The SME sector has become a key driver of India’s economy, fostering entrepreneurship and creating significant employment opportunities with low capital investment. It plays a vital role in the country’s inclusive industrial development, complementing large industries as ancillary units.
Despite its contributions, the SME sector grapples with significant challenges:
- Including access to finance
- Technology adoption
- Global market competitiveness.
About SMEs:
- Small and medium enterprises (SMEs) in India are businesses that are categorized as small-scale industrial (SSI) or medium-scale industrial units.
- They are a key part of the Indian economy and are classified based on their annual turnover and investment in equipment and plants.
Characteristics of SME:
- Classification:
- Micro Enterprises:
- Investment up to ₹1 crore and turnover up to ₹5 crore.
- Small Enterprises:
- Investment up to ₹10 crore and turnover up to ₹50 crore.
- Medium Enterprises:
- Investment up to ₹50 crore and turnover up to ₹250 crore.
- Micro Enterprises:
- Diverse Sectors:
- Operate across manufacturing, retail, IT, textiles, and more.
- Significant role in rural industrialization.
- Scalability:
- SMEs often act as ancillary units, supplying to large industries while fostering entrepreneurship.
Key Statistics:
- Contribution to GDP:
- SMEs contribute approximately 30% to India’s GDP.
- Exports:
- Account for nearly 48% of India’s total exports.
- Employment:
- Provide employment to over 110 million people across urban and rural areas.
- Number of Enterprises:
- Over 63 million registered SMEs operate in India.
Challenges:
- Access to Finance:
- Limited funding options and high borrowing costs.
- Technology Adoption:
- Low penetration of advanced technologies.
- Regulatory Compliance:
- Complex procedures and frequent policy changes.
- Global Competition:
- Difficulty competing with large-scale industries and international players.
Government Support:
- Schemes and Initiatives:
- MSME Samadhan:
- Resolves payment issues.
- Prime Minister’s Employment Generation Programme (PMEGP):
- Encourages entrepreneurship.
- Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE):
- Offers collateral-free loans.
- Production Linked Incentive (PLI) Scheme:
- Supports manufacturing SMEs.
- MSME Samadhan:
- Digital Platforms:
- Udyam Registration:
- Simplifies the registration process for SMEs.
- TReDS (Trade Receivables Discounting System):
- Improves cash flow management.
- Udyam Registration:
Recent Updates about SME:
- The Securities and Exchange Board of India (SEBI) has proposed new guidelines to make Small and Medium Enterprise (SME) Initial Public Offerings (IPOs) safer for investors.
- The changes aim to enhance compliance, reduce risks, and improve transparency in the SME IPO segment, which has seen increased retail participation in recent years.
- Key Proposals:
- Minimum IPO Size:
- Introduction of a minimum IPO size of ₹10 crore, replacing the current scenario where no minimum is mandated.
- Hike in Application Size:
- Increase in the minimum IPO application size to ₹4 lakh, from the current ₹1 lakh.
- Promoter Restrictions:
- Limit the sale of promoter shares to 20% of the issue size during the IPO.
- Profitability Requirement:
- SMEs must show a minimum operating profit of ₹3 crore in two out of the three years prior to filing IPO papers.
- Disclosure and Monitoring:
- IPO offer documents must be made public for at least 21 days before listing.
- A compliance monitoring agency will oversee the utilization of funds raised through IPOs.
- SMEs must disclose quarterly results and shareholding patterns, similar to larger listed companies.
- Rationale Behind the Changes:
- These measures follow concerns over inflated valuations, fund misutilization, and investor losses in the SME segment.
- SEBI’s proposals aim to safeguard smaller retail investors and ensure the SME market remains healthy and trustworthy.
- Minimum IPO Size:
