Small and Medium Enterprises (SMEs) play a vital role for the growth of Indian
economy by contributing 45% of industrial output and 40% of exports, employing
60 million people, creating 1.3 million jobs every year and producing more than
8,000 quality products for the Indian and international markets. The contribution
of SMEs to the Gross Domestic Product (GDP) in 2011 was 17% and increased to
22% by 2012. There are approximately 30 million MSME units in India and 12 million
persons are expected to join the workforce by 2015.1 As per the Development
Commissioner of Micro, Small and Medium Enterprises (MSMEs) (2001), the sector
has the credit of being the second highest in employment, and stands next to the
agricultural sector.
MSMEs in India face several problems such as lack of availability of adequate
and timely credit; high cost of credit; lack of collateral requirements; limited access
to equity capital, problems in supply to government departments and agencies,
procurement of raw materials at a competitive price, issues of storage, designing, packaging and product display, lack of access to global markets, inadequate
infrastructure facilities like power, water and roads; low technology and lack of
access to modern technology; problems of skilled labor for manufacturing; services
and marketing; multiplicity of labor laws and complicated procedures; absence of a
suitable mechanism which enables the quick revival of sick enterprises and measures
to close down the unviable entities; and issues relating to direct and indirect taxation
and their procedures (Report of Prime Minister’s Task Force, 2010).
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