mr juneja about smal scale industries
TRANSCRIPT
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SMEs & THEIR ECONOMIC RELEVANCE:
OVERALL POLICY AND FRAMEWORK
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The entrepreneur always searches for change, responds
to it, and exploits it as an opportunity.
By
Peter F. Drucker
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EVOLUTION OF POLICY FRAMEWORK
Industrial Policy Resolution 1948 Priority to promote rural and traditional industries in sectors, such as:
Handlooms, Handicrafts, Sericulture, Coir and Khadi and village industries
Constitution of Statutory Boards / Commissions for the same
Industrial Policy Resolution 1956
Policy Framework for SSI sector
Constitution of Independent Board for Small Scale Industries
Policy on Credit, Marketing, Technical Assistance, Industrial Infrastructureand Extension Services.
Policy Focus Priority to mitigate regional imbalances 1977
Measures to promote ancilarisation 1988
Stress on Exports and dispersal of enterprises in rural areas year 1990
Priority for Small tiny agro industries 1991
MSMED Act 2006
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DEFINITION OF SMALL
INDUSTRIES
Year 1950
Size of Gross Investment in fixed assets in plant and machinery, land,
building etc. (not exceeding Rs. 5 lakhs and strength of workforce
(employment less than 50 workers / day using power or less than 100
workers / day without use of power)
Year 1950 to 2004
Periodical change in the definition shifting the definition from work force,
criteria, inclusion of cost of building in the definition to a sole criteria of
investment in plant and machinery only and merging of this requirement for
both segments of the industry
Eligibility criteria based on investment in Machinery
and Equipment only
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INVESTMENT CEILINGS FOR SMALL
SCALE INDUSTRIES YEAR 2004Type of Unit Investment Ceiling
Limit in IRSConditions
Small Scale Industry 1 crore (10 million) Original value of plant andmachinery
Ancillary 1 crore (10 million) At least 50% of its output to go
together other industrialundertakings
Export Oriented Unit 1 crore (10 million) Obligation to export 50% of production
Tiny Enterprise 25 lakhs (2.5 million) No location condition
Service and Business(industry related) Enterprise 10 lakhs (1 million) No location condition
Women Enterprises 1 crore (10 million) 51% equity holding by women
High Tech and Exportoriented units
5 crore (50 million) Total only for 64 items
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OBJECTIVES FOR PERIODICCHANGES IN DEFINITION
To facilitate growth of this sector with changing
economic scenario
To facilitate growth within the framework of
social and economic policy of the country
To encourage technology modernization
To promote entrepreneurship among technically
qualified persons
To improve product standards
To create opportunities for in house R&D
To provide greater export thrust
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SMES THE MOST VIBRANT &
POTENTIAL GROWTH SEGMENT
A recent World Bank Report states: There is nowwidespread recognition within India that vibrant SMEs
are potentially a key engine of economic growth, jobcreation and greater economic prosperity.
10th Plan Document of Govt. of India states: Growthas planned will come from a sharp step-up in industrial
and services growth, spurred by SMEs.
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SME SECTOR SIGNIFICANCE IN
INDIAN CONTEXT
SMEs are generally less capital-intensive and more labour-intensive.
Are best suited for countries like India, China and most of the developing worldhaving abundant supply of low-cost manpower and bountiful natural resources
Have provided seed bed for Enterprise Development in the country
Provide large scale employment, ensure equitable distribution of income andfacilitate effective mobilization of resources of capital and skills, which wouldotherwise remain unutilized, particularly in rural and backward areas.
India has already established a niche in SME Development Strategy and providingexcellent support in product development, R&D, financial instruments, Infra-structure, marketing and export development
Consequently, India is fast emerging as a global hub for labour-intensivemanufacturing and knowledge-oriented businesses.
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PERFORMANCE OF SSI SECTOR IN INDIA
YearNo. of Registered
SSI working Units
(Million)
No. ofUnregistered SSI
working Units
(Millions)
Total SSI
working Units
(Millions)
Production (Rs. Billion) Employment
(Million
Persons)
At current
prices
At constant
prices (1993-9 4
prices)
1990-1991 0.79 6.00 6.79 635.18 682.95 15.834
1991-1992 0.87 6.19 7.06 730.72 791.80 16.599
1992-1993 0.99 6.36 7.35 855.81 935.23 17.484
1993-1994 1.06 6.59 7.65 988.04 988.04 18.264
1994-1995 1.16 6.80 7.96 1222.10 1091.16 19.140
1995-1996 1.16 7.12 8.28 1482.90 1216.49 19.793
1996-1997 1.20 7.42 8.62 1684.13 1353.80 20.586
1997-1998 1.20 7.77 8.97 1891.78 1478.24 21.316
1998-1999 1.20 8.14 9.34 2129.01 1594.07 22.055
1999-2000 1.23 8.48 9.71 2342.55 1707.09 22.9102000-2001 1.31 8.80 10.11 2612.89 1844.28 23.909
2001-2002 1.37 9.15 10.52 2822.70 1956.13 24.909
2002-2003 1.59 9.36 10.95 3119.93 2106.36 26.021
2003-2004 1.70 9.70 11.40 3514.27 2265.81 27.142
2004-2005 1.85 10.11 11.86 4182.63 2515.11 28.257
2005-2006 1.87 10.47 12.34 4762.01 2776.68 29.491Source : SIDOs Half Century y DCSSI, Govt. ofIndia, 2004, and Economic Survey, Govt. ofIndia, 2006-2007, Feb. 2007
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SSI units : 12.3 million
Employment generated in SSIs :
29.5 million
Production : At current Princes
Rs. 4762.01 billion
Exports : Rs. 1215 billion
SSIs account
Industrial Production : 40%
Exports : 35% (50% of
Direct & Indirect)
GDP Share : 7%
Ownership pattern :
Proprietorships : 78%
Partnerships : 16%
Corporate & Others : 6%
Industrial Units : 96%
Service Enterprises : 3%
Ancillary Units : 1%
Produces Diverse range of
products (more than 8000-
consumer items, capital goods
and intermediates)
INDIAN SME SECTOR AT A
GLANCE
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COMPARATIVE GROWTH RATES OF SSI
SECTOR AND TOTAL INDUSTRIAL SECTOR
Year SSI Sector Growth Rate Total Industrial SectorGrowth Rate
1993-94 5.65 6.00
1994-95 10.44 9.10
1995-96 11.49 13.00
1996-97 1.29 6.101997-98 9.19 6.70
1998-99 7.84 4.10
1999-2000 7.09 6.70
2000-01 8.04 5.00
2001-02 6.06 2.70
2002-03 7.68 5.70
2003-04 8.06 6.09
2004-05 9.96 8.04
Source: SIDO Half Century by DCSSI, Govt. of India 2004 and Annual Report of the
Ministry of SSI 2005-06
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NODAL AGENCY FOR POLICY FRAMEWORK
Ministry of Small, Rural and Agro Industries
FACILITATING INSTITUTIONS / DEPARTMENTS
Office of the Development Commissioner (Small Scale Industries)
Small Industries Development Bank of India
National Small Industries Corporation Limited
Commercial Banks
State Financial Corporations
National Institute of Entrepreneurship and Small Business Development
Product Process Development Centres
Tool Rooms and Testing Centres
NSIC Technical Services Centres
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INSTITUTIONS FOR GROWTH OFKNOWLEDGE BASED & SERVICES
SECTORS
Software Technology Park of India (STPI)
Tidal Park, Cyber City Public / Private Participation
STEP (Science & Technology Entrepreneurship Park)
Incubators Set up by Universities, Development
Institutions
National Institute of Fashion Technology (NIFT)
National Institute of Design
Institutes Pertaining to Hospitality sector
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Study by AIMA - SMALL SCALE INDUSTRY IN INDIA
ASSESSMENT OF GROWTH AFTER LIBERALISATION
While the cumulative growth rate over the five - year period (base: 1997-98) is negative,
there is a turn-around during the last two years.
Overall negative growth rate is primarily on account of Northern and Eastern regions. The
companies in the South have recorded a growth rate of 25% in their turnover in the last
five years.
The apparent wide disparity in the growth pattern of the SSIs between the Southern regionand the rest of India points to the fact that SSIs in South had exploited the market
opportunities better than others.
However for 1999-2003 while overall growth rate is 8.48%, in case of companies in the
North, East and West, the Southern region has reported a 24% growth.
Sector wise, the manufacturing sector has recorded a negative growth of -8.14% in the
last five years while in the services sector there is a growth of 16.34%.
Cumulative growth rate in various regions of India
between 1998-2003
Results Revealed
Percentage
North -18.61
East -0.15
West 9.65
South 25.79
Over all -5.18
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AIMAAIMA Impact AssessmentImpact Assessment
IMPEDIMENTS TO GROWTHIMPEDIMENTS TO GROWTH
Problems Faced by SSIs as Barriers to Growth
Market Related 70%
Finance Related 25%
Government Policy Related 12.78%
Power Related/Infrastructure 14.0%
Technology 14.60%
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TRENDS OF LENDING BY BANKING
SECTOR TO SSI
Rs. in Crores
As at end March Total advances by
Banking Sector
Total Advances to
SSI Sector
Proportion of SSI to
Total Advances
1999 246203 42674 17.30
2000 292943 45788 15.63
2001 469153 56002 1.94
2002 536727 57199 10.66
2003 669534 60394 9.02
2004 764383 65855 8.62
2005* 972587 76114 7.83
Source : RBI Report on Trend and Progress of Banking in India
* Provisional
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SALIENT FEATURES OF MSMED
ACT - 2006 Manufacturing enterprises defined in terms of investment in Machinery and
Equipment (excluding land and building) classified into
a. Micro enterprises - investment upto Rs 25 lakhs,
b. Small enterprises - investment above Rs 25 lakhs and upto Rs 5 crore
c. Medium enterprises - Investment above Rs 5 crores and upto Rs 10 crores
Service enterprises defined in terms of their investment in equipment (excluding land
and building) classified into
a. Micro enterprises-investment upto Rs 10 lakhs
b. Small enterprises-investment above Rs 10 lakhs and upto Rs 2 crore
c. Medium enterprises-investment above Rs 2 crores and upto Rs 5 crores
Constitution of national board, advisory committee
Provisions for clear cut procurement policy, credit, delayed payment, closure of
business etc
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MSMED Act 2006 and its ImpactClause Salient Features Impact
1. Establishment of National Smalland Medium Enterprises Board
Maximum No. of members 47
1. Specific representation forWomen
2. Mandatory Quarterly Meeting
Statutory Status, compact boardand quarterly meetings will
address problems of SMEs
immediately to take corrective
action
2. Concept of Enterprises Clear-cut demarcation of
manufacturing/production and
rendering services
Facilitates SMEs to enter into
service enterprises aggressively
3. Definition of Enterprises Specific ceiling limit for
manufacturing/production and
service enterprise definition for
Medium enterprises
Existing small units can graduate
into Medium units and avail
facilities under the act.
4. Filing of memoranda optional for
Micro and Small enterprises inmanufacturing and service
sector Medium enterprises in
Service Sector but mandatory
for Medium enterprises in
manufacturing sector
Replacement of registration with
memorandum
Facilitates SMEs to avail the
benefits of the act immediatelyafter setting up of the unit.
Contd/----
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MSMED Act 2006 and its IMPACT
Clause Salient Features Impact
5. Procurement Policies Notification of preference
policies by central or State
Governments for goods and
services provided by Micro &
Small enterprises
Facilitates opportunity for
supply of goods/services
without any hassles.
Public Procurement Policy
under Section 11 of MSME
Act, yet to be notified
6. Delayed Payment Penalty &dispute resolution Period of payment by theprocuring organizations 45
days
Penal interest 200% of PLR
SMEs can plan their cashflow/financial requirement
7. Dispute Resolution Establishment of MSE
facilitation Council; 90 days
framework for dispute resolution
Easy financial planning and no
waste of human resources for
chasing/follow up.
8. Delayed Payment allowable
deduction under IT Act 1961
Deduction disallowed This will encourage
procurement agencies to
ensure timely payment to
SMEs.
9. Closure of Business Statutory notification of scheme
for closure
Facilitates expedition of
liquidation
Contd/-
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MSMED Act 2006 and its IMPACT
Clause Salient Features Impact
10. Notification of guidelines or
instructions for promotion
of SMEs wrt. To Funds
appropriation and release
Statutory Mandatory on all facilitating
development of SMEs ensuring
fast growth
11. Facilitating Credit Statutory Mandatory on all providing
credit. Guidelines for credit for
20% year on year growth
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PRESENT POLICY FRAMEWORK
Enactment of MSMED Act 2006.
The present policy framework covers specific actions for
growth of MSME sector in the Areas of:
Specific legislation on limited liability partnerships covering Micro, Small and
Medium enterprises
Guidelines by RBI for 20% year on year growth of credit to SMEs
Grant for SIDBIs Portfolio risk fund
Additional Branches by SIDBI to cater to credit needs of clusters of MSMEs
Loan limit under credit guarantee fund to be raised to 50 lakhs
Credit guarantee cover to be raised from 75% to 80% for micro enterprises up
to 5 lakhs
Fiscal support excise exemption limit increased to Rs. 1.5 crores
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Identification of new sites for clusters and Management of Infrastructurerelated assets in public-private partnership mode.
Project cost for cluster program to be raised to 10 crores
Support and quality up gradation through setting up of new productdevelopment centres
Assistance for attainment of ISO 9000 and 14001 to be continued duringnext Plan period
Technology Mission to be launched
Support for Marketing
Support for Entrepreneurial and Managerial Development
Empowerment for women owned enterprises
Contd/-
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Opportunities
Fashion Technology
Information Technology
Design Technology
Health Technology
Bio Technology
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Fashion Technology
OPPORTUNITIES
Glamour & Limelight
Creative
High Value Addition
Coverage (Extensive)
Clothes
Dresses
Garments
Textile
Footwear
Various Leather Products
Jewellery
Travel Goods
Fashion Accessories (purses, bags, carryon, watches etc.)
Personal Embellishment (Face, Hair, Hands, Feet, Cosmetics, Perfumesetc.)
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Information Technology
OPPORTUNITIES
Media & Entertainment
Contents,
Animation,
Games,
Gaming.
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Design Technology
OPPORTUNITIES
Interiors - (Furniture & Furnishing homes, work places, community, hospitals,schools, shopping places, recreation, sports)
Exteriors - (Architectural)
Industrial products
Textiles
Electrical appliances
White goods
Leather products
Engineering products
Machinery
Dies and tools
Watches
Jewellery
Hospital equipments
Medical instruments
Electronics and Communication Products and Equipments
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Health Technology
Personal Health Care
Preventive Health Care
Physiotherapy
Monitoring (sensors)
Community Health
Vaccines
Public Health
Surveillance of Health Status (AIDS,Bird Flu etc)
Medical Imaging Technology such as
X-ray, Cat scanning, ComputedTomography Scan (CTs), MagneticResource Images (MRIs), Sonogramsetc.
Surgical & Physiotherapy
Health Information Management
Medical Laboratory Technology
Beauty Care and Wellness
Nursing
Pharmacy Technology
Medical Research Laboratory
Yoga & Naturopathy
Herbal Therapies
Environmental Health
Food Supplements Food, Inspection and Testing etc.
Medical Waste Management
Hospital Supplies & Staffing
Services
OPPORTUNITIES
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Bio Technology
The biotech industry continues to grow at almost the same rate that it did in last
year. The industry recorded 36.55 percent growth compared to the previous years
figure. There are 28 companies.
An Ernst and Young study has named India as one of the five emerging biotech
leaders in the Asia Pacific besides Singapore, Taiwan, Japan and Korea, with
mainland China catching up quickly. The study ranked India third in the region
based on the number of biotech companies in the country, after Australia and
China, including Hong Kong.
The above-expected growth will facilitate SMEs to enter into this field by setting
up contract Research Organisations (CROs) and in other areas to meet the demand
of US $ 3.1 billion market of Indian Pharmaceutical Industry.
Target for 2010 US $ 5 billion
With the industry zooming part the US $ 1 billion mark, registering revenues
of US $ 1.07 billion, the sector has achieved a significant milestone.
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Projected Market opportunities in theknowledge sector including above is US $ 365
billion in 2020.
as per High level strategic group of AIMA
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CONCLUSIONS
It can be seen that the policy framework is consistent sinceindependence
The specific definition for medium enterprises augurs well for
graduation of micro enterprises to small and small enterprises to
medium enterprises
With more budgetary allocation to service sector, SMEs will be
able to generate more employment opportunities to educated
unemployed youth
The launching of Technology Mission will facilitate the
Government to work out a long term action plan to ensure
organized growth of this sector to face competition in liberalized
services sector and knowledge based economic scenario
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