Five Ways to Boost Productivity of SMEs in India

Arun Bhardwaj
Managing Partner – Recalibrate
Author - The Xtraordinary Entrepreneur

MSMEs employ more than 40% of the total workforce in India but they contribute only 8% to the Indian GDP. “Productivity is, above all, a state of mind. It is an attitude that seeks the continuous improvement of what exists. It is a conviction that one can do better today than yesterday, and that tomorrow will be better than today”, according to European Productivity Agency, Rome Conference, 1959.

Productivity is, thus, critical for the long-term competitiveness and profitability of SMEs, as well as their survival. It requires constant effort to adapt economic activities to the ever-changing business conditions to create value for all stakeholders based on the process approach.

Lower technology levels in the MSME sector in India, with some exceptions, is characterised by low technology levels, a huge drawback in the emerging global market. As a result, the sustainability of a large number of MSMEs will be in jeopardy amidst competition from imports. The biggest impact is felt by their research arms as they don’t have the firepower to be able to innovate. Lack of skilled manpower is going to be another critical factor. Although India has a large pool of human resources, the industry continues to lack skilled manpower required for manufacturing, marketing, servicing, etc.

As per a recent research study conducted by YMCA, Faridabad, the usage of adopting productivity enhancement techniques was found at an alarming level of just eighteen percent in manufacturing organisations. It also found that there is a wide gap in understanding and implementing the concept of productivity between manager and supervisor by six percent which extends to the worker by twenty three percent.

The Industry 4.0 revolution has already begun and the focus is on value creation at each step of the process, as can be seen from the diagram below:

A screenshot of a cell phone  Description automatically generated

The key factors for improving the productivity are as follows:
I. Tools and technology: access to latest tools and technology is a key factor in driving the productivity.
A close up of a device  Description automatically generated
II. People: access to skilled people and investing in their training and continuous improvement, including culture, values, reward and recognition etc.
III. Digitisation: As per another report by KPMG and Google approximately 68% of MSMEs are completely offline, while those who adopt Digital technologies:
1. Grow profits upto two times faster than offline SMBs
2. Scale across cities and country boundaries
3. Employ upto 5 times more people than Offline SMBs
IV. Processes – investment in ‘lean manufacturing’, Quality management standards (QMS) and quality technology tools (QTS). The productivity enhancement by reducing waste, adopting quality technology tools and quality management systems and absorbing energy efficient technology must therefore be taken on priority.
V. Innovation – investment in research and development, innovative practices to absorb new technologies like ‘Artificial Intelligence (AI), Blockchain, Robotics, RFID, reverse engineering etc. Innovation in product development, sales and marketing, is another key to success.


Here are some of the things that the MSMEs can implement to improve productivity:

Productivity and Cost Reduction: Do More With Less

  • Less Space, Less Time, Less People, Less Materials, Less Expenses day after day.
  • Continually finding wastes and non-value adding activities and eliminating them.
  • Improving Inventory Turnover Ratio and reducing interest burden by working with lowest inventories.
  • Make production cells. Multi-Process operation by one person. Minimize people in non-value adding activities.

Quality:  Quality First Quantity Must

  • Every piece is made first time right.
  • Quality is made by design, planning and prevention. There are easy to understand and follow work standards and continuous training ensure mistakes are minimised. Mistake proofing devices make sure zero defects are achieved every time without fail.
  • Continuous audits of QMS (quality management system) help eliminate errors and achieve sustained improvements.
  • Continual Training on Quality and revision of Standards is a regular practice.
  • Supervisors and Managers work as teachers and not bosses. There is no fear. People bring forward problems; even own mistakes without fear of insult and punishments so we can become defect free company.


  • Every employee understands the Vision, Mission and Core Values of the organization and is totally aligned.
  • People work for purpose and not for bread alone.
  • People are recognised for good work and making improvements. Everyone contributes to the Kaizen (continuous improvement) scheme.

Digitisation and Technology Adoption

  • Investment in new technologies
  • Take your company digital
  • Enable e-commerce integration
Use of SaaS (software as service), cloud computing etc.