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Focus

Whither SMEs: Status and Opportunities

Pankaj Priya
Sep 2010

Entrepreneurship can develop only in a society in which cultural norms permit variability in the choice of paths of life (Hoselitz 1960).

India, as a nation has been famous for accepting and nurturing diversity in all phases of its history. The result has been the existence of entrepreneurs since Indus valley civilization. Even today, SMEs are the major contributors to the employment for the masses, growth of the national economy and creating the sense of competition at the grass-root level. The (Government) facts also state the same; MSMEs account for 80-90% of the employment and is the second largest contributor to GDP after agriculture and has 45% share in production and 35% share in exports. Yet, their growth and in some cases, their survival has been hindered by excessive bureaucratic hurdles, corruption and nepotism prevailing in the society.

Informal Sector

Hence, it has been observed that a majority of the SMEs operate in the informal sector, preventing them from availing the benefits that accrue from being in the formal sector. At times, even the formal sector raises the entry barriers through various means to keep these ‘competitions’ at bay. Despite these constraints, SMEs have survived and have continued to contribute to the well being of the society. Even a whiff of fresh air from some partially open window of opportunities have created success stories like Luminous, Sonalika, Trident group, Havell’s, Sewa, Jaipur rugs, OOH, Cyber Media and Carnation to name a few. Still, these success stories are very few in numbers, given the number of SMEs operating in the formal and informal sectors. Hence, in order to generate a great number of success stories, we have to identify the key drivers of growth for SMEs in India and then evaluate our efforts in enforcing these drivers. The drivers can be broadly categorized into three dimensions; entrepreneurial mindset and skills, enabling conditions through government regulations and existence/creation of markets

Though Indians have been known for entrepreneurial skills as mentioned earlier, yet, since sixties the educated youth got lured to the charms of fixed income government or private jobs, which was rather in synchronization with the socialist viewpoint of the society at that point of time. So, only those people turned to entrepreneurship, who were either not having better options or wanted to carry on and expand their family business. The emergence of this educated class as successful entrepreneurs in Silicon Valley and the deregulation by the Indian government in 1990s created a new interest among the younger generation to kick start their own enterprise. Yet, there has been a large segment of the society, especially in small towns and villages, who had been carrying out their business even in trying times. Still, what has been common thread among all these entrepreneurs?

Varying Degrees

The key skills and abilities applicable to all, though in varying degrees are, risk taking ability, a strong desire for achievement, positive self image, problem solving ability and a drive for autonomy. Most of these skill sets can be nurtured through behavorial inputs and imparting business management knowledge. Public institutions like Entrepreneurial Development Institute from the Government of India and some prestigious B-schools, have taken up this programme, some being part of National Entrepreneurship network (NEN), but the entrepreneurial attitude has to be developed at an earlier age. So now it is the turn of schools, colleges and parents to take the lead in this direction and create huge number of Rancho (of the 3 idiots fame).

A study conducted by IFC (Table 1) identifies the ten enabling drivers applicable to developing economies across the world and the ranking of India on these parameters. To start with, India is ranked very low (133 among 183 economies surveyed) as far as ease of doing business is concerned. The most attractive destinations to start an enterprise in that order are Singapore, New Zealand and Hong Kong (China).

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1 Comments >>

lubna

17 Nov 2011 (05:58:53)

It's a nice website, very informative.

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