Article: 4 key tactics to address skill gaps among MSMEs


4 key tactics to address skill gaps among MSMEs

The demand from the industry is on par with the rapid digital growth; however, there is a considerable skill gap between the requirements of the industry and the qualification and training that these employees receive.
4 key tactics to address skill gaps among MSMEs

India is home to 6.3 crore MSMEs and  employs nearly 110 million ; yet they face the challenge of addressing skills gaps that appear due to disrupted market, technology trends, and poor infrastructure. In 2020, workforce shortage became acute when the labour force returned to their hometown and villages due to the pandemic. This nonlinear change is still affecting a wide range of MSMEs. At the same time, they are attempting to digitize so they can make use of the latest advances in technology to grow.  Here too they struggle to find the right talent at the right time. 

Key Barrier: Growing unemployment rate and expectations 

As per the CMIE (Centre for Monitoring Indian Economy) reports, the unemployment rate in the country is constantly growing and is at 8.32% (August). In 2018, about 468 million Indians were part of the workforce and 92% of them were in the informal sector - today it is down to 80%. Researchers suggest that greater workforce informality leads to lower incentives to acquire new skills. Businesses often choose to replace labor with machinery as inadequately skilled workers are a bane to the company. It leads to fewer formal jobs and hence further increases the skill gap.

We do not have a dearth of workers. However, a significant percentage of India’s workforce aren’t skilled enough for the job at hand. The demand from the industry is on par with the rapid digital growth; however, there is a considerable skill gap between the requirements of the industry and the qualification and training that these employees receive. This skill gap between the demand and the supply also prevents the inclusive growth of the economy.

Technology developments and digital solutions

Technology is a great leveller.  If SMEs invest in the right digital channels and tools, they will enhance their operations and provide wider exposure and reach. Ultimately, the goal of SMEs is to compete with larger enterprises, without having to invest much. Digital solutions help streamline various business operations and optimize the output, thereby cutting down on a lot of operational costs. Whil business owners and employees can pick up new skills, a lot of the new technological tools, especially SaaS products, are easy to use and do not require specialised skill sets. So, businesses do not have to worry about finding skilled employees. 

Training and partnerships

That said, it’s important that MSMEs also invest in  training existing employees as technology advancements will continue across all aspects of business operations and companies run the risk of falling behind in growth if they do not keep pace with tech.   Partnerships with other technically abled enterprises is a phenomenon that’s widely accepted across the MSME industry. Sourcing talent and acquiring better machinery for optimising time, resources, and money is an effective way to propel the growth of the MSME industry.


Reskilling and upskilling the workforce is one of the most crucial ways to address the skill gaps. Employees should also make sure that they are utilizing the schemes run by the government. Rather than focusing on overall learning, it’s necessary that the workforce focuses on demand-driven skill development. It could be anything from healthcare, logistics, construction, merchandising, finance, accounts, or even hospitality. On-the-job training by HR and higher officials will boost the productivity of the employees and help in building their morale. This sort of constant learning will make employees consistent in their approach as well. 

Guidance and support from consultants

Seeking support and occasional advice from consultants for the growth of your SMB is always a good idea. As they say, looking at your business from an outsider’s perspective will not just help you understand the business better but will also encourage you to be a keen observer, who can keep track of the various nuances of the business.  

India has the second-largest freelancing market in the world. We have about 15 million freelancers, who boost the growth of startups and established organisations. International clients often hire Indian freelancers as their consultants to get an idea about the Indian market and it also opens their gates to enter into the Indian market. Outsourcing work is also known to cut costs by 20% when compared to a permanent employee who is hired for a specific job role.   

The skill shortage in the MSME sector and the challenges faced by SMEs can mostly be solved by enhancing employees’ personal skills, by making the right decision, and with proper strategic planning. The increased access to technology is predicted to ensure uninterrupted internet access by 2030. Given that the average age of the Indian workforce is 26 to 27 years old, the predicted internet revolution is a hopeful indicator for the future.  

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Topics: Skilling, #GuestArticle, #Outlook2022

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