SME manufacturing in India: a study of factors contributing to success in the SME sector and future of different SME sectors in India

Abstract

Small and Medium Enterprises ( SMEs ) share in national GDP is measured around 17% in the last couple of years and is projected to touch 22% of India's GDP by 2012.We also saw that SMEs grew at 35% over the last wo years and would register a 40% growth rate driven by technology. Their present manufacturing contribution is around 40-42%. Thus unlike China, which believes in Big , is better; India has been able to demonstrate considerable success in companies like Super Sales India Limited (Textiles), Sona, Caparo (Auto Components), Bhavani Industries (forgings), and many other sectors through the SME model. Numerous political entities as well as financial institutions have shown considerable interest in the SME sector. The current research undertakes a detailed analysis of the existing regulatory framework and policies that help SMEs scale up to a level where they are visible on the international map. We focus our research on identifying industry sectors which have the potential to become big in the SME space. We reviewed sectors which arealready successful, sectors which have most parameters common to these and then saw how the current policy framework helps them grow rapidly. We enumerate a list of factors that are responsible for the success of SMEs in India through an analysis of capabilities of different companies. The research concludes with a strategy roadmap on how the SMEs can benefit from foreign players through technology inflows, and what is the best way for foreign players to enter India (acquistions, JVs, greenfield, etc.).