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What Is the Importance of SMB’s in Our economy

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Strong economy starts with small workforce.

Small entrepreneurs play a very important role in the economic growth and development of the Indian economy. Industrial Policy Resolution, 1956 states the importance of small scale industries “The small industries provide immediate large scale employment, they offer a method of ensuring a more equitable distribution of the national income and they facilitate an effective mobilization of resources of capital and skill which might otherwise remain unutilized”

The role and importance of small scale industries can be judged as follows:

Employment generation:

Small entrepreneurs use labor-intensive techniques and therefore provide employment opportunities on a large scale. Small entrepreneurs provide self-employment to artisans, technically qualified persons, and professionals. Small entrepreneurs provide eight times more employment opportunities as compared to large-scale industries. The healthy growth of small-scale industries can be an effective solution to the unemployment problem in India. Small entrepreneurs can be located anywhere and hence can provide employment to workers near their homes, more work for the under-employed. Small scale sector accounts for nearly 75 percent of the total employment in the industrial sector. These industries also offer employment to farmers when they are idle.

Optimization of capital

Small entrepreneurs require less capital as compared to large-scale units. Small scale sector can become a stabilizing force by providing high output ratio as well as high employment capital ratio in a capital scarce economy like India. Small scale units also provide quick returns on investment due to the shorter gestation period. Small entrepreneurs help in capital formation by mobilizing idle and small scattered savings of people and put them into productive use by investing in small-scale units.

Balanced regional growth:

Small entrepreneurs promote the decentralized development of industries. They help to remove regional disparities by industrializing rural and backward areas. Dispersal of small industries in rural and semi-urban areas is the only means of balanced industrialization in all parts of the country. Small entrepreneurs help to reduce the problems of congestion, slums, and population in cities by providing employment.

Export promotion:

There has been a substantial increase in exports from the small-scale industries. Small entrepreneurs contribute about 35 percent to India’s total exports. Small entrepreneurs also help in reducing the pressure on the country’s balance of payments, because these industries do not require the import of sophisticated machinery or raw materials. Small entrepreneurs earn valuable foreign exchange through increased exports.

Share in National economy:

Small entrepreneurs have made major contributions to the Indian economy. Small scale sector has particularly emerged as a vibrant and dynamic segment of the economy. It is a matter of great importance and pride that India has a distinct leading position of its own amongst the developing economies particularly in the sphere of small scale sector. The small entrepreneurs have shown tremendous growth in their number, production, employment, and export. It is evident from the above discussions that small-scale enterprises play a dominant role in employment generation, resource mobilization and utilization, income generation. The growth of employment in this sector over years has been remarkable. The total value of production of small-scale units comes to nearly 40 percent of the total industrial output of the country. There is a sharp increase in exports from this sector also. They help to improve the standard of living in suburban and rural areas

Feeder to large scale industries:

Small entrepreneurs play a complementary role to large-scale industries by providing parts, components, and accessories. They act as ancillaries to large units.

SMB’S are playing a pivotal role in our Indian economy and foreign economy like the U.S.


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