In India, micro businesses form the backbone of the economy, contributing significantly to employment and GDP. However, inadequate infrastructure and high operational costs, particularly in the form of expensive real estate, continue to impede their growth. These challenges not only limit their competitiveness but also hinder their ability to scale operations and contribute more effectively to the economy.
The Infrastructure Deficit
India's infrastructure deficit is a well-documented issue. According to a report by the World Bank, inadequate road connectivity, unreliable electricity supply, and limited access to water and sanitation facilities are some of the key challenges faced by micro businesses. For instance, a small manufacturing unit in a rural area may experience frequent power outages, disrupting production schedules and leading to missed deadlines. Such inefficiencies increase operational costs and reduce profitability.
The Real Estate Conundrum
Real estate costs in India have surged significantly in recent years. A report by CBRE highlights that construction costs for greenfield real estate projects increased by 2-4% annually in 2024. This rise is attributed to higher input costs, including labour and materials. For micro businesses, which often operate on thin margins, these costs can be prohibitive. Renting a small office space in metropolitan areas like Delhi or Mumbai can cost upwards of ₹40,000 per month, excluding operational expenses, in India .
The Impact on Micro Businesses
The combined effect of inadequate infrastructure and high real estate costs is particularly detrimental to micro businesses. These challenges limit their ability to compete with larger enterprises that can afford to invest in better facilities and locations. Moreover, the lack of affordable workspace often forces micro businesses to operate from sub-optimal locations, further affecting their efficiency and customer reach.
What are the Industry Experts saying?
Industry experts have weighed in on these challenges. Mr. Rizwan Soomar, CEO of DP World North Africa and India Subcontinent, stated, "The fiscal budget's focus on infrastructure investments is a strong move towards accelerating India's growth trajectory. However, more needs to be done to make these investments accessible to micro businesses". Similarly, Mr. Girish Aggarwal, MD of APM Terminals Pipavav, emphasised the need for public-private partnerships to address these issues effectively.
Potential Solutions
1. Government Initiatives: The government can play a pivotal role by offering subsidies and incentives for micro businesses to access better infrastructure. Initiatives like the Pradhan Mantri Awas Yojana for affordable housing could be extended to include commercial spaces for micro businesses.
2. Technology Adoption: Leveraging technology can help micro businesses overcome some infrastructural challenges. For example, adopting solar energy solutions can mitigate the impact of unreliable electricity supply.
3. Co-Working Spaces: The rise of co-working spaces offers a viable solution to the real estate challenge. These spaces provide affordable and flexible options for micro businesses, enabling them to operate in prime locations without incurring high costs in India.
4. Public-Private Partnerships: Collaborations between the government and private sector can lead to the development of industrial parks and shared facilities tailored for micro businesses.
The Way Forward
Addressing these challenges requires a multi-faceted approach involving government policies, private sector initiatives, and technological advancements. By investing in infrastructure and making real estate more affordable, India can unlock the full potential of its micro business sector, driving economic growth and job creation.
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