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  Home > SME's > Defination of SME's
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IMPORTANCE of Small Medium Enterprises (SME's)

We are happy to enclose some findings of our research. Kindly go to www.google.com and search for sme sites of countries. For example, see www.smallbusinesseurope.org for Europe, www.esba-europe.org, etc

Small & Medium Enterprises

Small and medium sized enterprises are defined by the European Commission as independent enterprises that have fewer than 250 employees, and an annual turnover not exceeding E40/25 million or a balance-sheet total not exceeding E27/17 million (extract from the 96/280/EC, Commission Recommendation of 3 April 1996).

SME's, in most parts of the world, means organizations with up to 250 or 500 employees.

In USA*,

this is only half the truth. You will notice from www.sba.gov, the website for Small Business in USA, that Small Business in USA could be defined either by max number of employees, which varies from 100 to 1500, or maximum turnover per year, this varies from $0.75 to $30 million, or the amount of financial assets, this goes up to $ 150 million, depending upon the type of business!.

There are nearly 1100 sub groups of businesses in major groups of:- Agriculture, Forestry, Fishing, Hunting, Mining, Construction, Manufacturing, Wholesale Trade, Retail Trade, Transportation, Information, Finance & Insurance, Real Estate, Rental, Leasing, Professional, Scientific & Technical Services, Management of Companies & Enterprises, Administrative Support, Waste Management & Remediation Services, Educational services, Health Care & Social services, Arts, Entertainment & Recreation, Accommodation, Food Services and Other Services. See www.sba.gov/size, for details.

For Japan see www.sme.ne.jp


In Germany*,

see www.ifm-bonn.org, see www.ifm-bonn.org, SME's normally means organizations with an annual turnover of up to DM 100 million and/or with a maximum number of 500 employees. In Germany, nearly 80% of all trainees/apprentices (for Vocational Training), numbering more than 1.5% of the German population, are with SME's!

In all countries of the world, companies start as proprietorships, become small business units and then grow to medium size units or SME's, all in the same category. 99.7% of all enterprises in the world are SME's and balance 0.30%, are Large!

They account for nearly 80% of the employment and nearly 80% of all value addition within the economy, directly and indirectly. One could expect a similar number as far as GDP and Exports are concerned. Enterprises means all types of business and not only Industry!

The present definition of SSI's, and not SME's, will only disadvantage India to be more isolated and removed from the ground realities of what goes on in this world!

Even Pakistan has adopted the International definition of SME's and is implementing the same, in stages! For details see www.smeda.org.pk, Small Medium Enterprises Development Authority in Pakistan.

Our one page note on making India a Hub for International Markets, is a pointer to the present state of affairs of not recognizing the advantages of SME's and how they could transform the Indian Economy.

Reservation for SSI - Doing more harm than good!.

The size of a manufacturing unit cannot be decided by some official in New Delhi. It is decided by International market forces and by the cutting edge technology and processes, which would be required to produce the product with the best quality and lowest cost, to be able to make it world class.

A case in point is the ' Mini-Steel Plants ' where thousands of crores of Indian tax payer's money was invested in about 100 mini steel plants! Most of the organizations became sick and bankrupt. In today's context a steel plant should be of 5 to 10 million tonscapacity per year. Such a unit will produce low cost steel to world class quality and cost, which could trigger off many down stream units, using this low cost & high quality steel as a raw material.

A large number of units would be keen to start world class manufacturing units, for the domestic markets, but are forced to follow these guidelines, which are very restrictive in nature.

Indian organizations must be allowed the freedom to have a 'level playing field' as their counterparts and competitors in other countries of the world. SSI is only a part of SME!

SME's in USA, Japan, Taiwan, Europe, S.E. Asia, Brazil, China, etc., means enterprises with about Rs. 150 to Rs. 250 Crores turnover and about Rs. 80 to 100 Crores investment. SME's are the Dynamic Sector of any Nation.

How can our Indian tiny & small units - SSI compete with the so called Small Businesses or SME's of the developed and developing countries? Only decontrol and freedom will help.

We MUST recognize that 'Enterprises' means all types of business and not only Industry!

In USA, Europe, Japan and most countries of the world, SME's account for nearly 80% of economic activity and employment. Kindly see Definition of SME's and GDP analysis of the Indian Economy, [page 25 of our booklet] In India, sadly, this fact is also here but it is NOT recognized. For example banks will lend to an Industry but not so easily to a firm in trading, agriculture, construction, services or non-industrial activity. Why?

The only Constant in Life is CHANGE!

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