This document discusses opportunities for the MSME sector in India in the post-COVID era. It notes that COVID-19 has disrupted global supply chains and more companies are looking to India for manufacturing. However, for Indian MSMEs to capitalize, they need to adopt new business models and technologies. The document outlines challenges MSMEs face related to quality, supply chains, skills, and recommends solutions like digital platforms, IoT, cloud computing and more to help MSMEs become more efficient, flexible and globally competitive. Government support through policies improving the business environment are also encouraged to help MSMEs drive growth and employment in India.

1. Future Tech Series
COVID-19 Impact: Enabling Indian
Manufacturing MSME
For Global Competitiveness

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About us
The IET is one of the world’s largest professional societies for engineers, headquartered in the UK. Soon
to turn 150 years, the IET works closely with industry, academia and government in its mission to
engineer a better world. In line with this, the IET also has specific global initiatives around key sectors
that are relevant to solving problems that impact the society at large. In India, the IET has over 13,000
members and has wide ranging activities in areas such as Future technologies, Future of Mobility and
Transport, as well as the Future of Work. Eminent engineers like Shri Ratan Tata, Former Chairman
Tata Sons, N R Narayana Murthy, Chairman Emeritus, Infosys and T V Ramachandran, President,
Broadband India Forum (Ex-Resident Director, Vodafone) are Honorary Fellows of the IET.
With our members, we are driving innovation and change in the fields of engineering and technology.
We research, investigate, review and analyse the industry’s challenges, proposing solutions that will
have a significant impact on the world for years to come.
This whitepaper has been curated by the IET’s expert volunteers in India in the backdrop of the global
pandemic brought about by COVID-19. In this paper, experts from our Manufacturing working group of
the IET Future Tech Panel detail the opportunities available, scope for improvement and solutions to
varied challenges for the Micro Small and Medium scale Enterprises in India.
Read more about our Future Technology focus as well as our panels here:
https://india.theiet.org/innovation-knowledge/. To become a volunteer and to contribute, please write to
us at sectors@theiet.in
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While the authors, publisher and contributors believe that the information and guidance given in this
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Neither the authors nor the publishers assume any liability to anyone for any loss or damage caused by
an error or omission in the work, as a result of negligence or any other cause.

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Introduction
The COVID-19 pandemic has been a watershed moment for businesses globally. While the scenario
looks gloomy all around, there are significant local and global factors that may prove to be favourable for
Foreign Direct Investment in manufacturing, especially the Micro, Small & Medium Enterprises (MSME)
sector in India.
Post the lethal impact of COVID-19, more and more manufacturing companies are looking towards India
as an investment destination and as a reliable alternative to other low-cost producer countries. This will
benefit the growth of established firms / sectors, providing significant new prospects for Indian MSMEs to
step up and move to the next level. However, it is important to be cognisant of the fact that in order to
successfully grab these opportunities, there needs to be a serious rethink of existing business models.
This paper focuses on the opportunities available, scope for improvement, and solutions to varied
challenges for the MSME sector in India.
Understanding focus on Indian manufacturing sector in post COVID-19 era
India has always had its ears to the ground when it comes to harnessing new business opportunities.
The country has shown remarkable courage in implementing reforms, and great resilience in aligning
resources and capabilities accordingly.
Past few decades have witnessed several major policy reforms. These include opening up the economy
for FDI; focus on Information Technology and Telecommunication sectors and on the mobile phone
industry; investments in start-up companies; privatisation of healthcare and education sectors; and
massive investments in roads, railways, power plants, utilities and aviation.
Coupled with the thrust for Make in India, these initiatives have given a huge boost to the Indian
economy. As a result, India is now ranked the fifth largest country in the world on GDP, and the country
looks all set for making the next big leap in manufacturing.
It took 60 years for India to become a $1 trillion economy, but only in 12 years to move from a $1 trillion
to $3 trillion economy. And in the current scenario, there are several favourable factors that are
facilitating the next level of growth in India.
In terms of GDP, India is the fifth largest economy and is well on its way to be the third largest economy
in the next few years. Challenges of the COVID-19 pandemic notwithstanding, the country is on course
to move from the current $3 trillion to a $5 trillion economy.
A favourable climate in manufacturing, such as single window clearances and tax incentives, has
provided great scope for new investments. Initiatives such as Make in India, Atmanirbhar Bharat (self-
reliant India), Start-up India and Digital India have also created new avenues for a

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self-reliant and resilient economic climate. Atmanirbhar Bharat, in particular, has made several
provisions benefiting MSME sector such as, revising the definition of MSME for higher thresholds to
enable higher growth for the sector, necessary amendments for disallowing foreign companies in
government tenders up to Rs.200 crores, Collateral-free automatic loans for businesses, large fund for
Subordinate Debt for Stresses MSMEs, Equity infusion for MSMEs through Fund of Funds, e-market
linkages for MSMEs, etc.
India’s huge reserves of natural resources enable a high level of production capacities accompanied with
low costs for products.
Human capital has always stimulated India’s economic transformation. The country’s large youth
population (50% of India’s population is below 25 years, and over 65% of the population is below 35
years) addresses the needs for skilled manpower in the market.
India is one of the biggest markets in the world; domestic consumption is high, and the capacity for
spending especially among a burgeoning middle class continues to rise.
The low cost of labour in India – average $3.9 per hour compared with more than $25 per hour in the
United States– enables highly cost-effective production.
India accounts for 3% of the global manufacturing output currently. Therefore, if the big Indian firms,
MSMEs, central government and the states work together to derive the full component of the above-
mentioned benefits, it will generate huge business opportunities as well as generate employment to
millions of skilled resources.
Proper organisation of the MSME sector will help harness and utilise their full potential. Perhaps the
greatest takeaway is that the right policy tools and favourable business environment will lead to bottom-
up growth, a key challenge and requirement to become a global economic superpower.
Therefore, growth of the MSME sector will ensure that the benefits of globalisation and liberalisation are
made available to the ‘last person in the queue' and enable 360-degree growth in India.

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The way forward for the MSME sector post COVID-19
There are more than 60 million MSMEs in India. They contribute around 6.11% of GDP in
manufacturing, and 24.63% of GDP from service activities, as well as 33.4% of India's manufacturing
output.
While the sector provides employment to more than 120 million people – both in urban and rural areas –
these are mainly labour intensive and are running with minimum automation. Due to limited availability of
highly skilled resources and financial support, there is low investment of next-generation technologies in
MSMEs. (Some of these relevant technologies are elaborated in the next section.) These factors have
led to low productivity and inconsistency in product and service quality.
While growth projections in India reveal significant scope to create new opportunities for MSMEs and
help them grow exponentially, MSMEs should create innovative business models (Competitive
positioning, Value Offerings; Unique or differentiated products, Customer Segmentation, Online Service
Model, As-A-Service Model, supply chain experts, etc.) and products, as well as invest in technology to
fulfil new demand and capture new markets. This will also give them flexibility to scale, adapt to
changing customer requirements and meet growing market demand.
Some immediate areas for improvement for both the government and the MSME sector are enumerated
below:
Business Imperative Process Improvements Proposed Solution
Creating
conducive
environment for
innovation
This can help MSMEs in faster development of
new products and optimisation of manufacturing
processes.
Creation of centralised knowledge exchange
platform where innovators, designers and
manufacturers can collaborate and create
innovative solutions. One such initiative is the
“Smart Manufacturing Platform” by CII
Supply chain
optimisation
MSMEs need to reduce disconnect and increase
trust and reliability between source and target –
farmers and consumers; suppliers and
manufacturers; and connect centrally to logistics
providers. Load optimisation of transport can save
costs, as well as reduce lead times, wastages and
overall costs. Secondly, timely deliveries can
reduce overall manufacturing lead times.
Digital Fleet management system
Uber-isation of air cargo, rail and road
transport
Central Transport Management Systems
Material traceability
Load optimisation solutions
Blockchain technologies
Improving and
standardisation
of quality of
products
Gaps in quality of same type of products made by
different MSMEs. Standards and processes
should be well-defined, standardized and
implemented.
Standards, policies and strategies to ascertain
the quality of products should be defined based
on global experience
Central QMS platforms can be implemented to
monitor product quality

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Business Imperative Process Improvements Proposed Solution
Single-window
clearance and
ease of doing
business
For setting up manufacturing units in India,
clearances are required from multiple government
agencies. This consumes time and involves
paperwork, thereby delaying the start of business.
To enable faster clearance, a platform should be
created to digitally integrate different departments.
Creation of digital platform integrating different
government departments, along with unified
workflow engine and digital document
management facility
Reduction in
OPEX
Companies will retain only their absolutely core
functions under direct preview, while outsourcing
all non-core operations.
Cost-effective manged services solutions
Value engineering
IoT solutions
IT Infrastructure Most of the IT infrastructure is expected to move
to Cloud infrastructure.
Cloud Infrastructure solutions
Monitor impact
on climate
change
Focusing only on economic growth without
assessing environmental impact would be a
recipe for disaster.
Use of sensors and IoT-based technologies
Central command centres for monitoring
Ensure
uninterrupted
supply of
utilities
There is a large network of utilities management
authorities in India. Effective maintenance of
infrastructure related to utilities would ensure
uninterrupted supplies and improve productivity of
manufacturers. Technology can help to reduce the
losses.
Smart Grid
Drone-based solution
Image Analytics
GIS mapping
Sensor-isation of pipelines
Below is a classification of the technical challenges faced by MSMEs and their solutions:
Technical
Challenges
Process Improvements Proposed Solutions
Remote
command
centres
Remote and digital working will become the new
norm. Remote assistance to monitor and assist will
widen the physical scope of support of SME /
experts and reduce cost of support.
Tele-conferencing
AR/VR Solutions
Mobile-based solutions for alerts and real
time visibility
Finding new
sources of
supply
One learning from the current situation is that
companies cannot rely on single source / country for
their supplies. So, they will look for multiple and
cheap sourcing options for their supplies.
Global Sourcing solutions

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Technical
Challenges
Process Improvements Proposed Solutions
Consolidation of
shop floor roles
Due to distancing requirements, shop floors will be
run by lean teams. Therefore, operators will have to
perform multiple roles. To perform efficiently, they
will have to be supported by Advanced Analytics
and machine learning solutions.
Intelligent Operations Platform
Advanced Analytics solutions
Cobots
Upskilling of
operators
With changing technologies on the shop floor,
operators need to be upskilled or augmented with
AR/VR and other e-learning solutions.
AR / VR solutions for training
Online trainings (video and audio)
Remote guidance
Value delivered
by resources
will be
monitored
rigorously
Each action and value delivered by resources like
man, machine and material will be tracked
rigorously. This will need implementation of tracking,
tracing and dashboards for all shop floor operations.
Operational Data Analytics Platform
Changing
customer
demands
Customer demands are changing, and this will need
flexible and agile manufacturing solutions.
Manufacturing Operations Management /
MES Solutions
Reduce time to
market
Faster development of new products will require a
simulation environment.
Intelligent operations platform
Digital Twins
Distributed Engineering
Reduce
maintenance
cost
Advanced analytics will have to be implemented to
reduce maintenance cost and ensure the availability
of equipment.
Predictive and prescriptive analytics
Machine Learning
Operator health
and safety
Monitoring operator health and ensuring safe
operations will be priority for manufacturing firms.
Also, worker health to be prioritised and
incorporated in production planning.
Digital Connected Worker
Digital Tracker
Remote
command
centres
Remote and digital working will become the new
norm. Remote assistance to monitor and assist will
widen the physical scope of support of SME /
experts and reduce cost of support.
Tele-conferencing
AR/VR Solutions
Mobile-based solutions for alerts and real
time visibility

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A big transformation is taking place in the traditional manufacturing landscape. The convergence of IT
(Information Technology) and OT (Operation Technology) along with advances in other areas such as
Artificial intelligence, Automation, Robotics, etc. are transforming every link in the manufacturing value
chain. These new (digital) manufacturing technologies are a crucial development for the entire
manufacturing industry.
India is digitising faster than most of the other mature and emerging economies. Small businesses are
closing the digital gap with larger firms. Growing high-speed internet connectivity and shrinking data
costs are opening digital opportunities for many small-businesses. Government of India’s Digital India
policies have accelerated the adoption of digital technology both at the consumer and organisational
levels. In the last two years, more organisations in India launched their digital transformation journeys
and today, India is ahead of most countries in the adoption of digital technologies.
The India IT sector has evolved successfully with the changing economic, business, and technology.
Over the last few decades, it has been able to establish itself in the global market as a strong entity,
providing a wide variety of IT services, software products, and engineering products and services to
enterprises across the globe. Once the digital era kicked in, the India IT sector rapidly adopted to this
change. They reskilled people, hired new talent, forged new partnerships, strengthened consulting
capabilities, realigned their delivery methodologies and emerged as the partner of choice for clients’
digital transformation initiatives.
Their experience in bringing digital transformation across global manufacturing industries can be
leveraged to address the technical challenges faced by the Indian Manufacturing MSME sector.
Conclusion
No industry, market or geography (including India) will be immune to the effects of COVID-19. The best
solution would be to develop concrete fail-safe mechanisms to counter it, especially through faster
adoption of appropriate technologies. Adoption of technology does not always mean that huge
investments are to be made by single business.
There are few areas where cooperation between MSMEs is required to build the platforms; few
infrastructure improvement and process governance areas where government needs to invest; and
areas where a small business themselves need to do small / medium-term investments to improve the
trust, speed, scale and quality of products.
Effective utilisation of technologies will make MSMEs resilient to similar situations in the future and
enable them to be competitive in the global markets. Expected benefits will include:
 Higher productivity
 Improved quality of products for global markets
 Cost reduction

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 Reduce dependency on skilled manpower
 Real-time visibility of operations for faster decision-making
 Flexible and agile manufacturing facilities to support changing customer demand
COVID-19 has proven to be a great leveller. It has thrown up challenges never seen or experienced
earlier. But the age-old resilience of Indian MSMEs is the perfect foil to this disruption. The sector will
come up with new ways to overcome the COVID-induced business disruption and increase their pace to
reshape, recover and rebound.
This will require a conjoined and integrated effort by the government, industry, our experts and the
MSME sector itself to overcome this crisis. Indian government has taken steps by providing funds to
tackle the situation, and the industrial organisation needs to ensure pertinent utilisation of these funds.
The current situation will pass. What is critical is how the sector takes full advantage of local and
available expertise to fulfil the needs of the powerful slogan that has challenged and dominated our
discourse – Atmanirbhar Bharat (self-reliance)!
The success of MSMEs will be the country’s success. That is the need of the hour!

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Authored by
With inputs from
If you have a question or query, please feel free to reach out to us at sectors@theiet.in. Read more
about our work at india.theiet.org
References:
www.tradingeconomic.com
www.cii.in
https://smartmanufacturingindia.com/
https://dipp.gov.in
Sanjeev Gupta
Vice President, Digital Engineering
and Manufacturing Services,
Capgemini
Manish Lunge
Director, Digital Engineering
and Manufacturing Services,
Capgemini
Lux Rao
Senior Director & Head –
Solutions & Digital
Transformation, NTT India
Dr Purnendu Sinha
Technology Leader - IoT &
Analytics, Group Technology &
Innovation Office,
Tata Group