SME's as Growth Driver of Indian Economy: Strategic HR Issues and Perspectives

Abstract

Over the last few decades there has been a tremendous growth in small and medium enterprises (SMEs). SMEs have come to play a mounting role in growth of developing nations. A number of countries have witnessed successful SME-led economic growth and development. In India, 95 percent of industrial units (3.4 million) are in small-scale sector with a 40 percent value addition in the manufacturing sector. Enterprises of this type provide the second highest employment level after agriculture and account for the 40 percent of industrial production.As SMEs focus more on running the business on a day-to-day basis, they find less time to manage the HR processes which is perceived as non priority. SMEs do not feel like revamping existing organizational structure, especially when they know that the status quo is delivering the output. Competitiveness of SMEs can be enhanced through better human resource (HR) practices of recruitment, selection, training and compensation. Indian SMEs need to reduce overall cost of products to remain competitive with Chinese manufacturers and exporters. Apart from other functional areas such as production, finance, marketing, inventory and logistics, SMEs also need to focus on implementing best HR practices.