Reams of paper have been filled with glowing narratives of India's growth story. It is also predicted that by 2040 – 2050, India will become one of the largest nations in terms of GDP. This should be a welcome pointer for businesses especially SMEs in India. Sadly, the story at ground level says something else. SMEs (in general) today are struggling for their mere survival instead of firing on all cylinders for expansion and growth. Yes, finance is one of the key obstacles. But dearth of adequate laborers for SMEs is becoming a reverberating cause of concern across the nation. The “growth driver” of the economy is sputtering for life. It is deeply affecting productivity.

 

Around the world, SMEs are said to generate steady avenues of employment. This segment is actually instrumental in bringing about inclusive economic and social growth. The fundamental requirement here is to foster a health environment for SMEs to thrive. Though everyone understands and acknowledges the importance of SMEs, very little is actually being done to improve the conditions. A segment that contributes to approximately 8% of our GDP and creates employment for millions definitely deserves much more concentration than it receives. Contrary to the above, various policy decisions are hampering the existing atmosphere.

 

On one hand, many Indian cities are growing and expanding rapidly. Ahmedabad, Surat, Noida, Pune, Aurangabad, Nashik, Jaipur and Indore are few random examples. A quick glance at UNDP's 'India Urban Poverty Report 2009' reveals that 'poverty is rampant even in urban India'. This casts a shadow on the ongoing rapid urbanization. The poverty levels are much more severe than combine figures of 26 African nations. Urban poverty numbers are marked at around a significant 25%. It is important to note here that SMEs are significantly responsible for job creation and those who are above the poverty line. Thrust to SMEs will surely help in reducing this percentage.

 

The main opportunities for employment are in the agriculture sector (for rural people) followed by industry and service sectors. Agriculture largely lacks usage of better machinery for higher efficiency and hence does not provide satisfactory earnings for workers. The seasonality factor is also a hindrance. Fragmented pieces of land blocks economies of scale approach which can generate better revenues. The option here is for these workers to work in industries for better remuneration and opportunities. It is difficult to believe that in a nation with a billion plus population and high levels of poverty; suddenly there is a shortage of manpower. The findings of the recent survey of labor force published by the Government are quite skewed. One observation is the unemployment rate has reduced drastically! But where are the workers? Why SMEs are desperately seeking workers? Changing market dynamics are affecting profiles, types and availability of jobs as certain sectors like retail and ITES are faring better than others. 

 

Lack of laborers is affecting competitiveness of the firms. As it is our products have to compete with that of Chinese output that seem to have got the mix right where we are still lagging behind. Orders cannot be completed and delivered on time. Capacity remains underutilized. Many companies are resorting to contract labors for stop-gap arrangement but it is not a sustainable solution. What about the need and cost of training and skill development of these contract workers?

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