SMEs contribute to economic development in various ways such as creating employment opportunities for rural and urban population, providing goods & services at affordable costs by offering innovative solutions and sustainable development to the economy as a whole. SMEs in India face a number of problems - absence of adequate and timely banking finance, non-availability of suitable technology, ineffective marketing due to limited resources and non availability of skilled manpower.

 

Small and Medium Enterprises (SME) play an important role in the development of a country. There are around 26 million MSME units in India, of which 13 million are SMEs. SMEs contribute nearly 45% share of manufactured output, accounting for 40% in overall exports of the country and providing employment to about 32 million people.

 

The performance of SMEs in India though impressive comes next to China where this sector provides employment to 94 million people with a network of 37 million units.

 

India has registered a high economic growth (6-9%) consistently over the last one decade. For the sustainability of this kind of growth proper nurturing of SME sector is imperative. The need of the hour is to empower the SME Sector so that it is able to take its rightful place as the growth engine of the economy.

 

The paper throws light on various challenges being faced by SMEs in India at present and tries to find solutions to these problems, so that the SMEs become more vibrant and are able to make forays to new un-chartered areas such as infrastructure etc.

 

 

SMEs contribution in accelerating the growth of economy has been given due consideration all over the world. The lack of a universal definition for SMEs is often considered to be an obstacle in business studies and market research.  SMEs have been defined in different countries in different manner; mostly on the basis of number of persons employed or on the basis of investment made, or on the basis of both. In some of the countries turnover of business is also taken into account in defining a small enterprise. Thus, we find that there is no uniformity in defining a SME. For instance traditional definition in Germany had a limit of 250 employees, while in Belgium it is 200. But, now the EU has standardized the concept. Its current definition categorizes companies with fewer than 10 employees as "micro", those with fewer than 50 employees as "small", and those with fewer than 250 but more than 50 as "medium".  In United States, small business is defined as a business with fewer than 100 employees, while medium-sized business refers to those with fewer than 500 employees. Both the US and the EU generally use the same threshold of fewer than 10 employees for micro enterprises. The essence is that small medium organizations are those having 20-500 employees. In India, traditionally SMEs are recognized as Small Scale Industry (SSI) and defined in terms of investment limits which categorize SME sector as under:

 
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