Prof.R.Ramarao, Vignana Jyothi Institute of Management, Bachupally, Hyderabad,A.P.
Ph.No:09849946716
Role of Micro Small and Medium Enterprises for sustaining India’s Growth
ABSTRACT
09-01-2014
A nation’s growth is reflected in the quality of life of its people. Development of a nation
depends on the quality of growth: its composition, distribution and sustainability. High rates of
economic growth do contribute to a nation’s economic and social development. However mere
high growth rates alone do not contribute in building a nation’s economy. A long run sustainable
growth rate is equally essential to a nation to move from growth path to development.
Employment generation, innovation, well distributed economic activity across population,
sectors, geography along with good governance lead to inclusive growth, bridging various
divides in a nation thus fostering quality life.
Self-employed, micro, small, medium and large enterprises and multinational companies form
different types of market players. Micro Small and Medium Enterprises (MSMEs) are
heterogeneous group encompassing a wide range of business activities, from the single artisan
producing for the needs of a village market, the restaurant in a corner, the paan shop in a small
town to a small sophisticated manufacturing or software firm selling exporting to overseas
market and a medium-sized bulk drug units selling to multinational pharmaceutical companies in
the domestic and foreign markets. The firms operate in very different markets rural, semi-urban,
metro cities, local, national, regional as well international. They operate at different levels of
skill sets, investment, intricacies and growth orientation.
MSMEs account for a large share of all firms, constitute a major source of employment and
generate significant domestic and export earnings in the OECD, transition and developing
countries. MSMEs nurture entrepreneurial talent, in addition to creating employment and
fostering industrial development in an economy. SMEs are alleviating poverty around the world
as well as increasing the social and economic participation of women, youth and minorities3.
MSMEs, by number, dominate the world business stage. Estimates suggest that more than 95%
of enterprises across the world are MSMEs, accounting for approximately 60% of private sector
employment. The contribution of MSMEs to economic fundamentals varies substantially across
countries: from 16% of GDP in low-income countries (where the sector is typically large but
informal) to 51% of GDP in high-income countries. Japan has the highest proportion of SMEs
among the industrialized countries, accounting for more than 99% of total enterprises. In South
Africa, it is estimated that 91% of the formal business entities are MSMEs. Worldwide MSMEs
account for 52% of private sector value added, which provides a reasonable estimate for the
sector’s global economic contribution Thus they become important players in developing
countries and economies with high unemployment
MSMEs are generally more common in rural areas than larger businesses especially in
developing countries like India, thus providing much-needed employment in rural areas. In India
Manufacturing SMEs accounted for around 40% of industrial output, and 40% of all exports
along with large employment generation. Service sectors are by far the most important
contributors, accounting for 79% of SMEs’ contribution to GDP in United States. India is a
growing service economy and thus provides an opportunity for SMEs growth and achieve
balanced growth. SMEs can in fact become the engines that sustain growth for long-term
development for India. When growth becomes stronger, SMEs gradually assume a key role in
industrial development and restructuring. They can satisfy the increasing local demand for
services, which allows increasing specialization, and furthermore support larger enterprises with
services and inputs.
India will have to take lessons from global phenomenon wherein increase in contribution of
MSMEs is clearly visible for growth in developed countries than that for growth in developing
countries. It is a clear and one of the time tested paths for India to adopt and grow through
MSME route as a means for the nation to have a sustainable growth and achieve the goal of
joining the league of developed nations.
--------------------------------------------------------------------------------------------------------------------Bibliography:
1. OECD(2004): ‘Promoting Entrepreneurship And Innovative Smes In A Global
Economy: Towards A More Responsible And Inclusive Globalisation’; Istanbul, Turkey
3-5 June 2004
2. Edinburgh Group: ‘Growing the global economy through SMEs’; Edinburg,May 2003
3. Abe Masato etal: ‘Policy Guide Book for SME Development in Asia and the
Pacific’,UNESCO,December 2012
4. Mankiw Gregory N: ‘The Growth of Nations’-Harvard University,1995