SMEs drive the largest job creation
A new ASSOCHAM study on the potential of small and medium enterprises

In the aftermath of the global economic meltdown, the fastest recovery in terms of job creation has been in the small and medium enterprises (SMEs) more than large industries in India; indicates an Associated Chambers of Commerce and Industry of India (ASSOCHAM) analysis.

The SME sector reported about 25 per cent job losses during the recent global recession. However, it has been one of the fastest to tide over the gloom, with figures of job creation coming up on a steady pace, the analysis says. This sector alone contributed almost 40 per cent of all jobs created in the economy thereafter - showing the flexibility and adaptability of quick response. SMEs contribute to 45 per cent of the industrial output, 40 per cent of exports, provide employment to nearly 60 million people and create as many as 10 lakh jobs each year. The SME sector also produces more than 8,000 different types of products annually not only for the Indian markets but also for international shores. Further push is being given to the SME sector in the areas such as pharmacy, food processing, auto ancillary, IT, retail, textiles and garments, agro, nano-technology, finance, and service sectors. It is probably the only sector with an employment potential at a low capital cost. More labour intensive, the sector has consistently registered higher growth compared to the overall industrial sector. And owing to its size, these units are more adaptable to the changing market scenario and show remarkable innovation in each vertical. According to the fourth census of the MSME sector, the sector employs nearly 59.7 million people in over 26.1 million enterprises.

However, a lot remains to be done for the sector to make it all the more dynamic and self-reliant. For instance, there are several gaps to be filled where support from the banking sector is concerned. Another paper by ASSOCHAM points out that MSMEs’ contribution to national GDP is projected to go up by a minimum of 5 per cent and to touch 55 per cent share of India’s GDP by 2011, since over 55 per cent of MSMEs are aggressively upgrading themselves technologically to reduce their input costs and increase production and exports. Currently, the share of MSMEs in national GDP is measured around 45 per cent, as, in the last couple of years, the SMEs have been facing not only recession but also credit challenges and variety of regulations from the Centre, states and local governments. The scenario has started changing after enactment of Micro, SMEs Development Act (MSME) 2006, the results of which have started showing in the form of the sector becoming more competitive and innovative, adds ASSOCHAM assessment.

The assessment incorporated in a paper titled ‘MSMEs’ Cluster Development Deepens Inclusive Growth’ reveals that MSMEs that have been growing at the rate of 35 per cent over the last two years and will register a 40 per cent growth rate, which will be technologically driven.

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