Smaller enterprise are much greater in number

In most economies, smaller enterprises are much greater in number. In the EU, SMEs comprise approximately 99% of all firms and employ between them about 65 million people. In many sectors, SMEs are also responsible for driving innovation and competition. Globally SMEs account for 99% of business numbers and 40% to 50% of GDP.

In India, SME constitute an important segment . The contribution of SSIs alone has been greater than 7% to GDP and 40% to Industrial production. It is the second largest provider of employment after agriculture. SMEs also contribute to 35% to total exports directly and a significant amount of exports indirectly through large trading houses or third parties. The SMEs are dominant players in some of India’s major export sectors namely Textiles and Garments, Leather products, Gems and jewelry, Handicrafts among others. They also contribute substantially in industrial goods segments in sectors such as electricals, engineering, rubber and plastics.

Addressing participants in the award ceremony for SME sector in 1st Sepetembor,2008, the Indian Prime Minister, Dr Manmohan Singh, elaborated the importance of the SME sector for employment generation.

"The very positive contribution that this sector makes to employment is of utmost importance to our vision of shared and equitable growth. This sector provides employment to over 42 million people. It contributes about 45 per cent of the total manufacturing output and nearly 40 per cent of India's exports. It is the capacity of this sector to generate economic activity at the local level that prompted Gandhiji to give the pride of place to Khadi. He dreamt of an India comprising of self contained villages using local raw materials, local skills, serving local markets and providing employment to people locally near the places where they live," said Singh.

The Prime Minister further elaborated the resilience and the adaptability of this sector in the wake of a changing economic scenario.

"This sector has shown continued dynamism in terms of growth in the number of enterprises, production and the capacity to contribute to manufacturing output and exports. There were apprehensions about the impact of liberalization on the growth of this sector. However, experience during the past decade has amply demonstrated that this sector cannot only survive competition, but can also grow faster than the overall manufacturing sector. This demonstrates the high degree of resilience, entrepreneurial skills and the capacity for adaptation of people operating in this important sector," he added.

This again shows the importance of the SME in the growth of Indian economy, and also its unique contribution on employment generation.