Small and medium enterprises in India
How
SMEs help in growing an Indian economy?
Small
and medium enterprises are auxiliary businesses that maintain assets, revenues,
and a number of employees that fall below a certain threshold. These small
businesses employ a less number of employees starting from 5 then reach up to
50. But the small and medium enterprises in India make a great contribution to
the Indian economy.
How
various SMEs help the Indian economy grow?
Earlier,
the public sector was a big part of the job growth rate in India. During this
period, in the cases of only loss or crisis, opposition political parties used
to blame the Indian government for not generating enough jobs. Then the
question used to raise on the data arriving from public sector companies.
You
know what the big advantage of promoting small and medium enterprises in India
is that they provide employment to people without making the government get
involved in this. These SMEs helps in both urban as well as rural growth. Also,
they boost the Indian economy in the following ways:
● Generate
more employment
● Decrease
poverty rate
● Deduce
urban-rural income gap
● Diminish
migration
● Motivates
regional development
● Magnify
exports
● Reduce
pollution levels
● Enhance
production
● Encourage
people’s purchasing power
● Improve
the quality of life
These
all characteristics and improvements won’t be logistically possible for big
enterprises and organizations to establish themselves in rural areas. And if
suppose they anyhow become able to do so, they will be restricted to only a few
industrial and commercial zones.
Challenges
faced by Indian SMEs
Though
small and medium enterprises in India are resistant to growth. It results in
low productivity. The concept of staying small and comfortable is much better
since it eliminates regulatory and taxation hurdles.
When
an organization chooses to grow, they have to deal with multiple problems
beginning from financing. The estimate was made via an earlier survey which was
conducted with over 15000 listed and unlisted companies from multiple sectors.
These sectors included agriculture, power, textile, IT&ITES. This survey
clearly showed that small and medium enterprises in India had a drastically
falling exposure to bank credit due to the rising interest rates.
The
next reason that came out was shunned bank credit which was originated due to
repayment timelines. The big organizations who purchase products from SMEs
enjoy an interest-free repayment timeline of about 120 days. But these SMEs get
only 60 days to do so. Therefore, most SMEs have now adopted strategies to
decrease their exposure to bank credit.
Final
Thoughts
Though
SMEs face many challenges from limited access to lack of databases, finance,
undeveloped sales channels, and low levels of financial involvement, these
small and medium enterprises in India put a great contribution to an Indian
economy which is a good sign of future growth.
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