This document discusses sickness in micro, small, and medium enterprises (MSMEs) in India. It defines a sick MSME as one where accumulated losses over the past 5 years exceed 50% of its peak net worth. MSMEs become sick due to internal causes like poor planning, management issues, or external causes like lack of government support or raw material shortages. Rehabilitation of sick MSMEs involves analyzing past performance, identifying viable operations levels, determining funding needs, and developing action plans to address weaknesses. Regular monitoring is also needed to nurse sick MSMEs back to health and prevent future sickness. Early warning signs of potential sickness include absent leadership and non-compliance with statutory obligations. Remedial measures include diagnostic

1. Sickness of MSME
Definition:-
“ A company wherethe accumulated losses at the end of any financial year
results in erosion of 50% or more of its peak net worth during the immediately
preceding five financial years.”
Sicknessand its Magnitude
A unit become sick when it is not capable to generate internal surplus fund its
obligation towards suppliers or creditors in times. Incipient stageis called
when no unit becomes sick over night or rather than becomes a period of time.
According to V.N. Nadkarni, “...someindustrialunits are born sick, some
achieve sickness and somehave sickness thrustupon them.”
Three parts of sickness:-
1. Detection:- Industrial units sickness when 1) It faces Financial
embarrassment and 2) Internal and External causes of an industrial units
A) Internal causes-
1) Planning- Wrong location area, Absence of market analysis,
Unbalance capital structure,
2) Labour Problem- Lack of inefficient labour, unsatisfied labour,
Lack of coordination, Poorlabour productivity.
3) Financialproblem- unable to repay, Lack of financial support
from banks and financial institutions.
4) Production problem- Production related such as Poorcostof
quality, high maintenance cost, Quality related problems
5) Implementation- Delay work for another time.
6) MarketProblem- Lack of R&D, Lack of Marketing
Mix(Product, Price, Place, Promotion), Lack of marketing
techniques and not meet with customer expectation
7) ManagementProblem- Inefficiency of management, lack of
expertise, Lack of propermgmt. system and over centralization,
Lack of Management function
B) External causes-
1) Shortage in electricity (Power Cut)
2) Lack of government support, Suddenchange rules and regulation
(Government Policy)

2. 3) Change of out of fashion, Lack of credit Facility (Demand and
credit Restraints)
4) Shortage of raw material, high price (Erratic supply of units)
5) Lack of transport facility(Transport)
6) Developing Technology
7) Natural calamities.
2. Rehabilitation(You’ve to re-establish again):
It divided into 3 categories
1. Sicknessatbirth: - At the time of making project or due to in feasibility
of project.
2. Genuine Sickness:- covers external factors such as Market constraints,
Finance constraints.
3. Due to management problem such as labour problems, problem related
to availability of raw material.
In this part, several committees solve problem at small-scale sector. For
rehabilitation of sickness, three-tier mechanism developed by
Government such as DLC at Govt. level
3. Nursing
A systematic approach in necessary to convertsick into healthy. It includes:-
1. Analyse past performance:- When Business running on such highly
competitive level, it’s no wonder that analysing of the past business
result. Many techniques are their analysing the business result, it
provideeconomical, efficiency and effectiveness to businesses analysis a
range of performanceissues.
2. Identification of viable level of operation: - The operation activities
should identify the feasible level of operations to generate the internal
surplus.
3. Determination of funds required to continue the unit at the new
production level: - Sources of funds such as Personal saving, Working
capital, Debentures, Bank Overdraft should be analysed according to the
needed to operate at the proposedlevel of production.
4. Identify key areas which contribute to the weakness of the unit and
developing action plan for each weak spot.

3. 5. Regular periodicalchecking the status or progress of the unit.
So, some considered early warning signals of MSME falling sick such as-
1. Absence of key personnel in the board meetings
2. Non cooperative attitude of the promoters and directors
3. Avoidance of Follow-up system/ absence of promoters
4. Non-submission balance sheet
5. Non-submission of projects reports and progress reports
6. Failure to pay statutory liabilities
Remedial Measures:-
1. Diagnostic studies(Role of BIFR)
2. Monitoring and nursing the sick units during infancy
3. RBI guidelines…
4. Brain stormwith a select group to get creative ideas for improvement
5. Adopt better practices, right technology, better work cultural and
professionalmanagementSSI can improve their health as well as
economy.
Regards,
Sarthak Goyal
BBA3rd Year
3118BBA057