Taking a serious note of the working of government institutions set up for promotion of micro, small and medium enterprises (MSME) sector, the draft National Employment Policy emphasises on their scrutiny. Various government institutions like National Small Industries Corporation Limited (NSIC), the Khadi and Village Industries Commission (KVIC), National Institute of Micro, Small and Medium Enterprises (NIMSME), National Institute for Entrepreneurship and Small Business Development, Indian Institute of Entrepreneurship and National Commission for Enterprises in the Unorganised Sector had been set up by the government to lend institutional support to this sector. The report, however, suggests that current promotional policies of government should seriously examine if these institutions are contributing towards creating a conducive environment for this sector, preparing an action report thereafter. Rather the draft report, prepared by labour and employment ministry, recommends following a public-private partnership approach to carry out such infrastructure and business development services. A major policy objective is to facilitate up-gradation of enterprises from micro to small or medium-sized enterprises, noting that incentives and subsidies may drive firms to stay within certain size limit to continue earning benefits. Not only should the policy environment for MSEs combine growth promotion and productivity measures, but it also needs to improve working conditions and protect workers through compliance to regulatory framework. Acknowledging success of enterprises like automotive components, information technology, pharmaceuticals and biotechnology, report says business linkages between MSEs and larger enterprises should be promoted in other sectors as well.On the issue of priority sector lending policy to MSMEs, the report notes that the outcome of this policy has not been credible. The share of MSE sector in gross bank credit stagnated at 15 per cent in 1980’s and further fell down to 8 per cent between 2000 and 2007. To overcome this, report suggests that margin money support for all government sponsored programmes should be capped at 25 per cent. In addition, the MSEs should be assigned credit rating so as to provide adequate safety net to banks, facilitating the lending process.However, labour productivity soared at an annual growth rate of 3.3 per cent, largely driven by labour productivity in rural areas at 4 per cent per annum as compared with 1.8 per cent in urban areas. The sector has witnessed a spurt in growth of service sector within small enterprises that has been responsible for creation of additional employment in MSME sector. Draft employment policy•Suggests current promotional policies should be examined if institutions contribute for a conducive environment •Asks the government to facilitate up-gradation of enterprises from micro to small or medium-sized enterprises•Report suggests margin money support for all government sponsored programmes at 25 per cent apart from credit rating to facilitate lending process•Notes that the spurt in labour productivity is due to a 4 per cent per annum productivity in rural areas as against to 1.8 per cent in urban centres•Also points to an increase in small scale services business that has increased to 34.5 per cent in 2001-02, from a minuscule 3.2 per cent in 1987-88
