Stumbling blocks ahead of Indian SMEs

BANGALORE, INDIA: Small and medium enterprises have always been a vital part of the economy of major countries across the globe. This segment has played a crucial role in the GDP (Gross Domestic Product) growth of all these countries.

India, being one of the major developing economies, is giving huge priority to this sector, by way of lending low-interest loans and providing various entrepreneurship schemes etc. But is that enough? Is the government serious enough about this burgeoning sector, which is the backbone of India's economy? 

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In the other parts of the world, especially in the Western and European countries, there are innumerable SMEs that are being run successfully, as they are getting adequate support from their respective governments. And they don't mind risking their money or property to invest in what they think is right. They are sure that if something bad happens to their business, the government will stand by them and provide support to put it back on track.

But the Indian scenario is entirely different. The SMEs in the country are facing innumerable issues, right from access to funds and technology to lack of knowledge and unavailability of qualified staff.

Despite the number of programmes and schemes announced for the upliftment of this sector, the benefits of do not reach the right beneficiaries.

In an interview with CIOL sometime ago, S.M. Jamkhandi, director, MSME Development Institute, Bangalore, had said, “Though number of schemes have been announced for the SME sector, the benefits hardly reach the intended target, as there is a is lack of definite steps in the direction of creating awareness about these programmes.”

Also, when we contacted some small business owners in Bangalore in the backdrop of the presentation of the Union Budget for financial year 2012-13, despite the budget giving some hope to them, we found that they expected the government to give more importance to the sector.

What are the major challenges faced by our SME sector?

Lack of finance: Finance is key factor in starting a venture. Though most lenders — including new generation banks — in our country have turned their focus on this sector, many SMEs are not aware of various loan schemes provided by these banks. Since majority of SMEs are located in rural areas, they do not have access to developments happening in the banking sector.

The State Bank of India recently revised its interest rates on SME loans, reducing it by 2 per cent. The bank has already launched a collateral-free loan scheme for SMEs. So, if we create awareness about various schemes provided by banks and other government-backed financial institutions, like the SIDBI, that can serve as a huge boost for the sector.

Lack of infrastructure: Lack of adequate Infrastructure is another headache SMEs in India are facing. Irregular power and water supply, bad road and railway connectivity are some of the factors that are hampering the growth of SMEs in India.

If the government is serious about the growth of SMEs, it has to take all necessary steps to provide better infrastructure to these small and medium industries.

Lack of Technology: Technology, a crucial component of SME, is what decides the success of an SME in this era of IT revolution. There are umpteen number of IT and software solutions available in the market offered by major players like IBM, Microsoft, HP, SAP and Cisco, etc. If you do not make the most of these solutions, you might be chucked out of the market by your competitors. 

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Many of these IT solutions are easy to deploy and highly cost-effective. There are cloud solutions, HR management tools, unified communications tools, supply chain management software, ERP, etc at your doorstep. What you need to do is take the right step in this direction. This can help reduce your cost to a very large extent.

Lack of marketing assistance: Many SMEs in the country do not have the expertise on how to go to market with a product or service. The MSME ministry has various schemes for SMEs that want to market their products in the country and foreign markets. The government provides financial aids to those who are looking at major global markets to sell their products.

“A major problem is that many SMEs are not focusing on global markets, as they know that they can sell their products or services here itself, since ours is a very huge market. This is a serious issue. We have to look at the global markets. The government is there for your assistance, both in terms of providing finance and logistics. Moreover, you need to innovate your products so that they get better acceptance in foreign countries. This will help you build your own brand name,” Jamkhandi pointed out.