Small and medium enterprises (SMEs), particularly in developing countries, are the backbone of the nation's economy. They constitute the bulk of the industrial base and also contribute significantly to their exports as well as to their Gross Domestic Product (GDP) or Gross National Product (GNP).

INDIA'S SME SCENARIO:

India has nearly thirteen million SMEs, which account for almost 45 percent of industrial output and 40 percent of India's total exports.

A special role for SMEs were earmarked in the Indian economy with the advent of planned economy from 1951 and the subsequent industrial policy followed by government. By and large, SMEs developed in a manner, which made it possible for them to achieve the objectives of:

1. High contribution to domestic production
2. Significant export earnings
3. Low investment requirements
4. Operational flexibility
5. Low intensive imports
6. Capacity to develop appropriate indigenous technology
7. Import substitution
8. Technology-oriented industries
9. Competitiveness in domestic and export markets

However, as a result of globalization and liberalization, coupled with WTO regime, SMEs have been passing through a transitional period. With enhanced competition from China and a few low cost centers of production from abroad many units have of late been facing a tough time.

However, those SMEs who had a strong technological base, international business outlook, competitive spirit and willingness to restructure themselves withstood the current challenges and came out successful to make their own contribution to the Indian economy.

It is the most important employment-generating sector and is an effective tool for promotion of balanced regional development. These account for 50 percent of private sector employment and 30 to 40 percent of value-addition in manufacturing. It produces a diverse range of products (about 8000 odd items), including consumer items, capital and intermediate goods.

However, the SMEs in India, which constitute more than 80 percent of the total number of industrial enterprises and form the backbone of industrial development, are as yet, in technological backwaters vis-á-vis advances in science and technology. These suffer from problems of suboptimal scales of operations and technological obsolescence.

While most of the large companies, even in developing countries, have financial as well as technical capacity to identify technological sources and evaluate alternate technologies that would suit their requirements, unfortunately, this capacity is conspicuously missing in most SMEs.

It is these features of SMEs that make them an ideal target for technological upgradation through technological cooperation with foreign and local enterprises, with R&D institutions and centres of technology development.

So, what these SMEs need today is primarily access to new technology. Poor financial situations and low levels of R&D, poor adaptability to changing trade trends, non-availability of technically trained human resources, lack of management skills, lack of access to technological information and consultancy
services and isolation from technology hubs, etc. are some of the reasons why these SMEs are not being able to surge ahead.

Small and Medium enterprises are the backbone of India's economy. They have to now work hard to get out of this impending scenario. There has to be a major change in policy on how they are operating. SMEs have to put in more effort on research and development (R&D) and on ways to use technology at par with the international standards.