Need for bold changes in policy

India's growth story is significantly dependent on developing a strong SME sector. India's GDP is estimated to grow from $2 trillion to $5 trillion by 2025, with significant contribution by the services segment (approximately 60 per cent), followed by manufacturing and agriculture - the growth drivers being significant investment and expenditure by the government and the private sector. These comprise a range of infrastructure projects - smart cities, river waterways, airports, ports, urban transport, power plants, bridges, dams, roads, defence, railways - across multiple business segments such as telecommunications, health care, education, aviation, tourism, housing, renewable energy, automobile, digital, skilling, sanitation, mining, industrial and market clusters (Make in India), and many more. These investments are in response to the expected increase in domestic demand arising from significant growth in the number of households and their purchasing power over the next decade. This is likely to lead to significant growth in per capita consumption across business segments.

The ability of large corporates to achieve sustainability and competitive growth both in domestic and global markets is dependent on the development of a strong SME vendor and supply chain ecosystem. India's domestic market is diverse and complex. In order to meet the growth in domestic consumption, the manufacturing and services sectors will have to keep developing their value chain from procurement and sourcing, processing and conversion, to sales and distribution across the growing urban and rurban market segments in an efficient and cost-effective manner. This will require the development of an SME ecosystem at national and regional levels in order to be successful on a sustainable basis. The nature and extent of investment in the SME segment by the government and large private corporates are required to increase significantly.

The government and large corporates should change their mindset and approach towards the SME segment; else, it will be a challenge to develop a strong SME ecosystem to support their own growth plans and efficiencies on a sustainable basis.

The SME ecosystem on its own is continuously developing in response to the growing demands and needs of the government as well as the large corporates. Further, the growth in domestic demand explained earlier, especially in regional, rurban and rural markets, would also be met by the regional and SME segment. Reducing dependence on imports for domestic demand is an important area where SME development and growth can play an important role.

The SME ecosystem is further expected to be the one of the largest employment generators including entrepreneurship as the first career choice. India has to generate new employment for 10 million people on an annual basis, and the government and large corporations are unlikely to be able to meet this requirement entirely on their own. The growth of the SME segment is expected to fill this gap. The ease of doing business issues continue to be a deterrent in the emergence of a stronger SME segment.