Mathur Ritika Passi

Unlike basic and critical infrastructure
needs where the public sector is expected to
be the prominent investor, the government
must leverage the expertise and the
financial capabilities of the private sector
to drive investment in cyber infrastructure.
Platforms such as Digital India and other
policy directives must act as a catalyst to
ensure the private sector plays a dominant
role.
In addition to building infrastructure,
targets 9.1 and 9.4 also focus on ensuring
infrastructure built be sustainable—a
challenge facing the Indian policymakers as
well. In this regard, the Indian government,
through its Smart City initiative (announced
by Prime Minister Modi in 2014), is trying
to blend green infrastructure into urban
planning. By creating walkways, preserving
and developing open spaces, providing
efficient public transport with last-mile
connectivity, and ensuring infrastructure
is less vulnerable to natural disasters,
the government is attempting to reshape
and reimagine urban planning in India. 9
It remains to be seen, however, how this
project unfolds, given the concern that
it could further increase inequality and
exacerbate social inclusion.
Encouraging Inclusive and
Sustainable Industrialisation
Industrialisation refers to the process of
shifting an economy’s dependency from
the agriculture sector to the manufacturing
and services sectors. The MDGs remained
silent on this shift. Target 9.2 aims to
promote this process by raising the share
of employment in industry, and raising
industry’s share in GDP. The importance of
India’s industrialisation, in particular the
importance of the manufacturing sector, is
discussed in detail in Chapter 8. The focus
in this chapter is primarily on the “inclusive
industrialization” component mentioned
in 9.2, which in the Indian context should
mean promoting micro, small and medium
enterprises (MSMEs), which effectively
form the content of target 9.3.
Given that these enterprises are a key
feature of most developing and emerging
economies, ensuring they are included in
the process of industrialisation in the post-
2015 development agenda is very much
welcome. In India, as of 2012-13, the sector
had a total of over 40 million working
enterprises, employing over 100 million
people 10 (approximately 40% of India’s
workforce). 11 The sector also contributes
significantly to India’s GDP: As of 2012-13,
its share in total GDP stood at 37.54%, with
manufacturing accounting for 7.04% and
services 30.50%. 12
In order for the MSME sector to grow,
access to funds is critical, something SDG
9 rightly captures in its third target. As per
a 2012 International Finance Corporation
study, the total finance requirement of
the sector in India stood at $650 billion.
But a number of constraints have led to a
significant funding gap to the tune of $418
billion. 13,14 As the Indian economy grows,
the share of the MSME sector is expected to
expand considerably. The need of the hour is
then to bridge this finance gap, particularly
through the formal financial framework,
a key component of the overall SDG
framework.
In India, however, a number of current
practices constrain the flow of funds to
these enterprises. First, data for the sector
is collated as per the definitions provided in
the Micro, Small and Medium Enterprises
Development (MSMED) Act, 2006. The
reliance of banks (particularly public
sector banks) to gather said information
is counterproductive, since MSMEs are
more heterogeneous than their definition
allows for. There is a need, therefore, to go
beyond the formalised definition and collect
disaggregated data based on factors such
as location, access to natural resources and
infrastructure, and nature of the enterprise.
Second, the products and services offered to
MSMEs are conceptualised at the head office
of financial institutions rather than branch
offices that directly engage with MSMEs.
These products thus lack innovation and
are standard in nature. Furthermore, these
services require significant collateral as
backup, ignoring the fact that MSMEs
do not have access to such collateral.
Often, enterprises which require a high
risk premium are refused access to these
services. Third, the underwriting process
relies primarily on financial performance.
This proves to be counterproductive, as
these enterprises are often unable to provide
documented financial information. The
problem is further compounded by the fact
that credit information of these enterprises is
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