subject: Sme Predominance Impairing Indian Manufacturing Industry [print this page] Unlike the rest of Asia, the manufacturing industry in India is largely dominated by SMEs and MSMEs. Consequently, the small firms account for 84% of the total manufacturing employment in the country, while the figure is 69.6% in the Philippines and 24.8% in China.
Furthermore, large manufacturing firms in India account for a meagre 10.5% of the total employment in the sector, while the figure stands at 51.8% in China and 22.8% in the Philippines, states a study conducted by the Asian Development Bank (ADB).
Although the preponderance of the small and micro enterprises in the Indian manufacturing sector may apparently appear beneficial since SMEs are the major growth drivers of a countrys economy, in real terms it points to lack of decent alternate job opportunities, says Rajan Malik, an analyst working with a leading power equipment manufacturing firm in Mumbai. Mr Malik further added that the SME-MSME dominance also lowers earnings of both workers and enterprises as well as weakens the productivity of the sector, thereby affecting the sector as a whole.
The other sad story
Apart from the inability to create productive employment, the micro and small industries dominance in the countrys manufacturing sector also restricts the sector from emerging globally competitive. This is well explained by the Noida-based auto analyst Rimili Chowdhury, who opines, The large share of the SMEs in the Indian manufacturing sector is eroding the potential economies of scale and raising manufacturing costs, thereby making Indian products less competitive in the global market.
Going forward, an active intervention from the government is required to make the sector competitive in the international market.
by: David Parks
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