Effect of sustainable leadership development and employee empowerment in MSME industry in India

In the 21st Century, The Micro Small, and Medium Enterprises (MSME) in India have established their credibility of mass employment and contributing to around 30% of India’s GDP in 2020. As of 2020, India is a house of 2.5 million units and proved the backbone of large sectors such as Manufacturing, Agriculture, Aviation, IT & ITeS, Pharma, Cement, and Automobile to name a few. India Government initiatives helped MSME to grow at the rate of 18.5% CAGR in 2019-2020. Indian Government is committed to bringing sustainable growth to the MSME sector. This brings the point to look into scalability issues often faced by these industries due to typical Owner and employee organization structure with lack of knowledge in recent HR practices. All the management and operational decisions are factored into top leadership (the business owner and his son’s). With the young entrepreneurs stepping into the family business, the face of this industry is bound to change further. Indian Government has doubled the budget for the MSME sector in FY22 that is $ 1.03 billion in FY 21 to $ 2.14 billion in FY22. With the Industrial revolution 5.0, India has witnessed multiple Unicorns in the last decade; therefore, it is bound to see maturity in leadership sustainability and focus on employees’ empowerment. The study goal is to look into labour law barriers faced by the MSME industry which is not covered in the FY22 vision document for the early adoption of a modern HRM approach to meet 5 trillion dollars business demands by 2025.


Introduction
With the beginning of the Industrial revolution 5.0, World has faced worldwide pandemic challenges of COVID 19 and that pulled down all to negative economic growth in countries worldwide.India is a highly populated country that got the worst hit.The Indian economy contracted due to the disruption of the COVID 19 pandemic.In the 4 th quarter, 2020, India growth story went down to 3.1%.This has been reported by the Ministry of Statistics, Also, the impact in Q2 (April-June) FY2020-2021 has resulted in GDP contraction to (−24%) that led to an unemployment spike; supply chain distressed; drop in government income; tourism industry downfall; the breakdown in tourism industry; limited buyer activity; petrol/diesel consumption gone down south (Ref."Economic Impact of the COVID-19 pandemic in India, 2021").
On top of it, incremental rise in petrol, diesel, and LPG sales, and stressed trade with China and Pakistan.Indian economy suffered huge damage due to COVID 19 in 2020 which is valued at around 26 billion dollars.The COVID 19-second wave added fresh troubles for the Indian economy in March 2021.As a result, further, fall in GDP forecasts and putting expected losses at over 38 billion U.S dollars by Q2 2021, (Statista, 2021).Industries affected at large were Construction, Services, and the Micro Small, and Medium Enterprises.The non-affected industry was Telecom in India.
The Finance Ministry and Commerce Ministry under the guidance of Prime Minister, Mr Modi took stock of the economy and decided to liberalize norms on import duties, revamp tax structure for multiple commodities, medical types of equipment, critical COVID19 drugs, and announced series of packages to rehabilitate unorganized employment sectors, "Micro Small, and Medium Enterprises" to improve the staff employability.
With so much negativity around the industry due to pandemics, there were bright spots of sustainable leadership in MSME enterprises for growth stories by applying the principle of HRM (Maheshwari et al., 2020).MSMEs grew in India by 18.5% during 2019-20.It could happen due to government sustainable initiatives to promote young Indians, Female entrepreneurs, and SC/ST entrepreneurs to take up business for livelihood and create community employment.There are five statutory bodies governing MSMEs in India.In the current business scenario, "Micro, Small, and Medium Enterprises (MSMEs)" are recognized growth engines for reasonable progress.The MSMEs play a vital contribution in the dispersal of industries and the generation of employment openings.In a growth story of India's GDP, MSMEs is contributing approx.30 per cent of GDP.Out of this share, 45 per cent goes to industrial products and 48% exporting goods, and employment over 110 million workers.The registered micro, small and medium enterprises have demonstrated growth of 18 Under the distressed situation, around 170 business associations formed the "All India Council of Association of MSMEs (AICA)" to look into the challenges of the trade sector.With the due representation and approval from the "Ministry of Micro, Small, and Medium Enterprises", these enterprises have been categorized using two factors (a) investment in equipment and (b) annual turnover, given in below Table 1.

Literature Review
In the 21 st Century, India also has emerged from the shadows of the Colonial era of outdated business norms and labour laws; however, there is a growing need to improve upon the socioeconomic condition of a common man to live a better life.This is only possible through job creation and employment opportunities.And MSMEs are the only one that needs minimum capital investment to start with and low-cost operation that can be operated in rural and tier 3 and 4 cites in India.India has improved in ease-of-doing-business rank as reported in World Bank report 2019 however; the ecosystem needs multilayer improvements (Ali & Husain, 2014) in financial support, labour laws, Supply of raw material, and ease on taxation rule to stay competitive in the market.
The studies have been done about employees' engagement in MSMEs.Employee encouragement helped MSME to grow faster and delivered stabilization in operation.The case paper regarding Chhattisgarh State, India (Malewar & Nair, 2014) where Chhattisgarh State outperformed the sustainable development with the help of Government visionary policies that helped in their employees' retention and work satisfaction.

Labour Laws barriers as a bottleneck:
The Indian MSME sector is expected to achieve exponential growth due to the government's 'Make in India' drive to appeal to foreign direct investments (FDI).Despite all these efforts, India's 60+million MSMEs still have not picked up the pace.One of the key reasons is the complex regulatory framework and compliance requirements that consist of more than 69 thousand compliances, more than 6 thousand filings, and nearly 1.5 thousand different acts.The labour involves around 400+ acts, 32 thousand compliances, and 3 thousand filings (Ref."Labour Laws and Growth of Micro and Small Enterprises India -Country Report, 2014").And second, the Multiplicity of labour laws -44 central and about 100 state laws -presents implementation challenges and compliance assurance, certainly needs a second opinion (Ref."Overview of Labour Law Reforms, n.d.").Some of the terminologies challenges like -an "Employee", a "Workman", "Worker" to designate a "Worker", "Wages" or "Basic Wages", "Salary" mentioning as compensation, however, covering different references denoted in each "Legislation" have made compliance very clumsy thus multiple litigations (Ref."Labour Laws and Growth of Micro and Small Enterprises India -Country Report, 2014").
The applicable laws to all types of employment in the first category are considered to be introductory laws in the modern democratic society.Our subject of study is the second category of laws that apply to MSMEs.The third category laws apply to enterprises under the new category of medium enterprises.Indian labour laws exist since colonial times however, the focus would remain on specific relevant laws applicable even today (Table 2: Refer list of Indian national labour laws).The employment threshold level has been tabulated here below covering three categories -less than 9 employees; 10-19 employees and 20-49 employees.It is worth noting that this is the largest group ruled by the "first threshold", which is nearly 97 per cent of enterprises giving employment to 74 per cent of non-farm sector employees.
The above data points give a holistic view to understand the employability scale covering registered and unregistered MSMEs and therefore, labour laws to enforce employees' rights of safety and security, wage payment, and industrial disputes.To continue our discussion on labour laws compliance to the industry, labour laws are categorized into three categories.

Table 2. Deployment of significant labour laws to the MSME sector based on employee hiring threshold
MSMEs regional spread is in the top five states are like this -Tamil Nadu (15.07 per cent), Gujarat (14.08 per cent), Uttar Pradesh (12.08 per cent), Kerala (9.65 per cent), and Karnataka (8.99 per cent).That covers 61 per cent of entities.Interesting to note that rural area enterprises nearly account for 53 per cent of MSEs.

Labour Laws law enforcement challenges in India:
The Central Government of India enforces the "labour laws" through the "Office of the Chief Labour Commissioner" under the Ministry  MSMEs to self-certify their presence over the Government Portal through registration and they shall be entitled to the host of benefits ranging from "interest rate subsidy" on "bank loans" to "exemption under direct tax laws" and deep discount in Power bills, etc.The extension of the validity deadline would facilitate registered MSMEs to avail priority benefits provisioned under various welfare schemes including priority sector lending benefits to MSME.As per the "National Sample Survey", 73rd Round (2015-16), there are an estimated 63 million MSMEs in India.
Dr Ranjeet Mehta, the MSME expert and Secretary of the PHD Chambers shares his views -"There are several reasons for the low registration."(PHD Chamber | Dr Ranjeet Mehta Team, n.d.) "There is a lack of awareness about the registration system and the various benefits, which are attached to it.While the MSMEs in the Tier 1 cities and those in industrial hubs are aware, many others don't even know about Udyam," he points out.Like others, Mehta believes that ``the fear of added compliance costs makes the MSMEs wary of registering as they find it to be burdensome.Another reason for low registrations is MSMEs do not wish to come within the ambit of income tax authorities as the entities would have to declare their transactions and turnover" Also, Mr Vinod Kumar, President India SME Forum, assigned several reasons for the overall lack of registrations.(India SME 100 Awards | India SME Forum, n.d.).Like the others, Mr Vinod Kumar observed that many MSMEs do not wish to be caught up with the compliance burden and added costs that accompany it."Most MSMEs feel that they are better off without registering as the compliance costs would be much greater than the benefits that they could avail postregistration.Hence even under Udyog Aadhaar, only the 10 Million dollar turnover MSMEs registered were keen to avail the benefits" And on top of it, the MSME sector could not yield many benefits from the Digital Kranti in India which can substantially reduce the time to market and last-mile delivery benefits.

d.).
There was another factor to bring out here -The Ease of Doing Business in India.World Bank's has published a report in 2019 about the 'Ease of Doing Business Ranking 2020', that reflects a marked improvement for India jumped to 63rd position from 142nd (EASE OF DOING BUSINESS -Make In India, n.d.) (Chandra & Pareek, 2014) amongst a total of 190 countries; the index is poised of 12 areas of business regulation that would potentially build pressure points on the demonstration of MSME's business performance ("Doing Business 2020: Comparing Business Regulation in 190 Economies," 2019).But this is still not enough to sustain the business.

The objective of the Study
The objective of this paper is to study leadership sustainability in handling labour laws and focus on employees' empowerment in MSMEs with greater thrust in HRM practices for industrial growth.

Social Implications
MSME Ministry has five statutory bodies.Each one is responsible for strengthening the rural economy, providing employment opportunities in rural areas through promotion, developing khadi in village industries.They are accelerating rural industrialization for a sustainable village economy, empowering traditional artisans, attracts professionals and specialists to Gram-Swaraj inspire innovation in incubations through pilot study and field trials and R&D for alternative technology using local resources.These initiatives have a major impact on sustainability outcomes and the quality of life.Recognizing the need for their upliftment is a contribution through this paper.At the bottom of fig1, Depicts the self-support to run a business with three key contributors -The Owner and his family, Labour Inspector and the Firm Accountant take care of financial and legal compliances.The Wagon wheel is heavily loaded with government and open market factors having thin support to run the business.Looking at these deterrents to step into manufacturing or service sectors for the entrepreneurs; it is a highly risky proposition without the ease of doing business.The challenges are more for Micro and small business owners where the family business is the foundation to run an enterprise, inadequately self-funded and unprepared for business risks due to lack of education, and experience to understand the Government ecosystem.Small-time entrepreneurs are depending on the guidance of firm accountants and labour inspectors to take care of all government-related compliances.This is very thin support for enterprises to stay afloat in the highly competitive environment.There are multiple barriers to fix with simple tools (Johnson & Schaltegger, 2015).

Figure 1. MSMEs Health Check variables
RBI and Central Government have appointed several commissions to study the existing GOMs and MSME's governing models.There are several recommendations given by commissions from time to time to ease out operational norms of the MSME sector.However, due to lack of direct benefits and Red tape, there is no end of misery for the MEME sector at Pan India though a sporadic few state governments like MP, Tamil Nadu, Gujrat and Maharashtra, demonstrating better in facilitating healthy credit lines, promoting fair competition, skilled labour, Technology gain and marketing support.RBI has published a recent report on State ranking in managing MSMEs during COVID 19 where Uttar Pradesh was among the top five states in generating employment by managing 4 million migrated labours under the Skill India movement.The other best-rated states are Karnataka, Rajasthan, Delhi, Haryana, and Telangana among the top 10 States in India.
In continued support from RBI to strengthen the MSMEs sector, a theme-based programme was in the series of coherence to focus on "MSME Lending" in September month, 2021.This is the third theme-based innovation support to MEMEs from RBI under the regulatory "Sandbox" framework to do the live testing of new policies under a controlled environment for the selected enthusiastic players, selected based on the criteria announced by RBI.The new policy testing for "MSME Lending" will kick off in Dec 2021.The Other two Theme based cohorts that were initiated in August 2019 and 2020 by RBI were "Retail Payment" followed by "Cross-border Payment".Overall, results are encouraging, however, the lack of awreness in the MSME sector about these opportunities are not yielding a great result.

7.
Results and Discussion:

Labour Law Reforms 2.0:
To elevate the operational standards of MSMEs, "MINISTRY OF MICRO, SMALL & MEDIUM ENTERPRISES", GOI has announced the Credit Rating schemes for MEMEs.The guiding force behind is to deliver a reliable third-party opine on the competencies and financial credibility of the MSMEs, also to bring mindfulness amongst MSMEs and their existing business strengths and weakness and attract FDI for business expansion (Ref.To enable ease of doing business, various administrative initiatives such as the e-governance route are deployed to generate mass employment for MSMEs.These initiatives are executed through legislative changes done by State and Centre labour laws under Aatma Nirbhar Bharat Abhiyan (Ref.Aatmanirbharbharat, n.d.) The Economic Survey 2020-21 was presented on 29 Jan 2021, in the Parliament that lauds new reforms exercised by the Central Govt. to boost the agriculture sector and the labour laws, as well the change in the definition of MSMEs (Economic Survey,

2018). "The modified definition of MSMEs facilitates expansion and growth of these enterprises without them fearing the loss of government incentives, thereby avoiding the phenomenon of dwarfs among MSMEs"
The State and Central Government have put their acts together to simplify labour laws as summarised here: The existing Indian labour laws are complex and need reforms.

Reform coverage
The majority of the labour laws apply to establishments over a certain size (typically 10 or above).The size-based thresholds shall help companies in dipping the compliance load and focus on business growth and sustainability.It is expected that basic protections related to employee incomes, social security, and working conditions apply to all establishments.With this, MSMEs ensure focus on employees' engagement for their personal growth and build the second level and third command leaders to run operations.

Conclusion
With Labour Reform 2.0, the labour reforms shall assist MSMEs to upsurge employ hiring, improve workers throughput, and thus work satisfaction in MSMEs.The Economic Survey 2021 helped to learn the pulse of the industry.The simplified labour laws explanation to MSME is a must.The state and Central Labour Ministry should focus to arrange seminars for MSMEs owner associations to learn and train them about the changes and outcomes and shed the fear of doing anything wrong.
States need to build a partnership with MSMEs so that to dodge avoidance strategies with labour laws compliance and trade regulations.
It is fear of getting into the trap of Government bylaws that may lead to pervasive avoidance of questions to know more or it perhaps indicates the worries of the MSMEs owners in replying with specific answers during surveys.The MSMEs demands of simpler labour laws and trade laws have been resolved to a larger extent, however; ease-of-doing-business is still a concern.The interpretation of laws should be the same for everyone like learning over e-modules.Better the understanding MSMEs owner has of laws, the lesser the fear of Audits would deliver better governance.State Government needs to run trade promotion schemes for the MSMEs to support business growth and delivery transformation of these units into a vibrant economy, prosper employees income and employment opportunities.
Extensive use of 'Make in India' and 'Aatma Nirbhar Bharat' digital platforms will create a big momentum, all trade promotional schemes to comprise provision of (a) active workforce driven policies and on-demand based skill upgrade, (b) stress-free access to credit for a longer period, (c) Power supply assurance, (d) Uninterrupted raw material supply, (e) Finished good sale support, and (f) information on market conditions on demand and supply.India is a house of 63+ million MSMEs across the country.The revised labour norms and schemes can be implemented effectively with the help of the existing cluster development program.
The Central and State governments need to own this responsibility and accountability equally (50:50) with transparency for the growth of MSMEs.A new mechanism is required to develop where the Centre and State play partnership role for the MSMEs and support the growth engine through Public-Private partnership (PPP).Saudi Arabia's economy has been placed the most ease of doing business in 2020, with a total of eight reforms done in recent times.India needs to follow the same path of growth in the next five years to reach in top 10 countries for each of doing business.

Recommendation and Future direction
Through this paper, Labour Reforms 2.0 has been explained however there should be continual thrust on simplifying labour reforms to the next level every three years.The reformers need to take note of ground realities and continue their effort to reach out to the last MSME in remote areas.State Governments need growth opportunities in their states, therefore; they should publish an expression of interest to start MSMEs or a specific industry based on state natural resources and demand forecast backed by Economic surveys.There is a need to published similar research papers on key drivers of MSMEs such as (a) simplifications done in term loans to MSME industries, (b) simplification of income tax procedure, (c) simplification of the Industrial Act.The point is made here that any legitimate fear in the mind of MSME should be removed to flourish the growth.Law enforcement by Central and State governments should come with a carrot and stick policy offering and protecting the MSME industry from legal and exit threats.Only then, India can fulfil the dream of a 5 trillion dollar economy by 2025.
of Labour and Employment along with State Governments representing labour commissioners.State Government owns the joint responsibility to carry out law administration of the Central & the State Government labour laws in the MSMEs enterprises through the federal structure.Most small enterprises do not register and declare their existence for convenience and stay away from the compliance structure.It helps them to avoid income tax scrutiny.MSMEs are less enthusiastic about registering their enterprises with the new portal, Udyam Registration, an initiative taken by the Central Government to facilitate a host of supporting services.The main reason behind this is the fear of labour law compliance and falling under the income tax net.The MSME's Ministry has notified about the new definition of MSMEs and roll out a new enrolment process known as Udyam Registration on 26 June 2020.Udyam Registration for Micro, Small, and Medium Enterprises came into existence on 1 July 2020.By now only 3.43 million MSMEs have completed registration in one year.Again, The MSME Ministry has extended the validity of the "Udyog Aadhaar Memorandum" (UAM) to December 31, 2021, and requesting

The
MSMED Act, 2006, has been improvised to place a framework for industry development and bring the X-factor competitiveness of the MSME enterprises.This would ensure the credit flow to the MSME sector and flagging the procurement way of Government's preference for goods and services of the MSMEs, addressed the delayed payments.Through this paper, an attempt has been made to give a simplified view of MSMEs challenges in India.On the left side of fig 1, the Government factored Variables (such as enforcing labour laws, Business compliance, Registration in Income Tax portal for advance tax calculation based on quarterly sales, State Vigilance Inspectors, too much paperwork -complex ecosystem, and on top of Central and State Government conflicts leading to lack of transparency and confusion for MSMEs to run business), Market-driven variables have been listed and on Right side giving a sneak view of ongoing challenges such as Domestic competition, Poor logistic support for material movement, high labour cost, high cost of the loan from local lenders, Made in China products supply add chaos to business uncertainty.
These bodies are Coir Board, NSIC, NI-MSME, KVIC, and MGIRI, which hold responsibility for providing aid to MSMEs concerning government policies and schemes from time to time.Indian Government has doubled the budget for the MSME sector in FY22 which is $ 1.03 billion in FY 21 to $ 2.14 billion in FY22 (Ref."MSME Industry in India -Market Share, Reports, Growth & Scope | IBEF, n.d.").

Table 1 .
MSME categorization based on investment and Service Sector

Norms turing (Plan &Machinery, Food Processing th, Logistic & Hospitality etc.) Sector etc.)
Statement"The Micro, Small and Medium Enterprises (MSME)" sector has steadily registered a substantial growth rate in comparison to the rest of the industries.The MSMEs are not equally distributed all over India due to raw material challenges, unawareness of state resources distribution mechanism, and also lack of leadership skills (due to traditional management style -one-man show) and lack of support single-window clearance for financial and technical backing with local area authorities at district/state, and the centre.The other concern where Central Government support is required to get adequate and timely credit facility, support to buy modern technology, but insufficient technical skills training and managerial knowledge in product marketing, unable to leverage Digital India campaign, e-commerce for product selling and top of it to handle complex State labour laws are the main teething troubles of the MSMEs (Uppal, n. The Government of India has identified 29 such laws and replaced them with 4 Codes.These new 4 Codes are aimed to modernize labour laws, easy to interpret and protecting labour rights.There is zero tolerance for labour's rights.It is expected that new laws should cover the small to mid-size firms, guiding principles for staff retrenchment, managing threshold levels and flexible labour norms for collective bargaining.The 4 Codes described here below are sum up with a focus on simplicity, adaptability of emerging labour practices in all service sectors such as Gig work, Hospitality, Transportation and Business Process Outsourcing, etc. (Ref: "Labour Law Reforms | Ministry of Labour & Employment, 2018") Further, MSMEs can deploy a labour force equivalent to full-time workers as an alternative to customize workbench strength according to the market conditions and thereby enhance employment.To unleash growth and improve the economic scale of operations, the size of the revised threshold for a factory to be called from10 to 20 employees, contract workers slab revised from 20 to 50 labours to apply."The labour reforms will benefit MSMEs to increase employment, enhance labour productivity and thereby wages in MSMEs", Survey states.(Ref.Economic Survey, 2018) Similarly, the cost of compliance would drastically reduce as 41 central labour laws got replaced with just 4 laws and the drop in sections by 60 per cent (1200 to 480).The other reforms include the number sections of minimum wages being reduced to 40 from 2000.In addition to this, Unit registration's form submission at one place instead of at six different places, also, one license is required instead of four, and de-criminalization of numerous offences (Ref.Labour Law Reforms | Ministry of Labour & Employment, 2018).
7.2 Matrix of Simplified Governance initiatives at the Pan India States (as of 06-03-2020) The below matrix summarizes State Government wise initiatives taken through legislative and governance.To read the below table, each row designates the State name and a column designate the legislative title/governance initiative.The status of State and Central Acts is tick marked ( ) (Ref."Labour Law Reforms | Ministry of Labour & Employment, 2018").The details are here: IOP Publishing doi:10.1088/1755-1315/1306/1/01203111 (Source: https://labour.gov.in/labour-law-reforms)