Ease of doing business for MSMEs: The National Manufacturing Innovation Survey 2021-22 released on Friday reported that only 25.01 per cent of the 8,074 MSME and large firms surveyed were considered innovative. The firms successfully implemented either new or significantly improved products or processes (marketing and sales, procurement or other organisational methods in their business practices) during the survey period, the report released by the Department of Science and Technology (DST) said. The latest survey is a follow-up to DST’s first National Innovation Survey held in 2011.

The data for the survey was collected between February 2021 and May 2022 covering an observation period of the financial year 2017-18 to 2019-20. The firm-level survey comprised mostly of MSME respondents with 52.24 per cent micro firms, 29.26 per cent small, and 12.63 per cent medium across various manufacturing and service sectors. Large units were only 5.87 per cent of the 8,074 respondents.

According to the survey released for policymakers, 73.76 per cent of the respondents were non-innovative as they did not introduce product or business process innovations during the survey period.

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Among the most frequent barriers to innovation reported were a lack of funds within the firm or group for over 45 per cent of respondents followed by 40.30 per cent of firms claiming high innovation costs as a challenge to innovation. For 39.52 per cent of firms, lack of external sources was another barrier.

On the other hand, among the most critical barriers were low demand for innovations in the market according to 71.23 per cent of respondents, organisational rigidities within the firms as per 69.28 per cent of respondents, lack of funds within the firm or group for 68.57 per cent respondents and lack of finance from external sources according to 68.38 per cent respondents. 

Small firms reported the highest frequencies of all barriers across firm sizes, even more than micro enterprises, the survey said.

Frequencies of innovation barriers differ by region in India, according to the survey. For instance, Gujarat and the union territories of Dadra and Nagar Haveli and Daman and Diu reported the highest frequencies of barriers to innovation.  

“They are among the more industrialized states/UTs in India and have a higher concentration of established businesses and industries such as chemicals, textiles, plastics, pharmaceuticals and electronics. These factors can contribute to higher barriers to innovation as existing firms may be less willing to take risks on new technologies and processes and may have more entrenched organisational structures and cultures,” the survey noted. 

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Highly innovative states such as Telangana, Karnataka, Maharashtra, Tamil Nadu, also reported average to high (higher than national average) frequencies of barriers even as they have invested heavily in creating supportive innovation ecosystems, such as technology parks, incubators, and accelerators. 

In contrast, some of the low innovative states reported low frequencies in barriers such as Uttar Pradesh, West Bengal, North-eastern states (excluding Assam), Odisha and Andhra Pradesh. The survey said insufficient innovation potential and lack of qualified personnel were the most frequent barriers related to potential and capability nationwide as well as in most states, irrespective of their innovation rank.

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