Inadequate access to finance has remained a limiting factor to MSMEs for years. Lack of financial information is also hindering for SMEs as they have to depend on promoters’ capital. Also bank finance access is limited which leads to lack of new job creation by SMEs. Access to venture capital (VC) funds is also thin in India despite the fact that ‘Private Equity’ and VC markets have grown considerably in this country.

In this light, the NMP proposals is a welcome step as it is going to help large number of SMEs to raise equity and invest in manufacturing sector apart from boosting employment. Specific measures are also highlighted in NMP that includes setting up stock exchange and implementation of SEBI’s framework for supervising stock exchange platforms for SMEs.

The study quotes, Uday Kumar Varma, secretary in ministry of MSME, saying “Conventional financing is not enough to help the MSME sector and there is need for out-of-the-box thinking.”

Capital gains tax exemptions could be extended to those re-visiting their wealth in MSMEs. The study brings MSMEs at par with other organizations. For example, in Singapore, authorities provide S$50,000 per enterprise in order to fund day to day operations. Japanese government too provides affordable funding through institutions like National Life Finance Corporation, Shoko Chukin Bank and Japan Finance Corporation for Small Business. South Korea has Small and Medium Business Administration that supports the SME sector of the country.

The Government in India has launched ‘UDYAMI’, a helpline to make it possible for SMEs find information and solution to their problems. CII supports granting tax benefits to MSMEs and supports encouragement of foreign direct investment (FDI) in MSMEs. It can be done through measures like automatic approval of 100 percent FDI and single window clearance across sub-sectors of MSMEs.

To focus on modern machining, the Indian Machine Tool Manufacturers’ Association (IMTMA), the apex body of India’s machine tool industry, launched a ‘Finishing School in Production Engineering’. Here workers are taught about reading an engineering drawing, measurements and quality control. This includes machining processes, CNC programming, CNC machining and operation. Lessons are also given on tool materials, cutting tools, process planning, and optimizing of machining parameters.

A study conducted by Union ministry of labour and employment revealed that in 2007 around 132,000 diploma holders and 200,000 engineers remained unemployed. Also, 12 million people are needed by the manufacturing sector and this is being entailed by Confederation of Indian Industry (CII) report. Around 3,000 employees are added every year in Bangalore machine tool sector. It is being estimated that the job market in manufacturing sector would further expand.

CNC machines have become popular for manufacturing industries. This is irrespective of the industrial activity like mass production, batch production and one-off components. The finishing school programmed of IMTMA is meant for developing skills of graduates as fresh university engineers lack the knowledge of how things are made and fit together. Emphasis shall also be laid for development of soft skills in the school. Students with practical inputs will also gain hands on training for making CNC machinery, CAD/ CAM systems and other such accessories. A four-week programmed is also designed to help out engineers with a course fee of Rs 15,000.  This course will certainly improve upon the employment potential of young engineers as India is emerging as a global auto component manufacturer.

The suggestion was presented at the CII meeting with banks and economic secretaries.