vasudhaiva Kutumbakam" or "One Land One Family One Future" - is derived from the ancient Sanskrit Maha Upanishad. Essentially, the theme affirms the value of all life - humans, animals, plants, and microorganisms- and their interconnectedness on Earth and in the wider universe. The theme also focuses on LiFE (Environmental Lifestyle) and its associated environmentally sustainable and responsible choices, both at the level of individual lifestyles and national development, which will trigger global transformational action for a cleaner, greener, and more sustainable environmental future. More blue.


It is also important to ensure that the policies and support for MSMEs are clear, effective, efficient, and not abused by large multinational companies through their subsidiaries.

With the support of G20 members, this will be one of the most significant legacies of India's G20 Presidency to the global economy and its sustainable development goals. India can leave a significant footprint by accelerating the development of MSMEs, building their resilience, and improving their ability to respond to global standards and market demands in GVCs.

MSMEs are the economic backbone of society, and the G20 must take them seriously to build sustainable economic development. A strong policy base to identify, validate, empower, and defend these segments is essential to regulate the participation of all stakeholders, which in turn will drive healthy and inclusive economic development. Let's do our part so that the rest of the world can achieve this goal and achieve an inclusive recovery for all.

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