Indian SME Sector – Key Trends to Watch Out For

SMEs are the backbone of the Indian economy. As of 2013, SMEs collectively employed at least 42 million people in India. They are not only helping in growing more employment opportunities but also substantially growing Indian economy. The contribution of individual SMEs may seem small but collectively they have emerged as powerful players in the growth of the Indian economy. As the SMEs continue to grow, here are three key trends that are likely to have a strong impact on the growth of the Indian SME Sector in the coming years.

1. Availability of Financial Credit
2. Impact of Ecommerce
3. Job Creation

Financial Credit to SMEs

The financial institutions are focusing on making loans available to SMEs required for their growth. Let’s talk about some of them:

• SIDBI is one of the financial sectors whose vision is to meet financial and developmental needs of SME sector to make it more dynamic and effective.
• On the other hand, the private financial institutions are also slowly and steadily showing faith towards SMEs and are coming up with new financing schemes. The best example would be EXIM Bank of India expects to do around 2,000-crore SME refinancing in 2013-14 (April-March), compared with 685 crore last year.
• ICICI bank is also offering several schemes for SMEs and empowering them to make their business more profitable and efficient by utilizing their existing resources.

Impact of e-Commerce

E-Commerce platforms can help SMEs reach a pan-Indian customer base. Their products can be showcased without the need to invest highly in any distribution networks. Studies show that SMEs that have incorporated e-commerce as part of their sales model, are seeing higher revenues.

KPMG has collected the following facts from various sources that proves that e-commerce players are also focusing on SME growth. The e-commerce players are helping SMEs across Indian states connect to a larger and global audience.

• A study by market research firm KPMG and Snapdeal, an Indian e-commerce entity claims that e-commerce sector in India is projected to cross $80 billion by 2020.
• The study finds 85% of SMEs already using e-commerce believe it is a cost-effective channel for sales growth.
• It also claimed that SMEs actively practicing e-commerce benefit from 51% higher revenues and 49% more profit.
• They also have a 7% broader consumer base than SMEs who are still offline.

SMEs Creating Jobs

SME sector’s ability to create jobs, especially in the rural sectors, is a key positive trend for the Indian SMEs who are estimated to add over 1.3 million jobs per year. The SMEs are contributing to an impressive manufacturing (18% YOY) and service (34% YOY) sector growth rate.

Conclusion
SME sector is expected to contribute towards GDP growth by adding more jobs and augment industrialization in rural India helping create a balanced socio-economic growth for Indians. It will be interesting to see its growth in the next 5 years.