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ByNilesh Arora
Founder Partner, ADD VALUE Consulting Inc. ,INDIA
“SME OVERVIEW – INDIAN CONTEXT”
Adding Value In Totality !!
WHAT ARE SME’S ?
• Manufacturing Enterprises – Investment in Plant & Machinery Description
• Micro Enterprises up to $ 62,500• Small Enterprises above $ 62,500 & up to $ 1.25 million• Medium Enterprises above $ 1.25 million & up to $ 2.5 million
• Service Enterprises – Investment in Equipment Description • Micro Enterprises up to $ 25,000• Small Enterprises above $ 25,000 & up to $ 0.5 million• Medium Enterprises above $ 0.5 million & up to $ 1.5 million
WHY ARE SME’s CRUCIAL ?• SME sector of India is considered as the
backbone of economy contributing to 45% of the industrial output
• 40% of India’s exports, employing 60 million people, create 1.3 million jobs every year and produce more than 8000 quality products for the Indian and international markets
• With approximately 30 million SMEs in India, 12 million people expected to join the workforce in next 3 years and the sector growing at a rate of 8% per year
WHY ARE SME’s CRUCIAL ? …contd
Several factors that have contributed towards the growth of Indian SMEs1. Funding of SMEs by local and foreign investors2. New technology in the market is assisting SMEs add considerable
value to their business3. Various trade directories and trade portals
• Despite of this strong growth, there is huge potential amongst Indian SMEs that still remains untapped
VARIOUS MSME SECTORS
WHY ARE INDIAN SME’s CRUCIAL..?• SMEs are the major source for entrepreneurial skills, innovation
and employment, after agriculture• After agriculture, SMEs are the second largest employer of human
resources• Number of people employed in SMEs has grown to approx. 75
million at a growth rate of 5.5%• 45% of the SMEs are in rural areas while 55% of the SMEs are in
urban areas
• 67% of the SMEs are in manufacturing sector, 17% in service sector and
16% in repairs and automation
• SMEs make up for 80-90% of all enterprises and generate about 50-80% of
total employment in developing Asia
IMPORTANT DATA – SME’s(2013-14) …contd
IMPORTANT DATA – SME’s(2013-14) …contd
IMPORTANT DATA – SME’s(2013-14) …contd
REASONS FOR SME GROWTH1. Low investment2. High contribution to domestic production3. Significant export earnings4. Capacity to develop indigenous technology5. Operational flexibility6. Contribution to defense production7. Technology oriented industries8. Import substitution9. Location wise mobility10. Low intensive imports11. Competitiveness in domestic markets12. Competitiveness in export market
SME’s.. Manufacturing Sector• The various types of SMEs in manufacturing are textiles, machinery, plastics, auto
components, rubber, foundries, paints, electrical, automation etc. • SMEs contribute to 40% of total exports• Form 95% of the total industrial units• Manufacture 8000 quality products for Indian and international markets
CHALLENGESManufacturing SMEs in India are also facing a number of problems like…….• Sub-optimal scale of operation • Technological obsolescence• Supply chain inefficiencies• Increasing domestic & global competition• Working capital shortages – payment delays and Insufficient skilled manpower• Change in manufacturing strategies and turbulent and uncertain market scenario
OPPORTUNITIES • There lies a huge opportunity in terms of technological advancement, financial
assistance, manufacturing competitiveness, innovation, infrastructure development etc.
SME’s - SERVICE SECTORCSO (Central statistics organization) of India has classified servicesector into 14 classifications they are:1) Trade, hotels and restaurants (THR)2) Trade3) Hotels and restaurants4) Transport, storage and communication5) Railways6) Transport by other means7) Storage8) Communication9) Financing, Insurance, Real Estate and Business Services10) Banking and Insurance11) Real Estate, Ownership of Dwellings and Business Services12) Community, Social and Personal services13) Public Administration and defense (PA & D)14) Other
SME’s - SERVICE SECTOR…contd• Employment-intensity is highest in manpower-intensive services
like security agencies, housekeeping, and facility management.CHALLENGES • SME Sector is a handicap, despite of commendable contribution to
nation’s economy1. Absence of adequate and timely banking finance2. Ineffective marketing strategy3. Constraints on modernization & expansions4. Non availability of highly skilled labor at affordable cost5. Follow-up with various government agencies to resolve problems
etc. OPPORTUNITIES • There lies a huge opportunity in terms of available skilled and
unskilled manpower
SME’s AGRICULTURE SECTOR..• The various types of agriculture sector SMEs are inputs and
technology providers, producers (farmers), logistics trade and distribution, processors, wholesalers and retailers.
CHALLENGES• Fragile internal control systems• Poor management culture• Corruption and security risks• Lack of skilled workers and reliable infrastructure• The most significant barriers common are lack of access to
financing and to markets.OPPORTUNITIES • Addressing the lack of access to financing and to markets is
instrumental to unlocking the potential of SMEs as engines of domestic growth.
Agriculture Value Chain
OPPORTUNITIES IN INDIAN SMEs..• India is among the three most attractive FDI destinations in the world• One of world’s leading technology centers• India has highest return on foreign investment in the world• By 2032, India will be among the three largest economies in the world• India is a developed country as far as Intellectual Property is concerned• The Indian market has two core advantages – an increasing presence of
multinationals and an upswing in the IT exports.• In order to enable SMEs get easy access to the finance, government has
also introduced priority sector lending and has made mandatory on the domestic and foreign banks to lend 40% and 32% of their Net Bank Credit (NBC) to the SMEs
• The opportunities exists for foreign SMEs looking to expand in the Indian market in the field of technology transfer, setting up the new business in the country, obtaining the sub-contracting rights, out-sourcing to their Indian partners etc.
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