Politicians and government officials like to sing the praises of MSMEs saying they create most of the jobs and so on. They create banks, databases, and various schemes to support them.
We too believe that MSME are important. To the extent micro enterprises become small enterprises; small enterprises become medium and so on, we think it’s good for society.
Our Research Fellow Vigneswara Ilavarasan (Associate Professor at IIT Delhi) has been working on MSMEs for a long time. As part of larger project he headed a team that conducted a systematic review on network device in MSMEs (i.e., not just a computer, but one that was connected to the Internet and including things like smartphones and feature phones). The study looked at the most rigorous research conducted on the impact of the use of networked devices on internal efficiency and business growth.
Note that the research was not on various information services provided by government, chambers or others. It was simply on the use of networked devices. The MSMEs could be using the ability to communicate electronically for all sorts of purposes, such as contacting new suppliers; maintaining customer relationships, or even accessing specialized information services. For all these things, the ability to communicate through voice or data is what is necessary.
The systematic review found that use of networked devices contributed to internal efficiency and business growth, but that it was not a massive effect in statistical terms. It also showed that it took around three years for an impact to become evident.
So what is the policy recommendation?
Connectivity is a good thing for MSMEs. The government should not try to discourage the use of networked devices by MSMEs through the imposition of additional taxes. Our research has nothing to say about specific information services to assist MSMEs, but ability to connect even to those services depends on affordable rates. This is not helped when governments treat connectivity like a demerit good. Many MSME initiatives are not evaluated. More evaluations should be done and done well. In this regard, it would be good to factor in a three year period at minimum if effects are to be captured.