SMEs role in India's Economy

Introduction
What is an SME ? Small and medium enterprises (SMEs) or small and medium-sized businesses (SMBs) are companies whose personnel numbers fall below certain limits-Wikipedia

Employs 60 million people

SME contributes 45% of the industrial output

Produces more than 8000 quality products

No. of SMEs(in million)

50 40

40% of Indias exports

Creates 1.3 million jobs every year

30 20 10 0 2008 2009 2010 2011 2012 39.1 40.9 42.7

44.7

46.7

48.8

2013

SMEs role in India's Economy

Employment High contribution to Manufacturing
Largest employment opportunities next only to Agriculture Food products industry has ranked first in generating employment, providing employment to 0.48 million persons (13.1%) Non-metallic products contributed 22.7% to employment generated in rural areas. As for urban areas, Food Products and Metal Products almost equally shared 22.8% of employment Accounts for about 40% of the value added in the manufacturing sector SMEs are considered very important members of supply chain Contribute 40-50% export* This takes place through merchant exporters, trading houses and export houses Product groups which dominate the exports from SMEs sector include sports goods, readymade garments, woolen garments and knitwear, plastic products, processed food and leather products

Technological Innovation

Increased Export

Ability of SMEs to innovate assumes significance because innovation lends competitive edge to firms, industries and ultimately, economies SMEs) have been considered one of the driving forces of modern economies due to their multifaceted contributions in terms of technological innovations

With approximately 30 million SMEs in India, 12 million people expected to join the workforce in next 3 years and the sector growing at a rate of 8% per year Contribution of the sector to India's GDP has been growing consistently at 11.5 per cent annually, which is higher than the overall GDP growth of 8 per cent

*National Conference on Emerging Challenges for Sustainable Business 2012

Opportunity
The opportunities in the small-scale sector are enormous due to the following factors:

CHALLENGES FACED BY SME

SMEs faces a number of problems absence of adequate and timely banking finance, limited capital and knowledge, nonavailability of suitable technology, low production capacity, Ineffective marketing strategy, Identification of new markets, Constraints on modernization & expansions, Non availability of highly skilled labor at affordable cost, Follow-up with various government agencies to resolve problems etc.

Less Capital Intensive Extensive Promotion & Support by Government Reservation for Exclusive Manufacture by small scale sector Project Profiles Funding - Finance & Subsidies Machinery Procurement Raw Material Procurement Manpower Training Technical & Managerial skills Tooling & Testing support Reservation for Exclusive Purchase by Government Export Promotion Growth in demand in the domestic market size due to overall economic growth Increasing Export Potential for Indian products Growth in Requirements for ancillary units due to the increase in number of greenfield units coming up in the large scale sector. Small industry sector has performed exceedingly well and enabled our country to achieve a wide measure of industrial growth and diversification.

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