See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/379862062

Performance and futuristic scenario analysis of secondary agriculture based

MSMEs in Bengaluru district of Karnataka

Conference Paper · April 2024

DOI: 10.5958/0974-0279.2023.00025.3

CITATIONS READS

0 13

2 authors:

Ashwitha A S Gowda Ritambhara Singh

University of Agricultural Sciences, Bangalore Dr. Rajendra Prasad Central Agricultural University
2 PUBLICATIONS 0 CITATIONS 74 PUBLICATIONS 121 CITATIONS

SEE PROFILE SEE PROFILE

All content following this page was uploaded by Ritambhara Singh on 16 April 2024.

The user has requested enhancement of the downloaded file.

Agricultural Economics Research Review 2023, 36 (Conference Number), 167-178
DOI: 10.5958/0974-0279.2023.00025.3

Performance and futuristic scenario analysis of secondary

agriculture based MSMEs in Bengaluru district of Karnataka

Ashwitha A S Gowda1 and Ritambhara Singh2*

Department of Agricultural Economics, Post Graduate College of Agriculture, Dr. Rajendra Prasad
1

Central Agricultural University, Pusa, Samastipur, Bihar 848 125, India

2
Agribusiness Management, School of Agribusiness and Rural Management, Dr. Rajendra Prasad
Central Agricultural University, Pusa, Samastipur, Bihar 848 125, India
*Corresponding author: ritambharasingh@rpcau.ac.in

Abstract Micro, small, and medium enterprises (MSME) are an important sector in the Indian economy.
With their potential to generate both income and employment, the MSME sector has scope to significantly
contribute to economic growth. The performance of secondary agriculture-based MSMEs in Bengaluru
district of Karnataka and the effect of government support is examined in this study. It also constructs
possible futuristic scenarios for the MSMEs, and perceived performance under each scenario. Broad
results show that half of the 30 selected secondary agriculture-based MSMEs in the study area were high
performers. Government support has a positive influence on their performance. Among various scenarios
generated, Scenario A with high government support and domestic demand was found to be the most
favorable for their growth and upliftment. However, in order to scale up MSMEs, these enterprises need
incubation support, and technology and a right positioning of their products in the market.

Keywords Secondary agriculture, MSME, Performance, Future scenarios, Government support

JEL codes Q16, O3, Q28, L66

Introduction enterprise is called a medium enterprise when its

investment is not more than Rs. 50 crores and it has a
With more than six crore micro, small, and medium
turnover not exceeding Rs. 250 crores.
enterprises (MSMEs) in the country (PIB, 2022), this
sector, which includes manufacturing, processing and For developing economies, including India, the small-
services; has emerged as a dynamic sector under the scale segment plays a significant role in the socio-
Ministry of MSMEs, Government of India. economic upliftment of country. A changing nature of
Manufacturing enterprises in this sector are involved tastes, preferences, and income creates, demands that
in the production of goods; food processing units are are met by secondary agriculture based MSMEs. The
the ones that feed the supply chain of local enterprises, GOI Committee on Doubling Farmers’ Income also
and service enterprises provide services. In terms of suggested promoting and practicing secondary
investment, MSME by definition consists of agriculture to enhance farmers’ income, via value
establishments whose investment in machinery and addition, alternative enterprises, and converting waste
plant have a ceiling. Thus a micro enterprise has an to wealth.
investment of not more than Re. 1 crore and has a The secondary agriculture based MSMEs help in the
turnover not exceeding Rs. 5 crore. A small enterprise development of rural areas as they afford an opportunity
is one where investment does not exceed Rs. 10 crore to improve the manufacturing and service sectors,
and the turnover does not exceed Rs. 50 crore. An which generate more employment for both the non-
168 Gowda A A S and Singh R

skilled and skilled workforce. It not only plays a crucial potential for growth in the state along with textile,
role in providing large employment opportunities but automobile and pharmaceutical-based enterprises.
also helps in industrialization of the rural and backward
The state has immense opportunity for growth and
areas, thereby reducing regional imbalances, assuring
innovation as the manufacturing sector is enabled by a
more equitable distribution of wealth and national
talented and skilled labor force, by an institutional
income. MSME provides employment to 60% of the
environment, and an enhanced infrastructure supported
working population i.e., 1109.89 lakh and contributes by business climate. The new industrial policy for
nearly 29.2% of the country’s GDP. The contribution 2020-25 of Karnataka focuses on the development and
of MSME in India is higher in terms of the whole sector promotion of MSMEs. The state government hopes to
rather than by individual categories. As this sector has generate employment and reach the third position in
around 80% of enterprises in India, labor intensity is merchandise exports among other states in the coming
greater in this sector. Under the Udhyam Registration five years. This would attract investments of about five
Portal, 84,23,452 individuals have registered as lakh crore rupees and maintain a 10% per annum
employees of the MSME sector in the year 2022-23 industrial growth (NIP, 2022).
alone, which can be seen as an indicator of robust
employment generation by this sector. By contributing Need for the study
42.67% from exports (up to Aug 2022), 38.47% to
manufacturing, and 26.3% of Gross Added Value to The Central Government, many state governments and
the country’s GDP, it forms a pillar for the country’s the ICAR have been working to push secondary
economy (PIB,2022). Around 20% of these enterprises agriculture-based enterprises to enhance income and
are located in the rural areas, providing employment employment opportunities. The present study is solely
opportunities to about 40% of India’ total labor force based on an analysis of secondary agriculture-based
(Mukherjee, 2018). MSMEs. It delves into performance indicators to
evaluate the MSME sectors and conducts a Futuristic
MSMEs are present in almost all the states, but they Scenario Analysis of MSMEs which is useful to
are not evenly spread. In some states, MSMEs are formulate policies. Like other studies, this study is also
important contributors to the economy while in others subject to limitations. The secondary agriculture-based
they are slower to progress (Jena et al., 2018). The MSMEs included are mainly Type A Secondary
state of Karnataka, which is our study area, has agriculture (value addition to primary agriculture
implemented many schemes for the development of system). An exploratory research may be conducted
MSMEs with the support of the centre. As of 2021, which includes both Type B (alternate enterprises) and
38.34 lakh MSMEs are present in the state with Type C (enterprises that uses waste and residues of
Bengaluru having the highest number. It is said that primary agriculture) secondary agriculture-based
the MSMEs are major employment generators, enterprises (as classified by the Dalwai Committee
providing employment to 70.84% of the total working Report in its Volume IX submitted to the Government
population in the state. According to the Udhyam of India in 2018).
portal, the registered employees have been increasing
over the years in Karnataka. During 2022, 7,73,214 Material and methods
individuals have registered as MSME employees in
Bengaluru district, our study area, has a major
the state. The state holds the fifth position for state
concentration of MSMEs.We have taken 30 secondary
level distribution of MSMEs having a share of 6% to
agriculture-based MSMEs in both urban and rural areas
total MSMEs in India (MSME Annual Report 2022-
in the district, based on a snowball sampling method.
23).
The Guildford methodology i.e., normalized rank order
Bengaluru, the capital city of Karnataka, is identified method was used to develop effective scale which is
as an innovation cluster by the World Economic Forum used to construct a performance index of MSMEs. The
(District Industrial Profile, MSME-DI). As most of the index was constructed based on six performance
MSMEs in Bengaluru district are involved in agri and dimensions namely, efficiency, risk and returns factor,
food- processing, it creates a healthy ecosystem. Spice social performance, investment, growth performance
processing, juice and jam/jelly units possess a high and scale/size of the enterprise. Initially, 12 dimensions
 Performance and futuristic scenario analysis............ 169

were listed on the basis of a literature review. It was Where,

ranked by authors for their relevancy test on a Likert
PI = Performance index
scales, for example: the most relevant were assigned a
value of 5; relevant with value 4; somewhat relevant S1, S2,…..Sn = Scale values of the particular dimension
with value of 3; less relevant was given a value 2; and of the index.
not relevant was assigned value 1. Relevancy R1, R2,…..Rn = Performance score obtained by the
weightage was calculated using the following formula, particular MSME respondent for a particular
performance dimension.
M1, M2,….Mn = Potential score obtained by MSME
The dimension with a relative weightage of more than respondent for a particular performance dimension.
0.9 was considered as a relevant dimension. These
S = Total scale value of all the dimensions.
pretested dimensions were then ranked by
entrepreneurs and these ranks are converted to rank The performance index for MSMEs was calculated
values using the formula: using the above formula and then MSMEs were
classified into different categories according to Sturge’s
Ri = (n – ri +1),
rule, based on their performance index (Shirur, 2018).
Where, n is the number of items that were ranked, ri is According to Sturge’s rule, MSMEs were classified
entrepreneur’s rank for each dimension. Normalization into six different categories, namely, very high, high,
of ranks approach was used to calculate the centile upper medium, lower medium, low and very low.
positions of each dimension by the formula,
Sturges’ rule
P = [(Ri – 0.5) × 100]/n.
According to Sturges’ rule number of the category
The rank values of a particular dimension are then
depends on the number of samples (Sturge, 2008). As
multiplied with c values assigned to a particular centile
the Sturges’ value was 6, MSMEs were classified into
position values and then added to get Cj value.
six categories based on the range of score. A range
Scale value, Rcfor different dimensions is calculated value between the highest and lowest performance
using the formula, index score was taken. This then divided by six to know
Rc= (2.357*Rj) – 7.01, the range value of each category.

Where Rj is calculated by dividing Cjby number of Measurement of dimensions of performance index

judges.
Similar to a classification of the MSMEs according to
Sub-components were identified under each dimension performance index, MSMEs are further classified under
and statements were prepared on each. These different dimensions of the performance index i.e.,
statements were then ranked by 30 enterprises on the under scale/size; risk and return; business growth;
Likert scale of five-point continuum. Relevancy business environment; efficiency indicators; and
percentage, relevancy weightage and mean value are investment into low, medium and high category.
calculated for the same dimensions.
To study the effect of government support on MSME’s
Measurement of the performance index performance, a regression model was used. Perceived
performance of secondary agriculture-based MSMEs
In this study, performance of secondary agriculture- was regressed on scale and size, efficiency indicators,
based MSMEs is analyzed by developing a investment, risk and return, growth performance and
performance index. The scale values are calculated by social performance. A linear model was found to be
using the Guilford method to compute the performance the best fit to run the regression. Different indicators
index. Individual respondent’s performance index is of the performance index were taken as independent
calculated using the formula, variables. The mean scores are obtained for each
PI = [ (R1/M1) × S1 /S + (R2/M2) × S2 /S + …+ (Rn/ indicator by taking the average value of all the
Mn) × Sn /S] × 100, statements under each respective indicator. The scores
170 Gowda A A S and Singh R

were then converted into binary values 0 & 1 based on Scenario C: Low government support-high domestic
mean score and composite mean. The mean score above demand, and
the mean of total mean scores (composite mean) were
Scenario D: Low government support-low domestic
given the value 1 and the score below the composite
demand
mean was given the value 0. For the variable,
government support, a dummy variable was assigned Statements were prepared considering the situation with
i.e., with support and without support were given the two dimensions and were ranked by the entrepreneurs
value 1 & 0, respectively. in the Likert scale of strongly agree to strongly disagree.
The high perception statements and results from the
Y = a + b1X1 + b2X2 + b3X3 + b4X4 + b5X5 + b6X6 +
study were considered for constructing four future
b7X7 + e,
scenarios.
Where,
Y = Performance index Results and discussion
A = Constant General profile of the respondents
X1 = Scale & size
In all, 30 units were surveyed out of which, only 10
X2 = Investment percentwere small (investment between Re 1 crore and
X3 = Social performance Re 10 crores), and the remaining were micro (less than
X4 = Efficiency indicators Re one crore investment). Majority of the MSMEs (43
percent) were 3 to 5 years old. Four units were more
X5 = Risk and returns than 15 year old. Seven of these were in the rural areas
X6 = Growth performance and 23 were in the urban locality. An urban location
X7 = Government Support helps them in having better market linkages and access
b1, b2, b3, b4, b5, b6, b7 are regression coefficients of to infrastructure. Also, as more than half of the units
X1, X2….X7 were found to have owners between 35-45 years old,
mostly graduates and post graduates, who are self
e = Error term driven and motivated and are ready to bear associated
risks. We find gender disparity as female run enterprises
Futuristic scenario analysis
lag. In all, 70 percent of owners were males. In order
Based on the extant literature, two major dimensions to understand the MSME performance, several
viz. domestic demand and government support were indicators were identified as follows.
selected to construct four future scenarios. These
scenarios were constructed considering its high-high, Step 1. Identification of indicators
high-low, low-high and low-low conditions of two A total of 12 indicators were listed in final to indicate
dimensions, respectively. Government support was the performance of the secondary agriculture based
selected as a dimension as it finds greater importance MSMEs.
in protecting the MSMEs in the initial stages. This
provides the MSMEs with comparative advantage with • Scale/size of unit
large and well-established enterprises. Domestic • Infrastructure/ machinery employed
demand was selected as a dimension as it is one of the • Socio- capital indicators
important criterions for the MSMEs to stay in the
• Efficiency indicators
market and attain growth.
• Good manufacturing/cultivation practice
The following scenarios were taken:
• Incremental expansion
Scenario A: High government support-high domestic
• Risk and returns
demand,
• Business environment
Scenario B: High government support-low domestic
• Business expansion
demand,
 Performance and futuristic scenario analysis............ 171

• Investment (see Table 1). Six indicators were selected out of twelve
• Business growth indicators listed. The selected indicators are Scale and
Size (SS), Efficiency Indicators (EI), Risk & Return
• Customer satisfaction
(RR), Business Environment (BE), Investment (IN) and
Step 2. Relevancy of scale items by judges Business growth (GP).
A group of 20 judges consisting of social scientists Step 3. Ranking of the selected indicators
was selected to standardize the scale items and were
asked to rate the scale items in a five-point continuum Thirty secondary agriculture-based MSMEs were
scale of most relevant (MR), relevant (R), somewhat asked to rank the selected indicators according to their
relevant (SWR), less relevant (LR) and not at all importance.
relevant (NR), with the scoring of 5, 4, 3, 2 and 1,
respectively. The selected 12 indicators were rated by Step 4. Item analysis
judges for their relevancy and a relative weightage was Based on the responses received by the judges, the
calculated for the scores to retain the most relevant
data were transformed and tabulated in Table 2.
variables.
Tabulation of frequency of ranking for each component
Relevancy was calculated using the formula, was done accordingly. For example, the indicator, scale
and size was ranked by 30 secondary agriculture-based
MSME entrepreneurs. It was ranked one time as first,
six times as second, eight times as third, six times as
fourth, six times as fifth and three times as sixth.

Step 5. Computing the scale values

Guilford recommended centile position values (P) to
calculate the scale values of each indicator. After
calculating the centile position values, C value
(determined to each centile position) was recorded and
Rj values were worked out using the formula,
Indicators with more than 0.9 Relevancy weightage
were selected for the construction of performance index Rj= Cj/Σfi,

Table 1 Relevancyweightage, relevancy percentage and mean possible scores of the components

Sr Indicators Relevancy Mean possible Relevancy Remarks

No. % score weightage

1 Scale/Size of unit 93 4.67 0.93 Selected

2 Infrastructure/ Machinery employed 89 4.44 0.89 Not Selected
3 Socio-capital Indicators 78 3.89 0.78 Not Selected
4 Efficiency Indicators 91 4.56 0.91 Selected
5 Good manufacturing/ cultivation practice 87 4.33 0.87 Not Selected
6 Incremental expansion 82 4.11 0.82 Not Selected
7 Risk & return 91 4.56 0.91 Selected
8 Business Environment 91 4.56 0.91 Selected
9 Business Expansion 87 4.33 0.87 Not selected
10 Investment 91 4.56 0.91 Selected
11 Business Growth 98 4.89 0.98 Selected
12 Customer Satisfaction 89 4.44 0.89 Not Selected
172 Gowda A A S and Singh R

Table 2 Calculation of scale values of all the dimensions of performance index

Ri Ri2 SS EI RR BE IN BG P C

1 6 1 11 3 0 10 5 30 91.67 6
2 5 6 0 6 5 4 9 30 75.00 6
3 4 8 7 5 6 4 0 30 58.33 5
4 3 6 8 8 1 7 0 30 41.67 5
5 2 6 3 2 12 0 6 30 25.00 4
6 1 3 1 6 6 5 10 30 8.33 4
Σfi 30 30 30 30 30 30 180 -
Cj 148 157 151 137 159 148 900
Rj 4.933 5.233 5.033 4.567 5.300 4.933 30
Rc 4.618 5.325 4.854 3.754 5.482 4.618

Table 3 Computed scale values of six indicators Scale validity was established by Cronbach’s alpha test.
The alpha value of 0.82 indicates that the data set and
Sl. No. Indicators Scale values Rank
scale is valid and reliable. Internal consistency was
1 Scale and Size 4.618 IV done by using the correlation matrix with an individual
2 Efficiency Indicators 5.325 II indicator of scale. Correlation values were above 0.64
3 Risk and Returns 4.854 III for all the indicators which indicates a high construct
4 Business Environment 3.745 V validity. The scale values for six indicators ranged
5 Investment 5.482 I between 3.745 to 5.482, of which Investment has the
6 Business Growth 4.618 IV highest value (5.482), followed by Efficiency
Total 30.00
Indicators (5.325), Risk & Returns (4.854), Scale &
Size (4.618), Business Growth (4.18) and Business
Environment (3.745).
Where,
Among the six indicators, Investment was the most
Cjis the summation of multiplied value of frequency important indicator with the highest scale value (5.482)
of ranking of each indicator with its respective C value. contributing to the successful performance of MSMEs.
C value proposed by Hull0 was used for respective R&D investment, infrastructure and machinery
ranking. investment, capital and resource productivity,
efficiency optimization were included as components
Ri = Rank given by judges to six indicators of investment. This finding is similar to Bhatia and
Ri2 = Reverse ranking Aggarwal (2018) who found that investment on
tangible assets has a significant positive impact on
Σfi = Total number of judges for each component (total performance. All these components have a significant
frequency of ranking) role in the performance of MSMEs. Along with
Rc = Scale values investment, the Efficiency Indicator (5.325) also
influences the performance of MSMEs. Resource use
P = Centile Position = ((Ri – 0.5)/n) * 100 efficiency, cost efficiency, administration efficiency,
Rc=2.357*Rj-7.0 technology efficiency were included as determinants
of the efficiency indicator that influence performance
In the case of indicator, scale and size,
of MSMEs which helps them in creating continuous
Cj = (1X6) + (6X6) + (8X5) + (6X5) + (6X4) + (3X4) competitive advantage, taking appropriate risks,
making innovations and creating value (Civelek, 2015).
= 148
Risk & Return factor was ranked third with a scale
Rj= 148/30 = 4.933.
value of 4.854. Risk and return as components of
 Performance and futuristic scenario analysis............ 173

financial management are correlated, i.e., increase in Table 4 Distribution of units according to performance
one will increase the other. Return on equity, and proper index (Based on Sturges’ Rule)
risk management components were also included under
Category Score Range Number Percentage
this indicator which significantly influences the
performance of MSMEs. Under the fourth ranked Very Low 48.36 – 50.46 1 3.33
indicator, Business Growth, innovation, incremental Low 50.46 – 52.56 - 0
expansion, business expansion and R&D investment Lower Medium 52.56 – 54.66 3 10
components were included. The indicator, Scale & Size Upper Medium 54.66 – 56.76 10 33.33
is also considered one of the important indicators of High 56.76 – 58.86 15 50
performance with the scale value of 4.618. Increase in
Very High 58.86 – 60.96 1 3.33
size and scale of the enterprises will enable them to
have comparative advantage over smaller enterprises.
Business Environment was ranked last among the six lower medium group has MSMEs whose performance
indicators with the scale value of 3.745. Components index value ranges from 52.56 to 54.66,
like political, social, economic and legal environment upper medium group contains the MSMEs whose
were included in business environment, which are performance index value ranges from 54.66 to 56.76,
necessary for proper functioning of an enterprise.
Firm’s environment affects the strategic decisions that high category has MSMEs which has performance
are necessary for positive profitability and growth of index value between 56.76 to 58.86, and
an enterprise (Roper, 1999). very high category has MSMEs whose performance
index value ranges from 58.86 to 60.96.
Step 6. Developing performance index
The performance index revealed that 50% of selected
Performance index was calculated after obtaining the
MSMEs were high performers while upper and lower
scale values for the indicators. The performance index
medium performers were at 33.33% and 10%
is calculated using the formula:
respectively.
PI = [ (R1/M1) × S1 /S + (R2/M2) × S2 /S + …+ (Rn/
Mn) × Sn /S] X 100 Measurement of dimensions of performance index
Where, Different indicators were used to calculate the
performance index of secondary agriculture-based
PI = Performance index
MSMEs. Scale and Size, Efficiency Indicators, Risk
S1, S2,…..Sn = Scale values of the particular dimension and Returns, Business Environment, Investment and
of the index. Business Growth were the indicators that are closely
R1, R2,…..Rn = Performance score obtained by the connected to their performance. The MSME units were
particular MSME respondent for particular distributed on the indicators of performance index and
performance dimension. grouped into low, medium and high categories based
on the mean values.
M1, M2,….Mn = Potential score obtained by MSME
respondent for particular performance dimension. As shown in Table 5, with the exception of Investment,
a majority of the MSMEs were medium performers in
S = Total scale value of all the dimensions. the other five indicators of performance, namely,
MSME units were distributed into six groups (based Business Growth, Scale and Size, Risk & Return,
on Sturges’ rule) according to their performance index. Efficiency Indicators and Business Environment,
Table 4 represents the distribution of MSME units whereas in Investment a majority of the MSMEs were
according to their performance index, namely, high performers. In the case of Scale and Size indicator,
13.33% of MSMEs were found to be low performers,
very low category has MSMEs with a performance 76.66% of MSMEs were medium performers and 10%
index range from 48.36 to 50.46,
of the MSMEs were high performers. On the Efficiency
low category has MSMEs whose performance index indicator dimension, majority of the selected MSMEs
ranges between 50.46 and 52.56, were medium performers i.e., 66.66% followed by high
174 Gowda A A S and Singh R

performers, 20% and low performers, 13.33%. The Table 5 Distribution of secondary agriculture-based
same trend was observed in Risk and Return category MSMEs according to different dimensions of
with a small variation in percentage of respondents in performance index (n=30)
each category i.e., 10% of the respondents were low Indicators Category Frequency Percentage
performers, 73.33% were medium performers and
16.66% were high performers. The dimension, Scale and size Low 4 13.33
Business Environment showed that 56.66% of the Medium 23 76.66
respondents were in the medium performance category, High 3 10
36.66% were in high performance category and 6.66% Efficiency Low 4 13.33
of respondents were in low performance category. A indicators Medium 20 66.66
majority of the respondents were found to be high High 6 20
performers (46.66%) in the Investment dimension, Risk & returns Low 3 10
followed by medium performer, 43.33%, and low Medium 22 73.33
performers, 10%. On Business Growth, 10% of the High 5 16.66
respondent units belonged to low performance Business Low 2 6.66
category, 63.33% of the respondent units belonged to environment Medium 17 56.66
medium performance category, and 26.66% of the High 11 36.66
respondent units belonged to the high performance Investment Low 3 10
category. Medium 13 43.33
Using the same criteria, the performance index showed High 14 46.66
that a majority of the performers were high performers, Business growth Low 3 10
followed by medium and low. However, the MSME Medium 19 63.33
units were categorized into six categories based on High 8 26.66
Sturges’ rule on the basis of the performance index
(see Table 4). More than half of the respondent units
unit increase in scale and size, the performance
showed a high level of performance, 53.33%, whereas
increases by 0.14 unit. This indicates that as business
both the medium performance categories accounted for
grows, it solidifies and becomes less vulnerable to
43.33% of respondent MSME units and 3.33% of
external threats. The larger firms with high production
percent of the MSME unit were found to be low on
levels will have a greater competitive advantage
performance. Optimal size of unit, efficient business
(Mansikkamaki, 2023). The second indicator,
environment, high investment, high returns contribute
Investment also has a positive and significant effect
to the high performance of the MSMEs.
on the performance of MSMEs i.e., for every unit rise
in investment, the performance of an enterprises
Impact of Government support
increases by 0.19 unit. Results of this study are like
The dependent variable, performance index of MSMEs those obtained in Xuan and Thu (2023), Kamungeet
was regressed on the independent variables, Scale & al. (2014) which explain that investment increases
Size, Investment, Business Environment, Efficiency competition and improves business environment. This
Indicator, Risk and Return, Business Growth and may lead to more growth as well as better performance
Government Support to know the impact made by and a high investment on infrastructure encourages
government. The result indicates that all the better performance.
independent values have a positive and significant
Furthermore, Business Environment impacts the
effect on the performance index with Multiple R value
performance of MSMEs positively, i.e., improvement
of 0.96. The R2 value was 0.93 which explains that
in the Business Environment by one unit, increases
93% of the total variance of performance is explained
the performance by 0.17 unit. Results are in line with
by the independent variables.
the studies conducted by Gharbi et al. (2014), which
The indicator, Scale and Size has positive impact on found that business environment is the necessary
performance of MSMEs. Results show that with one condition for successful operation. The technological,
 Performance and futuristic scenario analysis............ 175

Table 6 Impact of different dimensions of performance Futuristic scenarios

index and government support on performance of
secondary agriculture-based MSMEs Four futuristic scenarios were constructed considering
two dimensions government support and domestic
Sl. No. Indicator Coefficient demand. These scenarios were developed to the
situations when these two dimensions are in low-low,
1 Scale and Size 0.14*
low-high, high-high, high-low condition.
2 Investment 0.19**
3 Business Environment 0.17** Business as usual Scenario
4 Efficiency Indicator 0.24**
5 Risk and returns 0.26*** In the business as usual scenario, government can be
6 Business Growth 0.15* seen pushing MSMEs towards growth through various
7 Government Support 0.16** supporting schemes and incentives. Considering the
success rate of existing MSMEs in the market, startups
Note * Significance at 10%; **Significance at 5%; *** Significance have been emerging. They are producing homogenous
at 1%
products. Changing taste and rising income levels are
increasing the demand for these products. This is
socio-cultural and institutional environment have a having a positive impact on production and
positive impact on the performance of MSMEs and employment levels also. Even though the government
deteriorating Business Environment will lead to their is promoting and supporting MSMEs, it will be difficult
poor performance (Kappel et al., 2011). Efficiency for them to stay in the business in the long run since
indicator also has a positive and significant impact on they lack product differentiation and innovative
performance of MSMEs. Results indicate that, for one products (Shrotriya, 2019).
unit increase in the Efficiency Indicator, performance In Fig.1, futuristic Scenario A, represents a scenario
will increase by 0.24 units. Efficiency of an enterprise where there is high government support as well as high
with respect to technology, innovation, resource use, domestic demand. Among all scenarios, Scenario A is
cost, etc. has positive influence on its performance. the most desirable for MSMEs as both dimensions are
taken to be high. When domestic demand is high, price
Risk and Returns also have a positive and significant
tends to rise, which induces high production. This in
impact on their performance. A one unit increase in
turn increases employment to meet the needs of
the Risk and Return factor would increases the
growing demand. With exposure to many government
performance by 0.26 units. Risk and return are directly
schemes which invest on innovation and new products,
related to each other i.e., increase in one will
secondary agriculture-based MSMEs starts producing
subsequently results in an increase in the other (Noor different products to stay in the competition and avail
et al. 2014). Business Growth also has positive impact high income/ profits. The number of MSMEs increases
on performance i.e., findings have shown that one unit in this situation as profit from this sector is high. It
increase in Business Growth factor will increase the follows a competitive pricing strategy to overcome
performance by 0.15 unit. Firm’s growth is essential competitors so as to have more profits. Youngsters
and considered important when we craft the shifting to entrepreneurial activities will have greater
profitability side of performance (Mansikkamaki, opportunity to prosper amidst support from the
2023). government, creating job opportunities for others.
The results explained that government support has Enterprises will follow product differentiation in order
to have competitive advantages over other enterprises
positive impact on performance of secondary
and to have market power.
agriculture based MSMEs i.e., one unit increase in
Government Support increases the performance by 0.16 Scenario B represents a situation when there is high
unit. Zhang and Ayele (2022) also found that the government support and low domestic demand.
Government Support exerts a positive and significant Demand for products depends on the purchasing power
impact on the performance of MSMEs. of an individual and as the taste and preference change,
176 Gowda A A S and Singh R

Table 7 Mean score and perception of different futuristic scenario statements by respondents

Sr. No. Statements Mean score Perception

Scenario A: High Government Support and High Domestic demand

1 Production increases as the demand is high 4.57 High
2 Employment increases 4.50 High
3 MSMEs earns higher profits 4.50 High
4 There is a scope for new products and innovation. 4.60 High
5 Increase of MSMEs in number 4.57 High
6 Product diversification brings economies of scale 4.63 High
7 Competitive pricing strategy is followed for higher profits 4.53 High
8 More public investment 4.27 Low
Scenario B: High Government Support and low Domestic Demand
1 Production decreases 4.67 High
2 Employment decreases 4.40 High
3 MSME suffers from reduced income. 4.73 High
4 More R&D investment backed up by government support 4.47 High
5 High government support increases the fund flows into the MSME sector 4.03 Low
6 Export Increases 4.10 Low
Scenario C: High Domestic Demand and Low Government Support
1 Production increases 4.60 High
2 Increased employment to meet the demand requirements 4.43 High
3 Increase in income 4.43 High
4 Private fund flow increases. 4.40 High
5 Product innovation for long term growth 4.50 High
6 Media based promotion increases 4.03 Low
Scenario D: Low Government Support and Low Domestic Demand
1 MSME falls into loss situation 4.63 High
2 Production decreases 4.63 High
3 Employment decreases 4.50 High
4 Shut down of units due to loss 4.47 High
5 Problem of raw material losses 4.53 High
6 Introduction of new product lines to attract demand 4.20 Low
7 Fails to find export market 4.30 Low

the demand for products might decrease. This may levels of income among population will lead to increase
cause MSMEs to decrease production to avoid losses. inthe product demand and higher income. As
Decrease in production will reduce demand for government support is low in this scenario, private
employees and hence employment will reduce. Facing party or private supporting agencies will pitch in to
less domestic demand for products, income from the provide support, credit and other facilities. MSMEs
MSMEs will decrease in this scenario. With high will go for more product innovation to grab more
support available from government, MSMEs will go market share and stay in competition.
for more R&D investment assuming that new and
Scenario D is a situation where both dimensions,
innovative products will attract consumers in the
government support and domestic demand are low.
market.
Even if the MSMEs are backed up by private agencies,
Scenario C represents a situation where government it will be difficult for them to survive. There may be
support is low and domestic demand is high. Rising chances of private party withdrawing support or
 Performance and futuristic scenario analysis............ 177

Figure 1 Futuristic Scenarios

investment from the MSMEs considering its low towards improving their performance with the help of
demand for products (this happened during covid-19). private sector and state extension machinery.
MSMEs will start incurring losses, cut down production Government should fund for skill development and
to avoid further loss or may shut down . This leads to incubation centers, which will enhance the performance
lay-offs of the employees and potential loss of raw of secondary agriculture-based MSMEs. Promotional
materials and hence depict the most unfavorable initiatives should be taken by the government to
scenario for their growth. encourage region-specific traditional products from
different MSMEs. In the case of futuristic scenarios,
Conclusion Scenario A with high government support and
As India is moving towards a high growth and domestic demand is found to be the most favorable
sustainable economy, it promotes bio economy, circular scenario for the growth and upliftment of MSMEs. By
economy and the secondary agriculture. It marks the contrast, Scenario D with low government support and
necessity of secondary agriculture-based MSMEs to low domestic demand will have the gloomiest
perform well to contribute to achieving the goal of a economic status. MSMEs backed up by government
sustainable economy. From a primary survey of 30 support can function well when there exists good
MSME in Bangalore, this study finds that investment demand for their products. Product innovation and
is an important indicator of performance with the scale differentiation are the key factors to maintain a
value of 5.325. In all, 50% of the MSME units were continuous demand for the products produced by the
high performers and two-third were upper medium MSMEs along with right positioning and branding of
performers in the study area. Government may work products.
 178 Gowda A A S and Singh R

References Venturing Insights 19: 372. https://doi.org/10.1016/

j.jbvi.2023.e00372
Bhatia, and K Aggarwal. 2018. Impact of investment in
intangible assets on corporate performance in India. Ministry of MSME, Government of India. 2022. Annual
International Journal of Law and Management 60 (5): Report 2022-23. https://msme.gov.in/sites/default/files/
1058-1073. https://doi.org/10.1108/ijlma-05-2017- MSME-ANNUAL-REPORT-ENGLISH%202020-
0127 21.pdf

Civelek, M E, M Cemberci, O K Artar, and N Uca. 2015. Mukherjee, S. 2018. Challenges to Indian micro small scale
Key factors of sustainable firm performance: Astrategic and medium enterprises in the era of globalization.
approach. Zea E-Books, Book-34. Journal of Global Entrepreneurship Research 8: 1-19.
https://doi.org/10.1186/s40497-018-0115-5
Guilford, J P, Psychometric Methods, Tata McGraw-Hill,
New Delhi, 1954. https://doi.org/10.1177/ New Industrial Policy 2020-25. https://ebiz.karnataka.
001316445501500220 gov.in/kum/PDFS/Industrial%20Policy%202020-
25.pdf
http://digitalcommons.unl.edu/zeabook/34?utm_source=
digitalcommons.unl.edu%2Fzeabook%2F34&utm_ Noor, J A M, and A I Abdalla. 2014. The impact of financial
medium=PDF&utm_campaign=PDFCoverPages risks on the firms’ performance. European Journal of
Business and Management 6 (5): 97-101. https://
Ishengoma, E K, and R Kappel 2011. Business environment www.academia.edu/download/68508098/10917-
and growth potential of micro and small manufacturing 13219-1-PB.pdf
enterprises in Uganda. African Development Review 23
(3): 352-365. https://doi.org/10.1111/j.1467- Press Information Bureau, “Contribution of MSMEs and
8268.2011.00291.x Cottage Industry to India”. https://pib.gov.in/
PressReleaseIframePage.aspx?PRID=1884734
Jena, N R, L R Thatte, and V G Ket. 2018. Performance of
the micro, small and medium enterprises (MSMEs) Roper, S. 1999. Modelling small business growth and
manufacturing sector in select states in India: The profitability. Small Business Economics 13: 235-252.
concept of MSME Manufacturing Business Facilitator https://doi.org/10.1023/a:1008104624560
(MSME-MBF) Index. Academy of Entrepreneurship Shirur, M, N S Shivalingegowda, M J Chandregowda, and
Journal 24 (1): 1-22. https://jaipuriamba.edu.in/wp- R K Rana. 2018. Performance analysis of South-Indian
c o n t e n t / u p l o a d s / 2 0 2 1 / 1 2 / mushroom units: Imperative policy implications for
jim_quest_jul_dec_2017_new.pdf#page=66 their preparedness for global competitiveness. Current
Science 115 (11): 2141-2146. https://doi.org/10.18520/
Kamunge, M S, A Njeru, and O I Tirimba. 2014. Factors
cs/v115/i11/2141-2146
affecting the performance of small and micro enterprises
in Limuru Town Market of Kiambu County, Kenya. Shrotriya, V. 2019. Product differentiation: key to success
International Journal of Scientific and Research in marketing. International Journal of Research and
Publications 4 (12): 1-20. https://www.academia.edu/ Analytical Reviews 6 (2): 560-567.
download/46191940/SMES.pdf
Xuan, V, N Thu, and N Anh. 2020. Factors affecting the
Laouiti, R, S Gharbi, and N Liouane. 2014. The effect of business performance of enterprises: Evidence at
business environment on firm performance Exploratory Vietnam small and medium-sized enterprises.
Study: Case of Tunisian enterprises. International Management Science Letters 10 (4): 865-870. https://
Journal of Management and Information Technology doi.org/10.5267/j.msl.2019.10.010
8 (3): 1430-1439. https://doi.org/10.24297/
Zhang, Y, and E Y Ayele. 2022. Factors affecting small and
ijmit.v8i3.1979
micro enterprise performance with the mediating effect
Mansikkamäki, S. 2023. Firm growth and profitability: The of government support: Evidence from the Amhara
role of age and size in shifts between growth– Region Ethiopia. Sustainability 14 (11): 6846. https://
profitability configurations. Journal of Business doi.org/10.3390/su14116846

View publication stats