India’s SME sector: A story of growth and challenges

India’s SME sector: A story of growth and challengesSmall and Medium Enterprises plays an imperative role for the growth of the Indian economy by contributing more than 45% of the industrial output. Despite being the backbone of India’s economy, it is also the most challenged sector.
Here are some of the day to day problems that pose a major challenge for the Indian SMEs.

  • Dearth of easy finance and credit instrument.
  • Limiting regulatory policies.
  • Unavailability of modern, affordable technology.
  • Lack of basic infrastructure facilities.
  • Absence of exclusive marketing platforms and distribution networks.
  • Inflexible labor laws and availability of affordable skilled labor.

According to a recent report in July’16 published by MasterCard, India has one of the strongest small and medium enterprises sector in the Asia Pacific region, but poor infrastructure and insecurity over government regulations are a dampener.

SME Business Environment Index tells the suitability of the market environment and the ease of doing business in a market, India scored a decent 50.4 along with other top performers like China (53.8), Australia (52) and Indonesia (51.5), with a score above 50 indicating a ‘Positive outlook’ and above 60 indicating ‘exceptional rating’.

“In line with the high growth GDP forecast (7.5 per cent in 2015 and similar forecast in 2016), business owners have a positive outlook on the economic and business conditions for growth and also business owners feel positive about their ability to respond the changes and adapt to new situations,” says the report which explains India’s score of 60 in economy, growth and financing category.

Being a country with the largest youth using Internet, India also scored a total of 63 in the Digital Engagement Category.

To make up for the challenges that the SME sector faces several plans have been rolled out. Cluster Infrastructure development through PPP model, solid ICT networks to let them compete globally, easy capital generation means and relaxation in Government regulations & policies will facilitate the ease of doing business in India.