Making SMEs productive and competitive to create more and better quality jobs in India

The Micro, Small and Medium Enterprises (MSME) sector of India plays a critical role in driving the country’s growth engine. But is the sector working fine? ILO- SCORE training programme equips MSMEs with critical factory management practices to improve their efficiency and productivity.

Feature | 08 September 2016
“Our machines and materials were damaged as the shop-floor was submerged in water for 20 days. We were being warned of order cancellation from our key customer if production didn’t complete within the grace period. The company was livid and we feared layoffs” says. Poongodi, a CNC operator in G A Industries Ltd., manufacturing automotive components, and one among many such MSMEs based in Chennai severely affected due to the floods December last year.

In India, the MSME (or Micro, Small and Medium Enterprises) sector is the second largest employer. Like Poongodi, over 80 million people in India depend on more than 36 million MSMEs for their survival. With more than 6,000 products, the sector contributes about eight per cent to GDP besides 45 per cent to the total manufacturing output and 40 per cent to the exports from the country.

As India gears up to retrace the high growth path with the ‘Make in India’ initiative by the government, the MSME sector plays a critical role in driving the growth engine. But how healthy are the MSMEs in India?

As per the data compiled by the Reserve Bank of India from scheduled commercial banks, the number of sick MSMEs in the country at the end of March 2015 was 516,619. In fact, the numbers have more than doubled since March 2013 to March 2014 - 222,204 and 468,397 respectively. The consequential direct and indirect job losses, as well as the compromise on the working conditions by the MSMEs to remain viable in the market, certainly doesn’t bode well for the sustainable economic growth in the country
(SDG 8).

“In 2012, Larsen and Toubro (L&T) accounted for 90 per cent of our business. With economy slowdown biting into L&T’s market share, its order fell drastically that year. Burdened with bank loans and mounting debts, I resorted to random announcement of unpaid holidays. I thought it would reduce my wage bill and at the same time help me to retain skilled employees. My decision was a complete failure,” says Bijal Seth, owner, Ikon Moulders, a plastic moulding manufacturer based in Pune.

MSMEs such as GA Industries, Ikon Moulders are being supported by The International Labour Organisation (ILO) in India through its global programme ‘Sustaining Competitive Responsible Enterprises’. The programme enables them to upgrade their management practises and improve their bottomline. It helps them enhance the performance of their enterprise and also sharpen the sectoral supply chain competitiveness needed for employment generation and achieving decent work for all. “SCORE introduced a joint-problem solving culture in Ikon Moulders. This resulted in my employees coming up with suggestions to tap the growing market trend for plastic bumpers and guards and broaden our customer base to automobile companies. We worked on new product lines and by 2013 end our dependency on L&T reduced to 60per cent. I realized my employees are not a cost. In fact they are an asset to the company’ says Seth.

SCORE training pack of five modules - workplace cooperation, quality, productivity through cleaner production, workforce management and, occupational safety and health - trains the MSMEs in cutting-edge in-factory management practices. All this helps them to increase their product quality, operational efficiency, and achieve on-time customer order delivery. Worker-manager dialogue, working conditions and employees’ skill building are central to the SCORE training. SCORE supports enterprises to pursue a path of continual improvement and sustain their competitiveness. “We developed a plan to check and control every point of process time loss due to re-works, material search time and tool setting based on the SCORE learnings. Every second and minute loss meant loosing valuable customer delivery timeline and an increased job risk” says Poongodi, “With workplace cooperation introduced by SCORE, we finally managed to deliver on-time despite 15 days shut down because of the floods’, she adds.

Since 2011 more than 100 MSMEs with an outreach to 6123 employees (of which 28 per cent are women) have participated in the SCORE trainings in India. SCORE-trained MSMEs report on an average more than 30 per cent of cost savings and improvements in areas such as material wastage, wait and idle time, energy consumption, defects, reduction in injuries, absenteeism, labour turnover and worker complaints.

SCORE training is currently offered to the MSMEs by ILO in India in partnership with FICCI and its cluster-level associations and corporate partners. It is also delivered by training institutions under the Ministry of MSME and the Ministry of Labour Employment.

For more details, visit SCORE project and AIOE SCORE