By Tias Chakraborty

Latest industry reports indicate that hiring in the R&D sector is likely to grow significantly as some of the global giants are shifting their R&D base to India as it is more cost effective. The trend has consequences that are widespread and long-term and also has the potential to bring about another revolution in the job market. However, for the SME sector, the challenges are at a different level altogether. Firstly, high input costs in the sector has put pressure on hiring and most SMEs today cannot afford to hire technical professionals and engineers. This makes R&D a small or non-existent aspect of their business, which in turn makes the companies unstable and somewhat short-sighted with little sustainability.

Adding to the woes of the high input costs for SMEs, multinational companies (MNCs) have also been on a hiring spree, which has pushed up the attrition rate in the SME sector. MNCs can offer higher salaries and better growth opportunities to employees. On the other hand, smaller firms are struggling to keep the margins intact as employees are demanding higher salaries due to high inflation rates.

Investing in R&D: Challenges and issues
Investment in R&D has been highlighted time and again, yet this segment remains underdeveloped. The biggest reason for this is the stronghold of the unorganised market in the sector and lack of awareness and education among small entrepreneurs in semi-urban and rural areas. The global market has also played spoilsport to the emerging success story of the SME sector in India and today’s dwindling growth figures also reflect the financial health of the SME industry.

According to Snehangshu Chakraborty, proprietor of Eco-Sylvia Interiors, a small-sized interior design firm in Kolkata, “In spite of small businesses gaining new contracts and getting orders, margins are at a critical point. Further hike in prices of raw materials or in the inflation rate is bound to cripple firms. We are finding it tougher by the day to make pay-outs. Investing in aspects such as market, developmental and scientific research is not even an option, given the difficult capital market scenario.”

However, growth in R&D recruitment has shown an upward trend in the MNC segment and the domestic SME sector is likely to follow suit. In a statement to the press, Vinay Grover, CEO of executive search firm Symbiosis Management Consultants, said that players in the domestic sector are waking up to the need for more manpower and investment in R&D. This trend has made mid and large sized firms realise that in order to globalise their firms, there is a need for investment in R&D.

With capital flow into the SME sector drying up due to tumultuous economic weather, recruitment in the R&D sector may have taken a backseat among small businesses. However, it is important for the sectoral players to ensure that not only do they take adequate steps to retain good talent but also make necessary investments that would ensure long-term benefits and provide an upper hand when the economic storm is over.