1. MICRO, SMALL AND MEDIUM ENTERPRISES
[Entrepreneurship Development]
2016
Deeksha Singh Sengar
B.Des FD (13/02)
Semester : VII
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TABLE OF CONTENT
Introduction
Enterpreneurship------------------------------------------------------------------------------------------------ 3-4
Enterpreneurship Ecosystem---------------------------------------------------------------------------------- 4
Enterprenial Behaviuor----------------------------------------------------------------------------------------- 4
Relationship Between Small Bussiness and enterpreneurship---------------------------------------- 5
Ministry Of Micro, Small and Medium Enterprises
Primary Responsibility------------------------------------------------------------------------------------------ 8
Organizational Setup
Khadi and Village Industries Commission------------------------------------------------------------- 9
Mahatma Gandhi Institute for Rural Industries----------------------------------------------------- 9
Coir Board---------------------------------------------------------------------------------------------------- 10
National Small Industrial Corporation (NSIC) Ltd.-------------------------------------------------- 10
National Enterpreneurship Development Institute------------------------------------------------ 10
MSME & its Role in Development of Enterpreneurship in India
Definitions of Micro, Small and Medium Enterprises-------------------------------------------------- 11-12
MSME as Growth Driver of Indian Economy------------------------------------------------------------- 12
Generating Employment Opportunities------------------------------------------------------------------- 12-13
Major Contributor to GDP------------------------------------------------------------------------------------ 13-14
Contribution to Industrial Production and Export------------------------------------------------------ 14-15
Major Plan Schemes Implemented by the Ministry--------------------------------------- 16-23
Conclusion------------------------------------------------------------------------------------------- 24
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INTRODUCTION
Entreprenureship
Entrepreneurship has traditionally been defined as the process of designing, launching and running
a new business, which typically begins as a small business, such as a startup company, offering a
product, process or service for sale or hire, and the people who do so are called 'entrepreneurs'. It
has been defined as the " capacity and willingness to develop, organize, and manage a business
venture along with any of its risks in order to make a profit."
While definitions of entrepreneurship typically focus on the launching and running of businesses,
due to the high risks involved in launching a start-up, a significant proportion of businesses have to
close, due to a lack of funding, bad business decisions, an economic crisis -- or a combination of all
of these or due to lack of market demand. In the 2000s, the definition of "entrepreneurship" has
been expanded to explain how and why some individuals (or teams) identify opportunities,
evaluate them as viable, and then decide to exploit them, whereas others do not, and, in turn, how
entrepreneurs use these opportunities to develop new products or services, launch new firms or
even new industries and create wealth. Recent advances stress the fundamentally uncertain nature
of the entrepreneurial process, because although opportunities exist their existence cannot be
discovered or identified prior to their actualization into profits . What appears as a real opportunity
ex ante might actually be a non-opportunity or one that cannot be actualized by entrepreneurs
lacking the necessary business skills, financial or social capital.
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Entrepreneurial spirit is characterized by innovation and risk-taking. While entrepreneurship is
often associated with new, small, for-profit start-ups, entrepreneurial behavior can be seen in
small-, medium- and large-sized firms, new and established firms and in for-profit and not-for-profit
organizations, including voluntary sector groups, charitable organizations and government. For
example, in the 2000s, the field of social entrepreneurship has been identified; in which
entrepreneurs combine business activities with humanitarian, environmental or community goals.
Entrepreneurshipecosystem
Entrepreneurship typically operates within an
entrepreneurship ecosystem which often
includes government programs and services
that promote entrepreneurship and support
entrepreneurs and start-ups; non-
governmental organizations such as small
business associations and organizations that
offer advice and mentoring to entrepreneurs;
small business advocacy organizations that
lobby the government for increased support
for entrepreneurship programs and more
small business-friendly laws and regulations;
entrepreneurship resources and facilities
entrepreneurship education and training
programs offered by schools, colleges and
universities; and financing (e.g., bank loans,
government and private foundation grants).
Entrepreneurial Behaviors The entrepreneur is commonly seen as an
innovator — a designer of new ideas and
business processes. Management skill and
strong team building abilities are often
perceived as essential leadership
attributes for successful entrepreneurs.
Political economist Robert Reich considers
leadership, management ability, and
team-building to be essential qualities of
an entrepreneur.
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Relationship between small business and entrepreneurship
The term "entrepreneur" is often conflated with the term "small business" or used interchangeably
with this term. While most entrepreneurial ventures start out as a small business, not all small
businesses are entrepreneurial in the strict sense of the term. Many small businesses are sole
proprietor operations consisting solely of the owner, or they have a small number of employees,
and many of these small businesses offer an existing product, process or service, and they do not
aim at growth. In contrast, entrepreneurial ventures offer an innovative product, process or service,
and the entrepreneur typically aims to scale up the company by adding employees, seeking
international sales, and so on, a process which is financed by venture capital and angel investments.
Successful entrepreneurs have the ability to lead a business in a positive direction by proper
planning, to adapt to changing environments and understand their own strengths and weakness.
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MINISTRY OF MICRO, SMALL & MEDIUM ENTERPRISES
Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic
sector of the Indian economy over the last five decades. MSMEs not only play crucial role in
providing large employment opportunities at comparatively lower capital cost than large industries
but also help in industrialization of rural & backward areas, thereby, reducing regional imbalances,
assuring more equitable distribution of national income and wealth. MSMEs are complementary to
large industries as ancillary units and this sector contributes enormously to the socio-economic
development of the country. The Sector consisting of 36 million units, as of today, provides
employment to over 80 million persons. The Sector through more than 6,000 products contributes
about 8% to GDP besides 45% to the total manufacturing output and 40% to the exports from the
country. The MSME sector has the potential to spread industrial growth across the country and can
be a major partner in the process of inclusive growth
Ministry of Micro, Small & Medium Enterprises (M/o MSME) envisions a vibrant MSME sector by
promoting growth and development of the MSME Sector, including Khadi, Village and Coir
Industries , in cooperation with concerned Ministries/Departments, State Governments and other
Stakeholders, through providing support to existing enterprises and encouraging creation of new
enterprises
On 9 May 2007, subsequent to an amendment of the Government of India (Allocation of Business)
Rules, 1961, erstwhile Ministry of Small Scale Industries and the Ministry of Agro and Rural
Industries were merged to form the Ministry of Micro, Small and Medium Enterprises (M/o MSME).
This Ministry now designs policies and promotes/ facilitates programs, projects and schemes and
monitors their implementation with a view to assisting MSMEs and helps them to scale up.
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The Primary Responsibility
The primary responsibility of promotion and development of MSMEs is of the State Governments.
However, the Government of India, supplements the efforts of the State Governments through
various initiatives. The role of the M/o MSME and its organizations is to assist the States in their
efforts to encourage entrepreneurship, employment and livelihood opportunities and enhance the
competitiveness of MSMEs in the changed economic scenario. The schemes/programs undertaken
by the Ministry and its organizations seek to facilitate/provide:
Adequate flow of credit from financial institutions/banks;
Support for technology up gradation and modernization;
Integrated infrastructural facilities;
Modern testing facilities and quality certification;
Access to modern management practices;
Entrepreneurship development and skill up gradation through appropriate training facilities;
Support for product development, design intervention and packaging;
Welfare of artisans and workers;
Assistance for better access to domestic and export markets ;and
Cluster-wise measures to promote capacity-building and empowerment of the units and their
collectives.
ORGANIZATIONAL SET-UP
The Implementation of policies and various programs/ schemes for providing support services to
MSME’s are undertaken through the following organizations of the Ministry:
Office of Development Commissioner (Micro, Small and Medium Enterprises)
The Office of Development Commissioner (Micro, Small and Medium Enterprises) headed by the
Special Secretary & Development Commissioner (MSME), being an apex body for formulating and
overseeing implementation of the policies for the development of MSMEs in the country, is playing
a very positive and constructive role for strengthening this vital sector. It functions through a
network of MSME-DIs, Regional Testing Centers, Footwear Training Institutes, Production Centers,
Field Testing Stations and specialized institutes. It renders services such as advising the Government
in Policy formulation for the promotion and development of MSMEs; providing techno economic
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and managerial consultancy, common facilities and extension services to MSME units; providing
facilities for technology up gradation, modernization, quality improvement and infrastructure;
developing Human Resources through training and skill up gradation etc.
Khadi & Village Industries Commission (KVIC)
The Khadi & Village Industries Commission
(KVIC), established under the Khadi and
Village Industries Commission is a statutory
organization engaged in promoting and
developing khadi and village industries for
providing employment opportunities in rural
areas, thereby strengthening the rural
economy. The KVIC has been identified as
one of the major organizations in the
decentralized sector for generating
sustainable rural non-farm employment
opportunities at low per capita investment.
This also helps in checking migration of rural
population to urban areas in search of the
employment opportunities.
Mahatma Gandhi Institute for Rural Industrialization(MGIRI)
The national level institute namely ‘Mahatma
Gandhi Institute for Rural Industrialization
(MGIRI)”(erstwhile Jamnalal Bajaj Central
Research Institute) has been established as a
society under Societies (Registration) Act,
1860 at Wardha, Maharashtra, to strengthen
the R&D activities in KVI sector. The main
functions of the Institute are to improve the
R&D activities under rural industrial sector
through encouraging research, extension of
R&D, quality control, training and
dissemination of technology related
information.
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Coir Board
The Coir Board is a statutory body established under the
Coir Industry Act, 1953 for promoting overall
sustainable development of the coir industry and
improving the living conditions of the workers engaged
in this traditional industry. The activities of the Board
for development of coir industries, inter-alia, include
undertaking scientific, technological and economic
research and development activities; developing new
products & designs; and marketing of coir and coir
products in India and abroad. It also promotes co-operative organizations among producers of husks,
coir fiber, coir yarn and manufacturers of coir products; ensuring remunerative returns to producers
and manufacturers, etc.
National Small Industries Corporation(NSIC) Ltd
The National Small Industries Corporation (NSIC)
Ltd. was established in 1955 by the Government of
India with a view to promote, aid and foster the
growth of small scale industries in the country. The
main functions of the Corporation are to promote
aid and foster the growth of micro and small
enterprises in the country, generally on a
commercial basis. It provides a variety of support
services to micro and small enterprises by catering
to their different requirements in the areas of raw material procurement; product marketing; credit
rating; acquisition of technologies; adoption of modern management practices, etc.
National Entrepreneurship Development Institutes
Entrepreneurship development and training is one
of the key elements for the promotion of micro,
small and medium enterprises (MSMEs). In order to
inculcate the entrepreneurial culture amongst the
first generation of entrepreneurs, the Ministry has
set up three national level Entrepreneurship
Development Institutes viz; The National Institute
for Entrepreneurship and Small Business
Development (NIESBUD) (1983) at Noida (Uttar
Pradesh), National Institute for Micro, Small and Medium Enterprises (NI-MSME) (1960) at
Hyderabad, and Indian Institute of Entrepreneurship (IIE) (1993) at Guwahati, as autonomous
societies.
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MSME AND ITS ROLE IN DEVELOPMENT OF
ENTREPRENEURSHIP IN INDIA
MSME (Micro, Small and Medium Enterprises) are the heart of Indian Industry. Their contribution
especially to a developing country like India is very valuable. They not only contribute in generating
employment but also encourage low skilled level workers to start as entrepreneur level in rural
areas. As data given by Economic Times in June 2013, they employ close to 40% of India's
workforce. Their main boost is given to Indian Manufacturing industry which is around 45% and
export oriented units which are close to 40%. The MSME sector in India is highly heterogeneous in
terms of the size of the enterprises, variety of products and services, and levels of technology. It
helps in industrialization of rural and backward areas, reducing regional imbalances and assuring
more equitable distribution of national income and wealth. MSME complement large industries as
ancillary units and contribute enormously to the socioeconomic development of the country.
Definitions Of Micro, Small &MediumEnterprises
As MSME focus more on running the business on a day-today basis, they find less time to manage
the HR processes which is perceived as non-priority. MSME do not feel like revamping existing
organizational structure, especially when they know that the status quo is delivering the output.
Competitiveness of MSME can be enhanced through better human resource (HR) practices of
recruitment, selection, training and compensation. Apart from other functional areas such as
production, finance, marketing, inventory and logistics, MSME also need to focus on implementing
best HR practices. Micro, small and medium enterprises as per MSMED Act, 2006 are defined based
on their investment in plant and machinery (for manufacturing enterprise) and on equipment for
enterprises providing or rendering services. The present ceilings on investment for enterprises to be
classified as micro, small and medium enterprises are as follows:
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The term “village industries” has been redefined in amended KVIC,Act,1956 as "any industry
located in a rural area which produces any goods or renders any service with or without the use of
power and in which the fixed capital investment per head of artisan or worker does not exceed Rs.
One lakh (Rs. One lakh and fifty thousand in case of village industry located in a hilly area) or such
other sum as may, by notification in the Official Gazette, be specified from time to time by the
Central Government"
MSMEAs GrowthDriver Of Indian Economy
In India, 95 percent of industrial units (3.4 million) are in small-scale sector with a 40 percent value
addition in the manufacturing sector. Enterprises of this type provide the second highest
employment level after agriculture and account for the 40 percent of industrial production. These
units contribute 35 percent to India’s exports. In this setting, Indian MSME is fundamentally
important to the Indian economic system. Their potential to generate employment, bolster exports
and bring flexibility into India’s business environment deserves close attention from India’s policy
makers and research scholars.
Generating Employment Opportunities
Employment opportunities are one among the important variables of economic growth of a
country. Now days, the Arab world is facing the problems created by its unemployed unrest people.
No economy can economically sustain unless and until it provide lively hood to its local people.
Traditionally the MSME are labor intensive and alleviating unemployment problems to a great
extent.
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Indian MSME sector is the second largest employment generator next to agricultural sector. It
employs about 101 million people and creates 4 million employment opportunities a year.
The number of MSME has been increasing steadily. In 1991 there were only 67.87 lakh units, but it
increased multi folded by 2011- 2012. This change might be the result of conducive policy
environment during the liberalization era. As MSME, generally is labor intensive, employment
generation always follows the increase in the number of units. It seems to be a boon to rural people
as MSME does not demand highly skilled employees and semi skilled and even unskilled people can
be employed in such units.
Major Contributor To GDP
MSME sector is a major contributor to nation’s GDP. News about GDP we listen to is alarming now
days. In the fourth quarter of 2012-2013 (January to March 2013) witnessed a slid of GDP to 4.8
percent. MSME sector constitutes an inevitable portion of GDP and hence it needs attention of the
policy makers. The statistics show that the contribution of MSME to GDP is ever increasing. The
below given graph delineates the percentage share of MSME in the nation’s GDP over the years. It
has managed to increase from 5.8 percent 2004-05 to 8.72 percent in 2008-09
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Contribution To Industrial Production And Export
MSME are, at present, operating in wide variety of sectors such as manufacturing, trade and
services and there by constitute a formidable component of country’s industrial production. Over
the year MSME reached at a level on the optimum utilization of available domestic resources and
produces quality products and services. The sector contributes much to the industrial growth of the
country. The sector account for more than 90 of the percent Industrial units in India and it has been
increasing impressively for last many years.
MSME had an impact on various issues of the economy such as industrial progress,
entrepreneurship, job creation, economic empowerment etc. MSME made possible an inclusive
and balanced growth. Around 50% MSME are owned by rural people and hence increases the
standard of living of people.
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As per the MSME Annual Report of FY 12 published by Ministry of Micro, Small and Medium
Enterprises MSME contribute 45% of the total manufacturing output.
MSME experiencing a significant increase in investment flows. The fixed investment in MSME is
ever increasing. Graph above shows the contribution of MSME to the total industrial production. It
is very clear that around 50 percent of total industrial production is constituted by MSME.
The total production of MSME sector is showing increasing trend. We can read it from the graph
given below. The graph depicts that investment in fixed asset has increased from Rs 8685.44 billion
in 2006 - 07 to Rs 11769.39 billion in 2011- 12 and total production shows an increase from Rs
13513.83billion in 2006- 07 to Rs 18343.32 million in 2011-12.
When we talk about country’s export, it is noticeable that MSME contribute 40 percent of the total
export. The current account deficit (CAD) has been subjected to hot debate during the third and
fourth courter of 2012 -13 financial year. The alarming decline in the CAD can be, to a great extent,
arrested by promoting the MSME sector though CAD is influenced by many other variables like
economic turndown. The data show that the MSME always showing an increasing trend in the
contribution to the total export of the country. It has an increase from Rs. 71244 corers in 2001-
02to Rs. 202017 corers in 2007-08.
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MAJOR PLAN SCHEMES IMPLEMENTED BY THE MINISTRY
SCHEMES FORMSME SECTOR
National Manufacturing CompetitivenessProgram (NMCP)
The Program aims to develop global competitiveness among Indian MSMEs by improving their
processes, designs, technology and market access. The
Program envisages substantial investments towards
enhancing the entire value chain of the MSME sector. All
the ten components of NMCP have already been
operationalized and are likely to spur innovation and
growth in the MSME sector. These include Quality
Management Systems and Quality Technology Tools,
Design Clinic Scheme, Building Awareness on IPRs, Support
for Entrepreneurial and Managerial Development,
Marketing Support/Assistance to MSMEs, Setting up of
New Mini Tool Room and Lean Manufacturing Competitiveness Scheme. These components seek to
introduce the best elements of industrial competitiveness in the MSME sector, which has often
been unable to afford such practices and techniques.
Credit Guarantee Scheme for Microand Small Enterprises
The objective of the scheme is to make available credit to SSI units, particularly tiny units, for loans
up to Rs. 100 lakh without collateral/ third party guarantees The Scheme covers collateral free
credit facility (term loan and/ or working capital) e x tended by e ligible lending institutions to new
and existing micro and small enterprises up to Rs. 100 lakh per borrowing unit
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The guarantee coverprovidedisupto 75% of the creditfacilityup
to Rs.50 lakhwithan incremental guarantee of 50% of the credit
facilityabove Rs.50 lakhand up to Rs.100 lakh.The scheme is
beingoperatedbythe CreditGuarantee FundTrustforMicro and
Small Enterprises(CGTMSE) setupjointlybythe Governmentof
Indiaand SIDBI.The corpus of CGTMSE is contributedbythe
Governmentof IndiaandSIDBIin the ratioof 4:1.
Credit LinkedCapital Subsidy Scheme (CLCSS)
CLCSS scheme aims at facilitating technology Up gradation
of small scale industries, including tiny, agro and rural
industrial units, by providing 15 per cent upfront capital
subsidy institutional finance availed of by them for
induction of well-established and improved technology in
specified sub- sector s /products approved under the
Scheme. The admissible capital subsidy under the
modified scheme is calculated with reference to the purchase price of plant and machinery. The
maximum limit of eligible loan for calculation of capital subsidy under this scheme has also been
raised from Rs.40 lakh to Rs.100 lakh. The modification in the CLCSS guidelines will further facilitate
modernization of small scale industries.
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MSECluster Development Program
The Micro and Small Enterprises – Cluster Development Program (MSE -
CDP) is being implemented for holistic and integrated development of
micro and small enterprises in clusters. The scheme envisages soft
interventions i.e diagnostic studies, hard interventions i.e setting up of
CFCs and Infrastructure Development in the new/ existing industrial
estates
Performance & Credit Rating Scheme
The scheme is being implemented through National Small
Industries Corporation (NS IC) Limited. The main objective of
the scheme is to provide a trusted third party opinion on the
capabilities and creditworthiness of the MSEs so as to create
awareness amongst them about the strengths and weakness of
their existing operations. Rating under the scheme is being
carried out through empanelled rating agencies i.e. CRISIL,
CARE, ONICRA, SMERA, ICRA and Brickwork India Ratings. Under this Scheme, rating fee payable by
the micro & small enterprises is subsidized for the first year only and that is subject to maximum of
75% of the fee or Rs.40000/-,whichever is less.
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International Cooperation (IC) Scheme
Technology infusion and/or up gradation of Indian
micro, small and medium enterprises (MSMEs), their
modernization and promotion of their exports are
the principal objectives of assistance under the
Scheme. The Scheme would cover the following
activities : (a) Deputation of MSME business
delegations to other countries for exploring new
areas of technology infusion/up gradation,
facilitating joint ventures, improving market of MSMEs products, foreign collaborations, etc; (b)
Participation by Indian MSMEs in international exhibitions, trade fairs and buyer-seller meets in
foreign countries as well as in India, in which there is international participation; (c) Holding
international conferences and seminars on topics and themes of interest to the MSME. IC Scheme
provides financial assistance towards the airfare and space rent of entrepreneurs. State/Central
Government Organizations, Industry/Enterprise Associations and Registered Societies/ Trusts and
Organizations associated with the promotion and development of MSMEs are eligible to apply.
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Marketing Assistance Scheme
The scheme is being implemented through National Small
Industries Corporation (NSIC) Limited. The main objectives
of the scheme is to enhance the marketing
competitiveness of MSMEs; to provide them a platform for
interaction with the individual/institutional buyers; to
update them with prevalent market scenario and to
provide them a form for redressing their problems. MSMEs
are supported under the Scheme for capturing the new market opportunities through organizing/
participating in various domestic & international exhibitions/ trade fairs, Buyer-Seller meets
intensive-campaigns and other marketing events.
Assistance to Training Institutions Scheme
The Scheme envisages financial assistance for establishment of new institutions (EDIs),
strengthening the infrastructure of the existing EDIs and for supporting entrepreneurship and skill
development activities. The assistance shall be
provided to these training institutions in the form of
capital grant for creation/strengthening of
infrastructure and program support for conducting
entrepreneurship development and skill development
programs. Maximum assistance for creation or
strengthening of infrastructure will be Rs. 150 lakhs on
matching basis, not exceeding 50% of project cost.
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However, for the North Eastern region (including Sikkim), Andaman & Nicobar and Lakshadweep,
the maximum assistance on matching basis would be Rs. 270 lakhs or 90% of project cost,
whichever is less. Any State/Union Territory Government, Training Institutions, NGOs and other
development agencies can apply for assistance for creation or strengthening of infrastructure.
Training Institutions who wish to conduct training program under the Scheme will have to enroll
themselves with any of the three National Level EDIs of the Ministry viz, NIESBUD, Noida; IIE
Guwahati and NIMSME, Hyderabad. Maximum assistance per trainee per hour for
entrepreneurship development and skill development program is Rs 50 (Rs.60 for NER, A&N and
Lakshadweep).
Survey, Studies and Policy Research
The main objectives of the Scheme are (i) to
regularly/periodically collect relevant and reliable data on
various aspects and features of MSMEs, (ii) to study and
analyze, on the basis of empirical data or otherwise, the
constraints and challenges faced by MSMEs as well as the
opportunities available to them in the context of
liberalization and globalization of the economy, and (iii) to
use the results of these surveys and analytical studies for policy research and designing appropriate
strategies and measures of intervention by the Government. Several studies on the MSME sector
and evaluation studies of various schemes implemented by the Ministry have been completed
under this scheme.
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Scheme of Fund for Regenerationof Traditional Industries (SFURTI)
With a view to making the traditional
industries more productive and competitive
and facilitating their sustainable development,
the Govt. of India announced setting up of a
fund for regeneration of traditional industries.
The objective is to organize the traditional
industries and artisans into clusters to make
them competitive and provide support for
their long term sustainability and economy of
scale, and provide sustained employment for
traditional industry artisans and rural
entrepreneurs to enhance marketability of products of such clusters by providing support for new
products, design intervention and improved packaging and also the improvement of marketing
infrastructure. The objective is also to equip traditional artisans of the associated clusters with the
improved skills and capabilities through training and exposure visits and to make provision for
common facilities and improved tools and equipments for artisans in order to strengthen the
cluster governance systems with the active participation of the stakeholders, so that they are able
to gauge the emerging challenges and opportunities and respond to them in a coherent manner.
Funding for the cluster varies from Rs.1.5 Crore to Rs.8 Crore in view of the size and scale of the
project.
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Funding pattern under the scheme has provision for soft interventions including skill training,
capacity building, design development, etc. hard interventions including Common Facility Centre,
Raw Material Banks(RMB), training centers, etc. and cross cutting thematic interventions which
include brand building & promotion, news media marketing, e-commerce, innovation, R&D
initiatives and developing linkages between clusters.
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CONCLUSION
Human Resource is one of the most essential growth indicatorsfor
organizations today. There is a lack of formalization in the
management of HR issues. This is in contrast to multinational
companies operating in India who have adopted structured and
formalized HR systems. As the studies showing very less MSMEs
have formal HR dept and in new small business unit’s owners only
handling the HR practices. So with skill training there should be
some procedure to provide basic HR functional training to owners
so that initially they can handle HR Functions and understand the
importance of HR in organizations. Later on after small units
become profit oriented units, they can have formal HR dept to run
each HR function systematically.