Small businesses power 30% of GDP, need support to thrive
India’s small businesses, from humble kirana stores to innovative digital startups, play a vital role in driving the country’s economy. These small, but mighty ventures contribute a staggering 30% to the country’s Gross Domestic Product (GDP). However, despite their significant contribution, small businesses face numerous challenges that hinder their growth and success. In this blog post, we’ll explore the hurdles these entrepreneurs face and the support they need to thrive.
The backbone of the Indian economy
Small businesses, also known as the “unorganized sector,” are the backbone of India’s economy. They are the engines that power local economies, creating employment opportunities, and providing essential services to communities. From street vendors to small-scale manufacturers, these businesses are the lifeblood of India’s informal sector.
A recent report by the Indian Council for Research on International Economic Relations (ICRIER) highlights the importance of small businesses in India’s economy. The report states that the unorganized sector accounts for around 40% of India’s GDP, with small businesses contributing a significant share of this figure.
Challenges faced by small businesses
Despite their importance, small businesses in India face numerous challenges that hinder their growth and success. Some of the key hurdles include:
- Funding gaps: Small businesses often struggle to access funds to scale up their operations, expand their customer base, or invest in new technologies.
- Red tape: Bureaucratic hurdles and complex regulatory processes can be overwhelming for small businesses, leading to delays and increased costs.
- Digital illiteracy: Many small businesses lack the necessary skills and knowledge to navigate the digital landscape, making it difficult for them to compete with larger, more tech-savvy companies.
- Market competition: Small businesses often struggle to compete with larger, more established companies that have deeper pockets and more resources.
The role of fintech in supporting small businesses
Fintech, or financial technology, has the potential to revolutionize the way small businesses access funding and manage their finances. Fintech companies are developing innovative solutions that provide small businesses with access to credit, payment solutions, and other financial services.
For example, fintech companies like Paytm and MobiKwik are providing small businesses with digital payment solutions, making it easier for them to receive payments and manage their finances. Other fintech companies, like Capital Float and Lendingkart, are providing small businesses with access to credit and loans.
Training and capacity building
In addition to fintech solutions, small businesses also require training and capacity building to upgrade their skills and knowledge. This can include training programs that focus on digital literacy, entrepreneurship, and management skills.
The government and non-profit organizations can play a crucial role in providing training and capacity building programs for small businesses. For example, the government’s Entrepreneurship Development Institutes (EDIs) and the Small Industries Development Bank of India (SIDBI) are offering training programs and funding support to small businesses.
Policy support
Policy support is also essential for small businesses to thrive. The government can provide policy support by simplifying regulatory processes, reducing taxes, and providing incentives for small businesses to invest in research and development.
For example, the government’s Startup India initiative has provided a range of incentives, including tax benefits, funding support, and regulatory relaxations, to encourage entrepreneurship and innovation.
Conclusion
Small businesses are the backbone of India’s economy, contributing a significant share to the country’s GDP. However, despite their importance, these businesses face numerous challenges that hinder their growth and success. Fintech, training, and policy support can play a crucial role in supporting these resilient ventures and helping them thrive.
By providing small businesses with access to funding, training, and policy support, we can fuel local dreams and strengthen the economy. The future of India’s growth lies in its small, determined entrepreneurs, and it is essential that we provide them with the support they need to succeed.
