GIPE report highlights key barriers in expansion of urban nano enterprises

Staff Reporter

Lack of formalisation and delayed payments affecting cash flow management, difficulty in hiring and retaining skilled labourers, compliance-related issues with complex regulations, and a disconnect between implementing agencies and the target segment are some of the key barriers in business expansion of urban nano enterprises. This has been highlighted in the latest report of The deAsra Centre of Excellence in Nano Entrepreneurship at Centre for Excellence in Entrepreneurship & Development (CEED) at Gokhale Institute of Politics and Economics (GIPE). Though the report highlights the struggles and challenges faced by service sector nano businesses in Pune, the challenges are more or less the same in case of nano enterprises in other major cities. Although not officially defined in India, nano enterprises are identified as a segment within micro business segment of Micro-Small-Medium Enterprises (MSMEs), with annual turnover ranging from Rs 10 lakh to Rs One crore. According to NSSO 73rd round, nano enterprises form more than 60 per cent of micro enterprises. As far as Udyam registration is concerned, of total MSME sector employment, 76 per cent is in micro businesses. Within micro enterprises, 89 per cent is generated by nano businesses with turnover less than Rs One crore.

The GIPE survey covered registered and unregistered nano enterprises, including grocery shops, boutiques, tutors, catering and food stalls, bakeries, salons, pharmacies, auto repair shops, retail outlets, trading outlets, and small restaurants. The report findings indicate that nano enterprises, despite being located in Tier-1 metropolitan cities like Pune, encounter significant obstacles ‘hindering their growth and progress’, read an official statement regarding the report. The highlighted key barriers in business expansion of urban nano enterprises include lack of formalisation and delayed payments affecting cash flow management, difficulty in hiring and retaining skilled labourers, compliance-related issues with complex regulations and a disconnect between implementing agencies and the target segment. Marketing challenges due to lack of cohesion in entrepreneurial ecosystem and fragmented voluntary associations, limited technology adoption due to lack of training, lack of cohesion in entrepreneurial ecosystem leading to a disconnect between nano entrepreneurs and enablers of growth are some other factors affecting the growth and expansion of nano enterprises. These findings underscore the importance of addressing them to support their growth and success, read the official statement.

Dr Lalitagauri Kulkarni, Director, CEED, was quoted as saying, “The lower-income, self-employed, and often rural or semi-rural segment is served by self-help groups (SHGs) and micro-finance institutions (MFIs) networks. The upper segment of micro-enterprise sector is served by banks and the financial system under MSME label. However, despite their struggle to survive and grow, the voices of mid-tier micro-entrepreneurs are seldom heard. This lack of attention is due to the perception that they are too urban, centrally located, and non-poor, which makes them less vulnerable and thus less likely to attract a policy focus”.

The report emphasized the need for a coherent ecosystem approach and specific focus on crucial role of NGOs and entrepreneurship associations in organising the ecosystem enablers. The report also highlights how nano enterprises could potentially transform the economy, serving as a viable alternative to mass-produced brands. It explains the need to relook into existing Government programmes, to eliminate implementation barriers and ensure effective utilisation of existing programmes. It discusses need for one-year ‘Tantra Mitra’ fellowships for skilled youth to train and mentor nano business owners in specific technical skills and strategies. The report elaborates on the need of forming Business Affinity Groups (BAGs) to reduce disconnect between nano entrepreneurs and the system. Further, it highlights lack of data on nano enterprises hampering the understanding of this sector and formulation of effective policies to support their growth. It underlines the need for a fundamental shift in the way that researchers, Government officials, and ecosystem enablers approach nano enterprise sector. Nano enterprises should be positioned as key partners within the ecosystem.