SME sector-I

Small and medium enterprises (also SMEs, small and medium businesses, SMBs, and variations thereof) are companies whose headcount or turnover falls below certain limits.
The abbreviation SME occurs commonly in the European Union and in international organizations, such as the World Bank, the United Nations and the WTO. The term small and medium-sized businesses or SMBs is predominantly used in the USA.
EU Member States traditionally had their own definition of what constitutes an SME, for example the traditional definition in Germany had a limit of 500 employees, while, for example, in Belgium it could have been 100. But now the EU has started to standardize the concept. Its current definition categorizes companies with fewer than 50 employees as "small", and those with fewer than 250 as "medium".[1] By contrast, in the United States, when small business is defined by the number of employees, it often refers to those with fewer than 100 employees, while medium-sized business often refers to those with fewer than 500 employees.
Both US and EU generally use the same threshold of fewer than 10 employees for small offices (SOHO).
In most economies, smaller enterprises are much greater in number. In the EU, SMEs comprise approximately 99% of all firms and employ between them about 65 million people. In many sectors, SMEs are also responsible for driving innovation and competition. Globally SMEs account for 99% of business numbers and 40% to 50% of GDP.
In India, the Micro and Small Enterprises (MSEs) sector plays a pivotal role in the overall industrial economy of the country. It is estimated that in terms of value, the sector accounts for about 39 per cent of the manufacturing output and around 33 per cent of the total export of the country. Further, in recent years the MSE sector has consistently registered higher growth rate compared to the overall industrial sector. The major advantage of the sector is its employment potential at low capital cost. As per available statistics, this sector employs an estimated 31 million persons spread over 12.8 million enterprises and the labour intensity in the MSE sector is estimated to be almost 4 times higher than the large enterprises.[2]
In South Africa the term SMME, for Small, Medium and Micro Enterprises, is used. Elsewhere in Africa, MSME is used, for Micro, Small and Medium Enterprises. Size thresholds vary from country to country.
The lack of a universal size definition makes business studies and market research more difficult.
SMEs IN INDIA
With the advent of planned economy from 1951 and the subsequent industrial policy
followed by Government of India, both planners and Government earmarked a
special role for small-scale industries and medium scale industries in the Indian
economy. Due protection was accorded to both sectors, and particularly for small-
scale industries from 1951 to 1991, till the nation adopted a policy of liberalization
and globalization. Certain products were reserved for small-scale units for a long
time, though this list of products is decreasing due to change in industrial policies
and climate.
SMEs always represented the model of socio-economic policies of Government of
India which emphasized judicious use of foreign exchange for import of capital goods
and inputs; labour intensive mode of production; employment generation; non-
concentration of diffusion of economic power in the hands of few (as in the case of
big houses); discouraging monopolistic practices of production and marketing; and
finally effective contribution to foreign exchange earning of the nation with low
import-intensive operations. It was also coupled with the policy of de-concentration of
industrial activities in few geographical centers.
It can be observed that by and large, SMEs in India met the expectations of the
Government in this respect. SMEs developed in a manner, which made it possible
for them to achieve the following objectives:
• High contribution to domestic production
• Significant export earnings
• Low investment requirements
• Operational flexibility
• Location wise mobility
• Low intensive imports
• Capacities to develop appropriate indigenous technology
• Import substitution
• Contribution towards defense production
• Technology – oriented industries
• Competitiveness in domestic and export markets

At the same time one has to understand the limitations of SMEs, which are:
• Low Capital base
• Concentration of functions in one / two persons
• Inadequate exposure to international environment
• Inability to face impact of WTO regime
• Inadequate contribution towards R & D
• Lack of professionalism
In spite of these limitations, the SMEs have made significant contribution towards
technological development and exports.
SMEs have been established in almost all-major sectors in the Indian industry such
as:
• Food Processing
• Agricultural Inputs
• Chemicals & Pharmaceuticals
• Engineering; Electricals; Electronics
• Electro-medical equipment
• Textiles and Garments
• Leather and leather goods
• Meat products
• Bio-engineering
• Sports goods
• Plastics products
• Computer Software, etc.
As a result of globalization and liberalization, coupled with WTO regime, Indian
SMEs have been passing through a transitional period. With slowing down of
economy in India and abroad, particularly USA and European Union and enhanced
competition from China and a few low cost centers of production from abroad many
units have been facing a tough time.
Those SMEs who have strong technological base, international business outlook,
competitive spirit and willingness to restructure themselves shall withstand the
present challenges and come out with shining colours to make their own contribution
to the Indian economy