Unleashing the Untapped Potential of SMEs through Empowerment

The Policy Consensus Centre (PCC) is at the forefront of pioneering institutions in India, driven by a mission to conduct impactful policy research and instigate transformative changes. Focusing on pivotal sectors and uncharted domains, PCC adeptly navigates India’s complex policy landscape, striving to bridge divergent opinions and foster consensus.

Committed to evidence-driven research, inclusivity, and rigorous methodologies, PCC advocates for thorough exploration across sectors. The emphasis lies on scrutinizing unconventional domains, recognizing their importance in accurate risk assessment and the formulation of robust policies. PCC champions the synergy of economic rationale and empirical data. It positions itself as a catalyst for meaningful policy shifts, embodying a pioneering spirit for India’s holistic growth.

In a candid discussion with The Interview World, Nirupama Soundararajan, Partner at the Policy Consensus Centre, sheds light on how aspects like hand-holding, sector-specific policies, brand building, product quality, and ESG initiatives can fortify the growth of SMEs. These measures not only empower SMEs but also enable them to make substantial contributions to India’s GDP. Here are the key excerpts from her insightful interview.

Q: Is hand-holding necessary for SMEs to scale?

A: Small and medium-sized enterprises (SMEs) are essentially businesses of modest scale. Due to limitations in both manpower and financial resources, they often struggle to conduct the extensive research required to achieve their goals, such as expanding into new markets. As a result, providing guidance and support becomes crucial, especially for fledgling businesses.

Hand-holding plays a pivotal role in helping these enterprises navigate the complex landscape of starting and growing a business. It serves as a guiding force, offering insights into procedural aspects, delineating the necessary paths, and highlighting key individuals to approach and the most effective methods of doing so.

Recognizing the significance of hand-holding in these early stages, it becomes an evidential component for the success of SMEs. Through this support system, businesses not only gain a clear understanding of the procedures involved but also learn how to approach various aspects of their operation. This acquired knowledge becomes invaluable as SMEs gradually build their skill set and experience, facilitating their growth and development over time.

Q: How imperative is the implementation of the right policy, brand building, and quality for the success of SMEs?

A: Implementing policies is crucial, especially in a vast country like India where the pervasive issue of trickle-down effects often prevails. However, despite this challenge, the contemporary digital landscape empowers SMEs to transcend mere policy constraints. In today’s digital era, the private sector, particularly in e-commerce, plays a pivotal role in disseminating information about foreign markets and supporting platforms within India. This assistance extends beyond what the government has achieved, providing much-needed guidance for small businesses to expand their reach.

Moreover, beyond policy and external support, branding assumes paramount importance. It serves as a strategic tool for businesses to articulate their identity and story effectively. The rationale behind this emphasis on branding lies in the understanding that emotional connections with consumers are pivotal. Connecting with consumers is not just a precursor to making a sale; it’s also the key to being memorable. When consumers connect with a product, appreciate its story, and recognize its brand, they are more likely to make a purchase and, crucially, remember the brand.

In the realm of e-commerce, where an abundance of products saturates the market, creating a distinct identity becomes imperative. The challenge lies in establishing a differentiating factor that makes consumers remember a specific brand. This differentiation is achieved by crafting a compelling brand narrative. Every product becomes more than just an item; it becomes a part of a memorable story that consumers associate with a particular brand.

Moreover, quality, undoubtedly, remains a fundamental parameter for any product. The allure for consumers hinges on the assurance of superior quality. Substandard products fall short in capturing consumer interest. Therefore, in the intricate landscape of commerce, where policies, digital dynamics, and branding converge, quality stands as a non-negotiable factor for sustained consumer appeal.

Q: How crucial is the adoption of Environmental, Social, and Governance (ESG) initiatives by SMEs?

A: We must consider another crucial aspect that both SME businesses, the government, and consumers should be mindful of. The significant advantage lies in the current landscape of brand positioning. The question arises: Where can a competitive edge be found? For businesses specializing in handcrafted products, crafting a compelling story is feasible. However, what about those engaged in mass manufacturing? SMEs extend beyond this specific sector, prompting us to ponder how others, unable to establish brand differentiation solely through their products, can carve out their niche in the market.

This is where the concept of ESG, focusing on environmental, social, and governance requirements, comes into play. Essentially, it implies that consumers today prefer products from companies that demonstrate responsibility in their production processes, sourcing materials ethically, and embracing environmentally, socially, and governance-conscious practices. This shift in consumer preferences presents an opportunity for SMEs to align themselves with these values, showcasing a commitment to responsible business practices. It becomes a powerful statement for SMEs to declare that they are conducting their business responsibly by ESG principles.

Q: What’s your projection of SMEs contributing to GDP five years down the line?

A: Certainly, SMEs have consistently played a significant role in bolstering GDP and exports. There’s no indication that this contribution will diminish. On the contrary, we observe a surge in B2C exports facilitated by e-commerce. Despite the foreign trade policy attributing only 5% of the total export target to B2C exports, which stands at approximately US$2 trillion, projections for e-commerce exports anticipate a range of US$200-300 billion by 2030. However, I believe this projection is an underestimation.

In my view, there’s untapped potential, and we should be actively pursuing more in this realm. The anticipated bulge in exports, I posit, will predominantly emanate from e-commerce. Specifically, a robust SME sector will significantly boost B2C transactions. Hence, I am confident that SMEs will emerge as substantial contributors to this growth.