International Journal of Management (IJM), (IJM) International Journal of Management ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume

me 2, Issue 2, May- July (2011), pp. 01-06 ISSN 0976 6502(Print), ISSN 0976 6510(Online) Volume 2, Issue 2, May- July (2011), pp. 01-06 IAEME IAEME, http://www.iaeme.com/ijm.html

IJM

INDIAN SMEs GLOBAL COMPETITIVENESS

Prof. K. Sambasiva Rao, Dept. of Commerce & Management Studies, Andhra University, Vizag, A.P., India, E-mail: profksrao@rediffmail.com Mr. K. Phani Kumar, Asst. Professor, School of Management Studies, Vignan University, Guntur, A.P., India.E-mail: katuri.phanikumar@gmail.com Ms. K. Kalpana, Asst. Professor, School of Management Studies, Vignan University, Guntur, A.P., India.E-mail: kalpana_koneru@yahoo.co.uk Ms. Ch. Hymavathi, Asst. Professor, School of Management Studies, Vignan University, Guntur, A.P., India.E-mail: hyma.chunduri@gmail.com

Abstract
Global competitiveness is considered by all countries to be a perquisite for maintaining high levels of income and employment. Small and Medium Enterprises (SMEs) play a predominant role in most developed and developing economies not only because of their number and variety but also due to their involvement in all segments of the economy. As a result, SMEs are now exposed to greater oppournities for expansion and diversification across the sectors. The new economic world order has opened up several opportunities for discerning SMEs to expand its business beyond the national borders. The most formidable problem gripping the SMEs has been in accessing technology and maintaining competitiveness. The clear thrust of the recent policy initiative ness has been three fold: enhance competitiveness through encouraging an innovative ethos amongst firms and being quality conscious, increase links with multiple stakeholders with a view to benefit from networks both nationally and globally. Today competitiveness matters much more than in the past. The promotion of inter firm linkages is another issue deserving more recognition. This paper focus on understanding the competitiveness and other key success factors that ensure the survival of SMEs through sustained innovation in the highly demanding global business environment. The SMEs in the country also acknowledge the power of technology and are all set to leverage it to their advantage. We have seen small and medium entrepreneurs developing their dream projects by effective use of technology. Indian SMEs are increasingly waking up to the realization that technology is going to play a crucial role in the sustainable development - a key factor in staying competitive in a fast paced global scenario. Key words: Global competition, SMEs, Fixed investment, Macro-economic reforms, Globalization, Deregulation

International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume 2, Issue 2, May- July (2011), pp. 01-06

INDIAN SMEs GLOBAL COMPETITIVENESS Introduction

Gandhiji once said, the poor of the world cannot be helped by mass production; it can be achieved only through production by the masses. If large number of producers were to exist for wider markets, the entities that produce should necessarily be small. The focus of this paper is involved in making the Small and Medium Scale Enterprises (SMEs) sector in India more competitive in the changing global environment. Global competitiveness is considered by all countries to be a prerequisite for maintaining high levels of income, employment and sustainable growth. Greater competitiveness allows to diversify from a traditional commodity exports and move up the skills, technology ladder and permit greater economies of scale in production. Competitiveness is not only dependent on macroeconomic parameters and adjustments or natural endowments but also on the ability to achieve high productivity by effectively utilizing the factors of production. Transiting on the high road to competitiveness, firms both large and small in developing countries have to build and continuously enhance endogenous capabilities. These capabilities can be applied to add value to existing activities and to compete in the global competitiveness. Understanding the global competitiveness and related success factors are ensure the survival of SMEs through sustained innovation in the highly demanding global business environment. In order to enhancing the global competitiveness, SMEs are meeting the ever growing challenges in the international trade arena. These are big numbers, with the latent potential to grow bigger, and signify one thing clearly: the SME sector can play a crucial role in the economic growth of India. On the other hand though, globalization is increasing and with the world economy going through an almost tectonic shift, competition is more vigorous than ever. To succeed in a competitive environment and to achieve its potential, the manufacturing sector realizes it will have to adopt some best practices and embrace some new age tools. One of the key differentiators can be Information Technology - and its adoption by Indian SMEs. The SMEs in the country also acknowledge the power of technology and are all set to leverage it to their advantage. We have seen small and medium entrepreneurs developing their dream projects by effective use of technology. Indian SMEs are increasingly waking up to the realization that technology is going to play a crucial role in the sustainable development - a key factor in staying competitive in a fast paced global scenario.

SMEs growth in India

SMEs play a major role in world economies not only because of their number and variety but also due to their involvement in all segments of the economy. SMEs play a vital role for the growth of Indian economy by contributing 48 percent of industrial output, 41 percent of exports, employing 65.9 million people, creating 2 million jobs and produce more than 8560 quality products for the Indian and international markets. The new economic world order has opened up several opportunities for discerning SMEs to expand its business beyond the national borders. The Government has taken several initiatives and measures for enhancing the competitiveness of SMEs in the present global environment. The most important among them is the enactment of the Micro, Small and Medium Enterprises Development Act, 2006, which aims to facilitate the promotion and development and enhance the competitiveness of SMEs. For enhancing the competitiveness of the Indian manufacturing sector, the Government has launched the National Manufacturing Competitiveness Programme (NMCP). The NMCP is the nodal programme of the Government of India to develop global competitiveness among Indian SMEs

International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume 2, Issue 2, May- July (2011), pp. 01-06

SMEs performance growth rate table Fixed Production Exports investme based on (crores) nt current prices (Crores) (crores) 1999-00 97.15 229.10 1,39,982 2,33,760 54,200 2000-01 101.1 238.73 1,46,845 2,61,297 69,797 2001-02 105.21 249.33 1,54,349 2,82,270 71,244 2002-03 109.49 260.21 1,62,317 3,14,850 86,013 2003-04 113.95 271.42 1,70,219 3,64,547 97,644 2004-05 118.59 282.57 1,78,699 4,29,769 1,24,417 2005-06 123.42 294.91 1,88,133 4,97,842 1,50,242 2006-07 261.01 594.61 5,00,758 7,09,398 1,82,538 2007-08 272.79 626.34 5,58,190 7,90,759 2,02,017 2008-09 285.16 659.35 6,21,753 8,80,805 2,35,586 Source: - www.msme.gov.in,http://www.techsmall.com, Economic survey of India 2008-09 The special attention received by SMEs sector has contributed to its rapid growth. The smallscale sector in India, which includes the modern sunrise small scale tiny and traditional village industries, has through the last one decade displayed exceptional growth in terms of number of units, fixed investment, production, employment and exports. The development of SMEs sector is entirely dependent on the initiatives taken by the government and entrepreneurs. The above table reveals the growth of SMEs sector since 1999-00 to 2008-09. Graphical presentation -1 Year Total no. of SMEs (Lakhs) Employment (Lakhs)

Growth rate of no of SMEs and Employment generation

700 600 s h k 500 a L 400 n i r 300 e b 200 m u N 100 0 1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 200800 01 02 03 04 05 06 07 08 09 Years

total no of SMEs

International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume 2, Issue 2, May- July (2011), pp. 01-06

As the government took up new regulations in the year 2006 there is a raid growth in the total no of SMEs and employment generation. When compared to the last decade there is almost 210% increase in the no. of SMEs and 190% increase in the employment generation. Graphical presentation-2
Performance of SMEs
e u l a v s t r o p x E , s n e o i r t o c r u C d n o i r P , t n e m t s e v n I 1000000 900000 800000 700000 600000 500000 400000 300000 200000 100000 0 1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 200800 01 02 03 04 05 06 07 08 09 Years

Fixed investment Production

There is a gradual increase in the exports from 1999 to2009. As per the data, investments and production is increasing proportionately, fixed investment is increasing at a very slow pace. In the year 2006-07 there is a sudden increase in the investment as the government took up new regulations on SMEs. Finally the performance of the SMEs when compared to the last decade has been almost tripled.

SMEs global competitiveness

SMEs are the largest industry worldwide in terms of employment and share of global GDP. SMEs Contribution towards GDP in 2009 was 17%, which is expected to increase to 22% by 2012. There are 26.1 million MSME Units in India and 12 million persons are expected to join the workforce in the next 3 years. There are about 28.5 million SMEs in India today, contributing about 16% to GDP but due to lack of enough attention and support given to them, they are in a state of misery. Government has to be proactive in recognizing this huge opportunity, which remains untapped. SMEs play an important role in job creation in the economies of Africa, Middle East, Latin America, Asia Pacific, North America and Europe, where they contribute over 70 percent of employment. In Asia-Pacific SMEs are key creators of employment opportunities and also have the potential to become a powerful engine of manufactured export growth. Recognizing the positive contribution that SMEs could make to the overall economic growth in several developed and developing countries, WTO has to take necessary steps in developing SMEs.

International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume 2, Issue 2, May- July (2011), pp. 01-06

Global comparative data of SMEs by region wise Growth rate of SMEs in % 2% 4% 7% 12% 18% 15% Growth rate of employment in % 4% 6% 5% 8% 12% 10% Growth rate of exports in % 1.8% 3% 4% 6% 9% 8%

Region Africa Middle East Latin America Asia pacific North America Europe

Source: - world bank reports, International trade center, European economic forecast Autumn 2009 statistical annex, SMEs world, NSIC 2010. In Africa and Middle East there is more increase in the growth rate of employment than growth rate in SMEs. But in other areas there is more increase in growth rate of SMEs when compared to growth rate in employment and exports. According to the above table SMEs, which locates in Asia pacific region, give the sustainable global competition to the developed regions. Particularly India, China, Japan and Korea play a key role in Asia pacific global trade region. In developing countries like India, making the SMEs more export competitive is particularly emphasizing on trade liberalization and deregulation. Nevertheless with their dynamism, flexibility and innovative drive they are increasingly focusing on improved production methods, preventive marketing strategies and management capabilities to sustain and strengthen their operations. According to the global competitiveness report, 2010 China, India, South Korea have been ranked first, second and third respectively. Perhaps India will gain an even stronger foothold over the next ten years with the countrys all abilities.

Conclusion
In a global economic environment characterized by trade liberalization, rapidly changing technology, growing and changing demand for higher quality and differentiated intermediate and financial products and services that meet a variety of stringent international standards. But traditional SMEs find it difficult to make the upgrades they need to stay competitiveness in both domestic and international markets. Competitive excellence is a key requirement for the small sector but it cannot be achieved unless we realistically assess the needs, issues and concerns of SME environment in the contemporary context. The problems faced by the sector are of multiple types based on their size, structure and area of operations. The good news is that our government has included small sector development as one of important pillars of national growth agenda but relevant macroeconomic reforms and commitments need to be seriously implemented so that a vibrant and dynamic environment for overall growth and transformation of this sector is seen. Review of the implementation of new trusts areas, government changing the policies and announcing the huge subsidies financial aids in recent years will enhance the global competition. Formation of alliances, clusters and global associations and financial-technical tie ups will maximize the growth potential of SMEs in the country. India need a sustained effort in creation and development of a series of capacity building schemes for enhancing the competitiveness of the SMEs through rigorous sensitization, mentoring, awareness, education and skill building training sessions.

International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume 2, Issue 2, May- July (2011), pp. 01-06

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