Impact of small businesses on the economy.
Small businesses contribute to local economies by bringing growth and innovation to the community in which the business is established. Small businesses also help stimulate economic growth by providing employment opportunities to people who may not be employable by larger corporations.
MSMEs (Micro, Small, Medium Enterprises) are the biggest contributors to the economy, as they enhance entrepreneurial development in regional, semi-urban, and rural areas. These small setups increase employment, enhance growth opportunities, and contribute to the economic evolution of the country.
According to the Annual Report 2017-18 by the Ministry of Micro, Small and Medium Enterprises, there are 633.92 lakh enterprises in India, out of which only 4,000 businesses can be considered large enterprises. Thus, MSMEs have a big impact on the country’s economy.
- Contribution to GDP
The MSME sector employs over 111 million people and contributes nearly 31 per cent of India’s GDP. The government has focused on micro, small and medium enterprises (MSMEs) as the preferred route for rapid job creation and self-employment in the Budget 2018-19. Thus, for economic growth of the country, developing nations such as India depend on these small organisations.
As reported by multiple resources, the GDP composition of India is 16% from agriculture, 26% from industry, and 58% from services. The services sector is clearly the main contributor to the economy when compared to other sectors.
Apart from being the biggest contributor, the services sector is also the fastest growing. Back in the 1950s, the services sector contributed only 33% to the economy. Now, it is almost double that.
Further, large organisations and MNCs prefer purchasing semi-furnished products from small and medium vendors. This creates a link between small, medium, and large enterprises which again enhances the cash flow of the economy.
2. Employment Opportunities
We need to generate 10 million job opportunities each year until 2030 to meet the employment requirements of the country. For India to have an enhanced employment structure, the needs are considerably high. Without a vast number of MSMEs to fill this demand, achieving the goal is nearly impossible.
In the year 2016, from the total employment of 494.8 million, MSMEs alone created 111 million jobs.
Amit and Vikrant used to work in a garment manufacturing factory. Since they knew the industry in and out, they thought of opening a business themselves. However, funding for equipment and other necessary things was the major roadblock in their way. dears helped them overcome this issue, and now, they sell customised garments – trousers, shirts, uniforms, and other exclusively stitched clothes.
Although they started as 2 people, they are now employing around 20. Who would have thought that a business which started with nothing could possibly give hope and employment to so many people?
3. Resolving the Problem of Migration
MSMEs have the ability to offer better employment and income opportunities to people in semi-urban and rural areas. The rise in the number of entrepreneurs in these areas has contributed massively to the areas’ development. This has prevented the people from these areas from migrating to urban quarters as a result.
On the other hand, the more the MSMEs in urban areas, the more livelihood opportunities for the population that continues to migrate here.
4. Empowering Women
In developing nations, empowerment of women is usually low due to high unemployment rates and a lower salary scale. There is a disproportionate division of job roles even in highly organised, corporate sectors. While more women are found succeeding in education and industry skills, very few reach higher positions in the professional world.
The growth of MSMEs has encouraged women to either start a business of their own or join small enterprises that offer higher growth chances.
5. Contributing to Local Government with Taxes
When consumers patronize local small businesses, they are essentially giving money back to
their local community. A thriving local business will generate high levels of revenue, which means that the business will pay higher taxes, including local property taxes. This money is then used for local police and fire departments as well as schools. A thriving small business also can improve property values throughout a community, improving every homeowner’s bottom line while generating more property taxes for local governments.
The small business impact on local economy growth also takes the form of sales tax collection. Local businesses charge sales tax based on their location and can be the backbone of special taxation districts focused on unique projects, such as lighting and sidewalk projects to improve historic shopping districts and attract additional customers.
Even though they are SMALL, they have a BIG impact on our economy. Small businesses not only help the country to grow economically by contributing to its GDP but also prevent a monopolistic situation from happening by providing competitions to these big firms.
They provide employment opportunities and bring forward the country to meet the international standards of quality and assurance.
BUILD A BUSINESS 