Small and Medium Enterprises (SMEs) are one of the most powerful drivers of economic growth across the world. Their prominence is highlighted in the fact that they constitute about 90% of the total business sector and are responsible for generating livelihood for over 50% of the workforce globally. The SME sector has also been instrumental in fostering innovation and creativity through their business ideas and initiatives.
Realizing the need to recognize their distinguished contribution to the economy, bring them in the spotlight and raise public awareness about the need for sustainable development through small businesses, the United Nations declared June 27 as the World SME Day in 2017. Every year on June 27, the United Nations, SME enterprises and other global bodies come together to address challenges faced by small businesses and empower them with necessary resources.
This year due to the ongoing pandemic, the SME sector, especially in the developing countries has been worst hit. Thousands of small business owners have suffered losses or shut down their shops. As a result, millions of people who were employed with these SMEs lost their jobs, further magnifying the social issues such as unemployment and poverty.
Recently, the United Nations hosted a few online events to help SMEs stay afloat in the current circumstances. The International Trade Centre, a multilateral agency formed jointly by the United Nations and the World Trade Organization has been providing useful insights and guidance through its website to help SMEs cope with COVID-19 challenges.
SME Sector in India
With more than 36 million units, the Indian SME sector is aptly termed as the backbone of the Indian economy. As per a FICCI report, the SME sector is the second largest employment generator after agriculture and contributes close to 31% to India’s GDP.
Despite their contribution to the nation’s economy, SME sector faces several challenges:
• Inadequate capital
• Lack of access to credit channels
• High interest on SME loans
• Shortage of skilled and talented manpower
• Lack of state-of-the-art infrastructure and manufacturing facility
• Lack of digital marketing know-how
• Low rate of technology adoption and upgradation
• Vulnerability to cyberattacks due to IT talent shortage and lack of digital security awareness
The Indian government had launched a series of schemes and campaigns such as Make in India, Digital India and Startup India to uplift the SME sector and give them a level playing field. These government initiatives have been instrumental in the transformation of the SME sector in India and enable small businesses to become a truly global player to some extent.
However, the progress of the Indian SME sector has received a major setback with COVID-19 and resulting lockdown. The small businesses run on day-to-day operations with limited resources. The pandemic has been a major blow to their existence.
The government’s COVID-19 financial package has brough some relief to the SME sector. It has announced Rs3 lakh crore collateral-free automatic loans for SMEs under Atma Nirbhar Bharat Abhiyan. These loans will help SMEs to resume their operations, rebuild their capacity and become self-reliant.
However, the execution and its expedition of the package remains a key concern here. Also, there is still ambiguity on whether this package is enough to meet all needs of 36 million + SME units.
On this World SME Day, the Indian SME sector is hoping for a full-fledged government’s support more than ever in the current scenario. It’s a matter of survival for small businesses.