Economic Reforms and Status of SMEs in India-A Study

The discussion on small and medium enterprises is rather ritualistic in India. The litany of positives as often been used as a cover up. But the picture of SMEs at the end of 2005 remains rather blurred. Two critical areas however stand out-SSI credit and micro finance. Both areas have significance, not simply by their strategic importance, but in practice, from their back ended relationship. There has been significant debate on the contribution of the micro finance movement. This movement in India, despite its social relevance, is yet to build economic rationale. The bandwagon effect of micro finance is such that targeted lending by commercial banks has got equated with micro finance. The government has announced several policies for Small and Medium Enterprises/Industries in the wake of the removal of Quantitative Restrictions as the WTO requires. It has decided to maintain the Foreign Direct Investment (FDI) limit for Small and Medium Enterprises/Industries at 24 per cent (not raise the limit as recommended by the study group), retain export obligations for large units producing items reserved for Small and Medium Enterprises/Industries (at 50 per cent), continue with the price preference policy for Small and Medium Enterprises/Industries, and finally set up a technology, up gradation and modernization fund. Through this paper an attempt was made to evaluate the economic reforms which were made for the SMEs.