The Impact of SMEs on the Economic Development of Pakistan

Abstract

Pakistan is a country where the expansion of the industrial sector is necessary, and in this process, the relative significance of the Small and Medium Enterprises (SMEs) sector cannot be overstated. SMEs comprise approximately 90% of total businesses in Pakistan; nearly 80% of the workforce other than the agriculture sector is employed by the SMEs; and approximately 40% of GDP is contributed by the SMEs.1 Though, the growth of SMEs is constrained by financial and other resources that is not faced by Large Scale Manufacturing (LSM) sector. From the facts and figures presented in this paper, it can be concluded that SMEs perform a dynamic role in the growth of all the related sectors of the economy. This study empirically analyzes the effect of innovation and activities of SMEs on economic growth of Pakistan over the span of 19732017. The study concludes that the activities of SMEs do influence the economic development of Pakistan.