Emerging Opportunities for MSMEs post COVID era

Current MSME scenario in India

Due to the lockdown, the Indian MSME sector suffered the most with its collective production decreasing by more than 90 per cent. This sector comprises around 64 million enterprises and employs close to 120 million people. It contributes 30 per cent to India’s GDP and constitutes 45 per cent of exports. Out of these, 14 per cent are women-led enterprises and close to 60 per cent are based in rural areas.

The COVID-19 pandemic has disrupted the economic growth of India. The World Bank and various other international and Indian rating agencies have downgraded the Indian growth. However, after the announcement of the economic package in mid-May, India's GDP estimates were downgraded even more too negative figures, signalling a deep recession. Within a month, unemployment rose from 6.7% on 15 March to 26% on 19 April. Centre for Monitoring Indian Economy (CMIE). During the lockdown, an estimated 14 crore (140 million) people lost employment (CMIE, April, 2020, report). More than 45% of households across the nation have reported an income drop as compared to the previous year.

Opportunities & Challenges Post COVID-19 Era

India’s fragmented supply chain – To set up an online platform which will have a robust listing of businesses and provide them means to directly interact and transact without depending on intermediaries.

Some of the key elements that will emerge in the supply chains of a post-COVID-19 world include:

Supply chain control towers that offer a single source of truth from sourcing to delivery that is available for all parties in the supply chain data management with intelligent automation and analytics that will deliver end-to-end information management and provide supply chain partners with insights around diagnostics, market intelligence and risk management.

Supplier risk management to help organizations model cost structures and keep abreast of any supply disruptions and secure capacity like simulation involving modelling new strategies based on changes to business or operating models which helps to validate and identify the most cost-efficient supply chain design.

Migration of labour - employers tap into the locally available labour workforce and restart production activities that were hampered due to the migration of labour to their hometown.

Locally manufactured goods - Government e-Marketplace (GeM) has already been set up to boost MSMEs’ share in government procurement of goods and services. The MSMEs have benefitted with orders worth Rs 20,000 crore since the inception of GeM. But still there are lot of technical issues on GeM portal, robust system should be in place to cater 64 million+ MSMEs. Along with the PM’s call for ‘self-reliant India’, the current face-off between Indian and China has led to an increased demand for locally manufactured goods, unleashing new opportunities for Indian MSMEs.

Rethink & Reinvent – MSMEs to rethink/reinvent their product strategy, its differentiators, distribution models, product pricing, geographical location, changed target market, etc. (While there is a visible dip in the discretionary spending of consumers, there is also a marked shift in consumer preferences which can be leveraged.)

E-Markets - Digital marketing and online channels can offer an inexpensive way for MSMEs to reach a wider customer base.

Reaching out to your worried audience via digital platforms is the way to go.

This starts by informing your audience in a clear and systematic way of how the pandemic will impact the way they buy/avail your products/services. Offering a sense of clarity to them before they approach you in a state of panic will go a long way in retaining them in the long run.

Strongly evaluate the power of e-commerce.

If Nike, Apple, and McDonald’s are having problems selling products or offering their services offline - you will too. e-commerce has taken a slight hit as well amidst all the chaos, but one could assume that it will pick up much quicker when compared to offline selling. The COVID-19 pandemic may just position e-commerce as a norm for every and any business soon. This time you can invest in content warehousing, building communities and strong SEO for the ecommerce domains.

Brands must use digital platforms to spread awareness

As stated above, simply being available on social media platforms for worried users can go a long way. You should also strive to clear confusion caused by inaccurate myths and rumors which are flying across the internet - one of the major causes of chaos in the modern world today. Keep it real with personalisation - in testing periods like these, personalised support and attention is a great way to leave an impression on your users. Lastly, you could lighten the mood by offering utility by emphasizing on how your products & services could help even the fortune & safe ones stuck at their homes.

Innovations - MSMEs can also foster product as well as process innovations by partnering with knowledge partners, that is, academic institutions & tech startups. Take advantage of incubation centres. Alternatively, MSME clusters can crowdsource solutions to improve their overall competitiveness as well as resilience.

MSMEs can grow innovatively. Following are the key points.

a) New processes - Sell the same stuff at higher margins: Cut production and delivery costs, automate for efficiencies, cut fat in the supply chain or manufacturing, and utilize robots.

b) New experiences - Sell more of the same stuff to the same people: Increase retention and share by powerfully connecting with customers. An example is the Apple Store experience, which many would argue is as compelling as the company’s products.

c) New features - Sell enhanced stuff to the same people: Add improvements that drive incremental purchases. An example of this is every new phone Apple releases, with better cameras and so on.

d) New customers - Sell more of the same stuff to new people: Introduce the product to new markets with needs similar to your core, or to markets where it might address a different need. For Apple, this goes back to reaching the mainstream rather than the design community.

e) New offerings - Make new stuff to sell: Develop a new product, not just enhancements. Find new needs to solve within existing markets, or invest in a new category. Think Home Pod or the iPod.

f) New models - Sell stuff in a new way: Reimagine how to go to market by creating new revenue streams, channels, and ways of creating value. This can be as simple as moving to a subscription model, or as transformative as Apple’s creating iTunes.

Technology adoption – This will help MSMEs to improve process efficiency, reduce cost, information visibility, and enhance worker safety. With the advent of cloud and cloud-based technologies, they can easily create an elastic and flexible IT infrastructure compared to its large enterprise counterparts to support digitalisation. They can manage compliance requirements as well as provide assurance to workers.

Partnerships - MSMEs can partner with established foreign players looking to explore the Indian market or make a low-cost manufacturing base. Even the large and established players are exploring ways to future proof their business against disruptive market forces. Partnerships with MSMEs could be low risk and economical mode to achieve this. MSMEs, in return, can get support in the form of capital, technology, marketing, supply chain know-how, product development support and so on.

Opportunities for MSME exporters –

To grab the global anti-China sentiment into opportunity. As countries like Japan and USA have already announced to come out of China and venture into other countries.

Try to find the top 500 products which China exports to other countries and grab the opportunity to venture into it.

Start Marketing our exports from now itself instead of waiting for the pandemic get over.

The medical protective gears, some type of electronic equipments, toys and plastics are recommended in the Phase I and Phase II Pharma, Steel and Gems & Jewellery for exports.

Opportunities for Financing MSMEs in post COVID-19

e MSMEs are having opportunities for working capital under Credit Guarantee Scheme under Govt. of India, Mudra loans up to a limit is given without any collateral security (Micro units only). This can be extended to MSMEs also up to a particular limit. Moratorium can be given for three months and EMI payment can be for 3 to 5 years. GST credit can be refunded in cash.

Finance Minister, Govt. of India, said the Government will pay 24 percent, including 12 percent of the employers’ contribution and 12 per cent of the employees’ contribution, of the monthly EPF contribution for the next three months. “This may benefit 80 lakh Employees and expected to incentivize 4 lakh establishments,” The above scheme will be applicable for establishments with less than 100 employees and the employee’s earnings should be less than ₹15,000/- month.

CSR Funds, GeM portal, Creating Cost Consciousness within the units, on-line training on various areas including soft-skills and computer applications, Preferring Low Margin Cash customers over High margin long credit customers.

Plan for the present and future for MSMES to ascertain present position and arrive at a realistic starting position with 4 Ms (Men, Material, Machine, Methods). They have to prepare multiple options for other business in future. Decide about approach and broad direction for the path to be taken. Arrive at actions and strategy that will work across multiple situations.

Business Opportunities in Green Technologies Post COVID-19

MSMEs in Green Technologies & Renewable energies should grab this opportunity Batteries are the most recognized electrical energy storage technology today. Lithium-Ion batteries support multiple applications from computers, transportation, and just in general large-scale energy storage.

The storage of solar energy by the conversion of biomass is fairly new technology. Conversion of biomass material to synthetic natural gas and fuel pellets provides energy storage as an application of Green Technologies in replacing use of fuel oil and felling of forests.

Opportunities on Tourism, Hospitality & Transport Sector post COVID-19

Open air theatres: Visitors sit in their vehicles it could be watching movie, play, music, magic, etc.

Travel: Reducing prices to make affordable; Distancing between passengers; Helicopters can be used.

Events and exhibitions: Virtual markets are increasing and even Government started procuring through GeM.

Food and essentials: Medical and COVID related kits especially increased; Closed cabins to offer food; Dark kitchen has become big business.

Stay: Staying as paying guests – Goa and Sikkim is known for this; Bunkers for staying happening in New Zealand; Facility for quarantine/isolation in hotels, service apartments, lodges, etc.; Service providers for quarantine. Online education and Virtual tourism has improved; Meeting, incentives, conferences/conventions and exhibitions/events segment has increased many fold.

Office: Small office home office (SOHO); Work from home (WFH); Employees attend office on rotation to minimise human intervention.

Medical tourism: Medical transcription, Medicines supply and manpower deployment; AYUSH is playing a great role, Kerala model of herbal water, Yoga and fitness, Government and private laboratories for tests.

Beverages and juices: HMPC model to sell fruit and other juices; Amul product; Punjabi lassi. Similarly other products can be identified.

Sulabh complex: Public toilets created long back is paying dividends during COVID period.

Service offers: Digital and technological interventions; Face masks, hand sanitiser and hygiene equipment facility.

Corporate social responsibility: Funding can be used to avail services of guides and others to propagate best practices. They can serve COVID affected persons; Cleaning and maintaining healthy atmosphere.