MSME (MINISTRY OF MICRO, SMALL AND MEDIUM ENTERPRISES) SECTOR IN INDIA

The MSME sector in India, consisting of 36 million units, provides employment to over 80 million persons. The sector through more than 6,000 products, contributes about 8% to GDP, besides 45% of the total manufacturing output and 40% to the exports from the country.

Due to the remarkable contribution of MSMEs to the Indian Economy, the Government has come forward with several schemes for its advancement. Since it is recognised internationally that Intellectual property is an important tool to enhance the local growth potential of the MSME produce, one facet of development in MSME industry that the Government has been focussing on is the protection of its intangible assets, including protection of innovative ideas that arise from the MSME sectors as well as protection of the existing traditional know-how etc. which are central to its business. This is done with an objective to a more favorable environment for IP development and innovation. Some of the major initiatives by the Government include:

Cluster Development Programme

Micro and Small Enterprises – Cluster Development Programme is one of the key strategies adopted by the Ministry of Micro, Small and Medium Enterprises for enhancing the productivity and competitiveness as well as capacity building of Micro and Small Enterprises and their collectives in the country. Through this programme, the Government recognizes the diverse nature of MSMEs in India, both in term of geographical location and sectoral composition, and addresses the needs of the industry through well-defined clusters.

Building Awareness on Intellectual Property Rights (IPR)

“Building Awareness on Intellectual Property Rights (IPR)” is one of the components of the National Manufacturing Competitiveness programme, visualized by the National Manufacturing Competitiveness Council (NMCC).  This Programme recognizes that IPR Protection plays a key role in gaining competitive advantage for achieving higher economic growth in a market-driven economy and hence, proposes various activities on IPR to facilitate the protection of their Intellectual Property and ensure effective utilisation of IPR tools by MSMEs, which would, in turn, assist them in technology up gradation and enhancing competitiveness.

Currently, there are also several institutions working for building awareness among MSMEs in India. They include National Institute of Intellectual Property Management (NIIPM), National Intellectual Property Organization (NIPO), National Institute For Micro, Small and Medium Enterprise (NI-MSME), The Intellectual Property Facilitation Centre (IPFC), Confederation of Indian Industry(CII), Federation of Indian Chamber of Commerce and Industry (FICCI) and Federation of Indian Micro & Small and Medium Enterprises (FISME).

Need for overhaul

The current schemes, policies, and programmes give a great thrust to the development of the MSME sector. However, MSMEs, despite their remarkable capacity for innovation in IP matters, still struggle to draw up IP strategies due to the lack of resources, knowledge, and expertise.

There is a need for a radical departure from the existing policies to develop a holistic strategy for the development of MSME units as well as clusters and in turn, the industrial growth of the State. The current scheme is mainly flawed on the aspect that the existing mode of IP awareness portrays IP to be a Government intervention to impose additional compliance obligations and burden on MSME units/ clusters. This in turn, further makes the enterprises apprehensive from taking an active interest in IP implementation. In order to change this attitude, the focus should be on the strength of IP as a tool which would enable the enterprises to establish a direct link to the market to understand customer preference, marketability of their product etc.

It is also to be noted that most MSMEs are based in rural areas and the sustainability of MSME’s growth momentum is under threat due to the large urban-rural divide. This divide creates a lack of nexus in the market between the enterprises and the consumers. Thus, to uplift the members of the MSME enterprises and create an economic system where the income gap between the MSME workers and the suppliers of its products are menial, it is necessary to build the reputation and branding of the MSME products which can only be done by making them aware of the benefits that lie in opening the Pandora box of Intellectual Property. This would, in turn, open a window of opportunities for the MSME sectors, increase the local producer’s income and support community development and capacity building.

Lack of awareness of schemes

The Project Implementation Committee of the Building Awareness on IPR Scheme, while reviewing the progress of the existing scheme has identified that lack of proper awareness has failed the entire objective of the scheme with instances where Patents etc. are registered in the name of the individual rather than in the name of the firm/company, thereby debarring the MSME from reimbursements under the scheme.  

Furthermore, although, the “Building Awareness on Intellectual Property Rights (IPR)” scheme emphasizes on spreading awareness about the importance of IP in MSMEs, particularly its benefits for improving the asset value of the business, it lays only a little importance on the fact that awareness among different MSME Industries requires different approaches. Thus, there needs to be a complete overhaul in the awareness programmes to make it suitable individually for each MSME industry through Tailor-made programmes, thereby concentrating particularly on the individual business standpoint of the unique MSME industries.   

The Government should take a three-way approach in spreading awareness of IP:

• The enterprises are to be made aware of the potential of registration of their Intellectual Property and how it would enable them in increasing their corporate value. Through practical cases and success stories among other enterprises, an IP culture may be imbibed among the enterprises to introduce IP as a door-opener and a strategic tool which would allow the enterprise to develop its own individuality to its product.
• Efforts must be taken to imbibe in them, the importance of Recognition of Brand Enforcement – i.e., bringing in conscious understanding that once a brand is established or IP registered, constant efforts must be taken to prevent brand dilution/infringement.
• The enterprises must also be made cautious to not infringe on others IP rights.

The Enterprise can lose money, reputation, and business in all three cases.

Recognition of IP as Strategic Tool

There lies a need for intrinsic IP audits as well as in-depth research to commercialize the IP of MSME enterprises. Thus, The Government, through IP audits should strive to recognize the hidden IP assets in the enterprises and enable them to capitalize over the results of their creativity, inventiveness and R&D investment. A specialized programme may be introduced for an in-depth analysis of a business IP, including opportunities for increasing revenue, as well as any potential risks, together with recommendations for increasing the value of their intellectual property catalog.

IP Management and Enforcement

Furthermore, it is important to recognize that the exercise of integrating IP into one’s business does not merely comprise the activity of IP registration. Once the IP is registered, there arise problems like IP infringement where other competitors would try to take advantage of the IP.  Thus, steps must be taken to integrate consciousness about IP management pursuant to its registration. The MSMEs must be trained on how to effectively manage their IP Portfolio after registration.

Branding and Marketing

It is not enough that the enterprises are aided in the registration and management of their IP. The focus must also be laid on exploitation and leveraging IP for commercialization. A review of the existing schemes reveals that the Government mainly focuses on protection of IP of MSMEs but is yet to bring forward a comprehensive marketing policy for the creation of a brand.

Thus, it is also important to teach the enterprises to increase the market value of the enterprise through the creation of a corporate identity and a branding strategy. This is especially relevant for MSMEs which lack the necessary funds for marketing their unique products on a wider scale.

Additionally, modern ways of marketing and protection will enable the products to develop a cross-border reputation and enhance international protection by acting as a piece of evidence of the protection of a legal action.

For this purpose, several steps may be adopted by the Government: 

• Promoting the GI Based MSME on the basis of a unique selling proposition (USP) that makes the GI product distinct. The inimitable tangible qualities of the GI based MSME products for which the consumers will be willing to pay a premium price for should be recognized and highlighted.  This will help in increasing popularity of the products as well as reduce comparisons with cheaper mass produced substitutes made of inferior raw materials.
• Further, in order to promote products of GI-based MSMEs, a specific logo may be developed by the Government to mark these products which will help identify the uniqueness of the products with respect to the qualities and characteristics of the products owing to its area of origin, environmental factors or production methods. This Government validation will improve the ease of the products to enter new markets as well as enable international and national brand recognition, by enhancing consumer confidence in the product and quality. Thus, for this purpose, a scheme similar to “Protected designation of origin (PDO), Protected Geographical Indication (PGI), and Traditional Specialities Guaranteed (TSG)” introduced by the European Union may be adopted.
• There is also a need for creation of Business Development Centres or giving the existing IP Facilitation Centres/ Common Facility Centres an additional role of marketing advice to concentrate on a comprehensive marketing and branding policy.  For this purpose, marketing/branding experts would have to be inducted into the center. Such initiatives have been successful in the case of coir industry of Kerala, where Kerala State Handicrafts Apex Co-operative Society (SURABI) and Handicrafts Development Corporation and Artisans Development Corporation were set up as promotional agencies to market the products. For efficient branding as well as pricing, it is necessary to outsource supplementary activities of manufacturing for lower labor costs.  This will enable the MSMEs to focus on more important aspects like improving quality, branding, marketing etc. This kind of segmentation would ensure that emphasis is laid on all steps of manufacturing, which would further enhance productivity.-
• The Government needs to recognize the reach of India’s unique MSME sector at a global level and encourage marketing of the innovative products and services across the Global markets. This requires the Government to play a role of enablers not only for registration of IP nationally but also internationally to make it possible for the products to have an international image as well. This would also protect the products that have gained an International Reputation from IP infringement.
• The collaboration of different ministries for complementing as well as realizing better outcomes of various strategies for brand development in MSMEs must be encouraged. (Eg. Collaboration with the Ministry of Tourism and Ministry of MSME for GI based clusters.) The alignment and synergy of respective policies/schemes of various ministries would give rise to the perquisite optimum results in the MSME Sector.
• Awareness must be spread about TMs among enterprises to ensure that branding is not limited to just logo registration but also includes slogans etc. which are important tools of marketing
• The focus must be laid on the creation of a common brand among Cluster entities which would act as an efficient tool to communicate brand value at the international level. For this, firms within the cluster have to go beyond the individual to pool their resources, negotiate with their neighbors and take up joint efforts to market themselves. To achieve the standards of a common brand, it is necessary to introduce a shared knowledge system (Intra MSME as well as Inter MSME) which would guarantee competence development and diffusion of their innovative process.
• The Government should take initiatives to set up a web portal, (an E-database of inventory of IP registered designs etc.) by the Govt. as a platform for consumer – enterprise interaction. This will not only improve the marketing of the product but also enable the clusters to understand the clientele, their preferences and market/ manufacture accordingly. Additionally, E-governance and E-commerce need to be strengthened to provide better services in terms of facilitating enterprises in the speedy and time-bound processing of applications and grievances, thereby increasing the efficiency and effectiveness of MSMEs.
• Steps must also be taken to obtain access to new International markets. This may be done through licensing, franchising or other IP- based contractual agreements.
• Furthermore, collaborations of MSMEs on an international front need to be encouraged for improvement in capacity building and productivity through an exchange of knowledge and information.  This will provide MSMEs useful technology and help them avoid wasteful investment in Research and Development. This will also lead to process innovation, improve productivity, reduce operating costs and aid in the standardization of products. For e.g. collaboration of a manufacturing MSME with quality machinery suppliers.

Conclusion

The Government’s assistance in the realm of Intellectual Property for MSME’s is in its nascent stage and the MSMEs are yet to take full economic benefit of their IP. The Government needs to work on establishing favorable IP conditions for a business- enabling environment. It is important to inculcate a culture among the enterprises where they recognize that their ability to convert their innovation into intangible IP assets will determine their future.