SME stands for Small and Midsize enterprises. The definition defers from country to country. A business that maintains its revenue or employees below a certain standard is called an SME. The European definition for SMEs is “The businesses which have less than 250 employees and the annual revenue is less than 50 million euro (or annual balance sheet total less than 43 million euro) are called SMEs.”
India has defined SMEs under Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. It says for a small sized enterprise the investment in plant and machinery should be between 25 lakh and 5 crore and for a medium sized enterprise it should be minimum 5 crore and should not exceed 10 crore. This definition is applicable to the enterprises which are in manufacturing sector. For the enterprises which render services, if the investment is between 10 lakh to 2 crore they are called small sized and if the investment is between 2 crore to 5 crore they are called medium sized enterprises.
The SME sector has been of prime importance for India as it involves less capital investment and is highly labour intensive. It boasts of being second highest in providing employment and contributes to our goal of inclusive growth and equal distribution of resources. SMEs prompts private ownership, instils entrepreneur skills in the youth and establishes powerful market supply chain. The report published by Ministry of Small and Midsize Enterprise says around 45% of the total output and 40% of the total export of the country comes from SMEs by employing 106.1 million people over 26 million units in 2013. It contributes around 22% to the nation’s GDP.
Now instead of discussing the past the immense potential ahead prompts me to throw some more lights on future of SMEs and how India can fulfil its “Make in India” dream through it. Now in the world of cut throat competition it is very important that we use all the technological resources we have. The next generation is to be driven by innovations and technology. The initial development in our SME sector was the result of the government policy of promotion and protection of small business units. But now after 1991 reforms and in the era of globalization the small business units are open to extensive competition from small and big giants all over the world.
Therefore it has become essential that India shifts from technology transfer to technology innovation. The recent research work published by BCG says if Indian SMEs adopt latest IT tools they could generate additional revenue of $56 billion and can add 1.1 million jobs. One such tool is cloud computing which has changed the way IT solutions are being delivered. Cloud computing can provide cheaper solutions as it adopts pay per use policy. It reduces total operation cost and total cost of ownership by alleviating the risk for the cash strapped SMEs. The cloud facility enables secure storage and transfer of data. As the maintenance and software up gradation is taken care by the service provider it saves the company’s time and resources.
To improve our supply chain further we can use computerized tracking and shipping devices along with electronic billing systems. There are plenty of supply chain related mobile apps like MCSA, Mobile TMS applications, Mobile Solutions by SAP and Oracle products. With barcode scanning, speech recognition features, high quality digital cameras and other auto run instruments provide high class warehouse functioning. Let me give an example to exhibit that. John Deere used SmartOps software platform and helped equipment supplier increase it’s on time shipments dealers from 63% to 92%, while reducing inventory by nearly $1 billion. Here one more thing to note is that we are in 21st century but our electric grid is a 20th century structure. It is highly inefficient and may breakdown any time.
In 2003 we observed east-coast wide black out in India. The first step to resolve the issue can be the use of Smart Meters. It can relay a range of information about electricity usage, can give utility and customers alike a real time picture of how much power they are using at any point in time. The electricity can be used efficiently at time when the overall demand is low and the meter helps in doing that. By doing so we are smoothing the demand curves of power plants and utilizing the current power plants fully instead of establishing the new ones.
Apart from that the SMEs can use technology to market their products on social media. There are many cost effective tools available like websites, blogs, emails etc. One of the most popular and heavily used such tool is Facebook. It provides facility of flexible budgeting and provision to target a highly specific audience as shown below.
Along with all the benefits that we extract from our SMEs we must ensure that we don’t harm our environment and use green technology as much as we can. The e-waste produced by the enterprises have to be managed properly. CloudBlue, based in New Jersey, helps tech companies process their e-waste on the site as well. So in nutshell technology is the answer to the question posed by the harmful effects produced by the technology.
Hence I think India must keep including SMEs in its five year plans and should highly focus on the use of technology and innovation to develop this sector. We must use our executive wing to make time to time reforms. If taken as national goal I am confident our poor and middle class will surely come out of mediocrity and contribute to the development of the nation and we will be able to drive this third global cycle of development along with China.