Role of SMEs in Economic Growth of India

Introduction
Small and medium enterprises are the backbone of industrial development.
It is very important for both developed and developing country Small and medium enterprises always
represented the model of economic development, which emphasized high contribution to domestic
production, significant export earnings, low investment requirements, employment generation,
effective contribution to foreign exchange earning of the nation with low import-intensive operations.
The development of this sector came about primarily due to the vision of our late Prime Minister
Jawaharlal Nehru who sought to develop core industry and have a supporting sector in the form of
small scale enterprises.
SMEs sector has emerged as a dynamic and vibrant sector of the economy. The Indian economy is
expected to grow by over 8 per cent per annum until 2020 and can become the second largest in the
world, ahead of the United States, by 2050, and the third largest after China and the United States by
2032.
Definition of MSME
According to new THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006 the
MSME Definitions are as follows: In the case of the enterprises engaged in the manufacture or
production of goods pertaining to any industry specified in the first schedule to the Industries
(Development and Regulation) Act, 1951, as

Some of the important organizations that are associated with SMEs in India are: Small Industries
Development Organization (SIDO), National Small Industries Corporation Ltd. (NSIC), Small Industries
Development Bank of India (SIDBI), Confederation of Indian Industry (CII), Laghu Udyog Bharti (LUB),
Federation of Indian Chamber of Commerce and Industry (FICCI), Associated Chamber of Commerce and
Industry of India (ASSOCHAM), National Institute of Small-Industry Extension Training (NISIET), World
Association for Small and Medium Enterprises (WASME), Small Scale Industries Board (SSIB), PHD
Chamber of Commerce and Industry (PHDCCI), Federation of Indian Exporters Organization (FIEO),
Federation of Associations of Small Industries of India (FASII)

What they actually are?
The commonly used criteria at the international level to define SMEs are the number of employees,
total net assets, sales and investment level.
The European Union makes a general distinction between self-employment, micro,small and medium
sized businesses based on the following criteria:
And the criteria is-
0 Self-employed
2-9 Micro business
10-49 Small business
50-249 Medium-size business

Criteria in India-
Micro enterprise-investment does not exceed 25 lakh rupees.
Medium enterprise- more than five crores but not upto ten crores.
Small enterprise- more than 25 lakhs rupees but doe not exceed 5 crores.
In case of services-
a micro enterprise- not upto 10 lakh rupees.
a small enterprise- more than 10 lakh but not upto 2 crore rupees.
a medium enterprise- more than 2 crores but not upto 5 crores.

Role of SMEs in Indian Economy
In order understand the impact of SMEs on the Indian economy; one must study the trend and pattern
that have been prevalent in the preceding years. It gives us the vivid picture of what follows next.
Following graphics help us to understand the present scenario and their contributions of MSMEs in
India.
Limitations of the study
The time period given for study was very limited

The respondents of the questionnaire were very busy and could not afford more time to
answer. The average time to response was 5-6 minutes only.

Study restricted through social sites .




MSMEs share by sector


Growth Performance of SMEs or MSMEs in India

Employment in MSME Sector




Sector wise MSME

Activity wise MSME


The opportunities of growth in the SMEs sector
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
Factors affecting SMEs
MSMEs in India face several problems such as-
1. lack of availability of adequate and timely credit
2. High cost of credit
3. inadequate infrastructure facilities like power, water and roads, and lack of access to modern
technology.
4. limited access to equity capital
5. problems in supply to government departments and agencies
6. procurement of raw materials at a competitive price
7. Issues of storage
8. Designing, packaging and product display
Conclusion
In India SMEs has achieved steady growth over the last couple of years. The role of SMEs in the
industrial sector is growing rapidly and they have become a thrust area for future growth. The Indian
market is growing and the Indian industry is making rapid progress in various Industries like
manufacturing, food processing, textile and garments, retail, precision engineering, information
technology, pharmaceuticals, agro and service sectors. Under the changing economic scenario the SMEs
have both the opportunities and challenges before them.


References:
o http://igovernment.in/site/india-to-develop-1150-sme-clusters
o www.oecd.org/dataoecd/37/47/34026603.pdf
o http://ec.europa.eu
o http://www.businessworld.in/bw/
2009_08_01_The_SME_Whitebook_20092010.html
o http://blog.optionsindia.com/2008/06/sme-sector-in-india-and-random-
thoughts.htm