With 27 member countries and a population of over half a billion, the European Union covers a large part of Europe. Since its creation it has worked to bring the prosperity and stability to its citizens. Its policies and actions affect the economy dynamics of the entire world. The Union also aims to be a fair and caring society, committed to promoting economic prosperity by creating jobs and making companies more competitive.
With the main aim of economic prosperity of the region, the Union has been taking actions to break down the barriers between its member states and create single market where goods, people, money and services can move around freely. As a result of this, trade between EU member countries has increased significantly and has made EU into major world trading power. The GDP of EU-27 for 2010 was pegged at US $17,557 billion, while US GDP for the same period was pegged at US $16,228 billion making it the largest economy in the world.
Although EU makes up only 7% of the world population, its trade with rest of the world accounts for one fifth of global imports and exports. Trade between EU countries itself account for 2/3rd of all EU trade. EU is the main exported of the world and the second biggest importer, which justifies why it is termed as the largest trading zone and the biggest trading partner.
With the progress that EU has been posting over past several years, it is quite easy to get the impression that the European economy is dominated by large, multinational enterprises. Their multi-billion Euro takeovers, global expansion plans or even the recent bankruptcies always dominate the headlines.
However, what most of the people fail to see is that European economy is in fact dominated by the SMEs. They provide two out of three of the private sector jobs and contribute to more than half of the total value addition created by businesses in EU. Moreover, SMEs are the true backbone of the European economy and are accountable for the wealth and economic growth of the region. They also play a key role in innovation and R&D in the region. There are over 23 million SMEs representing around 99.8% of all the enterprises and 57% of them are sole proprietorships. They provide two third of the total private sector employment, represent 80% of total job creation and produce more than half of EU’s added value. However the EU SMEs are struggling to grow. 9 out of 10 SMEs in Europe are microenterprises employing an average of 2 people.
Considering their importance to the economy and the role they play for increasing the competitiveness and dynamics of the European economy; Union has been taking several actions. In order to help them realize their growth potential, the Union is working towards promoting entrepreneurship, creating a friendlier business environment, providing them assistance to explore new markets and also awarding them for outstanding activities in their sectors.
In Europe, enterprises qualify as micro, small and medium enterprises if they fulfill the following conditions:
| Category | Headcount | Turnover |
| Micro Enterprises | < 10 Employees | < 2 Million Euros |
| Small Enterprises | < 50 Employees | < 10 Million Euros |
| Medium Enterprises | < 250 Employees | < 50 Million Euros |
These factors indicate the current the outlook of the world economy towards the investments in India. The Government of India has always given top priority to the Indian SMEs, leading to their growth and have contributed heavily to the growth of the Indian economy. The government too has introduced incentives for the SMEs in order to make them competitive in the international markets. In order to enable SMEs get easy access to the finance, government has also introduced priority sector lending and has made mandatory on the domestic and foreign banks to lend 40% and 32% of their Net Bank Credit (NBC) to the SMEs.
The opportunities exists for foreign SMEs looking to expand in the Indian market in the field of technology transfer, setting up the new business in the country, obtaining the sub-contracting rights, out-sourcing to their Indian partners etc.