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SME's and Small Scale Industries, The Growth Factors and Guidelines To Set Up Small Scale Industries in India - An Overview

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table of contents
Table of Contents
  • How Is SME Sector Growing in India: An Analysis
  • Factors Responsible for Growth of Small and Medium Businesses
  • How To Set Up Small Scale Industry

Small and Medium Enterprises (SMEs) are rightly tagged as the engine of the modern Indian economy. As per the experts, the small and medium enterprises in India must be encouraged to achieve the stable Gross Domestic Project growth trajectory.

The SME sector in India is definitely growing at an exceptional rate. Still, there are some important things that need to be focused upon so that best out of these enterprises can be obtained. Here is a brief analysis of the Indian SME sector.

some figures of interest
Some Figures of Interest
  • The Indian SME market is worth $5 billion.
  • There are over 11 million SME units in India that produce more than 8,000 products.
  • Nearly 90 percent of the Indian industrial units belong to the sector of small and medium enterprises.
  • The SMEs contribute 40 percent to the overall industrial output of the country.
These enterprises contribute almost 35 percent to the Indian industrial export.
  • Finally, these enterprises are estimated to grow at the rate of 20 percent per year for upcoming years.
main reasons for sme growth
Main Reasons for SME Growth
  • Foreign and local fund providers are taking huge interest in the small and medium enterprises of India.
  • Banking sector has also shown a keen interest in lending credit to these enterprises.
  • Many recent mergers have taken place in the sector.
The sector has significantly contributed towards the domestic production as well as the export earnings.
  • Low investment is required to start and maintain these enterprises.
  • The sector has contributed impressively towards job creation and increase in individual incomes.
  • Technological growth is also a factor for growth of SME's in india as there are several trade portals and business directories available online with huge database of buyers, sellers, manufacturers who are basically back bone of SME's.
challenges ahead
Challenges Ahead
  • Infrastructure needs to be developed for setting up the SMEs in the rural sector of the country. Transportation, electricity and communication are the main parts of the infrastructure required.
  • Technology need to be evolved so that quality products are manufactured by the sector.
  • Lack of information about the inputs, including raw material, machinery and skills, is one critical challenge in front of the owners of these enterprises.
  • High level of research and development is required.

Planning is not only the first step of starting a business, but it should be done every month without taking any break. You must know how to plan about your business marketing, making business budgets, setting up monthly targets and so on. Accounting is another activity that you need to practice for small business growth. You must know the monthly profits and expenses. Budget should be prepared without failing to ensure that your funds are strategically spent.


One important practice for rapid small business growth is extensive marketing and promotion. You must eye at global buyers and not only the local buyers. Growth is possible in the local market, but rapid growth requires you to extend your reach at the global level. For this, internet marketing is the best medium one can think of. You can choose b2c and b2b environments to take your business to more and more buyers.


Fast small business growth is possible by regularly updating your products and services. Retaining old customers and building new relations should be done simultaneously by giving good quality products and services to them. Most importantly, you should have a strong communication medium to spread your latest business updated to your prospects.


Offering discounts and special offers too help in rapid small business growth. Your availability and on-time delivery are other good approaches to win loyal customers for your business that will help your business to grow faster and further. Give all these best shots to expect the business success to keep on rising.


Small scale industries have a large contribution in the growth of an economy. If we take example of India, the fastest growing economy in the world, the small scale ventures have gained a huge success quotient. Not only these enterprises produce export quality goods, they have also created thousands of job opportunities as well.

Another advantage of small scale enterprises is that they are easy to set up and can fulfill one’s dream to become an entrepreneur. However, there are some important steps that you must follow to set up a small scale industrial unit. Learn about them from the following discussion.


First of all, you need to prepare the description for the small scale industry you want to set up. You have to decide whether you wish to have a corporation, proprietorship or partnership. Next, you need to describe the product you wish to manufacture or the service you wish to offer. While choosing the product or service you want to offer, you must conduct a good market research and learn about the prevailing competition in the market.


The next step is to choose a location to set up your small scale industry. Make sure you consider things like availability of raw materials, labor, transportation services and other such things while choosing the location. The next big step is to arrange for finance. If you don’t have enough finance, the best way is to borrow a loan. You may learn about financial aid offered by the government of your state or country. However, you must simultaneously plan on how you would repay the loan in future.


Production management is the next step, once you are able to start your small scale industry. This includes allocating space for different operations and choosing your production methods. Make sure that you follow the practices for quality testing and keep on improving. You have to purchase required machinery and hire employees and workers for different departments.


Marketing and business advertising form the next big step of setting up a small scale industry. Online business directories and various traditional forms of advertising can be used to gain exposure for your business. You have to decide prices for your products or services, keeping in mind the profit margin.

Planning in advance is a useful aspect of setting up a small scale venture. Keep on assessing and improving your plan at every stage. All these steps are the integral parts of the process to start up a small scale unit.

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