Positive Changes to Drive the Growth of SMEs in Future

Positive changes for SMEs are occurring at a slow pace. However, experts predict that few indicators show a brighter future for the SMEs. Several trends that have emerged with time show that a tremendous growth path for the SMEs is being laid out.

Increased spending

There are around 29 million small businesses in the U.S. They form an integral and vital part in shaping the economy. More than 99% of the total employer firms in the country are the SMEs. They are responsible of creating more than 60% of all the new jobs. However, this industry is blown by tight credit markets, limited spending and slow sales.

But things are changing now. Small enterprises have started to spend more on technological solutions. As per a recent report given by Wells Fargo/Gallup Small Business Index survey, around 71% of small businesses are anticipating that their financial position will strengthen in a year. Besides, 25% of the companies also agreed that new employees will be expanding their teams.  

Growing performance gap

It is also noticed that the performance gap is widening between the businesses that adopt modern technology and those which are reluctant towards it. The SMEs are making use of low cost, simple but impactful technological solutions to arrange their data in a systematic manner, become more efficient and lower the overheads. The widening performance gulf will create a strain on the businesses and will compel them to resort to technological solutions as much as possible.

Banks adopting innovations

These days, banks have started to lay focus on better consumer experience. They are adopting new solutions to enhance their connectivity with their customers. In the previous year, there was a boom of credit monitoring tools, personal investment services and spending trackers. Banking companies, these days, are in search of new innovative ways to apply financial technology for the market of SMEs.

The SME industry will greatly benefit from these solutions as they will find it simpler and safer to link real-time transaction data and third-party solutions such as QuickBooks, Xero and other applications. These new connections will give birth to quick decisions, wider opportunities and improved services for SMEs. As banks will apply new solutions along with their lending process, the SMEs associated with them will also adopt these greatly.

These latest trends clearly indicate that the small business sector is witnessing a lot of vital changes that will increase with time. The new opportunities will truly revitalize the way things are done in these businesses and thus expedite their growth process.

SMEs, a Key Component of ‘Make in India’

The Indian Prime Minister, Narendra Modi, launched his ‘Make in India’ campaign in September last year. He visualizes the transformation of India as a global manufacturing hub. This project has been rolled out with high expectations. But, it is not only the big corporates that will expedite the ‘Make in India’ process. The innumerable SMEs present across the country will also be significant contributors.

Contribution of the SMEs

The role of SMEs in development of India’s economy cannot be ignored. 45% of the industrial output is produced solely by SMEs. Their manufacturing base is strong enough and thus they contribute for more than 42% of exports from India. They produce over 8000 items in all.

40% of India’s workforce is associated with SMEs. They have employed 73 million people across the country. Besides, 1 million jobs are created by this industry on a yearly basis. As employment generation is a focus of ‘Make in India’ campaign, SMEs will play a vital role.

Encouragement from the government

The Centre is taking several measures to boost the SMEs. It has asked all the public sector companies to acquire a minimum of 20% of material from the SMEs. This will be effective for the companies from 1^st April 2015.The government had recognized 25 sectors for the ‘Make in India’ initiative. It later on added 5 more and SMEs is one of them.

Strength of SMEs

SMEs help to enhance the growth and development at thegrassroots level.  The key reasons why SMEs will act as a catalyst in the ‘Make in India’ campaign are:

• These industries adapt to new technologies easily and are swift in their decision-making process.
• With cheap labor and diminished overhead costs, SMEs are able to perform better than the big companies.
• The investment needs of SMEs are low.
• The worth of services and goods produced by SMEs is more than 4 times its investment.

SMEs have about 31 million units in India. This is 90% of the total industrial units in India. They account for 40% value addition in the manufacturing sector. Besides, they comprise over 80% of the total number of industrial set ups in the country.

Seeing their large volume and strengths, it is evident that they will play a vital role in the ‘Make in India’ initiative. Being the backbone of industrial development, SMEs are the best way to promote entrepreneurship and thus boosting manufacturing in the country.