That boost to SMEs is still missing

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The importance and contribution of the SME sector to growth and prosperity are well established. Their role in terms of employment creation, upholding the entrepreneurial spirit and innovation has been crucial in fostering competitiveness in the economy. Towards meeting the national developmental objective of a growth rate of over 8% on a sustained basis, it is imperative for the industrial sector to grow at a faster pace supported by a vibrant SME sector. Towards this, the government’s policy initiatives like the enactment of the new Micro Small and Medium Enterprises Development Act, 2006, pruning of the reserved SSI list, advising financial institutions to increase their flow of credit to the SME sector, are all initiatives towards boosting entrepreneurship, investment and growth.

According to a recent survey by New York-based Access Markets International Partners, more than 80% of SMEs in India are confident about reporting a revenue growth in 2008 over the last year.

Micro, small and medium scale enterprises (MSEs) facilitate the tapping of resources for productive purposes with minimum amount of capital investment, which in turn helps to strengthen the industrial structure of a nation. Worldwide, the micro and small enterprises (MSEs) have been accepted as the engine of economic growth and for promoting equitable development.

The MSEs constitute over 90% of total enterprises in most of the economies and are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports. In India, too, the MSEs play a pivotal role in the overall industrial economy of the country.

While the government has withdrawn itself from several cumbersome procedures of the past, it still has a lot of work to do to provide long-term clarity about its policy approaches towards small-scale industries. The government is not very clear as to what extent it would go to protect the interests of the small scale industries, in the face of competition from multi national companies in India and internationally.

Apart from many other positive features, the one aspect about small-scale industries that cannot be ignored is their potential for employment generation. In today’s Indian context, capacity creation and employment generation are equally important factors and the large number of skilled and technical manpower being generated by the universities and technical institutions can be adequately absorbed in jobs only by setting up a chain of small scale industries.