India is one of the rapidly growing countries situated outside the western world. Though it is a developing country, and has not yet attained the status of developed, its financial position is far better than other countries enjoying the same status. To understand the idea better, it is important to learn what the true strength of the Indian economy is.If we do a close look at the history of the country, we will get to know that the Indian economy has gone through several twists and turns. In the beginning, it was a fan of the soviet model. The adoption of the five-year-plan policy and the import substitution policy was a part of its affection towards the USSR model. The disintegration of the USSR overturned the entire story.
Actually, even before the disintegration, the change in the mood of the Indian economy was evident, through it largely remained unnoticed or unrecognised. Anyway, finally, in the year 1991, India embraced a new economic model, which transformed the destiny of the country forever. The action led the country towards the western model, which was the exact opposite of the soviet model. The country had to take down the iron curtain it had installed when it had embraced the soviet model. The development, in one way, was hugely beneficial, though was extremely controversial for the import-export relaxations and compromises offered in exchange of the benefits assured.
It is the prominent story we know about the Indian economy. What is less discussed is the inner stories where the actual soul rests. Small and Medium Enterprises (SME) is definitely an unignorable factor when Indian economy is discussed. It accounts for at least 75 percent of the total employment in the industrial sector. The key point to be remembered is that it does not matter what model we follow but it matters how the SME sector is handled. In fact, it is what the Indian experience conveys. The biggest strength of the country is its population. It is the second largest country in the world in terms of popular, after China.
SME provides the best opportunity to benefit from this strength, as it is a labour-intensive sector, as compared to the rest.The Indian economy is a capital scarce economy. As we all know, the country was under an extremely destructive colonial rule for generations. When, finally, we were liberated, we were left with nothing but a dream for a just society.SME is what helps the country address the issue of capital scarcity, as it demands less capital input and has low gestation period. Not every state in the country enjoys the same economic status. This imbalance is detrimental to the dream the country carries.
SME allows the country to bring down this imbalance as it helps to implement the decentralised distribution of capital. A SME enterprise can be built anywhere. It only requires a small amount of capital input and a small area of land. It can create local job opportunities.The country owes the SME sector for the crucial role it plays in the area of foreign exchange. The sector contributes at least 35 per cent of the country’s total export. It thus helps the country maintain its foreign exchange balance.No big industry can function without the support of this sector. For most of them, the sector is the prime source of their raw materials. If the sector ceases to exist, the giants will be forced to source the materials from the global market and the action may derail their growth ambition. In that sense, all these giants also owe the SME sector.
SME is indispensable. It is the true backbone of our economy – in fact any economy. Not only in the developing world, it is highly relevant in the developed, as well as the under developed world.The western countries like the US are the perfect example how the western world can use the SME sector to boost the performance of its economy.The North American country, at present, is one of the most powerful SME-friendly economic models in the world. The way it has created the structure is worth appreciable and commendable. We, the rest of the world, has many things to learn from this. Let’s learn from the best of the best.