Make in India


Small and micro enterprises contribute eight percent to India’s GDP, yet they are vulnerable to business cycles and changes in the market, with not much support or credit to fall back on. Strengthening this ‘bottom of the pyramid’ will result in strengthening livelihoods and local production.

Armies of micro and small enterprises make products and provide services in India. They work out of tiny spaces, literally holes in the wall, with or without power, usually with none or only one or two apprentices or wage earners making traditional and simple products. (This does not include the army of small and marginal farmers). These are the recorded non-farm livelihood of millions of Indians, often identified as Own Account Enterprises (OAE) – with family labour, but no hired help.

According to the last, 4th All India Census of Micro, Small, Medium Enterprises (MSME) estimates, there were 26 million such enterprises employing 60 million people. Only 1.5 million are registered and 95.05% of these are micro enterprises, mostly OAEs. Microenterprises have investments of less than Rs. 25 lakhs each and one or two hired help. They contribute to 8% of the GDP (Gross Domestic Product), 40% of manufactured output and 45% of exports according to the Prime Minister’s Task Force on MSME 2010. The enterprises fall into categories of traditional handicrafts, handlooms and modern activities like machine repair and assembly. The modern ones tend to be captives of larger enterprises. They often exist in clusters that resemble beehives of mutual dependence and completion. Many schemes, including priority sector credit at concessional rates have been put in place. Many commissions have studied their problems (including the famous Arjun Sengupta Report of 2006, the Prime Ministers Task force on MSMEs in 2010), but there has been no study of the felt needs of the micro entrepreneurs. There is no institutional arrangement whereby their multidimensional needs can be addressed locally and promptly. They remain vulnerable to losses, business cycles, changes in market demand and credit shortages, while they provide low quality employment to many.

Beneath this thick layer of micro enterprises there is yet another new and even tinier sized layer of enterprises, that of women’s self -help groups (SHGs), that produce or market products all over India, but most noticeably in Kerala, by members of their poverty elimination mission called ‘Kudumbashree’.

Of all the programmes, the most well-designed and calibrated micro-finance programme implemented for financial inclusion based on the livelihood approach in urban India, is the SHG-Bank Linkage Programme (SBLP) dovetailed into the centrally-sponsored SJSRY, now NULM and NRLM. There are about 20 lakh SHGs linked to banks with credit. Many of them are venturing into production and the sheer range of micro enterprise and welfare related activities that, for example, Kudumbushree is involved in throughout the state, is an indication of its possibilities. For instance, they are today involved in manufacturing (Kudumbushree brand of coconut oil, food products, Nutrimix baby food for anganwadis, curry powder, chappals, production and marketing of milk, computer units,waste collection and recycling), provision of health services in the form of clinical services, solid waste management systems, running ‘Gramashree’ hotels, identifying destitute and handicapped children for state support, enrolling children to schools, micro housing schemes, to agriculture (lease land farming programme, goat rabbit quail project, and dairy farming).

There is therefore a possibility at the so-called bottom of the pyramid, for strengthening livelihoods by reinforcement of local production. This would yield far greater inclusion than any manufacturing policy based on FDI. That may be more dazzling, more newsworthy, but unfortunately it does not generate adequate jobs.


Anuradha Kalhan

The writer is a Fellow at Teen Murti, Nehru Memorial Museum and Library (NMML).