SMEs to emerge as growth engine: Crisil

Unlike China, the small and medium enterprise (SME) sector in India will emerge as the country's growth engine in the new millennium by converting global challenges into opportunities, said Sunil R Parekh, advisor, Crisil.

In India, the share of small-scale industries in the manufacturing sector is more than 40 per cent in the gross turnover with 32 lakh units, 36 per cent in the exports and about 68 per cent in employment, with 18 million people, Parekh said.

"Several SMEs have closed down as a result of lack of adaptability to the changing business environment, while a sizeable number has grown and overcome such challenges successfully. With the dissolution of the quota regime, abolition of SME reservation, non-preferential government procurement and full operation of market forces, the SMEs have to face more competitions then ever before, both domestically within the SME sector itself as well as from imports," Parekh said.

With the increasing trend for ancilliarisation and outsourcing along with quality upgradation and international benchmarking, the SMEs are now identifying and developing their new core competitive advantage in the market place, Parekh said.

In order to be globally competitive, the internal reforms in the Indian economy which have already been initiated, is very vital and urgent, Parekh said.

However, expensive and inadequate finance, labour laws, roads, port and power bottlenecks, market development and bureaucratic mindset changes have been the key issues affecting the SMEs.

The challenges posed by globalisation have even offered plenty of opportunities to the SME sector.

Besides pharmaceuticals, gems and jewellery, textile, auto and IT, India's strength in bio-technology is highly respected across the globe, Parekh said.

Many international giants acknowledge India not only for outsourcing and contact manufacturing, but also for research and development activities.

Several SMEs have been successful despite hurdles to reflect on all such developments, with a view to learn from them continuously, Parekh said.

With a view to converting the global challenges into opportunities, the Centre for Bhartiya Marketing Development (CBMD) has organised a seminar for the SMEs on 'Challenges 2 opportunities' at the Gandhi Labour Institute in Ahmedabad on February 14.