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Government Boosts MSE Access to Market by making it Mandatory for Government Depts to procure from them!

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In what looks like a festive gift for MSEs,  the cabinet cleared a policy that aims to boost the growth of Micro and Small Enterprises (MSEs) in India.

Public Procurement Policy for goods produced and services rendered by Micro and Small Enterprises (MSEs) makes it mandatory for PSUs and government departments to procure 20% of their products and service needs from MSEs

The policy can do a world of good to MSEs by not only providing an opportunity to aim for a pie of high value contracts that various state and central departments dole out, but also provide them a chance to rub shoulders with large enterprises and compete at a larger scale.

With 26 million MSMEs in India that employ about 60 million people who contribute about 8% to its GDP, 45% to its industrial output and 40% to its exports, there is no doubt that MSEs, SMEs together are critical for the Indian economy which was highlighted by how SMEs handled the recessionary marketplace. An opportunity like this will only enhance their chance to sustain and succeed

The policy will implemented by next fiscal but will be made mandatory 3 years from now on and government departments will then have to set a target of procuring a minimum of 20% goods/services from MSEs.

Additionally, out of the 20% a minimum of 4% will be earmarked for MSEs run by Scheduled Castes / Scheduled Tribes but incase on non-participation by such MSEs other MSEs can fill in. Also, departments who fail to fulfill the 20% quota will have to provide reasons for the same to a committee

The move highlights the importance of MSEs in the Indian economy and the policy focuses on boosting the MSE sector in India. The move can also help improve the credit worthiness for MSEs helping them secure loans easily since banks will take into account the large opportunity available. This will be in addition to attractive loan options available for SMEs already

Policy sure seems out and out beneficial on paper but like all other policies, execution will decide how real the benefits are.  However, preferential procurement is not an entirely new concept and countries like South Africa have seen success by making procurement policies (BEE) with an intention to help domestic companies

What do you think about the mandatory procurement by MSEs? Do you think this will benefit MSEs and in-turn increase their contribution towards the economic development of India

  1. harsh gupta says

    with the increasing volatility in markets and mounting debt concern over europe, it is very likely that the prices of gold can hit the sky anytime soon… tomorrow we might see a sharp decline in precious metals..(reason : late on friday night CME came out with the decision to make the initial and maintenance margin requirements equal … for everything) this was a shocker of a news whose impact we might be seeing tommorrow that is monday when world commodities market will open trading.
    hold on to your investments in gold and silver tightly… we are in a massive gold bull run … u might be amazed to see prices of gold as never seen before.

  2. Ankan Kd says

    Your point wise description is very good skill. Keep Updating.

  3. Ankan Kd says

    Thanks for sharing this information. Very interesting…

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