MSMEs-Being Major Contributors, Struggling to Survive and Sustain

The Micro, Small, and Medium Enterprises generally are the main source of economic growth in many countries. The MSMEs provide higher employment and major share of industrial production and exports belongs to them. Coming to India, MSMEs play a very crucial role in the overall industrial development of the country. MSMEs, in spite of being the major contributors to the Indian economy, they still are still facing some challenges that are resisting their growth.

Contribution to GDP growth
Milagrow World SME Conference 2009 stated that the MSME sector is the second largest contributor in terms of GDP after the agriculture sector in the Indian economy. With the MSME’s huge contribution, India has achieved 7.98 per cent GDP growth despite the slowdown. According to Associated Chambers of Commerce and Industry of India (ASSOCHAM), small and medium enterprises (SMEs) are expected to contribute 22 per cent to India’s GDP by 2012 up from current about 17 per cent.

Contribution to employment
MSMEs provide employment to 60 million people, which is nearly 80 to 90 per cent of the employment. Most importantly, the volume of labor in the MSME sector is estimated to be nearly four times higher than the large enterprises in the country.

Contribution to production and exports
The SME sector contributes nearly 40 to 50 per cent to Indian economic activity. The small and medium enterprises contribute 40 per cent to the country’s exports and this share is expected to increase to over 44 per cent with the help of modernized technology. SMEs including Micro enterprises contribute through 45 per cent share in production and 35 per cent in exports.

Major challenges
As the process of globalization is gaining momen¬tum, SMEs are struggling hard to survive and stay for long term in the competition. The major issues with SMEs are lack of financial freedom, low R&D investment, low access to technology, lack of product innovation, and inadequate marketing support in an increasingly competitive environment. Apart from these, lack of manage¬ment skills, meager adaptability to new market trends, lack of tech¬nically trained people are some of the reasons that are blocking their growth.

Lagging in technology
In spite of their large presence, which constitutes over 80% of the total number of industrial enterprises, and immense con¬tribution to the economy of the country, SMEs are still lagging in technology. Most of the SMEs are not connected to the Internet. They are not aware of the trading and its benefits over the Internet.

How to survive and sustain
SMEs should first focus on the need of access to new technologies. SMEs can withstand and perform well through awareness by R&D and by using the latest technologies.

According to the Third Census of small-scale industries, SMEs are struggling to market their products in the open economy. Only a few of them are able to market themselves in the international market and most of them are ineffective. In today’s competitive global market, there is a need of good valued, knowledge-based products as well as production rather than less valued, price oriented way of businesses.

Businesses particularly MSMEs should be able to offer innovative and personalized services to succeed and sustain. Today customer needs are fluctuating and there is a huge competition in the market. In these situations, innovative power is the strongest deciding factor of a business’s success or failure. India has abundant potential for innovation but the only thing is to ‘be aware, adopt, and succeed’.

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