TLDR:
– MSMEs in India face working capital challenges due to a lack of funds
– Government and VC partnerships are being explored to help resolve these challenges
On MSME Day, the focus is on addressing the working capital challenges faced by micro, small, and medium enterprises in India. Despite contributing nearly 30% to the country’s GDP, MSMEs struggle to access working capital due to issues such as banks being reluctant to take on the risk of bad debts. The government has introduced various schemes to support the sector, but many MSMEs are unaware of these initiatives. To help alleviate these challenges, partnerships between the government and venture capitalists are being explored.
Mohandas Pai, former CFO of Infosys, suggests creating a separate fund of Rs 50,000 crore to support profitable MSMEs looking to expand. VC firms like 100X.VC are partnering with the government to provide funding to startups and SMEs. The key to resolving working capital challenges for MSMEs involves providing equity for expansion, improving efficiency through automation, and ensuring timely payments. Formalizing the sector, incentivizing tax compliance, and exploring peer-to-peer lending and crowd funding are also crucial steps in supporting the growth of MSMEs in India.
