Significance of SMEs

What is the issue?

Export growth is necessary for sustaining high growth and to create jobs in labour-intensive activities of the Small and Medium Enterprises (SMEs).

What is the importance of SMEs?

• 43% of jobs created in emerging economies are from SMEs.
• They could attract FDI, making India a hub for Global Value Chain (GVC).
• As a result they are likely to play a big role in promoting exports.

What are the issues with Indian SMEs?

• Limited Access - Indian SMEs lag behind due to limited access of information and technology.
• Workforce of Indian SMEs lacks the necessary skills to operate in a high-tech GVC environment.
• Quality Standards - Due to their inability to meet international product quality standards, demanded by an increasingly sophisticated international buyer, they have difficulty to be part of the GVC.
• Location - Unlike the large enterprises, several SMEs operate outside the main cities and suffer from lack of business environment and access to trade services.
• Representation - SMEs are also poorly represented in apex chambers of commerce and industry in India, which are dominated by large enterprises, who receive preferential access to trade services.
• Private sector - There is lack of private sector participation in the supply of trade services.

What needs to be done?

• Institutional reforms in trade policy are urgently required to make SMEs effective in promoting exports directly.
• The Ministry of MSME have no role in export promotion. This should be altered.
• An enlarged Department of Industrial Policy and Promotion could replace the Ministries of Commerce and Industry, Heavy Industry, and MSME, and promote development of industry, especially SMEs.
• Enterprises need to periodically train their workers in new design and packaging that satisfy fast-changing consumer trends.

Source: Business Standard