MMA IGCC KAF Seminar on Small and Medium Enterprises Engines for Growth and Employment Organised by

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Welcome
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MMA IGCC KAF Seminar onSmall and Medium
EnterprisesEngines for Growth and Employment
Organised byMadras Management
Association SMEs THEIR ECONOMIC
RELEVANCEOVERALL POLICY AND FRAMEWORK

• By
• Dr. J.S. Juneja
• Chairman
• Global Projects Services (P) Ltd.
• 707-708, Ansal Chamber II, Bhikaji Cama
  Place, New Delhi-110 066
• Tel [phone] Fax
  91 11 26172457
• E-mail gpsjsj_at_del6.vsnl.net.in
  gpsjsj_at_bol.net.in
• April 2007

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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 Infrastructure and
  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 2004
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OBJECTIVES FOR PERIODIC CHANGES 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 RD
• To provide greater export thrust

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SMES THE MOST VIBRANT POTENTIAL GROWTH SEGMENT

• A recent World Bank Report states There is now
  widespread recognition within India that vibrant
  SMEs are potentially a key engine of economic
  growth, job creation and greater economic
  prosperity.
• 10th Plan Document of Govt. of India states
  Growth as 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 world having 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 and facilitate effective
  mobilization of resources of capital and skills,
  which would otherwise remain unutilized,
  particularly in rural and backward areas.
• India has already established a niche in SME
  Development Strategy and providing excellent
  support in product development, RD, financial
  instruments, Infra-structure, marketing and
  export development
• Consequently, India is fast emerging as a global
  hub for labour-intensive manufacturing and
  knowledge-oriented businesses.

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PERFORMANCE OF SSI SECTOR IN INDIA
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INDIAN SME SECTOR AT A GLANCE

• 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)

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COMPARATIVE GROWTH RATES OF SSI SECTOR AND TOTAL
INDUSTRIAL SECTOR
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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 OF KNOWLEDGE 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
Results Revealed
Cumulative growth rate in various regions of
India between 1998-2003

• 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 region and 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.

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AIMA Impact Assessment IMPEDIMENTS TO GROWTH
Problems Faced by SSIs as Barriers to Growth
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TRENDS OF LENDING BY BANKING SECTOR TO SSI
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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
• Micro enterprises-investment upto Rs 10 lakhs
• Small enterprises-investment above Rs 10 lakhs
  and upto Rs 2 crore
• 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 Impact
Contd/----
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MSMED Act 2006 and its IMPACT
Contd/-
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MSMED Act 2006 and its IMPACT
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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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Contd/-

• Identification of new sites for clusters and
  Management of Infrastructure related 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 product development centres
• Assistance for attainment of ISO 9000 and 14001
  to be continued during next Plan period
• Technology Mission to be launched
• Support for Marketing
• Support for Entrepreneurial and Managerial
  Development
• Empowerment for women owned enterprises

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Opportunities

• Fashion Technology
• Information Technology
• Design Technology
• Health Technology
• Bio Technology

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Fashion Technology

• OPPORTUNITIES
• v   Glamour Limelight
• v   Creative
• v   High Value Addition
• v   Coverage (Extensive)
• v   Clothes
• v   Dresses
• v   Garments
• v   Textile
• v   Footwear
• v   Various Leather Products
• v   Jewellery
• v   Travel Goods
• v   Fashion Accessories (purses, bags, carryon,
  watches etc.)
• v Personal Embellishment (Face, Hair, Hands,
  Feet, Cosmetics, Perfumes etc.)

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Information Technology

• OPPORTUNITIES
• v     Media Entertainment
• v     Contents,
• v     Animation,
• v     Games,
• v  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
OPPORTUNITIES

• 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, Computed Tomography Scan (CTs),
  Magnetic Resource Images (MRIs), Sonograms etc.
• 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

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Bio Technology
With the industry zooming part the US 1
billion mark, registering revenues of US 1.07
billion, the sector has achieved a significant
milestone.

• 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

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Projected Market opportunities in the knowledge
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 since independence
• 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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Thank You