Small Enterprises and Patronising Bureaucrats

"Put the boy and girl in the park and walk off -- whether they make it or not is not our business!"

This was Mr. Jawhar Sircar's take on government intervention in foreign collaborations for private enterprises. Mr. Sircar is the Additional Secretary and Development Commissioner Ministry of Micro, Small and Medium Enterprises (MSME), a flamboyant satrap who oversees an 'empire' of 13 million micro and small enterprises employing over 40 million people in India.

The numbers are deceptive, of course. The government has no direct control over the enterprises. Each MSME represents an entrepreneur struggling to survive amidst all sorts of constraints and often, the local government itself is one of the problems.

Infighting amongst government departments is another. MSME's turf is constantly usurped by DIPP, an arm of the Ministry of Commerce and Industry. Both claim to be patron saints of all small enterprises.

What are small enterprises? In terms of investment ceiling for plant, machinery or equipment (excluding land & building), the present definition of Micro, Small and Medium Enterprises is as follows:

Micro - >$62,000 (mfrg); >$25,000 (services)
Small - $ 60,000 - $1.25m (mfrg); $25,000- $0.5m (services)
Medium- $1.25m - $2.5m (mfrg); $0.5m - $ 1.25m (services)

By this new definition, MSM enterprises account for $33b+ in exports, 6% of GDP; 45% share of manufacturing output and 40% share of exports.

Annual credit flow to these enterprises is $9.5 billion from PSU banks; $ 3.5b from other banks (foreign, Sidbi, SFcs..) and $3b from 'Emerging Sources (VC/PE, ECBs, Factoring etc.,).

Given the socio-economic imperative presented by the numbers it is not surprising that we have full fledged government departments and ministries to support this section. But are they actually effective? How much do the government officers really know running small-scale enterprises? do they really care about the rough and tumble of cut-throat competition?... I have my doubts.