Technological upgradation to help SMEs contribute more to GDP

29 Sep '08

4 min read

SME's contribution to national GDP is projected to go upto by a minimum of 5% and touch 22% share of India's GDP by 2012, since over 55% of SMEs are aggressively upgrading themselves technologically to reduce their input costs and increase production and exports, says a Paper brought out by ASSOCHAM.

Currently, SMEs share in national GDP is measured around 17% as in the last couple of years, the small scale part of small and medium enterprises have been facing not only recession but credit crunch and variety of regulations from centre, states and local governments.

The scenario has started changing after enactment of Micro, Small & Medium Enterprises Development Act (MSME) 2006, the fruits of which will start flowing in near future as the sector now has been relaxed and liberalized to a large extent, adds ASSOCHAM assessment.

The assessment incorporated in a Paper named SMEs – “Tomorrow's Blue Chips” reveals that SMEs that had been growing @ 35% over the last 2 years will register a 40% growth rate which will be technologically driven and contribute to manufacturing outputs to an extent of 46%, their present manufacturing contribution is around 40-42%.

Releasing the Paper, the ASSOCHAM President, Mr. Sajjan Jindal said that SMEs share to national exports currently is estimated at around 38% which will surge to over 44% in next 5 years.

The main reason of SMEs doing exceedingly well in next 4-5 years would be because over 55% of SMEs would have absorbed technological upgradation to their units.

Currently, this sector accounts for 95% of industrial units and its contributing about 40% on the value addition in the manufacturing sector.

More than 32 lakhs are spread over the country producing about 7500 items and providing employment to more than 400 lakhs persons.

The Paper, however, points out that ever since MSME 2006 has been enacted, SMEs have been given two classifications, one is that of manufacturing and those industries that provide and render services have also been brought under the SMEs jurisdiction.

As a result, the SMEs sector has been liberalized and deregulated to a large extent as earlier the small scale units were mostly governed under 60 central state and local laws.

Such units were required to maintain as many as 116 registered forms from various inspectors which include labour, factory maintenance, environment, municipal by laws, taxation, power etc.

Now the scenario has changed a great deal and would uplift the entire SMEs not only technologically but otherwise too, said Mr. Jindal.

This is other reason as to why the contribution of SMEs to overall GDP and production and exports would increase manifold, pointed out the ASSOCHAM President.

He, however, said that the main constraints which the SME still face is the credit problem. This sector is still neglected by banks and financial institutions, mostly in the private sector domain.

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