Small and medium enterprises (SMEs) in India has performed exceedingly well

and enabled the country to achieve a wide measure of industrial growth and diversification.

By its less capital intensive and high labour absorption nature, small-scale industry (SSI) sector

has made significant contributions to employment generation and also to rural industrialisation.


The SME/SSI sector is ideally suited to build on the strengths of the country’s traditional skills

and knowledge. By the infusion of technologies and capital and innovative marketing practices,

SME/SSI sector can achieve sustained growth. This is the opportune time to set up projects

in the SME/SSI sector.


It may be said that the outlook is positive, indeed promising. This expectation is based on the

following essential feature of the Indian industry and the demand structures.

The diversity in production systems and demand structures will ensure long-term

co-existence of many layers of demand for consumer products / technologies / processes.

SME/SSI sector will provide buffer to the Indian economy when employment opportunities

are drying up in other sectors.


There will be flourishing and well grounded markets for the same product / process,

differentiated by quality, value addition and sophistication. This characteristic of

the Indian economy will allow complementary existence for various diverse types of units.

The promotional and protective policies of the Government have ensured

the presence of this sector in an astonishing range of products, particularly in consumer goods. 

However, the limitations of the sector have been the inadequacies in capital,

technology and marketing. The process of economic reform and liberalisation, coupled

with Government support, will encourage the infusion of capital, technology and modern

marketing practices in the SME/SSI sector.

The small-scale industries sector plays a vital role in the growth of the country.

It contributes almost 40% of the gross industrial value added in the Indian economy.

It has been estimated that a million Rupee of investment in fixed assets in the small-scale sector

produces 4.62 million Rupee worth of goods or services with an approximate value addition of

ten percentage points.


The small-scale sector has grown rapidly over the years. The growth rates during the various

Five year plan periods have been very impressive. The number of small-scale units has increased

from an estimated 0.87 million units in the year 1980-81 to over 3 million in the year 2000.

When the performance of this sector is viewed against the growth in the manufacturing

and the industry sector as a whole, one is impressed with the resilience of the small-scale sector.


SSI Sector in India creates the largest employment opportunities for the Indian populace,

next only to Agriculture. It has been estimated that 100,000 rupees of investment in

fixed assets in the small-scale sector generates employment for four persons.


SME/SSI sectors will form the basis for the creation of employment / self-employment

in the country, when employment opportunities are drying up in the organized private sector,

public sector and local, state and central governments.


Food products industry has ranked first in generating employment, providing employment

to 0.48 million persons (13.1%). The next two industry groups were Non-metallic mineral

products with employment of 0.45 million persons (12.2%) and Metal products with

0.37 million persons (10.2%). In Chemicals & chemical products, Machinery parts

(except Electrical parts), Wood products, Basic Metal Industries, Paper products & printing,

Hosiery & garments, Repair services and Rubber & plastic products, the contribution ranged

from 5% to 9%, the total contribution by these eight industry groups being 49%.

In all other industries, the contribution was less than 5%.


Per unit employment was the highest (20) in units engaged in beverages and

tobacco & tobacco products, mainly due to the high employment potential of this industry,

particularly in Maharashtra, Andhra Pradesh, Rajasthan, Assam and Tamil Nadu. Next came

Cotton textile products (17), Non-metallic mineral products (14.1), Basic metal industries

(13.6) and Electrical machinery and parts (11.2.) The lowest was 2.4 in Repair services line.


SSI Sector plays a major role in India's present export performance. Approximately 45% to

50% of the Indian Exports is contributed by SSI Sector. Direct exports from the SSI Sector

account for nearly 35% of total exports. Besides direct exports, it is estimated that

small-scale industrial units contribute around 15% to exports indirectly.

This takes place through merchant exporters, trading houses and export houses.

They may also be in the form of export orders from large units or the production of parts

and components for use for finished exportable goods. It would surprise many to know

that non-traditional products account for more than 95% of the SSI exports. 

The exports from SSI sector have clocked excellent growth rates in the decade of 1990s.

It has been mostly led by the performance of garments, leather and gems and jewellery

units from SME/SSi sector. The product groups where the SSI sector dominates in exports,

are sports goods, readymade garments, woollen garments and knitwear, plastic products,

processed food and leather products.  The SSI sector is reorienting its export strategy

towards the new trade regime being ushered in by the WTO.


The following data reflect the trends in growth of exports from the SSI sector:


Share of SSI Exports

Share in Total


Rs. In Crore

































OPPORTUNITY: The opportunities in the small-scale sector are enormous due to the following aspects:

Less Capital Intensive;

Extensive Promotion & Support by Government;

Reservation for Exclusive Manufacture by small scale sector;

Project Reports - Subsidised Rates;

Funding - Finance & Subsidies;

Machinery Procurement;

Raw Material Procurement;

Manpower Training;

Up-gradation of Technical & Managerial skills;

Tooling & Testing support;

Reservation for Exclusive Purchase by Government;

Export Promotion;

Growth in demand in the domestic market size due to overall economic growth;

Increasing Export Potential for Indian products;

Growth in Requirements for ancillary units due to the increase in number of green-field units coming up in the large scale sector.


Click to Order Project Reports for SMEs

Click to Go Back


Online startup boom: What made the year 2014 special?


The Indian entrepreneurship eco system got its biggest fillip in 2014 as the year saw an unprecedented number of new businesses spring up, aided by an exuberant investor sentiment around startups. As more Indians took to their smartphones to access the internet, in many cases for the first time, numerous consumer technology ventures were built to cater to this growing population.

But what vastly differentiated 2014 from the previous years was the never-seen-before amount of capital that was funnelled into these digital companies across all stages.

It wasn't only the bigger online commerce players which received gobs of money , thanks to the trickle-down effect even the early-stage startups were flush with funds. The entrepreneurial zeal was palpable across food technology, online travel, grocery delivery, offline-to-online services, all of which were the preferred sectors for starting up as a total of 1,259 new ventures sprouted through the year.

Sample this: in the food tech space, for instance, out of 145 companies that operate in the country , 66 were created in 2014; almost half of the 83 local and home services ventures that exist today were built this year, according to data provided by Tracxn, which curates information about Indian startups and private companies.

Catch 'em young

"Just in the last six months, I have seen a massive uptick in the number of startups looking for funding at all stages. What makes this even more exciting is that the quality of startups continues to rise with the numbers going up," says Pankaj Jain, venture partner at 500 Startups, a Silicon Valley seed fund & accelerator.

As many as 270 early-stage investments were made in startups this year, with venture capital funds starting to make seed investments and further strengthening the domestic startup story. The VCs' intent was to catch these entrepreneurs early on at lower valuations, triggering the fight for who gets in first.

"More of the very early stage startups with little or no revenues received angel and VC backing. Driving this were new entrepreneurs starting businesses based on proven models in the US; we saw things like food tech and financial tech become buzzwords.Investors came into these companies very early ," says Rehan Yar Khan, an angel investor who raised Rs 300 crore in September to start an India-domiciled venture capital fund Orios Venture Partners.

Traditionally, VCs would leave it for angel funds and individual investors to plough in riskier, seed capital, but not anymore. "We saw a tectonic shift happening in the Indian entrepreneurship ecosystem with a once-in-a-lifetime confluence of unique factors of ever younger, driven and fearless entrepreneurs in a deepened, growing and well-funded market," says Avnish Bajaj, MD at Matrix Partners India, which made six seed-stage investments like Limetray and GrownOut, this year.

Big theme: mobile internet

Even as early-stage investments gained traction, the big winners as far as attracting disproportionate amounts of investor money were the later-stage ventures in the consumer tech startup space -in particular the online commerce biggies.

An eye-popping 46 funding rounds later, Indian e-commerce raised $3 billion this year, according to Tracxn -- the funding was largely split between Flipkart and Snapdeal. The China comparisons grew louder for Indian e-tailers after the much-ballyhooed IPO of Jack Ma's Alibaba earlier this year.

The next five years of India (internet and mobile) would be equivalent to the last seven years of the Chinese market, projections by Matrix Partners, based on a recent Nomura Research, say . This is largely due to the heightened growth of mobile internet. "Consumer tech companies exploded, up four times from four years ago as investment rounds grew five-fold to 300 plus this year compared to 60 in 2010," says Abhishek Goyal, co-founder of Tracxn. Food tech, which was one of the hottest sec tors being tracked by VCs, saw startups like TinyOwl and Hola Chef begin operations this year. A spiffy-looking location-based food ordering app, TinyOwl went live in March.

Founded by five IIT-Bombay batchmates, it got on board Sequoia Capital and Nexus Venture Partners just a few months after the launch, raising $3 million. Says Harshvardhan Mandad, co-founder of TinyOwl, "As many of our seniors (from IIT) who have done startups are becoming big like Flipkart, Snapdeal, Ola, Housing, it gives us confidence. VCs are also aggressively looking to fund Indian startups as we are in a growth stage. We're lucky to be starting at this time."

New investors chase tech startups

While money came easy , some blamed the frothy tech valuations on the advent of hedgies into the Indian startup ecosystem this year, who put in $525 million till October across internet companies, according to Venture Intelligence data.While Tiger Global, the largest shareholder in Flipkart and a top dog among foreign investors in the domestic internet story, established a beachhead here in 2007 when it bet on Just Dial, newbies like Falcon Edge, Steadview Capital, among others, started their innings in 2014.
Hedge funds weren't the only ones to join in.Other heavyweight tech investors like Russian tycoon Yuri Milner personally backed Olacabs and while his investment firm DST Global pumped millions into Flipkart. Japan's SoftBank made its big-bang entry (keeping aside its earlier investment in mobile ad network InMobi) as it poured almost a billion dollars across Snapdeal, Olacabs and Housing in one stroke.

"Unprecedented global appetite for getting a piece of India's digital consumption story fuelled some audacious bets across many sectors. Entrepreneurs were rewarded with big checks and high valuations if they executed well on aggressive, hyper growth strategies," says Prashanth Prakash, Partner, Accel Partners.

Soaring valuations, staying private

The worry then is whether this foreign capital will dry up once the investor exuberance fizzles out. "I believe that markets often get the macro trend right but get over-optimistic about the micro trends. There'll be a day of reckoning, where investors will start demanding results and start re-pricing these companies. There'll be a shaking out of the sector and the wheat will be separated from the chaff," says Aswath Damodaran, professor of finance at the Stern School of Business at New York University.

In this cycle, there has been a structural change in the nature of capital markets with a shift of dollars from public to private investing as tech companies globally opt for private money instead of going for an IPO. "We haven't seen these kinds of private market valuations before as they'd have been in the public markets then. It's nowhere near what we had in 1999-2000, whether it's the number of IPOs, maturity of companies when going public or valuation metrics. It's markedly different, this does not feel like a bubble. However, at some point, we will get to a bubble," Scott Kupor, managing partner at Andreessen Horowitz, told TOI in an earlier interview.

The likes of Uber, Dropbox, Airbnb and closer home Flipkart and Snapdeal continue to attract investors, bolstering the new tech economy. "This should not be confused with a bubble as we have a strong core where a high quality entrepreneurial ecosystem is constantly working towards what technology can do to create efficiencies and value for consumers," says Abhay Pandey , MD, Sequoia Capital. It's still early days to expect large exits. But, more consolidation may be in the offing through M&As, especially in spaces where clear leaders have emerged.



·         Internet Users: 300 mln

·         Smartphone Users: 200 mln

·         Online shopping of physical goods:3.5 bln (2014); 6 bln (2015)

·         Online shoppers: 40 mln (2014); 65 mln (2015)

·         Average annual spend: Rupees 6,000 (2014); Rupees 10,000 (2015)



·         Interesting online brands will emerge as vertical-commerce businesses gain momentum

·         Food-related ventures that are not just aggregating but delivering a full experience will spurt

·         Offline-to-online services will get traction

·         New generation of online travel businesses will start to scale

·         More consolidation will be seen across sectors

·         Local language apps will grow in reach

·         Many new startups will target global opportunities

·         Vertical online classifieds and social commerce will gain scale [Samidha Sharma]