How To Start An SME Business In India? Complete Guide Of Launching SME Business

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India is known to be one of the most crucial corporate hubs globally. There are numerous billionaires of India who have represented the country at the international level. But, there lies an unnoticed strong grassroots level responsible for such rich business importance.

Apart from the big companies and large businesses, there are lakhs of small and medium enterprises in India, giving excellent returns to the Indian GDP. The growth in the SME industry has been tremendous over the past two decades.

However, there are many people who look to start an SME business in India without any prior knowledge of the industry and various sectors. A person should have adequate information about the pros and cons of launching an SME business in India.

There has been an impressive growth in people starting SME businesses in India. There are various reasons for this uprising. The major reasons are highlighted in the following points:

  • Since the new economic policy in 1991, the perception of starting a business has changed. Earlier, there were many barriers like tariffs, quotas, and many such challenges which restricted people from taking up an SME business. With initiatives like ‘Make In India’, the government has proved that there is decent ease of doing business in the country.
  • The Indian economy as a whole has prospered at an exponential rate. Due to this ever-rising economic growth, many small and medium businesses have attracted foreign investors. This foreign investment has given many startups a much-need financial boost.
  • Furthermore, these businesses have a tremendous future scope due to numerous schemes by the government aimed at helping SME startups. Apart from financial assistance, the government has also helped these businesses by providing market opportunities, loans facilities, etc.
  • People should also start their business in India at this time due to the idle skilled workforce available in the market. There are many unemployed people who have excellent skills but are not utilized. Therefore, businesses can tap this opportunity for better growth.
  • The government reforms the existing SME laws to favor various enterprises or industries every year. With the help of favorable government laws, it becomes easier to start a business in the country.
  • Lastly, technology has played a remarkable role in bringing unrealistic aims and business together. Today, companies can learn new things and gain a competitive edge using sophisticated technological features.

Most Beneficial Sectors For Starting An SME Business In India

There are various sectors a person can start their SME business. The following sectors have less risk associated with it and turn out to be more profitable.

  • Agriculture: India is the epitome of agricultural excellence. Most of the Indian economic growth is constituted by the agricultural sector. The forestry and agriculture sector in India stands at $276.37 billion as of 2020.
  • Automobile industry: The automobile industry is growing tremendously with the rise in population. In India, the automobile sector can be one of the safest sectors to start a small or micro business.
  • Auto components: With an expected value of $200 billion by 2026, auto components are easily sellable items. It has created employment opportunities for more than 5 million people. Therefore, it is one of the best options to set up a business in India.
  • Aviation industry: It is unknown to many people that the Indian aviation market is growing rapidly, with current market passenger traffic growth of 11%. Apart from this, around 3.6 MMT of total freight traffic exists in the country. These facts point out the progress and future scope of the aviation market, which is currently the world’s third-largest aviation market.
  • Chemicals: India is one of the leading exporters of chemicals. There are tonnes of chemicals being shipped from various ports from India to different locations. It is a significant contributor to the global chemical industry, with around 3% contribution.
  • Biotechnology: The country has witnessed an incredible growth rate in biotechnology, with 7x growth in the last decade. India is also home to nine biotechnology parks. According to research studies, the country is the third-largest biotech hub in the Asian region.
  • Capital goods market: When a person comes to India, they would never forget the giants in the capital goods industry like Jindal Steels, Apar industries, etc. It provides direct employment to around 5 million people. The country is also excellent in exporting machinery, with an estimated value of $9.97 billion in machinery exports.

Apart from these sectors, other notable and considered industries to start a small or micro business are:

  • Leather
  • Information Technology and BPM
  • Healthcare
  • Food processing
  • Defense manufacturing
  • Electronic systems
  • Fisheries
  • Medical devices
  • Pharmaceuticals

How Government Is Encouraging To Start MSME Business

The government has launched various schemes and initiatives in order to encourage people to take up business in the SME sector. These policies or plans are listed below.

Pradhan Mantri Mudra Yojana

Launched in 2015, the Mudra Yojana is an excellent initiative by the government to help people financially. Micro Units Development and Refinance Agency Bank or MUDRA Banks assist people by lending money at feasible interest rates. These banks do not help them directly but provide these loans to non-banking financial institutions.

The maximum limit of the loans that people can apply for is INR 10 lakhs. The results of the initiative are awe-inspiring. Around 1.8 crore people got employed with the help of the initiative.

The scheme has been divided into three stages or categories, listed below:

  • Shishu, is suitable for new and budding businesses for which a person can apply for a maximum of INR 50000 for loans.
  • Kishor, is suitable for middle-aged enterprises for which a person can apply for a maximum of INR 500000 for loans.
  • Tarun, is suitable for long-aged businesses for which a person can apply for a maximum of INR 10 lakh for loans.

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

CGTMSE is one of the most effective government schemes responsible for bringing growth in the number of SME businesses in India. The Ministry of MSME and Small Industries Development Bank of India (SIDBI) is the organization controlling the scheme. This initiative provides funds of up to INR 1 crore to SME businesses.

Zero Defect and Zero Effect Mission

Also called ZED, this scheme aims to revolutionize a change in the manufacturing processes. It focuses on the existing enterprises supervising the quality of the manufactured products. They try to eliminate defects while producing local goods. This gives trust to people to start their businesses in India.

Credit Linked Capital Subsidy for Technology Upgradation (CLCSS)

The CLCSS scheme is the next-generation scheme that utilizes the technology to the fullest. Through this initiative, the government provides necessary funds to business people for upgrading their business technology. There are many subsidy brackets in the initiative that further smoothen the funding process. This scheme has 7500 products & services registered under itself.

Design Initiative For Boosting MSMEs

Design plays a crucial role in setting up any small or micro business. The government has launched a design clinic to inspire more people to initiate their businesses. The government provides design solutions for budding businesses to avoid any hassle. It gives various rewards for attending design seminars for people. This not only spreads awareness but also aids in learning creative ideas to modify a business.


The schemes and the SME role mentioned above give a detailed overview of how bright the future of SMEs is in India. A person should take advantage of various government projects to ease the process of setting up a business.