How can boosting efficiency in SMEs and entrepreneurship help the economy?
Entrepreneurship in itself is an important driver of economic growth, job creation and competitiveness. It is what leads to the creation of SMEs it becomes a major contributor to the global economy and development. SMEs have a key role in ensuring economic growth in a sustainable manner. SMEs make up more than 95% of all businesses in the whole world. They represent a path out of poverty for many people across developing countries.
What are SMEs exactly?
As there isn’t a set definition of SME that applies globally each country gets to set its own definition, and they decide to set specific limits. In the European Union, a business with less than 250 employees is considered an SME. While on the other hand in US, an SME can have a lot more, up to 1,200 employees.
However, there is a shared goal of defining an SME. It seeks to differentiate small and medium-sized businesses from large companies/corporations.
How do SMEs play out in India?
The Indian SME sector has played a key role in the overall growth of the upcoming industrial economy of the country. The sector has shown commendable and notable innovativeness and adaptability to survive the recent economic dynamics.
From manufacturing of simple goods to manufacturing of sophisticated goods and products, Indian SMEs have moved up the value chain, despite a number of challenges.
They have faced problems at various stages of their operation, whether it was the rise of finance, buying of raw materials, manufacturing products, marketing goods or adopting the latest digital solutions and softwares.
In a way, technology adoption has helped SMEs in many ways to enhance productivity and efficiency.
What is the Role of SMEs?
In market economies, SMEs are the engine of economic development, thanks to their private ownership, entrepreneurial spirit, their flexibility and adaptability and their potential to react to challenges and changing environments, SMEs contribute to sustainable growth and employment generation in a very significant manner.
They play a significant role in the national economy by providing various goods and services, creating job opportunities, developing regional economies and communities, helping the competition in the market and offering innovation in so many ways.
Main areas of their presence are manufacturing industry, distribution industry and services industry.
Why are SMEs so important?
SMEs play a major role in the vitalization and development of national economies because they are creating job opportunities, promoting stability and development of regional economies, producing much of the creativity and innovation that fuels economic progress, promoting competition and cooperation and producing high value added products. Large number of people relies on the small and medium enterprises directly or indirectly.
They play a big role with their contribution in labor absorption, poverty alleviation and also revenue generation. The critical importance of this sector warrants much more attention by all the stakeholders. It includes government agencies, academia and also multinational companies because of their vested interest.
Throughout the world, one finds the SMEs to be the employee, the customer and the supplier who provide goods and services to the local market. They also provide the majority of entrepreneurship in any and all economies.
SMEs are the starting point of development in the economies forwarding towards industrialization. Most of the current larger enterprises have their origin in small and medium company enterprises.
The extra growth over the past several years throughout the industrialized countries has been due to the large growth of SMEs.
There is a growing recognition that the market economy starts by establishing small and medium-sized enterprises. Then, it develops by developing the SMEs dynamically. Entrepreneurs establish companies, start business, acquire or change management resources, accumulate them and then expand their businesses. These activities of SMEs represent a big driving force behind the development of a national economy.