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Impact of Government’s Reforms on Crafts in India

As the ongoing Covid-19 pandemic and the subsequent lockdown restrictions significantly impacted livelihoods of artisans and craft communities, and survival of crafts enterprises, Startup Oasis and CIIE.CO reached out to sector experts and entrepreneurs to gather insights on ways to sustain businesses and to predict the immediate future for crafts. Last week, we had in-depth conversations with the following entrepreneurs on the impact of government’s economic reforms on the crafts startups and craftspeople.

Maneet Gohil, Lal10 Nitin Mehrotra, Dressfolk Radhesh Agrahari, Khanak Design Studio Rameshwari Kaul and Vinayak Sharma, Cotton Rack Umang Shridhar, KhadiGi Vijay Sharma, Fabriclore

Positive implications for crafts startups and craftspeople

1. Relative ease of accessing credit The banks and NBFCs have traditionally been hesitant in providing easy or quick loans to the producers due to lack of collateral and high risk of defaulting. However, now with the government guaranteeing the loan 100%, it should ease the banks’ concern, making it easier for enterprises to avail credit. Loans with the eased restrictions — no collateral, lower interest rates, longer moratorium — can help enterprises elongate their runway by covering up for needs of working capital, employee salaries, artisan payments, small time CapEx requirements, and even marketing expenses, depending on the enterprise’s risk appetite. It can definitely benefit self-sustaining businesses that are profitable on a per product basis, as they would be able to afford interest in the long term.

2. Push for local-made products There is already increased engagement from B2B buyers and brands enquiring with their vendors whether they are sourcing their products locally. Consequently, enterprises having end-to-end in-house sourcing and operations stand to benefit with better proof of authenticity of the products. It is expected that both B2B and B2C buyers will gather momentum for ‘Vocal for Local’ in coming months. If producers can ensure good quality and diversified product ranges, there can be increased demand in coming times. Handlooms like Khadi, which can capture the essential product category for day-to-day wearables, can see huge demand if the products are made to be affordable.

3. Digital wave through online sales and marketplaces With lesser exhibitions, more and more consumers will shift towards online purchases. It gives an opportunity for the producers — rural SMEs, the artisans, the weavers — to sell their products and inventories online, not just for domestic customers but globally as well. More artisans, weavers, and clusters will be incentivised to begin listing their products on online marketplaces, start their own sales channels directly and become entrepreneurs. Startups need to innovate on making the consumers’ transition to online channels easier — online purchase policies, easier navigation, pricing for different customer segments are some areas to focus upon.

4. Complementary partnerships between startups and craftspeople The artisans, who are great at their core craft, often lack the selling skills and know-how of their customers for which they look up to startups. Startups provide them with technological support, product-market fit and online sales channels. Given the complementary relationship, the onus lies with the entrepreneurs to help artisans leverage these economic reforms, and to facilitate the creation of micro-entrepreneurs at the community level.

Challenges in Implementation

1. Effective communication down the funnel There is little clarity at present on how startups can reach out or apply for the schemes, however that is likely to be resolved in the coming few days. At the same time, it will be imperative to ensure that the communication reaches the craftspeople through diligent awareness campaigns. For the announced policies to be implemented effectively at the bank and branch level, the communication to the issuing authorities also needs to be clear so that they, too, can exercise better judgement in rolling out the benefits.

2. How deeply can these reforms penetrate? Textile and handicraft sectors are huge sectors with a significant number of women contributors who work from home, and many artisans who may not be qualified as MSMEs since they operate in an unorganized sector at large. Additionally, how many schemes flow from master artisan to the final layer of artisans remains to be seen. Few beneficiaries are able to leverage these schemes in reality, historically, due to multiple factors. The government will have to push really hard when it comes to penetration, and creating an ecosystem to enable expansion of businesses.

Unresolved Gaps and Issues

1. Access to credit might not be that smooth Enterprises that are not involved in manufacturing, or creation of physical assets, often face difficulties in accessing credit through various channels despite being profitable. Now that the new reforms for MSMEs include both manufacturing and services enterprises, the impact remains to be seen. Increasing working capital limits can help access to credit. There is also a need to consider separate focused policy for handicraft and handlooms. The operations of a typical crafts enterprise are often not as smooth as those of a traditional manufacturing MSME, with multiple stakeholders operating across the value chain. With crafts being decentralised, a lot of artisans might get left out from availing benefits.

2. It is still a loan that has to be repaid Even though the non-collateral loans will support the enterprises in covering up for working capital and employee salaries, entrepreneurs will also be taking an additional risk of taking on another debt at a time when markets are not ready and demand is non-existent. Even for small family-based artisans with limited production capacity, debt can turn out to be a burden in the long term.

3. Is ecosystem ready for ‘Vocal for Local’ To create an ecosystem which can leverage ‘Vocal for Local’ for crafts, Design and Crafts Institutes and enterprises need to put dedicated efforts on two ends of the spectrum — one, towards training craftspeople to produce more of daily needs products to incentivise customers and, two, towards replacing pity with pride while positioning these products for the consumers. For institutional buyers, the mindset needs to shift from imports to local buying.

4. Incentives for Sustainable and Ethical Fashion With the emerging trend of sustainable and ethical fashion globally, artisans need to be sensitised and incentivised to shift to quality oriented and environment oriented approach and mindset. Market is big and is bound to grow. Giving artisans precise steps for production processes, and commitment of sales with higher margins, will enable enterprises to ensure higher returns to everyone in the value chain. Incubators can play a crucial role here by introducing entrepreneurs with key performance indicators, connecting them with labs / certification agencies and ironing out quality issues for changing standards.

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