At present, there are about 2.5 million small and medium scale enterprises (SMEs) in India. They have a share of seven per cent of the gross national product, 40 per cent of industrial production and 60 per cent of India’s exports. About 40 million workers are employed by the manufacturing sector (almost 12 per cent of the total labour force according to the National Sample Survey 2000).

SMEs play a very crucial role in the economic growth in terms of providing employment and equitable development in the developing countries. Nevertheless, restrains such as reach, scale, ability, resources and commercial acumen bring about a lack of competitiveness that, in turn, refrains SMEs from realizing their true potential. This becomes all the more significant looking at the tough competition faced by the Indian SMEs from countries like China and Taiwan.