India’s MSME Sector holds the key to 1 Cr. plus jobs over the next 4- 5 years” – says NRI Consulting Report

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Hyderabad: Nomura Research Institute Ltd. (NRI Consulting & Solutions), after a deep dive in to a study on the employment opportunity indices in India, has come up with a projection that India’s MSME (Micro, Small and Medium Enterprises) sector is poised to create ~1 crore jobs in next 4-5 years. The report states that growth of middle class & rising disposable income positions India as an attractive market for consumption. However, a substantial portion of what is consumed in India is catered to by imports, thereby limiting the domestic manufacturing sector’s ability to create employment opportunities. While there have been efforts to boost domestic manufacturing, a dedicated focus on manufacturing MSMEs spread across various clusters can lead to creation of these many jobs, through measures aimed at improving the market competitiveness of MSMEs.

Highlights of the report:
• MSME Sector to be the key driver for growth of jobs in India
• India’s current workforce in the age group of 15 – 64 years stands at ~ 48 crores
• An additional ~4.5 crore people expected to be added in the workforce by 2025
• Manufacturing sector contributes to ~14% of the GDP, employing 12.5% of the workforce
• MSME sector contributes to ~3.6 crore jobs (~70%) in the manufacturing sector
The manufacturing sector in India needs to shoulder the dual responsibility of accommodating the shift of labour from agriculture and also cater to the added labour force. As per the Ministry of MSME’s annual report 2017-18, the MSME sector contributes to ~3.6 crore jobs (~70%) in the manufacturing sector. The MSMEs have been spread across various clusters in India (as per UNIDO). A detailed look into product groups manufactured in various clusters, such as 1) artificial Jewellery, sports goods, scientific instruments, plastic toys etc; 2) Metal utensils, machine equipment like textile machinery, electric fans, mixers, threshers etc; 3) Rubber, plastic, Leather & related products; 4) Bicycle parts and auto components; and 5) Textile, wood, paper, food, minerals and chemical products in India suggests that a dedicated focus on developing these MSMEs can create additional 75 lakh -1Cr. employment opportunities in next 4-5 years through partial substitution of imports.

Mr. Ashim Sharma, Partner & Group Head at NRI Consulting & Solutions, said, “The manufacturing ecosystem is constantly evolving under the influence of several trends around changing consumer behaviour and technological shifts happening across the globe. This puts India’s domestic micro and small-scale industries into the driver’s seat to lead the employment generation. To scale-up, the MSME sector needs a market-oriented strategy based on two key areas of Demand Led Manufacturing and Advocacy Marketing of the products.”

Demand Led Manufacturing entails deciding product specifications by correlating the technical parameters with exact consumer needs and an analysis of competitor products. This ensures the products manufactured are of the right specification levels i.e. neither overdesigned and hence cost uncompetitive or under specified and hence not meeting the service life requirements. A comparison with the specifications of the products imported (competitors to the MSME produce) will also ensure MSMEs meet all the positive aspects of the imported products while also improving on areas wherein the imported products are lacking, thereby creating a Unique Selling proposition (USP).

The report further elaborates upon the role of Advocacy Marketing in helping develop a positive perception about the products manufactured by MSMEs as many of the traditional industries lose out on imports due to their perception of being “cheap” and “poor quality” not being “trendy”, etc. To ensure this, the report states that a wide range of people who have a say (‘Key influencers’) in the various customer segments both B2B and B2C must be identified. These people should then be made to experience the products as well as given an overview of the changes brought about in their design and manufacturing (wherever necessary) to make them in sync with the modern customer’s demands. These ‘Key influencers’, if satisfied with the products, would act like brand ambassadors for the MSME produce in various customer segments and help in rapid spread of a positive word of mouth. This, therefore, will make MSME products enter into the consideration set of customers while making purchases.

For instance, ~40% of tooling demand (Dies and moulds) in the automotive industry is met through imports as the Indian OEMs still prefer imports for their tooling needs against the Indian tool rooms which are mostly MSMEs. Scaling up of Indian tool manufacturers will help the auto OEMs localise production and improve bottom-line, while at the same time generate employment for the tooling industry.