Tech-based small business may find home in new hubs

A person in the know of the development said that the government may offer viability gap funding (VGF) or a fixed subsidy for the setting up of these industrial hubs.

“There is a consideration to develop latest technology industrial hubs for MSMEs and they would cater to only those businesses that are involved in advanced technology including artificial intelligence and machine learning. Government will allow setting up of these industrial hubs on private land and a subsidy also may be provided," the person said.

The model is similar to that of industrial hubs where business entities get ready-made infrastructure and operate in a plug-and-play mode.

“An entity can occupy space ranging from 200 sq feet to 1,000 sq feet as per their requirement. Every required amenity including power supply and other facilities would be provided to these businesses," said another official, adding that the government is looking at getting more private investment for these small businesses working in high-tech sectors.

The scheme is likely to attract businesses in telecoms, healthcare, semiconductor and defence, the official added.

India has grown its manufacturing sector over the years. Through the production-linked schemes, the government has tried to boost manufacturing in a wide range of sectors including mobile phones, automobiles and solar photovoltaic cells. But a large number of components required for their manufacturing are still imported. The scheme is expected to boost domestic supplies of such components. “Most of the manufacturing in India has been low-end manufacturing. It is high time that policy support was provided to high-tech manufacturing in the country. Getting investments for small businesses in advanced technology has been tough. Further, efforts are required to bring the standards of components produced in the country at par with global standards, for which government support would be critical," said Vinod Kumar, president, India SME Forum.

To be sure, India has a scheme to support cluster-based development of MSMEs. But this is not specific to high-tech or technology-based businesses. Further, the scheme has not picked up as anticipated.

According to the annual report of the MSME ministry for FY23, development of clusters for micro and small enterprises moved at a slow pace with only three out of 28 approved projects completed as of 1 January. The report said that out of the revised budget estimates of ₹120 crore for the scheme, only ₹78.68 crore was spent.

A draft policy for MSMEs, released in March 2022, mentions the need for financing cluster developments with special incentives. “Create MSME clusters to collaborate with firms offering innovation infrastructure, research and development institutions and universities specializing in specific industries or knowledge area," it said.

The draft policy has been revised and the final version is expected to be published in 3-4 months. MSMEs are receiving renewed government focus as they grapple with high inflation, mounting input costs, and a slump in exports on fears of a global recession.Besides, small businesses are still struggling to recover from covid-led disruptions.The Centre has taken a series of measures to provide targeted support to small firms. The definition of MSMEs was expanded, granting more businesses access to assistance.

Queries mailed to the spokespeople of the union ministries of MSME and finance remained unanswered till press time.

Government is also working on a bring in changes to the ongoing scheme for MSME industrial parks. On 29 May, Mint reported that micro, small and medium industries (MSMEs) will be allowed to set up dozens of industrial parks on private land in order to create an ecosystem that will help expand their operations and attract more investments.