An overview of SME's in India, Why are Indian SEM's Crucial! Find the Reasons for Small & Medium Enterprise(SME) Growth and details about Manufacturing Sectors. The opportunities exists for foreign SMEs looking to expand in the Indian market.

1. By
Nilesh Arora
Founder Partner,
ADD VALUE Consulting Inc. ,INDIA
“SME OVERVIEW – INDIAN CONTEXT”
Adding Value In Totality !!

2. WHAT ARE SME’S ?
• Manufacturing Enterprises – Investment in Plant &
Machinery Description
• Micro Enterprises up to $ 62,500
• Small Enterprises above $ 62,500 & up to $ 1.25 million
• Medium Enterprises above $ 1.25 million & up to $ 2.5
million
• Service Enterprises – Investment in Equipment Description
• Micro Enterprises up to $ 25,000
• Small Enterprises above $ 25,000 & up to $ 0.5 million
• Medium Enterprises above $ 0.5 million & up to $ 1.5
million

3. WHY ARE SME’s CRUCIAL ?
• SME sector of India is considered as
the backbone of economy
contributing to 45% of the
industrial output
• 40% of India’s exports, employing
60 million people, create 1.3
million jobs every year and produce
more than 8000 quality products
for the Indian and international
markets
• With approximately 30 million SMEs
in India, 12 million people expected
to join the workforce in next 3 years
and the sector growing at a rate of
8% per year

4. WHY ARE SME’s CRUCIAL ? …contd
Several factors that have contributed towards the growth of Indian
SMEs
1. Funding of SMEs by local and foreign investors
2. New technology in the market is assisting SMEs add considerable
value to their business
3. Various trade directories and trade portals
• Despite of this strong growth, there is huge potential amongst
Indian SMEs that still remains untapped

5. VARIOUS MSME SECTORS

6. WHY ARE INDIAN SME’s CRUCIAL..?
• SMEs are the major source for entrepreneurial skills, innovation
and employment, after agriculture
• After agriculture, SMEs are the second largest employer of human
resources
• Number of people employed in SMEs has grown to approx. 75
million at a growth rate of 5.5%
• 45% of the SMEs are in rural areas while 55% of the SMEs are in
urban areas

7. • 67% of the SMEs are in manufacturing sector, 17% in service sector and
16% in repairs and automation
• SMEs make up for 80-90% of all enterprises and generate about 50-80% of
total employment in developing Asia
IMPORTANT DATA – SME’s(2013-14) …contd

8. IMPORTANT DATA – SME’s(2013-14) …contd

9. IMPORTANT DATA – SME’s(2013-14) …contd

10. REASONS FOR SME GROWTH
1. Low investment
2. High contribution to domestic production
3. Significant export earnings
4. Capacity to develop indigenous technology
5. Operational flexibility
6. Contribution to defense production
7. Technology oriented industries
8. Import substitution
9. Location wise mobility
10. Low intensive imports
11. Competitiveness in domestic markets
12. Competitiveness in export market

11. SME’s.. Manufacturing Sector
• The various types of SMEs in manufacturing are textiles, machinery, plastics, auto
components, rubber, foundries, paints, electrical, automation etc.
• SMEs contribute to 40% of total exports
• Form 95% of the total industrial units
• Manufacture 8000 quality products for Indian and international markets
CHALLENGES
Manufacturing SMEs in India are also facing a number of problems like…….
• Sub-optimal scale of operation
• Technological obsolescence
• Supply chain inefficiencies
• Increasing domestic & global competition
• Working capital shortages – payment delays and Insufficient skilled manpower
• Change in manufacturing strategies and turbulent and uncertain market scenario
OPPORTUNITIES
• There lies a huge opportunity in terms of technological advancement, financial
assistance, manufacturing competitiveness, innovation, infrastructure
development etc.

12. SME’s - SERVICE SECTOR
CSO (Central statistics organization) of India has classified service
sector into 14 classifications they are:
1) Trade, hotels and restaurants (THR)
2) Trade
3) Hotels and restaurants
4) Transport, storage and communication
5) Railways
6) Transport by other means
7) Storage
8) Communication
9) Financing, Insurance, Real Estate and Business Services
10) Banking and Insurance
11) Real Estate, Ownership of Dwellings and Business Services
12) Community, Social and Personal services
13) Public Administration and defense (PA & D)
14) Other

13. SME’s - SERVICE SECTOR…contd
• Employment-intensity is highest in manpower-intensive services
like security agencies, housekeeping, and facility management.
CHALLENGES
• SME Sector is a handicap, despite of commendable contribution to
nation’s economy
1. Absence of adequate and timely banking finance
2. Ineffective marketing strategy
3. Constraints on modernization & expansions
4. Non availability of highly skilled labor at affordable cost
5. Follow-up with various government agencies to resolve problems
etc.
OPPORTUNITIES
• There lies a huge opportunity in terms of available skilled and
unskilled manpower

14. SME’s AGRICULTURE SECTOR..
• The various types of agriculture sector SMEs are inputs and
technology providers, producers (farmers), logistics trade and
distribution, processors, wholesalers and retailers.
CHALLENGES
• Fragile internal control systems
• Poor management culture
• Corruption and security risks
• Lack of skilled workers and reliable infrastructure
• The most significant barriers common are lack of access to
financing and to markets.
OPPORTUNITIES
• Addressing the lack of access to financing and to markets is
instrumental to unlocking the potential of SMEs as engines of
domestic growth.

15. Agriculture Value Chain

16. OPPORTUNITIES IN INDIAN SMEs..
• India is among the three most attractive FDI destinations in the world
• One of world’s leading technology centers
• India has highest return on foreign investment in the world
• By 2032, India will be among the three largest economies in the world
• India is a developed country as far as Intellectual Property is concerned
• The Indian market has two core advantages – an increasing presence of
multinationals and an upswing in the IT exports.
• In order to enable SMEs get easy access to the finance, government has
also introduced priority sector lending and has made mandatory on the
domestic and foreign banks to lend 40% and 32% of their Net Bank
Credit (NBC) to the SMEs
• The opportunities exists for foreign SMEs looking to expand in the
Indian market in the field of technology transfer, setting up the new
business in the country, obtaining the sub-contracting rights, out-sourcing
to their Indian partners etc.

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