Strengthening SMEs for a New India

The Small and Medium Enterprises (SME) sector has a crucial role to play in the country’s industrial development. Waking up to the fact that not enough has been done towards its upliftment, the Government has taken certain initiatives that have the potential to raise the sector’s bar and empower it to meet global needs.

For the large number of SMEs that dot India’s landscape the business may perhaps be demonstrably smaller than the industries that rely on it. It is the role played by SMEs that make them critical for the manufacturing industry’s success. SMEs are considered as the backbone of the industrial development owing their big share and remarkable contribution in it, total manufactured exports and the extent to which they have generated employment.

Surmounting challenges

SMEs have a strong presence but face numerous challenges that hinder their growth. Continuous quality improvement, scope and scale are primary trials to be overcome. Sustainable development of manufacturing will happen only when SMEs upgrade the technologies which they deploy for shop-floor activities and enhance the skill-set of workers tending their machines. This will reduce the extensive manual interventions in the processes and enable a smooth flow of data.

Digitalization is slated to help SMEs enhance their efficiency to scale up, overcome manufacturing defects, reduce production cost and shorten production lifecycle. The future will see them meeting global quality standards and strengthening their position as proficient suppliers. The automotive industry is a befitting example where entrepreneurs have used modern technologies in their production process. Catering to the demands of the automotive industry kept them firmly on their feet in terms of R&D, innovation and investments, and we today see them as primary suppliers for many auto companies.

Metal forming and metal cutting exhibitions such as IMTEX provide a large platform for manufacturing industry to sharpen their everyday activities with advanced technologies and create extraordinary competitive advantage as well as sell machine tools to a global market. Companies which have fully understood the power of digitalization and are utilizing it for their business are leading a new wave of growth.

Ensuring SMEs’ progress

The announcements spelled out in the Union Budget 2019 are widely seen as favorable for SMEs. The 25 percent cut in the corporate tax for companies with annual turnover of up to `400 crore is expected to boost investments. It is a positive step towards the development of the SME sector and enhancing their production capacities. The machine tool industry is the mainstay of SMEs and this move bodes well especially for machine tool manufacturers. The Indian machine tool industry has around 1,000 units engaged in the production of machine tools, accessories / attachments, subsystems and parts. More than 90 percent of these are in the SME sector which are likely to benefit from this budget. The ministry’s move is expected to eventually give an uptick to machine tool industry’s business.

Moving forward the Government of India may implement suitable measures to extend credit to SMEs along with connected financial reforms. With India targeting to become a $5 trillion economy by 2024-25 and manufacturing sector contributing $1 trillion to it, SMEs have a large role to play.

The 25 percent cut in the corporate tax for companies with annual turnover of up to `400 crore is expected to boost investments. It is a positive step towards the development of the SME sector and enhancing their production capacities.