Academic journal article Advances in Management

Small Innovations: The Big Drivers of Indian Economic Development

Academic journal article Advances in Management

Small Innovations: The Big Drivers of Indian Economic Development

Article excerpt

Abstract

MSMEs can be considered to be contributing to the economic development of India. One of the most reviewed factors that contribute to the economic development of a country includes innovation. Therefore the current paper studied the contribution of MSMEs to the economic development of India from the point of view of the above mentioned parameter from 2004 to 2010. The results highlight the importance of MSMEs in bringing economic growth to India and motivate recommendations related to government intervention in supporting survival and growth of MSMEs in India.

Keywords: MSMEs, economic development, IPR, patent, design, trademark, innovation.

Introduction

Micro, small and medium enterprises are widely called the back-bone of the newly developed economy like India. MSMEs can be considered to be contributing to the economic development of India from the view point of its growing contribution to the factors indicating economic development of a country. For example, MSME is the largest employment providing sector, having employed more than 600 lakh persons in India (source: online MSME official portal 2010), it has contributed to 10% of share in GDP of India, 40% to total economy exports, there are more than 100 lakh MSME units in India with an investment of more than 1 lakh crore and producing about 7500 items. 55% of MSMEs are involved in Technology Upgradation and implementation (source: ASSOCHAM report, 2010). This sector comprises of all types of business units like tiny, small and medium sized enterprises. Most of these also act as ancillary units for the large scale industry.

Therefore, the current paper aims to find out the impact of micro, small and medium enterprises (MSMEs) on the economic development of the country from the view point of contribution to innovation. The methodology used to study this impact was descriptive analysis. The time duration considered for study of related statistics was from 2004 to 2010. The principal variable MSMEs was studied with the help of number of MSME establishments while the factor economic development was studied with help of the variable innovation.

Micro, Small and Medium Enterprises

There are wide variations in the definition regarding the size of a small company31. In some literature, the size of the small company is defined only by number of employees while other literature uses both number of employees and annual sales (or turnover) when defining the size of a company. Other work defines enterprise size in relation to the sector within which the firm is active. The commonly used criteria at the international level to define SMEs are the number of employees, total net assets, sales and investment level. According to the European Union, the following classification of units is done on the basis of number of employees as a criterion:

According to United Nations Industrial Development Organization (UNIDO), the definition of MSMEs is a significant issue for policy development and implementation and depends primarily on the purpose of classification. UNIDO Investment Promotion Unit (UNIDO/IPU) offices in Amman refer to the local definition that has been set by the Ministry of Industry and Trade which defines SMEs as follows:

* Micro-sized enterprises are those employing between 1 and 9 employees and/or have a registered capital of less than $42,300.

* Small enterprises employ between 10 to 49 employees and have a registered capital of more than $42,300.

* Medium enterprises employ between 50 to 249 employees and have a registered capital of more than $42,300.

Recognizing the contribution and potential of the sector, the definitions and coverage of the Small Scale Enterprises Development (MSMED) Act, 2006 which recognized the concept of "enterprise" to include Industry (SSI) sector were broadened significantly under the Micro, Small and Medium both manufacturing and services sector besides, defining the medium enterprises. …

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