SME - Its role and importance.

SMEs (Small and medium size enterprises) in India plays a very important role in building the country’s economy. They help in providing a constant economic growth, provides jobs and employment, not only this but also help in sustaining a downfall where there is a recession. So, I’d go a little higher and say the SMEs help in keeping the country’s economy alive.

In reality, there is not a sector or an industry to which the SMEs don’t cater to. They range from textiles, and agriculture, pharmaceutical to food and beverages and not to forget the IT sectors. So it covers a wide variety of sectors. While they work tirelessly day in and day out, they can be compared to the VVS Laxmans, the Rahul Dravids and the Steve Waughs of international cricket. Like them, they are the unsung heroes of the corporate world, quietly employing a staggering 81million in the 36units they work in and also providing an astonishing 45% of the total industry output as per the recent surveys by the ENTREPRENEUR MAGAZINE. I really loved the article on it, the importance of SMEs. This blog is inspired from it in a way. Providing a GDP of 7.9% in 2012-2013, the SMEs can be called as the backbone of India’s economic growth.

 Though the SME sector seems to be in a good state now thanks to the previous two budgets (2012 and 2013), it still has a few shortcoming and faces new challenges now. Why I stress upon this is because this sector has a great potential to help India outshine its neighboring countries and revive the economy in the county’s favor.

A few problems that I feel they face are discussed here. Firstly it’s the inadequate infrastructure. That seems to be the biggest problem in all the sectors here. Except the top industries who can actually afford something really fancy, the others out of great difficulty manage to get a decent infrastructure. The growing land rates and various other revenues hit hard on the entrepreneur’s heart and half the time this is the main reason why the man backs out to start his own enterprise.

Skilled labor is one of the biggest issues we face. There is no real technical knowledge imparted to the youth of India. Hardly 20% of the studying population has the ability to break through the chain and get them equipped for the existing industry demands. The large chunk of population suffers due to various reasons and the SMEs generally wouldn't have the resources and the capital, this’ll mean that they’re forced to hire unskilled labor and spend time training them thus hitting the level of production hard. This is a larger issue when the progress of the nation is taken into account. This has to be worked upon.

Finance was and always is a big issue for the Indian players. The system is very tedious and messy and funds are often misused.

With the rise in inflation being this high, another factor which becomes very evident is the power. The power generation and supply is very important to these tireless workers. There is not a single day in the SME sector when work is not done since they sometimes are seasonal operators i.e. they change with the production based on the demand and season.  One good thing is that there are some able leaders recognizing this and are willing to supply power and lands at reasonable rates but this plan is happening majorly in the north of India leaving the south behind and this shouldn't create a dividend of sorts. This is a challenge within the states and each state should adopt this policy to be more SME friendly.

There are two other major problems in this, since not all the SME sector require actual training and manufacturing techniques, there are hundreds and thousands of individual players who invest their money in building these SMEs this creates a lot of competition and it gets so bad that they run the show just to beat each other up. Also, marketing is a big factor. They must focus of this instead of trying to spoil one’s run. But the cost of marketing being this high and due to lack of information on how to market, this can be a daunting factor to make a name. But sadly many wither our and die before that can die.

But there is good news for the SMEs in this current budget. It has extended its non-tax benefits for SMEs and setting up new and better informed and equipped incubators and support centers for the growth of SMEs. There is also a talk of providing land and power at subsidized rates till the SME grows to be self sufficient. So a lot of good stuff is happening. The reach needs to be stronger. I sincerely feel India is at its transition state. I really do hope it catches up. We still have a long way to go.

But for SMEs in the current budget, things seem bright!