Boosting the SME Business for India’s GDP Growth
Over the last few years, several nations across the world have understood the importance of the small and medium industries in boosting the economy of the country. SMEs have gained great attention recently and the several surveys conducted, indicate that SMEs have the potential to make the economy grow and keep it balanced. The biggest advantage of SMEs in a country like India is generating employment and boosting the nation’s GDP.
There are over 50 million SMEs in India both registered and unregistered which is 95 % of the industrial units in India as a whole. This accounts for 38% GDP. SMEs are responsible for 106 million employments i.e. 40 % of India’s total workforce and produce around 6000 products.
In developing economies like India, strengthening SMEs ensures that the purchasing power of the poor and middle-class section of the society experiences a great uplifting and also that the tremendous difference between the middle class and upper-class section of the society is reduced. SMEs play an important role in the development of the economies across the urban as well as the rural sections of the country. Small and medium scale enterprises have been creating a surge in employment in various sectors as well.
What limits the growth and development of SMEs in India?
The growth and the need to develop SMEs are very crucial for the economy for various reasons. But often these businesses are not able to sustain or grow due to financial limitations at various stages. In India, barely 10% of small organizations get access to formal business credit. When they approach banks for a business loan, they are often asked to submit some kind of collateral against the loan. Usually, these businesses may not have sufficient assets to keep as collateral and even if they do; such loans might take a long time in processing and require a lot of documentation. This processing period could even extend to months in some cases. These limitations have demotivated many SMEs from expanding their business or even continuing their existing business. When these SMEs shut their operations, many jobs would be lost and this could seriously affect India’s economy.
How can SMEs find the right kind of financing?
In order to boost the growth of these businesses and to motivate more people to start SMEs, more options of financial funding should be made available to them.The government, however, has understood the importance of the SMEs in defining the GDP and has enacted several laws and regulations under which small and medium businesses are given all sorts of financial support at a very nominal interest rate.
There are numerous Fintech companies providing small and medium scale businesses unsecured or collateral-free business loans. These loans do not require the borrower to attach any collateral to their loans. These loans are processed in a very short time and require minimal documentation. If the loan applicant fits in the eligibility criteria and provides with complete and proper documentation, they could even get these best small business loans sanctioned in 5 days!
A promising hope for SMEs and India
In a country like India, it is very important to have steady growth, in the last few years when the world’s economy faced problems regarding the average development rate, India continued to grow at over 6% which left the rest of the world amazed, the biggest reason behind this impeccable growth was the strengthened SME sector that boosted the economy at the hour of need.
These SMEs contribute 6.11 % in the manufacturing GDP and 24.63 % in the service sector GDP. SMEs have maintained a growth rate of 10 % throughout the years. The global growth rate in 2016 and 2017 was recorded as 3.40 % and 3.80 % respectively.
Considering how important the SMEs are towards our growing economy, making sure that they have easy access to adequate financial funding is critical. With options such as unsecured business loans,
An SME could witness a lot of success. If planned well with a clear objective as to how much fund is required and how they plan to use it in a detailed, strategic way these businesses could grow immensely, thereby improving the country’s overall GDP.Even 5% of the unmet SME lending requirements in India could turn out to be a $15 billion opportunity by the year, 2020.