Product marketing a big challenge for SME cluster development: MSME secretary

The newly appointed secretary for MSME ministry, Vivek Rae has said that marketing of products manufactured remains a big challenge for small and medium enterprise (SME) clusters to develop in India. He was speaking at an event on SME cluster development in Gurgaon on Thursday.

“Traditional clusters in India have bigger problem in their development because they are small in size and have no one to market their products. That is the challenge for government as well and we have not been very successful. The investment made into these clusters has not given good results and end result has been dismal,” said Rae in his address to the audience.

Rae focused on the training and development of youth to provide for more skilled workforce to SMEs. “Ours biggest challenge is demographic dividend as the number of young people in India is mind-boggling. And to harness the enthusiasm of these people, we need massive efforts in skill development,” he added.

Rae also said that the best skill development happens on shop floor. If the industry, including both service and manufacturing enterprises happens to open their door for skill development, not just as CSR, that would also help in their future growth.

The secretary also highlighted on the lack of integration between manufacturing and research & development (R&D) activities among SMEs. “There is a lack of integration between manufacturing and R&D activities. Though big enterprises have been investing in manufacturing, but it has still been a grey area. Indian companies are not investing in R&D which is the structural problem that exists and industry needs to think about it as to how to integrate both of them,” Rae further said.

He stressed on the need for smaller associations to define the future for their clusters so that government can provide the necessary support.

Among the schemes for SMEs, Rae discussed about the Defence Offsets Policy by government’s defence acquisition council on encouraging investment in SMEs. As per the policy, 30 percent of all military hardware deals have to be ploughed back into India's defence, aerospace or homeland security sectors.

The revised offset policy will help SMEs by letting foreign companies to select SMEs as their offset partners by introducing a 'multiplier' of 1.5 for all offsets discharged through them.

This implies that by sourcing Rs 100 crore work from Indian SMEs, the foreign company will be able to discharge offset liabilities worth Rs 150 million.

Talking positive about the opening up of FDI for SMEs, Rae said, “FDI impact is sector specific. If a big manufacturing company comes in, it has to develop vendor base in the country and by developing the vendor base, it starts sourcing from SMEs. So, it has a multiplier impact down the supply chain for developing it. So, the impact is spread throughout the system.”