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Growth Of SME Sector In India: An Analysis.

By: Admin In: Business Last Updated: 2010-09-27

SME is the abbreviation for Small and Medium Enterprises. These enterprises can be rightly called as the backbone of the GDP of India. The SME sector in India is growing at an exceptionally fast rate due to which it is proving to be beneficial to the Indian Economy. However, there are some important points that need to be considered for further development of the SME sector. Let us first analyze the current figures related to the SME sector in India:

  • The contribution of the SME sector to the entire output of the country is 40 %.
  • Currently, there are over 11 million SME units in India that produces more than 8000 products.
  • 90 % of the Industrial Units in India belong to the SME sector.
  • These SME units contribute 35 % to the Indian Industrial Export.

Let us analyze the factors that have contributed to the growth of the SME sector in India.

  • SME units in India are being funded by foreign and local fund providers.
  • The advancement in technology has also contributed highly to the SME sector. There are numerous business directories and trade portals available online that contains a rich database of manufacturers, sellers and buyers
  • To start and maintain these units, minimal investment is required.
  • These SME units are now being funded by many government and private banks.
  • The SME sector is one of the greatest contributors of domestic production as well as the export earnings.Many major mergers have taken place recently.

Thought the sector is flourishing and expected to grow further in the near future, there are however certain challenges that the SME sector will have to face.

  • Though the SME industries are spread all over the urban areas, proper infrastructure needs to be developed in the rural areas to establish these industries there.
  • The SME units are functioning efficiently and effectively, but even now there is lack of information regarding the inputs of these industries, like the raw materials, skills, machinery and equipment.
  • There is need of high level research and development required to develop these sectors in both the urban and rural areas.

The SME sector is almost at the initial stage of its growth. With further advancements in technology, this sector is likely to grow further and contribute greatly to the economy of India.

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