The Micro, Small and Medium Enterprises (MSME) sector will have a crucial role to play in Tamil Nadu’s aspiration to be a $1-trillion economy. For this to happen, the MSMEs have to embrace change, and technology and collaboration will be the key differentiators.
An expert committee, headed by retired civil servant N. Sundaradevan, has recommended the ‘Corridors and Clusters’ approach for the growth of the sector in Tamil Nadu.
“The MSMEs that embrace this change are more likely to sustain in the medium and long run,” said the report submitted by the Sundaradevean committee that had a dozen members from the fields of business, finance, academics, consultancy and venture capital. The report has recommendations for short term (3-5 years), mid term (up to 5 years) and long term (above 5 years).
Looking at the long term, the committee felt a ‘Corridors and Clusters’ approach will be ideal for Tamil Nadu. For this, the State government should endeavour to bring as many enterprises as possible under the umbrella of one cluster or other, identify gaps in the value chain of those clusters and concentrate on plugging the gaps through shared services in each of the clusters. Thrust should be on incentivising technology upgrade through a fund and facilitating exports.
The committee also speaks of building a digital platform, improving access to finance, support for research and development, developing start-ups and setting up centres of excellence along with the facilitating industry — academia — private research interactions exclusively for the sunrise sectors looking into the future.
Officials said that though the cluster model has been in vogue since the 1990s, the committee re-emphasised it, particularly with the emergence of disruptive technologies across sectors, demand for greater specialisation and possibility of entry into global markets through access to e-commerce platforms.
Once only principle
To make Tamil Nadu “truly” business friendly, the committee suggested a re-look at the institutional set-up within the Department of MSMEs and pushed for all clearances for MSMEs to be brought under the Single Window Clearance Portal. It suggested moving department processes online and harmonisation across departments.
It strongly recommended institutionalising the ‘Once Only’ principle in which the applicant has to submit/upload documentary proof for all government applications just once. Currently, Tamil Nadu Guidance Bureau has designed the Single Window Portal to auto-fill fields entered in the Common Application Form (CAF). A similar process, using the existing digilocker or a new online repository, needs to be implemented for uploading of the documents (and not just filling of fields), the committee recommended.
While small and medium enterprises will generally align themselves better to economic changes, micro enterprises will require constant support in view of their inherent shortcomings and smallness. Formalising micro enterprises through a combination of push and pull interventions will be a credible first step for the State government to take, it pointed out.
R&D support
Support for research and development and innovations through speedy and discounted registration of IP trademarks and patents in India and overseas was also highly recommended. A vibrant start-up ecosystem (including incubators, accelerators and venture capital) should be developed in the clusters through appropriate partnerships with incubators, accelerators, venture capitalists, providing access to labs in neighbouring academic institutions.
Besides, the State government-sponsored Financial Institutions (SFIs), given their scarce budgetary resources, must move away from lending directly to the MSMEs in the long run, but try to use their capital to help leverage funds from banks and other financial institutions. SFIs must build capabilities to participate in securitisation transactions to achieve this.
Micro parks
The committee recommended the establishment of exclusive micro parks for the MSME export sector. These parks may be considered in the existing brownfield clusters. Smaller land parcels of up to 10 acres, especially in defunct government enterprises, may be considered. Plug and Play sheds of 2,000- 10,000 square feet may also be considered. By leasing the sheds, the MSMEs with limited resources can start quickly.
With Tamil Nadu slowly emerging as a thriving State for start-ups, the committee has suggested fab labs/makers lab/tinkering labs and conversion of select Industrial Training Institutes (ITIs)/ polytechnic colleges into innovation centres to ensure start-ups across all sectors are provided customised infrastructure support.
As the COVID-19 pandemic also highlighted the potential for software services to be decentralised once digital infrastructure is in place, identification of segments of software and IT-enabled services that can be undertaken in tier-two locations can be done, the report highlighted.
