Dream Big With SMEs in India

SMEs in India Size does matter as 3E Accounting’s quick read on SMEs in India explains what a powerhouse they genuinely are.

The world economy experienced unprecedented contractions due to the many crises that have assailed the global marketplace. Yet, India has shown perseverance and resilience, weathering the worst downturns with confidence. The International Monetary Fund has projected that India will rebound in 2021 with an 8.8% growth. SMEs in India are driving most of this growth.

Currently, more than forty million SMEs provide income and employment to 40% of India’s workforce. SMEs are forecast to contribute 22% towards India’s gross domestic product (GDP) by 2021. It is also estimated that 40% of total exports originate from this sector.


India’s Small and Medium Engines of Growth

In India, most SMEs include all micro, small and medium enterprises. Generally, they are self-funded, proprietary companies that are built around cottage industry principles.

The Ministry of MSME recently introduced changes that will ease the classification of SMEs. The criteria used to be based on investment in plant and machinery or equipment. As of 1st July 2020, annual turnover (AT) has been added to this to create a composite classification. The revised classification includes the following:

  • Micro Classification: Investment up to Rs 1 Crore and AT not exceeding Rs 5 Crore
  • Small Classification: Investment up to Rs 10 Crore and AT not exceeding Rs 50 Crore
  • Medium Classification: Investment up to Rs 50 Crore and AT not exceeding Rs 250 Crore

A profusion of SMEs can be found in India’s rural areas. Predominant business activities include manufacturing handmade textiles or Khadi, which is made from natural fibre and coconut husk fibre or Coir industries. SMEs can also be found in the following sectors:

  • Chemicals & Food
  • Infrastructure especially construction
  • Information Technology
  • Manufacturing & Packaging
  • Service Industry

Small, medium enterprises are colloquially known as engines of growth that have spurred development in rural and urban areas. Aside from increasing employment rates, they also boost exports and drive industrialization. In the long run, SMEs have the power to improve the living standards of millions, bridge the income gap, and reduce poverty.

However, SMEs do face challenges such as limited capital and the inability to source financing. Some SMEs may face a lack of skilled workforce, access to technology, or effective business solutions. Due to their business’s very nature and size, SME proprietors continue to have challenges to overcome.


Starting Small to Earn Big Bucks

Acknowledging the importance of SMEs in India, the Government has introduced several policies and initiatives to support these businesses. Most of the changes have been initiated by input from the SME Chamber of India.

A key scheme is the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). It facilitates collateral-free credit capability to businesses and is essential for SMEs just starting out.

The Government’s E-Marketplace initiative is also empowering SMEs. Most of these businesses have turned to digital platforms to market their products, which enables SMEs to benefit from economies of scale and scope. Similarly, the Credit Linked Capital Subsidy Scheme (CLCSS) makes funding available for technological upgrades.

Other schemes include the Marketing Development Assistance Scheme (MDA) and cultivating Intellectual Property Rights Awareness via workshops and programs.

If you’re looking to set up a company in India, 3E Accounting has the requisite industry experience to provide suitable solutions. Top business consultants such as 3E Accounting offer workable and customizable enterprise-level solutions.

Contact 3E Accounting today to leverage best practices towards innovative conclusions for your every business need.
SMEs in India