Innovation Promotion in Micro, Small and Medium-sized Enterprises (MSME)
Title: Innovation Promotion in Micro, Small and Medium-sized Enterprises (MSME)
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Lead executing agency: Ministry of Micro, Small and Medium Enterprises (MoMSME)
Overall term: 2014 to 2017
Sustainable economic development is at the top of the political agenda in India. By 2017, the aim is for growth to be ‘faster, sustainable and more inclusive’. Every year, around 12 to 13 million young people enter the labour market. In order to absorb this influx of job seekers, between 120 and 130 million new jobs will need to be created by 2025. The private sector, particularly micro, small and medium-sized enterprises (MSMEs), is expected to be a key driver here.
The MSME sector, with roughly 44 million micro companies and thousands of small and medium-sized businesses, has an enormous economic, social and environmental impact. However, the sector faces several challenges, including strong international competition, pressure to use key resources like energy, water and raw materials more efficiently and to implement more environmentally sustainable production processes. By modernising and adopting green and inclusive innovations, India's MSME sector can create new economic opportunities and strengthen its long-term competitiveness.
In contrast to Germany, enterprises in India with innovative ideas often work in isolation. Cooperation with research and technology institutions or with academic establishments is virtually non-existent. Furthermore, support for MSMEs in key areas such as technology transfer, resource efficiency and sustainability management has been either poor or inadequate. Although the Indian Government has launched a number of initiatives aimed at strengthening MSMEs, the initiatives of the government have not yet led to a significant improvement of the framework conditions. Cooperation between industry, the academic community and government bodies remains weak, thus hampering the innovative capacity and sustainability of MSMEs (including social enterprises and start-ups). The climate is not conducive to cooperation, with supporting institutions lacking effective methods, support programmes and the incentive structures needed to boost cooperation.
With support from the programme, selected MSMEs have enhanced their capacity for developing inclusive and sustainable innovations.
Based on the assumption that innovation occurs when businesses and other stakeholders work together, the programme aims to strengthen cooperation between the private sector, government and the academic and research community. The goal is to initiate, introduce and disseminate new technologies, products, processes and business models.
To this end, the programme supports institutions that promote economic development – such as business chambers and associations – in developing a range of innovation-enabling services for MSMEs. In addition, GIZ provides advice on methods and instruments that can be used to identify opportunities for improving business operations and the supply chains of large companies. Here, the programme draws on the knowledge of international and national experts in the field of innovation. GIZ is also helping to produce training materials on innovation management and establish new mechanisms to support start-ups. The project will have a strong demand focus, both in terms of closing the gap between MSMEs and academia, and between MSMEs and the demands of international (German) manufacturers.
At national level, the programme advises the Ministry of Micro, Small and Medium Enterprises on developing new support instruments that foster innovation and modernisation in the MSME sector. Experiences of promoting innovation will be incorporated into policy dialogue and provide new impetus for improving policies and instruments to support MSMEs. In short, drawing on these experiences will become an integral part of economic development in India.