Make In India Promise - Challenges Faced By SMEs In India !

Micro Small Medium Enterprises (MSME) & Small Medium Enterprises (SMEs) form the back bone of economic activity in all countries around the world in India. In the run up to Make in India event during 13TH-18TH FEBRUARY 2O16/MUMBAI we explore the common barriers SMEs face in India and ways to mitigate risks.

SME/MSME – The distribution

Enterprises/Companies engaged in manufacture or production, processing or preservation of goods, the CAPEX is within the range 25 Lakhs – 10Cr.

The CAPEX investment is the original cost excluding the land, building and the items mentioned in No.S.O.1722(E) dated October 5, 2006

A Micro enterprise is a company where the initial Capital expenditure (CAPEX) for plant and machinery is less than Rs. 25 Lakhs.
A Small Enterprise the CAPEX is within the range Rs. 25 Lakhs – Rs. 5 Cr.
A Medium Enterprise, the CAPEX is within the range Rs. 5 Cr. – Rs. 10 Cr.

Enterprises/Companies engaged in providing or rendering of services and CAPEX is within the range Rs. 10 Lakhs – Rs. 5 Cr.

A Micro enterprise is a company where the initial Capital expenditure (CAPEX) for plant and machinery not exceed Rs. 10 Lakhs.
A Small Enterprise the CAPEX is within the range Rs. 10 Lakhs – Rs. 2 Cr.
A Medium Enterprise, the CAPEX is within the range Rs. 2 Cr. – Rs. 5 Cr.

SME/MSME Contribution to India’s exports

With a booming population, younger generation, increasing senior citizens and home care products and services economy that we are in, SME/MSME are the drivers of the economy as far as local consumption and production of goods and services are concerned.

Indian economy is 7^th largest with GDP growing at 7.5% and estimated to increase in 2016-2017, SME/MSME sector is the fast growing in the nation.

The total merchandise exports of India is $322 Billion and services exports is @ $157 Billion. Out of which, 35%-40% of these exports is contributed by SME/MSME.

Top Barriers for SME/MSME

Some of the Top Barriers for any MSME/SME today to enter International Market are as listed below:

Meeting export product quality/standards/specifications.
Shortage of working capital to finance exports.
Inability to contact potential overseas customers.
Identifying foreign business opportunities.
Unfamiliar foreign business practices
Complicated Service Tax, Customs, shipping, exports procedure/paperwork

Majority of Small and Medium Businesses tend to focus their business to local or domestic markets. Staying in the known local market is lesser risk than entering into unknown markets with lot of variables to consider and requires capability to handle challenges in serving foreign markets from finance to managerial risks.

In this part, we have tried to outline some of the problems faced by SME/MSME. In the next part, we shall try to provide some solutions for the problems and how the current government can help mitigate the problems.

About The Authors:

Sudhi Seshachala & Babu Jayaram are founders of B2BSphere – Global Marketplace for buyers and Asian Suppliers. With 50 years of combined experience and 2 decades of experience in exports, they founded B2BSphere with a vision to make India $1 Trillion exporter in merchandise, which currently stands @ $322 Billion.