Indian SMEs: At the Crossroads

Growth in Small and Medium Enterprises (SMEs) in India has gained momentum in the last decade. Traditionally, SMEs have been very active in the manufacturing sector than in the service sector. SMEs' operations are primarily concentrated in the textile, engineering, jute and auto ancillary industries. SMEs constitute nearly 95% of the industry establishments. Their share in domestic export and industry outputs are on the rise. With their sheer potential to generate employment and increase industrial output, SMEs play a crucial role in sustaining our economic growth in the future.

Rapid globalization of our economy has brought in enormous challenges to the Indian SMEs. Their competitiveness in the global market is low. SMEs today are crippled by outdated business processes and technology. Modernization of business practices, technological upgradation and enhanced government support are the need of the hour. These initiatives will help them to effectively compete in the global market on the price and quality fronts. But due to their low capitalization and limited assets, they face difficulties in accessing capital market for the much-needed funds to strengthen their infrastructure.

In the above context, two papers in the current issue analyze some of the major issues that SMEs are facing currently from the perspective of the two important stakeholders of SMEs - the government and financial institutions.

The first paper, "Financing Small Enterprises: Recent Trends", by B Sobha Rani and D Koteswara Rao, presents an overview on the recent trends in financing SMEs in the wake of experts' recommendation and Union Finance Ministry's policy directives. Additionally, the paper also suggests focus areas for improving credit flow to the SMEs.

The second paper, "A New Deal for Small and Medium Enterprises in India", by P R Kulkarni, begins with a review of the growth of SMEs in India. This is followed by an analysis of the challenges faced by SMEs. The analysis calls for a fresh review on the criteria used to define and identify SMEs apart from emphasizing technological entrepreneurship.

The third paper, "Current Status of SMEs and Entrepreneurship Education and Training Intervention in Select South and South-East Asian Countries", by Rajiv Joshi and B Ganapathi, presents a comparative analysis of the entrepreneurship development in the select south and south-east Asian countries with a special focus on India. This paper contributes to our understanding of the role of SMEs in the economic development of the region under study.

The case study, "Entrepreneurial Promotion Through EDP", by P Laxmana and Ishwara P, attempts to assess the effectiveness of Entrepreneurship Development Programs conducted in the districts of Davangere and Chitradurga of Karnataka state. The criterion used in this study is the start-up rate among the sample beneficiaries of EDPs. In the light of the findings, the paper also offers various suggestions to promote entrepreneurship.

- S Senthil Kumar
Consulting Editor.