You are here

SMEs : The Life Blood Of Indian Industry

Small and Medium Enterprises (SMEs) have a strategic and significant role in the economy. This sector, comprising of manufacturing, infrastructure, service industry, food processing, packaging, chemicals, and IT, has emerged as the most vibrant and dynamic engine of growth of the Indian economy over the last five decades. SMEs not only play a crucial role in providing large employment opportunities at comparatively lower capital cost than large industries but also help in the industrialization of rural & backward areas, thereby, reducing regional imbalances, assuring more equitable distribution of national income and wealth; and thus, invariably plays a significant role in Nation’s development. SMEs are complementary to large industries as ancillary units and this sector contributes enormously to the socio-economic development of the country. With the Indian economy expected to touch $5 trillion by 2025, and with groundbreaking economic reforms kicking in, SMEs are expected and bound to play a much more important role.

It paves a way for entrepreneurs to grow and take chances, and explore the untapped markets emerging in India. SME is considered as the backbone of economy contributing to 45% of the industrial output, 40% of India’s exports, employing 60 million people, create 1.3 million jobs every year and produce more than 8000 quality products for the Indian and international markets. 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, Government of India is taking different measures so as to increase their competitiveness in the international market.

To communicate the importance of the SME sector, let us look at some key SME statistics, trends and reports.

  • Number of SMEs in India: The number is estimated to be at 42.50 million, registered & unregistered together.  A staggering 95% of the total industrial units in the country.
  • SME & Employment opportunity: Employs about 106 million, 40% of India’s workforce. Next only to the agricultural sector.
  • Products: produces more than 6000 products.
  • GDP Contribution: Currently around 6.11% of the manufacturing GDP and 24.63% of Service sector GDP.
  • SME Output: 45% of the total Indian manufacturing output.
  • SME Exports: 40% of the total exports.
  • Bank Lending: Accounts for 16% of bank lending.
  • Fixed Assets: Current fixed assets at INR 1,471,912.94 crore.
  • SME Growth Rate: Has maintained an average growth rate of over 10%.

 

Sources: msme.gov.in/KPMG/CRISIL/CII.

However, the SME sector has its own set of challenges that they have to deal with. Inadequate and timely banking finance, skilled manpower, limited capital and knowledge, non-availability of suitable technology, low production capacity, ineffective marketing strategy, identification of new markets, constraints on modernization & expansions are some of the problems that entrepreneurs face. But with our constantly evolving economy, digitalization, and Government reforms & support conducting a business is smoother than it was before.