Kuldip Maity

 

Subho Noboborsho. This week, we started with the Bengali New Year. The Bengali calendar year 1431 corresponds to April 14, 2024, to April 14, 2025, in the Gregorian calendar. The Bengali calendar, also called Bangabda or Bangla Son, is a lunisolar calendar with 12 months. 

‘Pohela Boishakh,’ as it is normally called in Bangla, holds immense significance in the business world in the Bengali-majority regions of India. This day is celebrated with great enthusiasm and festivity. While traditionally a time for cultural and social gatherings, Pohela Boishakh also influences the business landscape, especially the MSMEs of the region, in several ways.

Pohela Boishakh is not just a cultural event but also a crucial occasion for businesses to boost sales and revenue. In the weeks leading up to the festival, markets and shopping centers experience a surge in activity as people shop for new clothes, gifts, and festive items. The ‘Chaitra Sale,’ offering discounts on traditional and modern fashion wear, further boosts the demand for clothing. As people prepare to celebrate the New Year, businesses related to accessories, jewelry, home decor, and electronics also show a significant upswing.

Like every festival, businesses launch marketing campaigns and promotional activities to leverage the festive spirit to attract customers with special discounts, offers, and festive-themed advertisements. Brands across various industries capitalize on the cultural significance of the occasion to enhance brand visibility and engagement. 

The ‘Halkhata’ ritual, a traditional custom observed by businesses at the start of the Bengali New Year, holds immense cultural and religious significance. It symbolizes a fresh start and the beginning of a new financial year, reflecting how traditional businesses used to close their financial books for the previous year and start anew. The ritual, often conducted on the first day of the Bengali calendar year, coincides with the festive occasion of Pohela Boishakh.

Haal Khata, which translates to "opening the new book," often adorned with auspicious symbols and colorful decorations, symbolizes a clean slate and the beginning of a new financial year. The ritual is conducted with great reverence and attention to detail, as it is believed to set the tone for prosperity and success in the coming year. The shop owner, dressed in traditional attire, sits at the counter or a designated shop area with the new account books placed before them. Customers and well-wishers are invited to participate in the ceremony, symbolically inaugurating the new financial year by making the first purchase or transaction of the day. With the standardization of accounting norms across the country, the ritual no longer signifies financial accountability but fosters transparency and trust between the business and its customers.

Haal Khata is culturally and socially important, bringing together members of the community in a spirit of camaraderie and goodwill. It is a time for exchanging greetings, blessings, and good wishes for the New Year. Many businesses also organize cultural programs, musical performances, and feasts to celebrate the occasion with their customers and the local community. The ritual is a cherished tradition that embodies the spirit of renewal, prosperity, and community bonding. 

Though it might have lost its significance in the digital age, by observing this age-old custom, businesses reaffirm their commitment to financial integrity and accountability and strengthen their ties with customers and the broader community.

 

 

On many occasions, I am asked this question by owners of micro, small and medium enterprises (MSMEs): “Is it advisable for MSME businesses to diversify?” To me, this is an area of ambiguity, as it depends on the business, its founder, and its performance. 

For MSMEs operating with limited resources, diversification can strain finances, human capital, and infrastructure. The need to invest in a new category or venture can stretch thin the already constrained resources, potentially harming the core business operations.

MSMEs often thrive by specializing in niche markets or specific product categories. Diversification may dilute the focus on the original market segment, and diverting mental bandwidth and resources away from the core business may decrease efficiency and effectiveness.

However, we also need to remember that in diversification, a seasonal downturn in one market may be offset by steady sales in another. Diversification enhances the resilience of MSMEs by making them less vulnerable to economic downturns or industry-specific crises. A diversified portfolio can help cushion the impact of adverse events, ensuring the continuity of business operations even during challenging times. We saw this during the pandemic, especially the intermittent lockdowns.

From the brand perspective, introducing unrelated products or services under the same brand umbrella can dilute its identity and confuse customers. MSMEs may undermine the reputation they've built in their core market by associating with unrelated or inferior offerings. However, if planned well, introducing new products or expanding into new markets can reinforce the MSME brand presence and enhance its visibility. A diversified portfolio demonstrates innovation, adaptability, and a commitment to meeting diverse customer needs, thereby enhancing brand reputation and customer loyalty, which should positively affect revenue through cross-selling and upselling.

Markets are dynamic, with consumer preferences, technology, and regulatory landscapes constantly evolving. Diversification equips MSMEs with the agility to adapt to these changes effectively. It allows them to pivot their strategies, explore new business models, and capitalize on emerging opportunities, ensuring long-term sustainability and relevance in the market. However, we should also appreciate that managing diverse business interests adds complexity to operations. MSMEs may find it challenging to maintain standards, streamline processes, and ensure consistent customer satisfaction across multiple ventures. This complexity can hinder agility and responsiveness to market dynamics.

MSMEs can spread their risk across multiple sectors or customer segments by diversifying their business categories or entering new markets. This may reduce the dependency on a single source of revenue and provide a buffer against market disruptions. One may argue that venturing into new markets or product categories exposes MSMEs to additional market risks. These risks include demand fluctuations, regulatory changes, and competitive pressures. Unlike larger corporations with greater financial buffers, MSMEs may struggle to weather adverse market conditions in multiple sectors simultaneously.

As I said earlier, there is no fixed rule.

 This is my first blog in the financial year 2024-25, and I wanted to write about my expectations for the next 12 months. 

As with every election year, this year starts with uncertainty. However, I am sure the country will reach a consensus for the general good. Hence, we should expect renewed positivity in business.

In its latest South Asia Development Update, the World Bank has projected robust growth of 6.0 percent for the region, driven predominantly by India’s strong economic performance. India has been regarded as the region’s economic powerhouse. This growth is largely attributed to the resilience of the services and industrial sectors. Even Morgan Stanley is bullish about the Indian economy, raising its GDP growth forecast to 6.8 percent for 2024-25 from 6.5 percent estimated earlier.

Market experts say FY24 was an outstanding year for the Indian stock markets. The BSE Sensex saw an incredible rise of about 24 percent, outperforming prior years’ performance and generating substantial wealth for investors. This growth outpaced many global counterparts, showcasing the market's resilience and strength. The predictions point to an optimistic trend into the fiscal year 2025, with volatility mostly triggered by events happening worldwide.

In my opinion, the digital payments ecosystem in India is well set for growth and will drive smartphone penetration, internet connectivity, and digital transactions. Fintech innovations, including digital wallets, UPI payments, and contactless transactions, are expected to gain momentum, leading to greater financial inclusion and convenience for consumers. We can also expect the business growth of cyber security firms, which guard the fintech innovations.

ESG considerations will gain prominence in India's financial landscape. Investors increasingly prioritize sustainable and responsible practices, accelerating the adoption of green bonds, renewable energy projects, and socially responsible funds. As awareness of climate change and social issues grows, ESG investing will likely become mainstream during the financial year.

However, will all be as positive as we expect? I am curious to see how inflationary pressures drive policymakers' monetary decisions. Rising commodity prices, supply chain disruptions, and geopolitical tensions may continue contributing to inflationary concerns, necessitating a cautious approach toward monetary policy. The Reserve Bank of India has a task ahead of itself to maintain a delicate balance between supporting economic growth and managing inflationary risks in the financial year 2024-2025, which I am sure will be handled as efficiently as we have witnessed in the past.

Summing up, the financial year 2024-2025 in India may witness various challenges and opportunities across various sectors. Proactive policies, innovative solutions, and resilient business models will drive inclusive and sustainable growth as the country navigates through economic recovery, digital transformation, and sustainability imperatives.

 

Holi, the vibrant festival of colors, holds significant cultural and economic importance in rural India. Rooted in ancient traditions and folklore, the festival celebrates the arrival of spring and plays a pivotal role in bolstering the rural economy. From agricultural practices to local businesses, the impact of Holi resonates within rural communities, fostering economic growth and vitality.

Holi finds its origins in various mythological tales and religious scriptures. According to Hindu mythology, the festival commemorates the victory of good over evil, with the burning of Holika symbolizing the triumph of righteousness. There is another story of Lord Krishna and Radha playing with colors, which became the tradition of playing with color and water. People play Holi and apply color to their loved ones, which symbolizes love, friendship, and the arrival of spring. This cultural significance translates into a period of jubilation and unity within rural communities, transcending barriers of caste and creed.

But Holi is not only about celebrations. The economic impact of Holi extends much beyond the rural economy. Local businesses experience a surge in demand for essential commodities and festive goods as households prepare for the celebrations. From the preparation of traditional sweets such as gujiya and jalebi to the purchase of colorful attire and decorations, the market witnesses a flurry of consumer activity, driving sales and revenue for MSMEs. The preparation for Holi results in a significant increase in revenue for local businesses as people buy colors, sweets, and traditional attire.

Fashion purchases generally revolve around the sale of white and colorful apparel. Consumers are not much concerned with longevity, as it is normally for one-time wear. Therefore, the rush is more towards local textile shops and boutiques that can offer the best value for money and stock Holi-themed clothing.

The demand for Holi-specific sweets, such as gujiya and jalebi, varied snacks, and festive beverages, such as thandai, goes up sharply, benefiting the local sweet shops and bakeries. As for all festive occasions, the evenings of family get-togethers are filled with culinary indulgences from local restaurants.

Lately, organizing big-budget Holi parties has become a lucrative business. Event management companies and local clubs organize special Holi events, including music, dance, and color play, attracting guests through ticket sales. These events boost the business of event venues, entertainment groups, and event management companies, generating revenue for local service providers.

Holi also provides a significant boost to the travel and hospitality sector as people travel to celebrate with friends and family, especially if the day falls as an extension to the weekend as this year. There are many who also travel to participate in well-known Holi events in places such as Mathura, Vrindavan, and Jaipur. Hotels, guesthouses, homestays, and travel operators thrive owing to the influx of tourists, as it increases demand for accommodation, food, and transportation services.

This discussion on business generated during Holi would be incomplete if we do not discuss the sale of colors, water guns, and other related items. While these contributed to large-scale chemical manufacturers, the recent inclination towards the use of herbal and organic colors has boosted the sales of MSME manufacturers.

The economic ripple effect of Holi is evident in the increased income, employment, and livelihood opportunities generated for artisans, farmers, vendors, and service providers in rural India. The festival catalyzes entrepreneurship and innovation, inspiring local initiatives aimed at promoting indigenous crafts, culinary delights, and cultural heritage.

Holi also announces the advent of spring and the celebration of the beginning of the cropping season after a lean period. That is a discussion of some other blog.

But we also need to be cautious that such businesses facing demand spikes should be able to sustain themselves the year round. While MSME businesses should take all measures to benefit from the seasonal business, they should ensure steady sales during the rest of the year.

 My last blog discussed the pros and cons of women entrepreneurs operating out of a home office. We realized that though the options offer flexibility for women entrepreneurs, there are also social and mindset challenges to overcome. The biggest issue that our women must tackle is the isolation and loneliness of home offices. Add to that the difficulties in being taken seriously and gaining respect in a male-dominated business environment.

The lack of physical presence in a traditional office environment can make it harder to assert authority, build professional relationships, and network effectively. This can hinder the advancement opportunities that they come across. With the limited access to resources and support networks vital for business growth, these opportunities might crop up once in a lifetime. For example, a woman entrepreneur working from home may face skepticism or discrimination when her child becomes visible on the screen while she is trying to pitch her ideas to potential investors or clients. It is sad, but can one ignore the harsh realities?

Coming back to the issue of the isolation and loneliness associated with remote work of the team, it can take a toll on the mental health and well-being of women entrepreneurs. Working from home can be isolating, especially for an entrepreneur who is supposed to thrive on social interaction and collaboration. The absence of colleagues and peers to bounce ideas off, seek advice from, or share a break with can lead to feelings of loneliness and disconnection. This can negatively impact motivation, creativity, and overall job satisfaction. For instance, a woman entrepreneur may feel isolated and demotivated when she joins her peers working in physical office environments. A simply shared joke at work can create a huge mental trauma of being left out.

The positive side is that women workers can overcome these challenges and mental pressures by maintaining regular communication with colleagues, clients, and other professionals. Here are a few essential tips that help combat isolation: Use as many video calls as possible with the team. Never miss out on opportunities for physical meetings and brainstorming sessions. These can recreate the camaraderie and collaboration in traditional office settings. Schedule regular check-ins with coworkers to help them stay connected and informed about projects and initiatives.

In the days of growing social media influence, women entrepreneurs may try joining online communities and professional networks related to the industry or interests. These can provide opportunities for networking and social interaction. Through these platforms, they can find avenues for connecting with like-minded individuals, sharing knowledge and resources, and building meaningful relationships. Engaging in these communities by participating in discussions, attending virtual events, and reaching out to fellow members can help alleviate feelings of isolation and foster a sense of belonging.

Establishing a routine incorporating breaks and social activities throughout the day can help break the monotony of working alone. Taking short walks outside, practicing mindfulness or meditation or scheduling virtual breaks with colleagues can provide much-needed mental and emotional stimulation and prevent feelings of isolation from escalating.

Finally, even in rural settings, women entrepreneurs may try creating co-working or shared spaces near home as an alternative to working from home. These can provide opportunities for social interaction and collaboration with other entrepreneurs while staying a stone’s throw away from home.

A win-win, we can say!!!

 

 

Many micro-entrepreneurs start their journey by setting up their businesses at home. Whether it's a small factory or an office to interact with other stakeholders, operating from home is a paradigm shift in how we work and comes with challenges. While it offers flexibility, comfort, and freedom, it also demands a high level of self-discipline, which is the cornerstone of productivity and success. Women entrepreneurs associated with VFS Capital have unique hurdles to cross.

One of the biggest challenges of operating from home is that it multiplies the independence of an entrepreneur and the lack of external accountability. Since entrepreneurs may not have supervisors, their physical presence in an independent office helps monitor progress. The set hours, structured routines, and working in a team help the entrepreneur to ensure focus at work. At home, there is unparalleled autonomy, and succumbing to procrastination or distractions is easy. From household chores to social temptations, countless distractions are vying for our attention, making it essential to cultivate self-discipline to stay on track. While autonomy can be liberating, it also requires a heightened sense of responsibility and self-control to stay focused and productive amidst myriad distractions.

Women entrepreneurs often have additional responsibilities outside their businesses, such as childcare, household chores, and caregiving for elderly family members. Balancing these responsibilities with running a business from home can be overwhelming, leaving women feeling stretched thin and unable to devote sufficient time and energy to their enterprises. These women entrepreneurs must also contend with societal expectations and norms regarding their roles and responsibilities. While men are praised for having ambition and dedication to their careers, women may face judgment and criticism for prioritizing their businesses over traditional gender roles such as caregiving and homemaking. This can lead to guilt and self-doubt, undermining women's confidence and motivation to succeed in their entrepreneurial endeavors.

Another positive outcome of the office is the social support received by the team members. For example, a woman entrepreneur who is also a mother of an infant may get support from the other women members of the team if they are working together in an external setup. That way, she can concentrate on addressing the business issues while having the confidence that her child is being cared for.

Entrepreneurs and all family members need to tune their expectations in case they are operating out of home. Everyone has to appreciate and respect the physical boundaries of the home and office, even if they are on the same premises. Other than emergencies, a person should not be disturbed by issues at home. 

Operating a home office offers women entrepreneurs flexibility and independence but presents unique challenges that can impact their success and productivity. Women entrepreneurs face a myriad of problems when running a business from home. However, with determination, resilience, and access to support networks and resources, women can overcome these challenges and build successful and sustainable businesses from the comfort of their homes.

Let us discuss this in more detail in my next blog. 

 

An entrepreneur in the micro-enterprise sector is constantly faced with critical decisions that shape the trajectory of the business. One such decision is the choice between drawing profits for personal use and reinvesting them for sustainable growth. This is a pivotal decision that requires careful consideration of various factors, like the current state of the business, growth prospects, and personal needs.

Drawing profits from the business is a tempting option, especially when it is generating healthy revenues. As an entrepreneur, it is natural to want to reap the rewards of your hard work and dedication. However, many times this approach can prove to be short-sighted, hindering the long-term growth of the business.

Withdrawing profits from the business may essentially mean reducing the capital available for reinvestment. This limits the company's ability to expand operations, invest in new initiatives, hold inventory for spikes, or enter new markets. In the fiercely competitive micro-enterprise landscape, where innovation and agility are paramount, this can put the business at a major disadvantage.

Furthermore, drawing excessive profits can compromise the financial health of the business. In times of economic downturns or unforeseen challenges, a robust reserve of capital can be a lifeline. Without adequate reserves, the business may struggle to weather the storm and may even face closure. While organizations such as VFS Capital are always eager to help such enterprises within the purview of process guidelines, nothing beats their reserves.

However, while reinvesting profits back into the business is crucial for long-term growth, it is also essential to meet personal financial requirements. For an entrepreneur, personal financial obligations, such as family expenses, debt repayment, and retirement planning, need to be addressed on a priority to ensure a sound mental state which again helps the business growth. A typical profile of VFS Capital customers may be left with no other option but to withdraw regularly. Many start their entrepreneurial journey guided solely by the fact that they cannot make ends meet. For them, growth may seem more like a luxury, while personal obligations are a harsh reality.

Therefore, it is essential to adopt a disciplined approach to financial management. This involves setting aside a portion of profits for personal needs while ensuring that a part of profits is reinvested back into the business. Establishing clear financial goals and sticking to a budget, helps ensure that both the business and personal finances are managed effectively. 

This financial discipline is the core to the prosperity of micro-entrepreneurs and those who can operate under the guidelines can grow beyond their current state, into the world of small enterprises.