Survival of Small and Medium Enterprises in India

By Amit Agarwal On 23 Nov 2013

Are Small Manufacturing Industries vanishing from India? Once, these were considered as significant contributor in various economy metrics - GDP, Exports, Employment etc. Ironically, they still are being considered as equally important. But then, what’s going wrong?

In last few decades, India has seen significant growth of the Services Industry. Not planned so, but this has certainly impacted the traditional industries and agriculture in the country. Agricultural lands are being acquired and used for development of SEZ to make plush offices and beautiful landscapes for the show case industry. Skilled labor in manufacturing and agriculture is being attracted to low key jobs in service industry - something like house-keeping, security etc. One of the important reasons being that the service industry is rich and can afford to pay better salaries to skilled labor than what they earn by working in their area of expertise. Farmers are happier selling their lands for exciting prices than toil under the sun and strive for the survival. Unfortunately, not many government policies favored agricultural and manufacturing sectors to stop people from the getting attracted towards Service Industry. This has certainly impacted small business, who are anyway facing tough challenges from international competition - likes of China, opening up of giants like Walmart and so on. The legacy of these small businesses is dying, with next generation not keen to face these challenges, and rather take an easy route into USAs of the world and earn in Dollars. The rupee charm has gone down further with the steep hike in dollar. The big question is "What will lead to the survival of the SMEs in India" - still the back bone of Indian economy, or perhaps any country in the world.

First and foremost, SMEs in India lack, since ever, is focus towards processes. The world has experienced the business transformation by defining processes as per best practices and automation of same. In India, processes are still whims and fancies of the individual or group of people who are running businesses. Next,  use of technology for the produce. This is another area where we are still relying on age old technologies for production. In my opinion, these 2 are the prime reasons, because when we miss these, we tend to fault on our delivery schedule, compromise of product quality, miss repeatability in following best practices, cost over runs and lack competitive edge. For once, we should look at our neighbors and learn from them - the transformation from being the most populous country to the top economy of the world!   

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