Is the current business environment conducive for SME’s?

For some time now I have been following global economies where recession is slowly creeping in, and I ask myself why are these largely successful economies failing now? Is it because of the pandemic, or have they suddenly started making bad decisions. Well, in my opinion, the pandemic just amplified already existing problems in the economic ecosystem. The largely non-diversified procurement and complete dependence on a few sources for energy, food etc. has also been a major contributor to the current market problems. What I want to focus on is why such stable economies have suddenly become sensitive to market volatilities. The answer to this probably lies in the foundation of the economy, the lack of swift decision-making, or one can say resistance to adapt quickly to new challenges, and forgetting the basics that ultimately create a robust economy. I will elaborate on my thoughts on this in a separate blog soon enough.

What the pandemic brought out in open was the lack of risk assessment, and support to small businesses. Government’s not securing the business environment for its SME’s and making drastic changes to their ecosystem led to hassles for business operations if not a complete systemic crash. SME’s might not generate that much revenue for the government compared to the large industries, but they do what large corporates are unable to, and that is provide employment to people. In India, SME’s generate approximately 20% of total industrial revenue, but give employment to more than 70% of the workforce. A healthy industrial environment for SME’s brings down unemployment, controls inflation, and generates revenue for the government.

Under prevailing market conditions, governments can take measures like reducing the cost of raw material imported in the country and providing temporary duty / import tax break. Another thing that governments of a few countries especially in the west can assist with is creating access to labour by making short-term changes to their immigration policy. Also an important thing that is required is access to new markets and cheap logistics.

If governments start working on the these points along with the SME's I am sure that they will soon witness market stability and greater economic momentum. Its not just a new policy that is required, constant communication needs to be done with the businesses on ground in order to understand the current challenges and what needs to be done urgently. I always believe that a constant two-way communication between the government and businesses lead to development of a healthy business environment. Also SME’s should understand that they need to become less dependent on governments for help and need to strategize to spread operations and generate more income . New thinking needs to be adopted by SME’s where they realise that governments will assist and incentivise with zeal when they themselves are earning and expanding. Its also a responsibility of SME’s to steadily increase their revenue so that tax revenue of the governments from these industries also goes up. SME’s should always strive to evolve from being local businesses, to becoming global suppliers, and provide impetus to their respective governments to think for their welfare and draft policies which strengthens the business ecosystem.

 

Think holistically,

 

Manan