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SME’s Need to Adopt Innovative Approach in Their Operations.

by Amar Nararen


Indian Small and Medium Enterprises (SME) sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. SMEs not only play a crucial role in providing large employment opportunities at comparatively lower capital cost than large industries but also help in industrialization of rural areas. SMEs are complementary to large industries as ancillary units and this sector contributes enormously to the socio-economic development of the country. The sector consisting of 36 million units, as of today, provides employment to over 80 million persons. The sector through more than 6,000 products contributes about 8% to GDP besides 45% to the total manufacturing output and 40% to the exports from the country. The SME sector has the potential to spread industrial growth across the country and can be a major partner in the process of inclusive growth.

SMEs also play a significant role in nation development through high contribution to domestic production, significant export mobility, low intensive imports, capacities to develop appropriate indigenous technology, import substitution, contribution towards defence production, technology – oriented industries, competitiveness in domestic and export markets thereby generating new entrepreneurs by providing knowledge and training.

Despite their high enthusiasm and inherent capabilities to grow, 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, not getting trade receivables from large and multinational companies on time, insufficient skilled manpower, change in manufacturing strategies and turbulent and uncertain market scenario. To survive with such issues and compete with large and global enterprises, SMEs need to adopt innovative approach in their operations. SMEs that are innovative, inventive, international in their business outlook, have a strong technological base, competitive spirit and a willingness to restructure themselves can withstand the present challenges and come out successfully to contribute 22% to GDP. Indian SMEs are always ready to accept and acquire new technologies, new business ideas and automation in industrial and allied sectors.

Definition of MSMEs in India
(As per Micro, Small & Medium Enterprises Development (MSMED) Act, 2006)
Manufacturing Enterprises – Investment in Plant & Machinery
Description INR USD($)
Micro Enterprises upto Rs. 25Lakh upto $ 62,500
Small Enterprises above Rs. 25 Lakh & upto Rs. 5 Crore above $ 62,500 & upto $ 1.25 million
Medium Enterprises above Rs. 5 Crore & upto Rs. 10 Crore above $ 1.25 million & upto $ 2.5 million
Service Enterprises – Investment in Equipments
Description INR USD($)
Micro Enterprises upto Rs. 10Lakh upto $ 25,000
Small Enterprises above Rs. 10 Lakh & upto Rs. 2 Crore above $ 25,000 & upto $ 0.5 million
Medium Enterprises above Rs. 2 Crore & upto Rs. 5 Crore above $ 0.5 million & upto $ 1.5 million

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