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MICRO, SMALL AND MEDIUM ENTERPRISES IN INDIA: CHALLENGES AND OPPORTUNITIES MUKESH R Independent Researcher, Andheri (East), Mumbai
Abstract Indian literature has well documented the importance of micro, small and medium enterprises in terms of their contribution towards employment, output and exports. There were only a handful of studies which tried to examine the opportunities and challenges faced by micro, small and medium enterprises in the wake of globalisation. The present study examines the impact of globalisation on micro, small and medium enterprises. The paper also looks at the opportunities and challenges after the onslaught of global economic crisis. Key words: enterprises, globalisation, economic crisis, WTO. INTRODUCTION The Micro, Small and Medium Enterprises are a part and parcel of manufacturing sector in India. They lay down the foundation stone to the manufacturing sector. If the base is strong, the entire manufacturing sector is considered to be strong. A small and medium enterprise can be easily started with less amount of capital. It is thus suitable for developing entrepreneurial spirit in the young generation. The Micro, Small and Medium enterprises are promoted in every country for bringing down regional disparities in development. There is no dearth of human resources for India. So the number of employees cannot be considered as the criterion for identifying the small and medium enterprises in India. In India, small and medium enterprises cover all enterprises having investment in plant and machinery up to Rs.100 million.
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IMPACT OF GLOBALISATION ON SMEs Globalisation denotes the integration of the domestic economy with the world economy. It enables the free movement of goods, services, ideas, capital and technology across national borders. The process of globalisation accelerated since the beginning of 1980s and subsequent to the establishment of World Trade Organisation (WTO) on 1st January 1995. The globalisation in itself is controversial. It has gains and losses as well. The strategy of every country is to maximise the gains and minimise the losses. Globalisation has paved the way for unequal competition – a competition between giant multinational companies and dwarf Indian enterprises. The survival of small scale enterprises depends on the capability to upgrade existing technology. This may call for technology transfer from other countries. Table 1 Performance of Micro, Small and Medium Enterprises in India in the Post Globalisation Period
Year
MSMEs (Lakh numbers)
Fixed Investment (Rs. Crore)
Production at current prices (Rs. Crore)
Employment (Lakh persons)
Exports (Rs. Crore)
1992-93 73.51 109623 84413 174.84 17784 1993-94 76.49 115795 98796 182.64 25307 1994-95 79.6 123790 122154 191.4 29068 1995-96 82.84 125750 147712 197.93 36470 1996-97 86.21 130560 167805 205.85 39248 1997-98 89.71 133242 187217 213.16 44442 1998-99 93.36 135482 210454 220.55 48979 1999-00 97.15 139982 233760 229.1 54200 2000-01 101.1 146845 261297 238.73 69797 2001-02 105.21 154349 282270 249.33 71244 2002-03 109.49 162317 314850 260.21 86013 2003-04 113.95 170219 364547 271.42 97644 2004-05 118.59 178699 429796 282.57 124417 2005-06 123.42 188113 497842 294.91 150242 2006-07 261.01 500758 709398 594.61 182538 2007-08 272.79 558190 790759 626.34 202017 2008-09 285.16 621753 880805 659.35 NA 2009-10 298.08 693532 982919 695.35 NA 2010-11 311.52 773487 1095758 732.17 NA Source: Annual Report of MSME – Ministry of micro, small and medium enterprises, New Delhi. The employment potential of micro, small and medium enterprises is really surprising. The employment potential was so robust even at the time of global economic crisis. However this 17
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could also be due to the increase in fixed investment in that period. The impact of fixed investment on the exports sector is very low as compared to the manufacturing and employment sectors.
Table 2 Labour Productivity in Micro, Small and Medium Enterprises in India Year
Labour Productivity (Rs. Thousands)
1992-93
48.28
1993-94
54.09
1994-95
63.82
1995-96
74.63
1996-97
81.52
1997-98
87.83
1998-99
95.42
1999-00
102.03
2000-01
109.45
2001-02
113.21
2002-03
121.00
2003-04
134.31
2004-05
152.10
2005-06
168.81
2006-07
119.31
2007-08
126.25
2008-09
133.59
2009-10
141.36
2010-11
149.66
Source: Computed from Table 1 Labour productivity shows the output per employee. Table 2 clearly shows that labour productivity was steeply declined from 168.81 in 2005-06 to 119.31 in 2006-07. This could be due to the fears arising from economic crisis which has hit all the sectors in the economy. Even though the production of the industry has increased, the payments for employees may be reduced. 18
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CONCLUSION The micro, small and medium enterprises in India has been a recession-proof one. The impact of global economic crisis on fixed investment, production, employment and output of micro, small and medium enterprises was very negligible. However, labour productivity was fluctuated highly during the period. This could be due to the fears arising from global economic crisis. Even though the production of the industry has increased, the payments for employees may be reduced. It is the need of the hour to study the comparative performance by making a decomposed analysis of small scale industries into clusters and dispersed units.
REFERENCES 1. Kour, Manjit (2013): ‘SMEs and their significance in India’, Shiv Shakti International Journal in Multidisciplinary and Academic Research, Vol.2, No.2, pp.1-8. 2. Mallika, V (2012): ‘The role of small scale industry in reduction of poverty in India’, Available at http://www.indiastat.com, Accessed on March 1, 2013. 3. Ponmani, R and R Annapoorani (2013): ‘Growth and Performance of Micro, Small and Medium Enterprises in India in Post Globalisation Period’, International Journal of Research in Commerce, Economics and Management, Vol.3, Issue 03, pp.39-41. 4. Subrahmanya, M H Bala (2005): ‘SMEs in India: Will they able to join “Global Chains”, The Chartered Accountant, pp.421-427. 5. Venkatesh, Sudha and Krishnaveni Muthiah (2012): ‘SMEs in India: Importance and Contribution’, Asian Journal of Management Research, Vol.2, Issue 2, pp.792-796.
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