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Business Environment

Notes

Case Study Growing SME's in India

MEs constitute almost about 50% of industrial output & 42% of India's total exports.
It is also an important employment generation sector & a means for promoting
Sbalance regional development. Table 1 below gives certain important data about
SMEs in India. A wide variety of products including consumer items, capital intermediary
goods are produced by this sector. Despite all this, they seem to suffer from sub-optimal
scales of operations and technological obsolescence. Government of India had a
protectionist policy in place from 1951-1991 to protect the SMEs. Certain products were
reserved for small scale units, though in recent times, this policy is fast changing.
Table 1
Year % Share in No. % Share in % Share in value % Share in gross
of factories Employment of production value added
1989/90 93.00 66.00 52.00 44.00
1996/97 92.31 61.29 43.57 34.19

Source: EPW Research Foundation (2002)
Governmental policies towards SMEs always represented certain viable measures which
could promote this sector creating more avenues for entrepreneurial development and
substitute guarantee of employment in different sectors of the economy, affected by the
forces of market fluctuations and variations in the employability conditions. The prospect
of SMEs has a viable alternative for the economic development of the country can be listed
as below:

1. High contribution to domestic production
2. Significant export earnings
3. Low investment requirements
4. Operational flexibility

5. Location wise mobility
6. Low intensive imports
7. Capacities to develop appropriate indigenous technology
8. Substitution of Imports

9. Contribution towards defense production
10. Technology-oriented industries
11. Competitiveness in domestic and export markets.
However, Indian SMEs were very hard hit by the liberalization and faced a number of
problems which may be listed as follows:
1. Poor financial situations and low levels of R&D
2. Poor adaptability to changing trade trends

3. Desire to avoid risk
Contd...

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