Key challenges SMEs in India face and why?
- April 24, 2017
- Posted by: Blog
- Category: SME's
India is a developing country and most of the India’s Economic Business are influenced by Two main sectors – Multi national corporations and SMEs ( Small & Medium Enterprises ). All the companies have to deal with a government department at one time or the other and so they have to face corruption on a regular basis. Whereas in the Growing Phase Multi- national Companies dominates the domestic companies as well as the SMEs due to which small and medium enterprises face many challenges which are much more complex. As we know, India has now been growing at a steady pace. To continue at the current pace, India needs to strengthen one of its core micro factors one of them being the Small & Medium Enterprises (SME) segment in India.
Some of the Key challenges faced by SMEs are listed below
1. Scarcity of Resources
One of the most important challenge faced by SMEs in India is Scarcity of Resources such as Raw material and labor. Due to systemic factors the government invests the public resources, sometimes they are uneconomic high profile projects rather than necessary projects such as infrastructure development or development of rural India. Which hinders the growth process and overall development of SMEs located in such areas.
2. Lack of FDI’s
Lack of transparency and compliance led inefficiencies makes the Micro sectors and SMEs in India unattractive for the the foreign investors . Lack of FDI in the Indian economy can be seen by the fact that though the FDI rules have been eased by the Indian Government in the recent past but we are yet to see its benefits for India for MSMEs.
3. Lack of Finance
One of the most important barrier for perfect utilization and competing market in micro sector. Again banking prudential norms with low compliance and transparency levels are key factors why SMEs are able to monetize only limited resources from banks and government especially for high risk projects. Insufficient basic infrastructure facilities like irregular power and water supply, sub-par roads and railway connectivity etc. are some of the factors that lowers the growth process of SMEs in India.
4. Lack of Technology
One of the crucial factor the decides the success or failure of an Enterprise is the use of Technology for the production. The best technology helps the enterprise to reduce it’s cost of production, improves productivity and brings efficiency. SMEs need to be slightly nimbler to harness the latest technologies to boost efficiencies.
5. Lack of Marketing Assistance
When it comes to marketing of products or services internationally, any small or medium company is always hit by its scarcity of budgets, which in turn limits its growth. A B2B ( business to business) market is a platform where sellers can list their businesses free of cost and use the power of internet. But due to lack of technology and knowledge the workforce fails to explore the benefits of internet in today’s era. All this leads to slow growth of SMEs in India.