SME Digital World

Category: SME

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
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
Policy Changes Expected from New Modi Government to Boost MSME Sector

Policy Changes Expected from New Modi Government to Boost MSME Sector

With the newly elected NDA government led by Prime Minister Narendra Modi preparing to announce ministry allocations, several policy changes are anticipated to enhance job creation, entrepreneurship, and business growth.
According to a report by CNBC-TV18, citing sources, at least nine policy changes are expected, some of which may be introduced in the upcoming July budget. These include higher indemnity for banks issuing loans to MSMEs, integrating MSMEs into production-linked incentive (PLI) schemes, and establishing a new institute to facilitate increased credit access for small businesses and enhance exports.
Additional anticipated changes include a revamp of the government’s Atal Innovation Mission to focus more on entrepreneurship and job generation, increased funding for the aspirational districts program, and more.
Industry experts are also advocating for increased support for MSMEs to drive job creation and export growth. Vijay Kalantri, Chairman of MVIRDC World Trade Center in Mumbai, emphasized the need for Prime Minister Modi to simplify regulations and expand the PLI scheme to boost industry and trade productivity.
“The capacity building is crucial to enable us to export more and employ more people,” said Kalantri.
One of the key changes expected is a revision of the 45-day payment rule for MSMEs to address delayed payment challenges. Last month, Finance Minister Nirmala Sitharaman hinted at potential changes during an interaction with MSMEs and local industries in Ludhiana. She mentioned that the government would consider repealing modifications to Section 43B of the Income Tax Act if MSMEs prefer operating without payment timeline uncertainties.
Additionally, the Federation of All India Vyapar Mandal (FAIVM) has called for extending the payment period for MSMEs from buyers to 180 days from the current 45 days. FAIVM President Jayendra Tanna indicated that the body will urge the new NDA government to implement this extension to better support MSMEs.

June 11, 2024
India now has 4.5 crore registered MSMEs of which 98% are micro enterprises

India now has 4.5 crore registered MSMEs of which 98% are micro enterprises

Of the 4.5 crore MSMEs, 4.4 crore or 98.1 per cent enterprises were micro units followed by 7.04 lakh small enterprises and 67,266 medium enterprises.
The total number of micro, small and medium enterprises (MSMEs) in the country registered with the MSME Ministry has crossed the 4.5 crore mark. According to the data from the government’s Udyam registration portal launched on July 1, 2020, to ease registration of small businesses in the country, 4,50,64,147 units were registered with the MSME Ministry, at the time of filing this report.
Of the 4.5 crore MSMEs, 4.4 crore or 98.1 per cent enterprises were micro units followed by 7.04 lakh small enterprises and 67,266 medium enterprises. The micro enterprise count also included 1.86 crore micro enterprises outside the ambit of the Goods and Services Tax (GST) such as street vendors, registered via the Udyam Assist Platform launched in January 2023.
Importantly, according to the 2015-16 national sample survey by the government, India has 6.33 lakh crore unincorporated non-agriculture MSMEs. The current count of registered MSMEs indicates that 71 per cent of unincorporated non-agri MSMEs are now in the formal economic fold.
Before Udyam registration, the government had the Udyog Aadhaar Memorandum (UAM) and prior to that Entrepreneurs Memorandum (EM-II) in place for MSME registration. According to the MSME Ministry’s 2020-21 annual report, 21,96,902 EM-II filings were recorded during the 2007-2015 period while from September 2015 till June 30 2020, there were 1,02,32,451 (1.02 crore) UAM registrations.
The Udyam registration for MSMEs offers benefits including registration on the government’s e-commerce marketplace GeM, delayed payment monitoring portal Samadhaan, onboarding on the TReDS platform for invoice discounting, availing schemes such as credit guarantee scheme, public procurement, priority sector lending from banks and more.
However, wholesale and retail traders registering for Udyam certification are limited to the benefits of priority sector lending.
According to the details from the Udyam portal, the registered MSMEs have so far reported 19.5 crore jobs and the number of women employees is over 4.3 crore.

June 6, 2024
DoT Launches Baseline Survey for MSMEs, Emphasizing Digital Evolution with 5G

DoT Launches Baseline Survey for MSMEs, Emphasizing Digital Evolution with 5G

The Department of Telecommunications (DoT) has invited proposals from organizations and startups to develop a comprehensive Industry 4.0 baseline survey focused on the digital transformation of India’s MSME sector through 5G technologies. This survey aims to evaluate the current readiness of MSMEs in the manufacturing sector for Industry 4.0, identifying areas for improvement and prioritizing investments.
Industry 4.0 represents a major transformation in manufacturing, driven by advanced technologies like artificial intelligence, the Internet of Things (IoT), and cloud computing to boost efficiency, productivity, strategy, and competitiveness. The Telecom Centre of Excellence India, a public-private partnership initiative, is spearheading the survey to understand the challenges MSMEs face in adapting to these technologies.
“The survey aims to establish a robust ecosystem that can leverage the capabilities of 5G and 6G networks. This includes identifying sector-specific needs in at least 10 sectors, recognizing the diverse landscape of MSMEs, and providing targeted support to foster innovation and competitiveness,” the department stated.
The survey is designed to address immediate barriers to digital transformation and pave the way for the integration of cyber-physical systems through 5G and 6G technologies, driving sustainable growth across sectors. It will cover five sectors each in the northern and southern parts of India over a 60-day period. The key recommendations from the survey will inform policy interventions to achieve the transformative adoption of Industry 4.0, enhancing the competitive positioning and survivability of MSMEs.

June 6, 2024
Holani Group Secures ₹184 Crore for New SME-Focused Fund

Holani Group Secures ₹184 Crore for New SME-Focused Fund

The Holani Group has entered the fund management and investment sector following the Securities and Exchange Board of India (SEBI) approval for its Alternate Investment Fund earlier this year. Jaipur-based merchant banker and stockbroker Holani Consultants has raised ₹184 crore for its new SME-focused ₹300 crore fund, launched in late April.
The fund includes a greenshoe option to retain an additional ₹100 crore.
“With our sector-agnostic strategy, we aim to create long-term value for our clients while fostering innovation, entrepreneurship, and economic growth in India through our fund,” said Ashok Holani, Director of Holani Consultants Private Limited.
The venture capital fund, Holani Venture Capital Fund Category I AIF (Alternate Investment Fund), is an Indian growth capital private equity fund managed and sponsored by Holani Capital Advisors. The fund is now registered under SEBI as a Category I AIF – Venture Capital Fund.
The fund offers investment opportunities to individuals, including high net worth individuals, corporates, institutional investors, financial institutions, family offices, insurance companies, foreign investors, other alternative investment funds, and other permissible investors.

June 5, 2024