Ease of Doing Business for MSMEs: India’s most populous state with over 200 million people and approximately 150 million eligible voters – Uttar Pradesh has significantly improved itself in terms of ease of doing business in the past few years. The state, which went to polls on Thursday, had jumped 12 ranks from 14 in 2016 to second in 2019 rankings under the Yogi Adityanath administration on the back of reforms announced to improve the business regulatory ecosystem. However, MSME experts and promoters feel a lot more still needs to be done. They have highlighted a number of challenges and suggested additional reforms for the upcoming ruling party to make Uttar Pradesh as competitive as the other top states such as Maharashtra, Gujarat, Tamil Nadu, Karnataka, etc. 

Uttar Pradesh has a whopping 90-lakh MSME base – the highest in the country. These 90 lakh MSMEs make up for the state’s 14 per cent share in India’s total MSME count of 6.33 crore, as per data from the MSME Ministry’s annual report of 2020-21. Arguably, these lakhs of promoters might play a significant role in election results that are due to be announced on March 10. 

“I would list key concerns in the state that should be addressed on a war footing. First, the inspector raj or over supervision by the government in certain areas that businesses can’t stand anymore. For instance, to set up a factory, you need 16 different clearances. Clearances from local authorities for let’s say to start a hotel may take four-five months while conversion of rural land to industrial land may take even up to a year,” LK Jhunjhunwala, President, Associated Chamber of Commerce and Industry — Uttar Pradesh and Uttarakhand told Financial Express Online. 

The second concern is around the availability of skilled labour as many people are yet to return from their native towns and villages, said Jhunjhunwala. “Third issue is related to the availability of finance particularly for businesses such as restaurants, aviation, travel, hotels, salons and gyms, and similar sectors that are witnessing slower recovery post the pandemic. The fourth challenge is related to the relatively higher cost of electricity in the state at around Rs 8 per unit for commercial units in comparison to around Rs 5 in states like Haryana and Punjab,” he added. 

Bharatiya Janata Party (BJP) in its election manifesto had promised job and self-employment opportunities to at least one member of each family in the state. In comparison, the Samajwadi Party had promised regular government jobs in three years. On the other hand, the grand old Congress party promised 20 lakh jobs in the public sector, 12 lakh vacancies to be filled, and the creation of 8 lakh new jobs. 

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“Unemployment is certainly a concern. The number of businesses set up under the green belt initiative in cities like Agra is very limited. Many businesses in the foundry and machinery sectors were shut due to environmental concerns. New enterprises haven’t emerged at the pace that was required. Leather is the only sector that is seeing employment generation. On the other hand, there is a lack of commercial or industrial land available to set up businesses or factories. We also expect more focus on micro units. The government could mandate enterprises to procure a certain share of their annual procurements from micro enterprises,” Anil Agarwal, Vice President at Agra-based National Chamber of Industries and Commerce told Financial Express Online. 

MSMEs specifically had also found mention in these parties’ manifestos. For instance, Samajwadi Party promised to set up a State Micro Finance Bank to provide collateral-free loans to small businesses, artisans, and weavers. Moreover, the party also said it would establish traditional MSME clusters in all major cities of the state through a Central Facilitation Centre and create one crore jobs in the MSME sector. Focus on electricity supply at flat rate, a Raw Material Bank, Display Mart, e-commerce-based marketing support system, and a Karigar Bazaar were also part of the manifesto. 

“Credit is an important factor but the government would have to focus on grievance redressal system for MSMEs which is lacking currently. Apart from that, ease of access to online services such as getting NOCs related to fire, pollution, and more to set-up units, more interactions and engagements with MSME community in the state, freedom from penalties and lower interest rates from banks need attention,” Ashok Kumar Agarwal, President of around 10,000-member strong Indian Industries Association in the state told Financial Express Online. 

BJP manifesto noted that it would complete setting up of six industrial parks for MSMEs to provide employment and self-employment opportunities to youth. It also promised three electronic manufacturing clusters and a mega leather park in Kanpur. BJP said it would create an Atmanirbhar Yuva Startup Mission to provide 10 lakh employment and self-employment opportunities. Lastly, Congress promised the development of clusters, a seed fund for startups, and collateral-free loans for micro and small enterprises. 

To boost industrialization and entrepreneurship culture in the state, Jhunjhunwala suggested focusing on automobile production and promoting startups. “There are other states that are vying to become Tesla’s home in India. Uttar Pradesh must pitch itself also. IT sector also needs focus. Noida is getting saturated while the central and eastern parts of the state have only sugar mills. It is important to note that despite having institutions like IIT Roorkee, IIT BHU and IIM Lucknow, the startup ecosystem in Uttar Pradesh is not as strong as the ecosystem of other states like Delhi, Maharashtra or Karnataka,” he added.