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 bidding Corruption the government invests the public resources in 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
Due to high influence of Multi-national corporation over the Micro sectors and SMEs in India the foreign investors hesitate to invest in projects of SMEs . 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 in long term. Thus it would be more difficult for the SMEs and budding Entrepreneurs to get loans and this may hamper their development.
3. Lack of Finance
It has emerged as the most challenging barrier for perfect utilization and competing market in micro sector. SMEs are not able to raise funds from banks and government especially for high risk projects. Insufficient basic infrastructure facilities like irregular power and water supply, bad road 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, but SMEs fails to cope up with the latest technology due to lack of finance in India.
5. Bad Economic Environment
Another external factor that hampers the growth of a small business is that corruption creates a bad economic environment in the country. A lot of money is spent on corruption activities and that money drains out to the economy and thus leaves the country to face shortage of cash flow. All such factors led to the poor growth of SMEs sector in India.
6. 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.