Indian economy is projected to develop as one of the top economies in the world and is expected to become a $ 5 trillion economy by 2025. In this context, it is good to note that Small and Medium Enterprises (SMEs) of India have been contributing significantly to the growth of Indian economy. It is said that SMEs contribute nearly 45% to the GDP of the economy. It is prudent to ask to what extent the SMEs can continue to contribute towards this projection because, it is reported that sustenance of SMEs has been a major source of concern for the last few years.
According to the one of the surveys conducted by IFC, it is learnt that nearly 24% of SMEs close shop in two years of their inception and nearly 53% of them go out of the market totally in about four years for various reasons like poor cost management, bankruptcy and business loss. A report of a National Research Study (2013) opines that SMEs fail to survive on account of lack of competency in cost management and failure to forecast rising cost. Hence, managing the cost of their products or services in SMEs with a strategic focus becomes very important to respond to the challenging economic times faced by business today.
The present paper is an attempt to discuss growth of SMEs in India, analyze the current cost management practices adopted by SMEs with specific emphasis on Strategic Cost Management (SCM) Practices adopted and how these practices impact their Business performance.