SME Digital World

Author: SDW Editorial Desk

New Challenges and Opportunities for the Dairy Industry Amid Changing Customer Behavior

New Challenges and Opportunities for the Dairy Industry Amid Changing Customer Behavior

The dairy industry is currently navigating a landscape rich with opportunities and challenges. New sources such as plant-based dairy alternatives and a focus on sustainability, including precision farming and automation, are reshaping the sector. Additionally, the industry is expanding into new markets.
Ravin Saluja, Director of Sterling Agro Industries (Nova Dairy), highlights that the growing emphasis on health and wellness offers significant potential for dairy FMCG companies. “Consumers are increasingly seeking functional dairy products enriched with probiotics, vitamins, and minerals, catering to diverse dietary needs and preferences. By leveraging scientific research and innovation, dairy brands can capitalize on this trend to offer products that promote overall well-being and address specific health concerns,” Saluja explains.
The increasing popularity of plant-based diets and rising lactose intolerance have fueled the demand for dairy alternatives. “FMCG companies have the opportunity to diversify their product portfolios by introducing plant-based dairy alternatives made from almonds, soy, oats, and other plant sources. Embracing this trend enables dairy brands to tap into new consumer segments while contributing to sustainability goals and reducing environmental impact,” Saluja adds.
Aman J Jain, CEO and Co-Founder of Doodhvale emphasizes the importance of adapting to new trends. “Dairy brands should consider developing digital marketing approaches, interacting with customers on social networks, and offering personalized experiences. Steps toward long-term sustainability, transparency in production processes, and the use of sustainable materials can appeal to specific customers. Functional dairy products, plant-based and fortified creations can address various dietary choices and health needs,” Jain states.
Challenges for the Dairy Industry
The dairy industry faces mounting pressure to address sustainability and environmental challenges, such as greenhouse gas emissions, water usage, and animal welfare concerns. “FMCG companies must adopt sustainable practices throughout the value chain, from sourcing raw materials to packaging and distribution, to mitigate environmental impact and meet consumer expectations for ethical and eco-friendly products,” says Saluja.
Compliance with stringent regulatory requirements and quality standards also presents a challenge, particularly in a globalized marketplace with diverse regulatory frameworks. “Ensuring product safety, traceability, and adherence to labeling regulations is essential to maintain consumer trust in dairy products. FMCG companies must invest in robust quality assurance systems and compliance measures to navigate regulatory complexities and uphold industry standards,” Saluja notes.
Economic uncertainty, geopolitical tensions, and market volatility are significant challenges, affecting supply chain stability, pricing dynamics, and consumer spending patterns. Fluctuations in commodity prices, currency exchange rates, and geopolitical developments can disrupt operations and profitability, necessitating agile and adaptive strategies to manage risks and seize opportunities in dynamic market environments.
“The main problems that dairy industries face are fluctuating raw material prices, increasing regulatory measures, issues around emission reduction and water usage, ethical concerns for animal welfare, the shift in consumer behavior towards non-animal-based products, and the increasing prevalence of lactose intolerance and dairy product allergies,” Jain elaborates.
Furthermore, supply chain disruptions, workforce shortages, and the pressure to maintain sustainable operations add to the industry’s challenges.
Despite these challenges, stakeholders agree that the dairy sector has a promising future, provided it adapts effectively to changing consumer preferences.

June 17, 2024
Government Needs to Review Unfavorable FTAs: CII Chairman

Government Needs to Review Unfavorable FTAs: CII Chairman

NEW DELHI: The government should reassess free trade agreements (FTAs) with countries like South Korea and ASEAN members that have not been advantageous for India in terms of market access, stated Sanjiv Puri, Chairman of the Confederation of Indian Industries (CII). However, he noted that trade agreements with the UK, EU, UAE, and Australia have been beneficial for the Indian economy.
The Global Trade Research Initiative (GTRI) in Delhi reported that India’s merchandise trade deficit surged by 302.9% with ASEAN countries and by 164.1% with South Korea. This comparison was made using data from the pre-FTA period (2007-09) and the period between 2020-22. India had established trade agreements with these countries in 2010-11. During these periods, India experienced a higher growth rate in imports compared to exports when trading with these nations.
Puri also highlighted the potential for the production-linked incentive (PLI) scheme in sectors like textiles and toys, citing its success in new-age and traditional sectors.
“PLI schemes have been effective in new-age sectors and traditional sectors like food processing. Given their success, we can extend them to labor-intensive sectors and link them to the employment index,” he added.
Addressing concerns about slow growth in the manufacturing sector, Puri remarked, “Recent policy interventions have strengthened financial sector balance sheets, improved corporate balance sheets, rationalized corporate income tax, and introduced PLI schemes and FTAs. These measures have positively impacted manufacturing, and we are moving in the right direction.”
He emphasized the need to build on this momentum through continued reforms in factors like cost, land, labor, and improving ease of doing business to make the ‘Make in India’ initiative more competitive.
Puri also expressed optimism about a revival in rural consumption, given favorable monsoon predictions.

June 17, 2024
India’s Electronic Manufacturing Set to Double to $250 Billion in Five Years: Report

India’s Electronic Manufacturing Set to Double to $250 Billion in Five Years

India’s electronic manufacturing sector is poised for significant growth, with projections indicating it will double to around $250 billion in the next five years, according to a report from The Economic Times. This growth would elevate the sector from its current value of $125-130 billion in electronic exports.
To combat unemployment, the government is targeting job creation in the electronic manufacturing sector, aiming to double the current workforce of 2.5 million to around 5 million in the same timeframe.
“Our focus remains on providing services to digital technology and expanding large-scale electronics manufacturing. These targets will only accelerate,” stated Ashwini Vaishnaw, Minister for Electronics and Information Technology.
The report highlights India’s shift from import substitution to becoming self-reliant (Aatmanirbhar) and an export-led manufacturer, especially in segments like mobile phones. The country is also working towards self-reliance in laptop manufacturing.
The Indian government has earmarked Rs 760 billion for electronic manufacturing through various incentive schemes. Despite this, India’s per capita electronic consumption remains at one-fourth of the global average.
Currently, a significant portion of India’s electronic imports come from China (44%) and Hong Kong (16%). On the export front, mobile phones and Electronic Control Units (ECUs) dominate, with the United States and the UAE being the largest export destinations.
Experts note that India’s electronic manufacturing sector is undergoing a transformation, strengthening the country’s position as a global electronics manufacturing hub.
To further this goal, the government has launched several initiatives, including the Production Linked Incentive (PLI) Scheme for large-scale electronics manufacturing, PLI for IT hardware, the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), and the Modified Electronics Manufacturing Clusters Scheme (EMC 2.0).
Additionally, the government has introduced the Semicon India Program with a $10 billion incentive outlay, aiming to develop a sustainable semiconductor and display ecosystem, further establishing India as a global hub for semiconductor and display manufacturing.

June 17, 2024
Women constitute 36% of workforce in Indian start-ups and SMEs, finds HerKey report

HerKey Report: Women Constitute 36% of Workforce in Indian Start-Ups and SMEs

A recent HerKey study revealed that women represent 36% of the workforce in Indian startups and SMEs. The HerKey DivHERsity Benchmarking Report 2023–24 found that women make up 34% of the workforce across all surveyed companies, which included 300 firms.
Large enterprises led with a 38% women participation rate at the entry level, although this figure drops to 19% at mid-management and senior levels. Notably, the proportion of women hired in C-suite roles has decreased to 24% from the previous 37%, indicating a need for stronger measures to support women’s advancement to top leadership positions.
Neha Bagaria, Founder & CEO of HerKey, commented on the findings: “Women don’t face a constraint on ambition—they face a constraint on opportunity. The DivHERsity Benchmarking Report underscores the need for continued efforts to elevate women to leadership roles.”
The study highlighted that 84% of surveyed companies have initiatives dedicated to recruiting women, with 98% of large enterprises committed to gender diversity goals in hiring. Among these, 88% successfully met their objectives. Startups and SMEs are also making strides, with a 97% success rate in achieving gender diversity goals.
Additionally, 82% of large enterprises and 67% of SMEs and startups have launched programs to hire women returning to work. These initiatives have been highly successful, with 93% of women in large enterprises and 83% in startups and SMEs being hired through such programs.
Founded in 2015, HerKey collaborates with over 15,000 companies across India, helping them to recruit women employees.

June 14, 2024
Startups Leverage ‘Value-Add’ Mentors for Growth

Startups Leverage ‘Value-Add’ Mentors for Growth

Shared resource model enables PE, VC firms to oversee management
Known for their expertise, ‘value-add professionals’ are becoming increasingly popular among private equity (PE) and venture capital (VC) firms. These firms are adopting a shared resource model, utilizing these experts to support their portfolio companies.
Under this model, experts are shared across various firms where PEs and VCs have invested. They suggest improvements in areas such as tech, legal, training, HR, operations, and brand building, implementing optimal methodologies. Typically, these professionals have extensive experience, having served as chief finance officers, chief marketing officers, or chief technology officers, or leading verticals like training, operations, and legal for at least 15-20 years.
According to TeamLease Services, India hosts around 1,700 VC and PE firms managing portfolios of about 15,000 companies. Approximately 35-40% of these firms, or 595-680 funds, utilize shared resources.
Firms like Motilal Oswal Alternates, Eximius Ventures, Elevation Capital, Prime Venture Partners, and Matrix Partners follow this model. Their shared resources teams collaborate closely with fund partners and portfolio company management teams.
Notable portfolio companies engaging shared resources include BimaKavach, Dairy Classic, Simpolo, Asian Footwears, Symbiotec Pharma, Ganesh Grains, Shuru, Vegapay, and Finarkein.
The shared resources concept has long been prevalent in established startup ecosystems such as the US and China. In India, it gained traction recently, especially following multiple corporate governance and ESG (environmental, social, and governance) issues.
“This model provides portfolio companies with access to expertise they may not have in-house or afford full-time,” said Vikram Ramasubramanian, partner at Inflection Point Ventures. Specialized mentors help establish robust frameworks, prevent mismanagement, foster transparency, integrate sustainable practices, and meet regulatory requirements, which are critical for long-term success.
The shared resources model allows startups to access expertise as needed, reducing overall costs. By leveraging mentors from shared resources, startups can save around 30-40% of their costs, depending on employee costs and numbers. This is because the need for deep expertise in every function on a full-time basis is low for most startups.
For example, a D2C company opening offline stores might only need an operations expert initially. Similarly, a startup might need a marketing expert when taking the digital route and understanding analytics.
Hiring CXOs can cost around ₹60-80 lakh per annum. Ravi Teja Gupta, founder of Guptaji Invests, emphasized that startup success depends more on spending than funding. “Many B2C startups spend around 30% on marketing, and many D2C companies spend around 40-50% on marketing. So, we hired proven experts in viral marketing,” he said. He added that some VC companies have increased their fund size and transitioned into PE companies by adopting this model.
The shared resources model benefits both funds and portfolio companies. For investors, it generates better results from portfolio companies and allows structured control without daily interference. It also protects startups from complications arising from poor corporate governance.
Vishal Tulsyan, MD and CEO of MO Alternates, noted that an organization is built by its support functions. “Every company must embrace tech significantly, but mid-sized companies often cannot afford a strong head of technology. Likewise, HR is a crucial function, but such talent is often unaffordable,” he said.

June 14, 2024
Compliance Burden Hampers MSME Chemical Units

Compliance Burden Hampers MSME Chemical Units

The extensive compliance requirements are stifling growth in India’s $220 billion chemical industry, particularly affecting MSMEs. Each unit in this labor-intensive sector must meet up to 635 compliance requirements monthly, posing a significant challenge, according to industry sources and analysts.
Rishi Agrawal, co-founder and CEO of TeamLease RegTech, noted, “Understanding the compliance needs is difficult for most MSMEs. The lack of training and skilled manpower further complicates compliance efforts.”
Frequent changes in regulatory and compliance norms exacerbate the issue. “For example, in the last week alone, there were 200 compliance changes, 700 in the past month, and approximately 1,963 in the current quarter,” Agrawal said. While large companies have in-house teams to manage these requirements, MSMEs face considerable difficulty.
Jaimin Vasa, chairman of the Gujarat Chemical Association, suggested, “There should be industry-specific general licensing instead of multiple regulations under various acts like the Factories Act, health, explosives, hazardous materials, and food safety.”
Compliance needs also vary by state, complicating matters for companies operating in multiple locations. Vasa added, “The government should simplify the application process and expedite clearances to assist units in meeting compliance requirements.”
Agrawal pointed out that rent-seeking is a major issue in obtaining the necessary registrations and licenses for manufacturing units. He suggested, “To address this, we need a controlled environment and support for private entrepreneurship. The rapid pace of digitalization can be a significant aid.”
India’s chemical industry is the sixth largest globally and third largest in Asia, accounting for about 11% of the country’s exports and projected to reach $1 trillion by 2040. The industry has improved significantly in the World Bank’s Ease of Doing Business rankings, rising from 142nd in 2014 to 63rd in 2019.

June 14, 2024
Manufacturing Sector Seeks Policy Continuity and New PLI Schemes Under Modi’s Third Term

Manufacturing Sector Seeks Policy Continuity and New PLI Schemes Under Modi’s Third Term

With the Narendra Modi-led NDA government commencing its third term, the manufacturing sector anticipates policy continuity, increased capital infusion, and new PLI schemes to strengthen India’s position as a preferred manufacturing hub and to enhance a robust and resilient supply chain ecosystem.
Industry insiders are optimistic about the coalition government. The entry of Chandrababu Naidu-led Telugu Desam Party (TDP) into the ruling alliance is seen positively, as Naidu, now Andhra Pradesh’s chief minister, is expected to drive reform and innovation, acting as a “force multiplier.”
“There is comfort in having just two main alliance partners with the BJP. Chandrababu Naidu is perceived as a progressive and forward-thinking politician, and Nitish Kumar, aiming to keep his prospects bright in Bihar, will likely push for the state’s development,” an industry body spokesperson told ET anonymously.
The coalition regime is expected to lead to a more “uniform distribution” of projects across various states.
“We anticipate more even project distribution among states. With BJP’s win in Odisha and its proximity to Andhra Pradesh, areas like Visakhapatnam might see increased industrial investment,” the spokesperson added. However, some officials expressed concerns that big-ticket projects might favor Andhra Pradesh due to Naidu’s influence, potentially intensifying competition between states for projects.
Overall, the TDP partnership with BJP is viewed positively, with Naidu seen as accessible and receptive. The appointment of a TDP cabinet minister for civil aviation is welcomed, as it could expedite approvals for regional airports in southern states.
“There’s no nervousness or uncertainty,” an electronics manufacturing industry representative told ET. “The coalition is seen as enhancing focus on manufacturing, benefiting the electronics sector.”
The manufacturing industry is eager for the continuation and expansion of successful PLI schemes from Modi’s second term, including new incentives for traditional sectors like textiles, cement, and leather.
In the electronics manufacturing industry, attention is on pending proposals with the India Semiconductor Mission (ISM) awaiting cabinet approval, with hopes for progress post the July budget.
In the automotive sector, expectations of policy continuity and a sustained focus on the Make in India initiative are fostering optimism.
“The general sentiment is very positive, with no expectation of losing momentum,” said Soumen Mandal, senior research analyst at Counterpoint Research. “In the automotive and heavy industries sectors, there’s a belief in continued policy direction, as these are major employment sectors that the government aims to further boost in their third term.”

June 14, 2024
Indian Banks to Request Regulator Not to Increase Provisioning for Infrastructure Loans

Indian Banks to Request Regulator Not to Increase Provisioning for Infrastructure Loans

The Indian Banks’ Association (IBA) plans to ask the Reserve Bank of India (RBI) to maintain the current provisioning requirements for infrastructure project loans. This response is in light of the RBI’s recent proposal to significantly increase the capital banks and non-banking financial companies (NBFCs) must set aside for these loans, according to three banking sources cited by Reuters on Wednesday.
In May, the RBI suggested that banks and NBFCs should allocate a provision of 5% of the total loan amount for infrastructure projects during the construction phase, a substantial rise from the current requirement of 0.4%.
“The blanket 5% provisioning requirement will sharply increase the cost of implementing such projects and will hurt project financing,” one source familiar with the matter stated. They suggested that additional provisioning should only be required if there is a delay in project completion.
Indian banks have previously faced significant defaults on infrastructure loans during 2012-2013 due to aggressive lending, which strained the banking system. Currently, India is experiencing a surge in government-led infrastructure projects aimed at boosting the economy. Given that asset quality issues are not particularly alarming at present, two banking sources believe implementing stringent provisioning rules may not be wise.
The IBA met on Tuesday to discuss feedback from individual banks and intends to submit a formal request before the June 15 deadline. The association did not immediately respond to Reuters’ request for comment.
The Finance Industry Development Council (FIDC), representing NBFCs, has also opposed the RBI’s proposal, suggesting the provisioning requirement remain at the current level. Additionally, the IBA will request that the new norms not apply to loans extended prior to the implementation of these guidelines.

June 13, 2024
Industrial Output Grows 5% in April, Bolstered by Mining and Power Sectors

Industrial Output Grows 5% in April, Bolstered by Mining and Power Sectors

India’s industrial production growth fell to a three-month low of 5% in April 2024, primarily due to a weaker performance in the manufacturing sector, despite strong contributions from the mining and power segments, according to official data released on Wednesday.
Factory output, as measured by the Index of Industrial Production (IIP), had grown by 5.4% in March and 5.6% in February 2024. The previous low for IIP was 4.2% in January 2024. For the fiscal year 2023-24, IIP growth was 5.9%, compared to 5.2% in the preceding fiscal year.
In April 2024, India’s IIP grew by 4.6%, according to the Ministry of Statistics & Programme Implementation. The latest data revealed that mining output growth accelerated to 6.7% in April, up from 5.1% in the same month last year. However, manufacturing sector growth decelerated to 3.9% in April from 5.5% a year ago. Power generation increased significantly by 10.2% in April, compared to a contraction of 1.1% in April of the previous year.
In terms of use-based classification, the capital goods segment’s growth fell to 3.1% in April 2024 from 4.4% in the same period last year. Consumer durables output expanded by 9.8% in April, rebounding from a contraction of 2.3% in April 2023. Conversely, consumer non-durable goods production contracted by 2.4% in April 2024, following an 11.4% growth in April 2023.
Infrastructure and construction goods reported an 8% growth in April 2024, down from a 13.4% expansion in the previous year. Primary goods output grew by 7% in April 2024, a significant increase from the 1.9% growth recorded a year earlier. The intermediate goods segment saw an expansion of 3.2% in April 2024, up from 1.7% in the same period last year.

June 13, 2024
SBI Launches ‘SME Digital Business Loans’, Promising Sanction in 45 Minutes

SBI Launches ‘SME Digital Business Loans’, Promising Sanction in 45 Minutes

The State Bank of India (SBI), the nation’s largest lender, has introduced ‘SME Digital Business Loans’ aimed at approving loans within 45 minutes. This initiative targets micro, small, and medium enterprises (MSMEs), which SBI has identified as key to its growth and profitability over the next five years.
“This innovative product marks a significant leap forward in digitalisation by offering SMEs a digital loan journey with an end-to-end sanction turnaround time of up to 45 minutes,” SBI stated.
The new loan offering eliminates the need for traditional credit underwriting and lengthy appraisal processes, introducing a simpler, faster, and more accessible approach to MSME lending. For loans up to Rs 50 lakh, SBI has waived the requirement for financial statements, relying instead on transaction history and GST returns for appraisal.
SBI has developed a data-driven credit assessment engine that uses authentic data footprints from income tax returns (ITR), GST returns, and bank statements. This engine can provide sanction decisions within 10 seconds after the necessary details are submitted, without any human intervention.
“We are committed to setting a new industry benchmark with SME Digital Business Loans, underscoring our constant efforts to drive innovation in MSME lending,” said Dinesh Khara, chairman of SBI. “By leveraging the rich data footprint of MSME units in the ecosystem, we aim to provide the fastest and most intuitive lending process, further solidifying our position as the leading MSME lender in the country,” Khara added.
SBI’s outstanding SME loan portfolio has grown from Rs 2.67 trillion at the end of March 2020 to Rs 4.33 trillion at the end of March 2024. Additionally, the asset quality of this portfolio has improved, with gross non-performing assets decreasing from 9.43% in March 2020 to 3.75% in March 2024.

June 12, 2024