Micro, small and medium enterprises in indiaPresentation Transcript
Micro, Small and Medium
Enterprises in India
What they actually are?
• The commonly used criteria at the
international level to define SMEs are
the number of employees, total net
assets, sales and investment level.
• The European Union makes a general
distinction between self-employment,
micro,small and medium sized
businesses based on the following
And the criteria is-
2-9 Micro business
10-49 Small business
In the Indian context, micro, small and
medium enterprises are defined as..
• It is based on the investment
investment in plant and machinery (for
manufacturing enterprise) and on
equipments for enterprises providing or
Criteria in India-
• Micro enterprise-investment does not
exceed 25 lakh rupees.
• Medium enterprise- more than five
crores but not upto ten crores.
• Small enterprise- more than 25 lakhs
rupees but doe not exceed 5 crores.
In case of services-
• a micro enterprise- not upto 10 lakh
• a small enterprise- more than 10 lakh
but not upto 2 crore rupees.
• a medium enterprise- more than 2
crores but not upto 5 crores.
Importance of the MSME sector
• The contribution of micro, small and medium
enterprises (MSME) sector to
manufacturing output, employment and exports
of the country is quite significant.
• The MSME sector employs about 42 million
persons in over 13 million units throughout
• There are more than 6000 products, ranging
from traditional to high-tech items, which are
being manufactured by the Indian MSMEs.
Specific policy measures initiated
for boosting MSMES-
• Reservation of items for exclusive
manufacturing in small sector.
• Preferential credit support measures.
• Fiscal concessions.
• Infrastructural development like
development of industrial estates,
testing labs, common facility
• Entrepreneurship development
CONTRIBUTION OF MSMEs.
13 Million MSMEs
> 8000 products
Micro, Small and Medium
Enterprises Development Act, 2006
1. Industry replaced by enterprise which
include service enterprises also.
2. Ambit of sector enlarged to cover
3. Constitution of MSME Board.
4. Simplification of registration
5. Progressive credit support.
6. Penalty for delayed payments.
7. Provision for exit policy.
Institutional Support Structure
for MSMEs in India
At Federal Level
1. Ministry of MSMEs
2. Small Industries
3. National Small
4. Khadi & Village
5. Coir Board
At State Level
1. Directorate of
2. District Industries
3. State Finance
4. State Industrial
1. Public sector banks advised to double the
flow of credit to MSMEs within 5 years (20%
2. A minimum of 40% of bank credit
earmarked for priority sector lending which
includes loans to MSEs
3. Specialised SME Bank branches in
industrial clusters for smooth flow of credit
4. One Time Settlement (OTS) scheme for
settling NPAs of MSMEs
• Credit Linked Capital Subsidy Scheme
for Technology Upgradation
– Scheme meant to improve quality
of products by technology
– Investment upto INR 10 million
(US$ .250,000) eligible for support
with subsidy upto 15% on
• Testing Centres for Quality Certification
• Tool Rooms and Training Centres for
• Incentive scheme for obtaining ISO
Certification by MSEs
Marketing Assistance and Export
1. Support for participation in trade fairs and
exhibitions – national as well as
2. Training programmes on packaging for
3. Purchase preference in Government
4. Market Development Assistance Scheme
for publicity, market studies and adoption of
modern market practices
• Cluster formation has been considered
important for MSME development. A
cluster may be defined as a local
agglomeration of enterprises (mainly
SMEs, but often also ncluding some
large enterprises), which are producing
and selling a range of relatedand
complementary products and services
International Cooperation Programme
• Provides exposure to MSMEs to the
latest technologies, manufacturing
practices prevalent in their fields in
• Encourages their participation in
international exhibitions for exports.
Factors affecting MSMEs
• Accessing adequate and timely
financing on competitive terms,
particularly longer tenure loans.
• Accessing credit on easy terms has
become difficult in the backdrop of
current global financial crisis which has
held back the growth of SMEs and
impeded overall growth
• factors that include policy,
legal/regulatory framework (in terms of
recovery,bankruptcy and contract
enforcement), institutional weaknesses
(absence ofgood credit appraisal and
risk management/ monitoring tools),
and lack ofreliable credit information on
• It has become difficult for lenders to be able
to assess risk premiums properly,creating
differences in the perceived versus real risk
profiles of SMEs.
• Access to skilled manpower, R&D facilities
and marketing channels is limited
• Availability of finance at cheaper rates, skills
about decision-making and good
management and accounting practices, and
access to modern technology.
• Bribery,corruption,red tapism.
Challenges before MSMEs
• Problem of skilled manpower.
• Inadequate credit assistance.
• Irregular supply of raw material.
• Absence of organised marketing.
• Lack of machinery and equipment.
• Absence of adequate infrastructure.
• Competition from large-scale units and imported
• Other problems like poor project planning,
managerial inadequacies, old and orthodox designs,
high degree of obsolescence and huge number of
bogus concerns etc.
• A presentation by-