All About Indian SMEs


Micro, Small and Medium Enterprise (MSME) sector has emerged as a very important sector of the Indian economy, contributing significantly to employment generation, innovation, exports, and inclusive growth of the economy.

Introduction: Micro, Small and Medium Enterprises (MSME) are the backbone of the socio-economic development of our country. Whether it is agriculture, manufacturing or service industry, SMEs are mushrooming in a myriad of sectors across the country. It accounts for 45 % of total industrial production, 40% of total exports and contributes very significantly to the GDP. Manufacturing segment within the MSME contributes to 7.09% of GDP. MSMEs also contribute to 30.50% of services. The total contribution of MSMEs to the GDP is 37.54. It generates employment for 60 million people and creates 1.3 million jobs every year. Given that a majority of India’s population lives in villages and Tier-1/Tier 2 cities, the SME sector has also emerged as a key factor to urbanize rural India.

(Informative - United Nations celebrates ‘Micro-, Small and Medium-sized Enterprises Day’ on 27th June every year to raise public awareness of this sector’s contribution to sustainable development.)

Challenges and opportunities for Indian SMEs
More than 50 million SMEs exists currently and over the last five decades, the SME sector has grown dynamically by contributing substantially in the country’s exports and creating millions of jobs annually. The SME sector has a lot of potential for growth in the coming years with respect to job creation, entrepreneurial spirit, and innovation. However, the sector has always struggled due to the burden of challenges.

The most significant constraint to the growth of SMEs in our country relates to inadequate capital and credit facilities.

Following are the challenges for the SMEs:
1) Inadequate access and marketing platform
Factors like insufficient government support, lack of adequate marketing facilities, the path for the marketing and sale of SME products. For marketing of products or services internationally, SMEs are always constrained by the scarcity of budget, which in turn has limited their growth.

2) Lack of access to new technology
Although technology has advanced in the recent years, thanks to the proliferation of mobile phones and internet, the continuance of low technology use by SMEs has always resulted in low productivity. This has rendered them uncompetitive in the ever-widening market.
Though SMEs in metropolitan cities have now shown their positive attitude towards the technological uptake, the rural destinations are still not advanced. This will continue to be the challenge in 2018 also.

3) Lack of required credit
The most significant constraint to the growth of SMEs in our country relates to inadequate capital and credit facilities. In the coming year also, SMEs are bound to face the situations of complex collaterals by the banks, cumbersome sanction procedures, delay in disbursement and high rate of interest on the SME loan. Difficulty in obtaining an easy and timely credit is crucial factor hampering the SME growth.

4) Cumbersome regulatory practices
The regulatory practices such as construction permits, resolving insolvency, collateral securities/guarantees, and taxation etc. will continue to be the constraining factors for many SMEs in 2018. The absence of a common regulatory body and inadequate provisions for start-ups will affect the growth of such enterprises.

1) Leveraging the e-commerce trend
SMEs now can make their presence in the online world by going digital. For many years, the SME sector was struggling with the intense competition, but going digital can give them the required edge.
2) Adoption of technology
Since social media, mobile phones, and cloud technology is the talk of the town now, SMEs can take help of these platforms. Embedding the social and cloud platform will open up vast opportunities for revenue growth and operational efficiency.

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