The SME sector is flourishing amid a slew of challenges being thrown its way like the general economic slowdown and the imposition of GST. Though GST may have a net positive impact in the long term, in the short term it would have been something to tackle.

Arun Jaitley said, “Organised sector jobs in India are a very small section. Bulk of jobs created in informal, SME and unorganised sector.”

The government has done its bit to launch several programs specially designed to boost the SME sector. Some of these programs are Public Procurement Policy, Pradhan Mantri MUDRA Yojana, Make in India, Startup India, and Skill India.

One of the stated aims of these programs is to increase the growth of the manufacturing sector by 12-14% per annum and make the sector a 1/4 of the GDP by 2025. SMEs. Manufacturing is a sector with a high prevalence of SME activity and a boost to manufacturing would correspondingly bolster the SME sector.

The number of SMEs in India is estimated to be at 42.50 million if unregistered SMEs are included as well. This is a significant 95% of the total industrial unit in India. Approximately 106 million people, or 40% of India’s workforce are employed by SMEs. This is second only to the agricultural sector. 16% of bank lending is also attributed to SMEs seeking financing.

Despite these staggering numbers, contribution to GDP is quite low and the FM’s desire to strengthen the SME sector shows that he sees it in the country’s interest to nurture a sector that employs so many people and keeps the country motoring along despite a general sluggishness in the global economy.

An encouraging development is that the World Bank in its annual review of countries on their Ease of Doing Business working said that India’s rank had improved to a 100. This is a jump of 30 places. The cause of this significant jump, when otherwise India hovered around a 130-140 for the last three years, is threefold. Three parameters on which India has improved which made this jump in ranking possible are resolving insolvency, protecting minority investors and the improvement of the tax system.

With the government looking at implementing structural reform that would aid in facilitating business activity, the SME sector will also get a boost. The aim will be to bring unorganised players that comprise a large proportion of the SME sector into the fold of the formal economy. The future is bright.