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MSMEs

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  • 1. International Journal of Business and Management Tomorrow Vol. 3 No. 1 Micro, Small, and Medium Enterprises: An OverviewMr. Jitender Kumar Tiwari, Assistant Professor, Sri Sai University, PalampurMr. Guru Swarup, Assistant Professor, Sri Sai University, PalampurAbstractMicro, Small and Medium Enterprises (MSMEs), are credited with generating the highest rates of employmentgrowth and account for a major share of industrial production and exports. They also play a key role in thedevelopment of economies with their effective, efficient, flexible and innovative entrepreneurial spirit.Government of India has developed key strategies to promote and support the MSME sector to promotecompetitiveness, quality upgrading, finance, technology, etc. This has resulted in a dramatic positive change inthe sector. The present article deals with the role of Micro, Small, and Medium Enterprises in the economicgrowth, employment generation, production and exports. The period of the study is from 2001-2011 and basedon secondary information. This paper is an attempt to throw some light on the facts and figures related toMSMEs over last ten years. It has been observed that with the passage of time, there is an increase in the totalnumber of MSMEs, with the increase in employment opportunities and exports.Keywords: MSME (Micro, Small and Medium Enterprises), MSE (Micro and Small Enterprises), SME (Smalland Medium Enterprises), SSI (Small Scale Industry), NPA (Non-Performing Asset)1. IntroductionMicro, Small and Medium Enterprises (MSMEs), are credited with generating the highest rates of employmentgrowth and account for a major share of industrial production and exports. They also play a key role in thedevelopment of economies with their effective, efficient, flexible and innovative entrepreneurial spirit. Thesocio-economic policies adopted by India since the Industries (Development and Regulation) Act, 1951 havelaid stress on MSMEs as a means to improve the country‟s economic conditions.ISSN: 2249-9962 January|2013 www.ijbmt.com Page | 1
  • 2. International Journal of Business and Management Tomorrow Vol. 3 No. 1Ministry of Small Scale Industries was first created on 14th October 1999 and, on 6th September 2001, furtherbifurcated into two separate ministries, namely, the Ministry of Small Scale Industries and the Ministry of Agroand Rural Industries. Subsequent to enactment of “Micro, Small and Medium Enterprises Development Act,2006” by the Parliament, the President under Notification dated 9th May, 2007 has amended the Government ofIndia (Allocation of Business) Rules, 1961. Pursuant to this amendment, Ministry of Agro and Rural Industriesand Ministry of Small Scale Industries were merged into a single Ministry, namely, “Ministry of Micro, Smalland Medium Enterprises.The salient features of this MSME Act include:• Setting up of a National Board for MSMEs• Classification of enterprises• Advisory Committees to support MSMEs• Measures for promotion, development and enhancement of MSMEs• Schemes to control delayed payments to MSMEs• Enactment of rules by State Governments to implement the MSMED Act, 2006 in their respective States1.1 Definitions of MSME’s as per the MSME Act 2006• Micro-Enterprise - A micro-enterprise is one where the investment in plant and machinery (their original cost excluding land, building and items specified by the Ministry of Small Scale Industries in its notification No. S.O. 1722(E) dated October 5, 2006) does not exceed Rs.25 lakh.• Small enterprise - A small enterprise is one where the investment in plant and machinery (their original cost excluding land, building and items specified by the Ministry of Small Scale Industries in its notification No. S.O. 1722(E) dated October 5, 2006) is more than Rs.25 lakh but does not exceed Rs.5 crore.• Medium enterprise - A medium enterprise is one where the investment in plant and machinery (their original cost excluding land, building and items specified by the Ministry of Small Scale Industries in its notification No. S.O. 1722(E) dated October 5, 2006) is more than Rs.5 crore but does not exceed Rs.10 crore.The definition of MSMEs in the service sector is:• Micro-enterprise: Investment in equipment does not exceed Rs.10 lakh.• Small enterprise: Investment in equipment is more than Rs.10 lakh but does not exceed Rs.2 crore.• Medium enterprise: Investment in equipment is more than Rs.2 crore.1.2 Opportunities for MSMEs in IndiaGovernment of India has developed key strategies to promote and support the MSME sector to promotecompetitiveness, quality upgrading, finance, technology, etc. This has resulted in a dramatic positive change inthe sector. Over the years, this sector in India has progressed from the production of simple consumer goods tothe manufacture of many sophisticated and precision products like electronics control systems, micro wavecomponents, electro medical equipment, etc. MSMEs in India are considered to be important members withinthe supply chain and are established in almost all major sectors in Indian industry such as:Food Processing, Agricultural Inputs, Chemicals & Pharmaceuticals, Engineering; Electricals; Electronics,Electro-medical equipment, Textiles and Garments, Leather and leather goods, Meat products, Bio-engineering,Sports goods, Plastics products, Computer Software, etc.1.3 Policy Package for Stepping up Credit FlowThe Government announced a „Policy Package for Stepping 4p Credit to Small and Medium Enterprises(SMEs)‟ on 10 August 2005. The measures in the Policy Package to increase the quantum of credit to SMEs(including Micro and Small Enterprises-MSEs) include:• Public sector banks to fix their own targets for funding SMEs in order to achieve a minimum 20 percent year-on year growth in credit to the SMEs sector.• Public sector banks to follow a transparent rating system with cost of credit linked to the credit rating of the enterprises.• Commercial banks to make concerted efforts to provide credit cover on an average to at least 5 new tiny, small and Medium Enterprises at each of their semi-urban/urban branches per year.• The Reserve Bank of India (RBI) to issue detailed guidelines relating to debt restructuring mechanism so as to ensure restructuring of debt of all eligible Small & Medium Enterprises.• Introduction of one-time settlement scheme to apply to MSE Non-Performing Asset (NPA) accounts in the books of the banks as on March 31, 2004.ISSN: 2249-9962 January|2013 www.ijbmt.com Page | 2
  • 3. International Journal of Business and Management Tomorrow Vol. 3 No. 1• Taking the exiting RBI guidelines as indicative minimum, banks to formulate a comprehensive and more liberal policy relating to advances to the SME sector.• Banks to adopt cluster based approach for SME financing.• The RBI to constitute empowered committees with the Regional Director of RBI as the chairman to review the progress in SME financing and rehabilitation of sick Small & Medium Enterprises.• Boards of Banks to review the progress in achieving the self-set targets as also rehabilitation and restructuring of SME accounts on a quarterly basis.The RBI issued circular dated 19th August 2005 to all the public sector banks and 25th August 2005 to allprivate banks/foreign banks/ RRBs, advising them to implement the measures announced in the Policy Package.The RBI has also circulated the guideline on One-Time Settlement (OTS) Scheme for SME accounts to publicsector banks on 3rd September 2005 and the detailed guidelines on debt restructuring mechanism for SME to allthe commercial banks on 8th September 2005. Further, the RBI has constituted empowered Committees with theRegional Director of the RBI as the chairman to review the progress in SME financing and coordinate withother banks/financial institutions and the State Government in removing bottlenecks, if any, to ensure smoothflow of credit to the sector.As per the RBI data on credit flow to MSE sector, the Public Sector Banks have consistently registered year-on-year growth of over 20% in advances to the MSEs during the period 2005-06 to 2008-09.2. Review of Literature2.1. For the first time, J.M. Keynes (1936)1 has focused his attention on the forces that determineemployment policy followed in industrialization. He propounded the theory that entrepreneurs will offer theamount of employment which maximizes their output and profit. Here he stressed the productivity of labour asthe determining factor of the level of employment. There is a positive relationship among productivity of labour,output and employment.According to Keynes “employment can only increase pari-pasu with an increase in investment”.2.2 According to the Village and Small scale Industries Committee Report (1955)2, popularly known asKarve Committee Report, since a substantial number of employed and underemployed belongs to the villageand small industries group, setting up of small scale and village industries will provide employment to them inoccupations in which they have been traditionally trained and for which they possess equipment‟s. Thecommittee realizes the necessity of introducing better techniques in the village industry, so that they can keeppace with the progressively expanding economy and do not become unsuitable tomorrow.2.3. Prasad (1983)3 in his study found that the small scale industrial sector is an integral part of not onlythe industrial sector, but also of the country‟s economic structure as a whole. If small scale industries areproperly developed, they can provide a large volume of employment, can raise income and standard of living ofthe people in lower income group and can bring about more prosperity and balanced economic development.Small scale industrial sector has vast potential in terms of creating employment and output, promotion of export,expansion of base for indigenous entrepreneurship and dispersal of industries and entrepreneurship skills in bothrural as well as backward areas.On the basis of Review of Literature, it is observed that Researchers have emphasized on the importance of theemployment generation opportunities through MSMEs, their role in the economy upliftment and in export.3. Objectives of the StudyThe paper is attempted with main objectives to study the number of MSMEs working in India and their impacton employment opportunities, production and Export potential.4. Importance of the StudyIn the previous studies it has been observed that inspite of promising potential, ample opportunities, people arereluctant to grab these opportunities. Therefore the study is important to prove that MSMEs are for helping thepeople.5. Research MethodologyThe data for the present study has been used from secondary sources. In consonance to the objectives of study,the secondary data has been collected from the published Annual Reports of the MSME‟s and from the relatedISSN: 2249-9962 January|2013 www.ijbmt.com Page | 3
  • 4. International Journal of Business and Management Tomorrow Vol. 3 No. 1government websites. The tabulated data as per the requirements of the objectives of the study has beenanalysed with appropriate methodology.6. Result/Interpretations of DataThe data collected is discussed in the following tables along with their results and interpretations.6.1. Total working MSME’sFrom the given table 1.1, it can be seen that the number of MSMEs have increased from 105.21 lakhs to 311.52lakhs, showing almost three times increasing from 2001-2011, with every year increase in other years. Table 1.1 Sr. No. 1 2 3 4 5 6 7 8 9 10 Year 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 02 03 04 05 06 07 08 09 10 11 Total working 105.21 MSME‟s(In – 109.49 113.95 118.59 123.42 261.12 272.79 285.16 298.08 311.52 Lakhs) The data of Table 1.1 is depicted in the following figure 1.1. Figure 1.1 Total working M M ’s(In – Lakhs) S E 350 300 250 200 Total working M M ’s(In – Lakhs) S E 150 100 50 0 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 02 03 04 05 06 07 08 09 10 116.2. EmploymentFrom the given table 1.2, it can be seen that the employment opportunities have increased from 249.33 lakhs to732.17 lakhs, showing almost three times increasing from 2001-2011, with every year increase in other years. Table 1.2Sr. No. 1 2 3 4 5 6 7 8 9 10Year 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 02 03 04 05 06 07 08 09 10 11Employment 249.33 260.21 271.42 282.57 294.91 595.66 626.34 659.35 695.38 732.17(In – Lakhs) The data of Table 1.2 is depicted in the following figure 1.2. Figure 1.2 E ploy ent (In – Lakhs) m m 800 700 600 500 400 E ploy ent (In – Lakhs) m m 300 200 100 0 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 02 03 04 05 06 07 08 09 10 11ISSN: 2249-9962 January|2013 www.ijbmt.com Page | 4
  • 5. International Journal of Business and Management Tomorrow Vol. 3 No. 1Correlation Coefficient-Deviations taken from Assumed Mean (Total working MSMEs and Employmentgeneration opportunities) Table: 1.2 (A) Year Working Employment dx dx2 dy dy2 dx.dy MSMES(In opportunities( in lacs) x lacs) Y 2001-02 105.21 249.33 -155.91 24307.9 -346.33 119944.5 53996.3 2002-03 109.49 260.21 -151.63 22991.6 -335.45 112526.7 50864.3 2003-04 113.95 271.42 -147.17 21659 -324.24 105131.6 47718.4 2004-05 118.59 282.57 -142.53 20314.8 -313.09 98025.3 44624.7 2005-06 123.42 294.91 -137.7 18961.29 -300.75 90450.6 41413.3 2006-07 261.12 595.66 0 0 0 0 0 2007-08 272.79 626.34 11.67 136.19 30.68 941.3 358 2008-09 285.16 659.35 24.04 577.92 63.69 4056.4 1531.1 2009-10 298.08 695.38 36.96 1366.04 99.72 9944.1 3685.6 2010-11 311.52 732.17 50.4 2540.16 136.51 18635 6880.1 Σdx = - Σdx2 = Σdy =- Σdy2 Σdx.dy = 611.9 112854.9 1289.3 =559655.5 251071.8 r = +0.99Employment generation is directly proportional to the increase in no of MSMEs. A positive co relationhas been observed when No of working MSMEs and Employment opportunities were studied. This isshown in Table 1.2(A).6.3. ProductionFrom the given table 1.3, it can be seen that the total value of production has increased from 282270 crores to1095758 crores, showing almost four times increasing from 2001-2011, with every year increase in other years. Table 1.3 Sr. No. 1 2 3 4 5 6 7 8 9 10 Year 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010-11 02 03 04 05 06 07 08 09 10 Productio 28227 31485 36454 42971 49784 70939 79075 88080 98291 109575 n (In – 0 0 7 6 2 8 9 5 9 8 Crore) The data of Table 1.3 is depicted in the following figure 1.3. Figure 1.3 P d c n (In–C re ro u tio ro ) 1000 200 1000 000 800 000 600 000 P d c n (In–C re ro u tio ro ) 400 000 200 000 0 20- 20- 20- 20- 20- 20- 20- 20- 20- 21- 01 02 03 04 05 06 07 08 09 00 02 03 04 05 06 07 08 09 10 116.4.ExportFrom the given table 1.4, it can be seen that the total value of Export has increased from 71244 crores to 202017crores, showing almost three times increasing from 2001-2008, with every year increase in other years.ISSN: 2249-9962 January|2013 www.ijbmt.com Page | 5
  • 6. International Journal of Business and Management Tomorrow Vol. 3 No. 1 Table 1.4 Sr. No. 1 2 3 4 5 6 7 8 9 10 Year 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010-11 02 03 04 05 06 07 08 09 10 Export 71244 86013 97644 124417 150242 182538 202017 * * * (In – Crore) * Data not available. The data of Table 1.4 is depicted in the following figure 1.4. Figure 1.4 E p (In– C re x ort ro ) 25 0 000 20 0 000 15 0 000 E po (In – C x rt rore) 10 0 000 5 0 000 0 2001-02 2002-03 2003-04 2 -0 004 5 2 -0 005 6 2 -0 006 7 2 -0 007 87. Findings of the Study7.1 It is observed that there is steady increase in the number of working MSMEs.7.2 It is clear that there is steady increase in the employment opportunities with the increase in the number of working MSMEs from 2001-2011.7.3 There is increase in the production by MSMEs from 2001-2011.7.4. It is clear that there is increase in Export from 2001-2008.8. ConclusionFrom the figures stated above it is clear that the number of working MSMEs, employment opportunitiesprovided by MSMEs, Production in MSMEs and Export has shown an increasing trend from 2001-2011.9. SuggestionsAt present there are less awareness programs or counselling cells provided by the government which willanswer the questions in the minds of people about the consequences of MSMEs. Therefore it is suggested thatgovt. should come with the more awareness camps and programmes in the public.For providing a better understanding on MSMEs the govt. should continuously conduct a research to know therequirements and the problems faced by the people in order to resolve their problems and for further guidance.Mr. Jitender Kumar Tiwari, Mr. Guru Swarup,Assistant Professor, Assistant Professor,Sri Sai University, Sri Sai University,Palampur PalampurReferences1. 1 Keynes, J.M. (1936): The General Theory of Employment, Interest and Money, Harcourt Brace & Co, New York.2. Report of the Village and Small Scale Industries (Second Five Year Plan) Committee (1955), commonly known as the Karve Committee Report. Government of India.3. Prasad, L. (1983): Industrialization- Concept and Issues, S. Chand and Co. New Delhi.4. Annual Report 2008-09, Govt. of India, Ministry of Micro, Small and Medium Enterprises5. Annual Report 2009-10, Govt. of India, Ministry of Micro, Small and Medium Enterprises6. Micro, Small & Medium Enterprises Development (MSMED) Act, 2006ISSN: 2249-9962 January|2013 www.ijbmt.com Page | 6
  • 7. International Journal of Business and Management Tomorrow Vol. 3 No. 1Websites:1.) http://www.msme.nic.in2.) http://msme.gov.in3.) http://dcmsme.gov.in/ssiindia/msme_in.htm4.) http://dcmsme.gov.in/publications/circulars/GazetteNot.htm5.) http://www.rbi.org.in/scripts/FAQView.aspx?Id=846.) http://msme.gov.in/msme_ars.htm7.) http://www.dnb.co.in/SME_cluster_series2012_Indore/PDF/MSMEs_in_India.pdfTables: 1.1, 1.2, 1.2(A), 1.3, 1.4.Figures: 1.1, 1.2, 1.3, 1.4.ISSN: 2249-9962 January|2013 www.ijbmt.com Page | 7

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