Friday, January 9, 2009

My article on SME in DNA, Mumbai, dated 9th of January 2009


Home Money Comment

SMEs more prone to downturn blues
Manishankar Chakraborty
Friday, January 9, 2009 3:14 IST

The global slowdown is impacting all economies and India is no exception. Impact on the Indian economy may not be felt with immediate effect, but in the long run, it's going to have a bearing on the Indian populace.

Many leading businesses are feeling the heat and have started to take evasive action, either in the form of cost cutting or by halting production and expansion plans. If this is the state of big enterprises, imagine the impact on small and medium enterprises (SME) who have little resources and rely on bigger counterparts for a smooth functioning. The emphasis to boost the SME sector was felt long time back, however, only half-baked measures have been taken, resulting in these units fighting for their survival on a daily basis.
The major difference between typical organisations and SMEs is in the headcount and their overall scale. These make SMEs more susceptible to economic turmoil.

To quote from Wikipedia, "EU member states traditionally had their own definition of what constitutes an SME, for example the traditional definition in Germany had a limit of 250 employees, while, for example, in Belgium it could have been 100. But now the EU has started to standardise the concept. Its current definition categorises companies with fewer than 50 employees as "small," and those with fewer than 250 as "medium."By contrast, in the US, when small business is defined by the number of employees, it often refers to those with fewer than 100 employees, while medium-sized business often refers to those with fewer than 500 employees."

In the European Union, almost 99% of the firms are SMEs, employing 65 million people. Globally, SMEs contribute 40%-50% to GDP and in India, the sector accounts for 99% of business numbers and contributes 40%-50% to the GDP. It's, therefore, imperative for decision makers to understand the importance of the SME sector and make the necessary moves.

The author is an expert on SME and works for a Dubai-based firm.

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