What are SMEs? SMEs is commonly recognized as Small Medium Enterprises. SMEs are defined differently in different regions of the universe, depending upon their, employee strength, assets, net worth, and shareholders etc. In India, SMEs is classified into two main classes, established on the nature of the business. These are the major classes:
– Manufacturing Enterprises: These are absorbed in the production of commodities, within this, the enterprises are classified based on their investment levels, such as: Micro: Up to ? 25 Lacs, Small: Above ? 25 Lacs, but less than ? 5 Crores and Medium: Above ? 5 Crores, but less than ? 10 Crores. – Services enterprises: These are absorbed in rendering of services. Inside this, the enterprises are classified based on their investment levels, such as: Micro: Up to ? 10 Lacs, Small: Above ? 10 Lacs, but less than ? 2 Crores and Medium: Above ? 2 Crores, but less than ? 5 Crores (Anon, 2018).
SMEs act as a significant role in the Indian economy. It solves various economic problems like unemployment, income inequalities, poverty. SMEs employ around 106 million people, which are 40% of India’s workforce, next only to the agricultural sector, they are altogether afforded a chance for employment and livelihood via low-skilled jobs. Fundamentally, the employment intensity of medium, small and micro enterprises is estimated to be four times greater when compared with other large enterprises (Anon, 2017). There are presently about 42.50 million SMEs in India, which is the second largest number in the world, close to China, which possesses the greatest number of SMEs in the world approximately 50 million small medium enterprises. SMEs produces more than 6000 products. The Small and Medium Enterprises (SMEs) sector contributes significantly to the manufacturing output, usage and exports of the nation. It carries on a GDP contribution of close to 6.11% of the manufacturing sector and 24.63% of the service sector. It also contributes 40% of total exports and 45% to country’s manufacturing output (Anon, n.d.). The product group SMEs dominates in exports are – ready-made garments, knitwear, sports goods, plastic products, leather products and processed goods. SMEs is the nerve of the country. SMEs have proven its importance, it is likewise vital to ensure that SMEs in India remains competitive both nationally and globally. One of the primary determinants of SMEs’ competitiveness is innovation. “Developing economies such as India face a dreadful objection in this regard due to limited government capacity to advance innovation backing mechanisms. Modern concepts such as cluster development are often wasted or avoided” (Sharma, 2016). SMEs is helping India in balancing the economic development. SMEs is like million drops of water who have joined together to form an ocean of change. Small medium enterprises also help larger enterprises by supplying them with accompanying products.
Small enterprises have succeeded in fulfilling the socialist goals of providing equitable growth. It had also helped in the industrialization of rural and backward areas, thereby, assuring more equitable distribution of national income and reducing regional imbalances. SMEs also create permanent and immediate employment. Small medium enterprises also meet a major part of increased consumer demand. It facilitates mobilization and exploitation of resources. It also looks after integration and development of industries with rural economy, ensuring equitable and justifiable distribution of income. SMEs has emerged as a dynamic and vibrant sector of the economy. SMEs are really important, like they are much labour intensive than large enterprises, elasticity in SMEs are higher, it has the capacity to adjust to changing environment and they are expected to earn more quick returns. “A big percentage of the work generated by SMEs is in the manufacturing and services sectors which are growing at impressive rates of 18 percent and 34 percent year on year respectively” (Anubha Vashisht, 2016). The GDP is also anticipated to increase by 22% by 2020 and the reason is Small Medium Enterprises.