Small and Medium Enterprises (SMEs) typically contribute to around 50 per cent of GDP and 60 per cent of employment internationally. Contribute between one quarter and one third of manufactured exports and account for usually less that 10 per cent of foreign direct investment (FDI). In most national economies, SMEs comprise more than 95 per cent of market participants, and contribute to around 50 per cent of direct value added or production. Overall, SMEs are estimated to contribute between 25 and 35 percent of world manufactured exports.

Today, SMEs in India are grappling with fast changes at the market place that is transiting from a controlled economy to a free market set-up. They being the important members within the supply chain are also exposed to the competitive pressures either directly from the market place on indirectly passed on from their higher ups in the chain. Considering the strategic role played by SMEs, it is essential to examine how they can improve their performance in international markets and how they can enhance their export competitiveness.

For long, small and medium scale enterprises were clubbed together loosely, with no clear definition of what constituted medium scale units. The government has now provided clarity on this issue with the enactment of the Micro, Small & Medium Enterprieses Development Act, 2006 (MSMED Act) which came into force form 2nd October, 2006. (See attached definitions)

As per the MSMED Act 2006 (A definition exists for Micro, Small and Medium units). A Micro enterprise engaged in the manufacture or production of goods will be the one, where the investment in Plant & Machinery does not exceed Rs. 25 lakh, a Small enterprise engaged in the manufacture or production of goods will be the one, where the investment in Plant & Machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore, while a medium enterprise will be the one, where the investment is more than Rs. 5 crores but does not exceed Rs. 10 crore. As per the new Act, Micro enterprise engaged in providing or rendering of services will be the one, where the investment in Plant & Machinery does not exceed Rs. 10 lakh, a small enterprise engaged in providing or rendering of services will be the one, where the investment in Plant & Machinery is more than Rs. 10 lakh but does not exceed Rs. 2 crore, while a medium enterprise will be the one, where the investment is more than Rs. 2 crores but does not exceed Rs. 5 crores.

Small Scale Sector in India

The Small Scale Industry (SSI) Sector constitutes a vibrant and dynamic sector of the Industrial economy of India. This sector has recorded consistently good growth in terms of production, creation of employment and phenomenal growth in exports over the years. The post liberalization era in the Indian economy has enhanced the opportunities and challenges for the SSI sector. With their dynamism, flexibility and innovative drive they are increasingly focusing on improved production methods, penetrative marketing strategies and management capabilities to sustain and strengthen their operations. They are thus poised for global partnership to absorb and more importantly to impart latest technologies in diverse fields. Currently, the sector accounts for around 95 percent of the industrial units in the country contributing to 40 per cent of the manufacturing sector output and 35% of the nation’s exports.

More than 8000 products are manufactured in the small-scale sector. The composition of exports shows that the largest shares of SSIs are in the industry groups such as hosiery and garments (29.0 percent), food products (21.4 percent) and leather products (18 percent). The industry groups that have recorded high growth rates and account for a large share in total production of SSIs are textile products, wood, furniture, paper, printing, metal products, electrical & electronics.

The small industry sector has done quite well and has enabled the country to achieve considerable industrial growth and diversification. Being generally less capital intensive, SSIs suit the Indian economic environment with scarce financial resources and large population base. In addition, it is highly labor intensive and has a scope for building upon the traditional skills and knowledge.

Employment in the manufacturing sector has been largely generated by the small-scale sector. In the total manufacturing sector, the share of registered small & medium scale enterprises (SSIs) is 48.8%. The household and non-registered SSIs together contribute 37% of the employment generated. Together all SSIs, registered and unregistered (informal sector) generate employment to the extent of 85.8% of the manufacturing sector.

Small Scale Industries produce a wide range of products, from simple consumer goods to highly precision and sophisticated end products. As ancillaries, it produces a variety of parts and components required by the large enterprises. SME sector has therefore emerged as a major supplier of mass consumption goods.

Statistics of SMEs in India
Year	No. of units (million Nos.)	Production (Billion Rs.)	Employment (Million Nos.)	Export (Billion Rs.) (at current prices)	Comparative growth of SME & Industrial Sector %
					SME Sector	Industrial Sector
1996-97	8.62	1684.10	20.60	392.70	11.29	6.00
1997-98	8.97	1891.80	21.30	444.42	9.19	6.70
1998-99	9.34	2129.01	22.10	489.79	7.84	4.10
1999-00	9.72	2342.05	22.91	542.00	7.09	6.70
2000-01	10.10	2612.89	23.90	599.78	8.04	5.00
2001-02	10.50	2822.70	24.90	697.97	6.06	2.70
2002-03	10.95	3119.93	26.01	712.44	7.68	5.70
2003-04	11.39	3577.33	27.13	860.13	8.59	6.90
2004-05	11.86	4297.96	28.25	1244.17	10.88	8.40
2005-06	12.34	4978.42	29.49	----- N/A	12.32	8.10

Source: Ministry of Small Scale Industries, Govt. of India

About the Database

The database in the CD-ROM contains 578 profiles of exportable technologies/ projects in 18 industrial sectors from 20 States & 02 Union Territories (U.T.) in India. (Click here for details)

These profiles can be searched using the various search options.