MSMEs benefited from digital reformsImage Credit source: ai generated
A recent working paper of the International Monetary Fund (IMF) has presented a very positive picture about the Indian economy. Generally the question arises that what benefit has the common businessman working on the roadside or in small factories received from the government work going online or the initiatives of ‘Digital India’? The report by IMF economists Somnath Sharma and Kenichi Ueda has given the correct answer. According to this report, states that have rapidly implemented digital reforms in their administrative structures have recorded a tremendous increase in the productivity of micro, small and medium enterprises (MSMEs).
Freedom from the web of files, profits take flight
To improve the business environment in India, large-scale administrative changes were made between 2010-11 and 2014-15. The main emphasis of these reforms was on taking business related government processes out of paper and onto computers. Big companies have resources and an army of employees, so it is easier for them to overcome bureaucratic hurdles. But for a small businessman, each red tape comes with a huge financial and mental cost. The report makes it clear that with the implementation of the digital system, this burden of administrative compliance has reduced significantly. Facilities ranging from online tax filing to automated approvals have made the entire process transparent and curbed ‘under the table’ expenses.
The real ‘silent’ engine of the country’s economy
It is important to understand that these micro and small industries account for 35 percent of India’s manufacturing output. Not only this, this sector provides employment to about 11 crore people and has a major contribution of about 45 percent in the total exports of the country. Interestingly, most of these enterprises are not even formally registered under the Companies Act of 1956.
’98-Point Action Plan’ changed the game
In 2014, the states had agreed on a ’98-point action plan’ to improve the business environment. Under this big step, work was done mainly on six fronts. Tax system, construction permits, compliance with environmental and labor regulations, government inspections, commercial disputes and single-window clearance. There was a direct jump in the total production of small industries in the states which rapidly implemented digital processes on these six parameters. Digital tools eliminated arbitrariness in government decisions.
No need to migrate, got expansion on our own land
Another important thing has come to light in the study. It is often believed that businessmen can migrate from one state to another in search of better facilities. But, data shows that micro enterprises did not change their location to take advantage of digital reforms. These small enterprises got the direct benefit of the digitalization of systems in their own state. This entire process has created a level playing field in the market for all small and big businesses, due to which the common Indian businessman is able to focus on his business without any hindrance.
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