UNIT 3

Introduction

► The micro, small and medium enterprises sector in India, just like the
population, is second only to China. In financial year 2021,
► the total number of MSMEs in the country was more than 63 million.
► The majority comprised of micro enterprises, with a higher number in rural
areas than urban parts of the country.
► The Indian MSMEs sector contributes about 29% towards the GDP through its
national and international trade.
The sector

► New online system of MSME/Udyam Registration(former,Udyog Aadhaar Memorandum) launched by the Union MSME Ministry, w.e.f.
July 01, 2020, successfully registered >5.7 million MSMEs until November 2021

► As per data from the MSME Ministry, as of November 26, 2021, the Udyam Registration portal registered 5,767,734 MSMEs.

► Registered micro-enterprises stood at 5,441,220 (94.34%)

► small enterprises at 293,555 (5.09%)

► midsized enterprises at 32,959 (0.57%).

► As of November 26, 2021, under the top five state-wise Udyam registrations

► Maharashtra recorded maximum number of registrations with 12.18 lakh units,

► Tamil Nadu (6.23),

► Gujarat (4.86),

► Rajasthan (4.68)

► Uttar Pradesh (4.45).

MSME Overview
Organisation

► MSME is having two Divisions called

► Small & Medium Enterprises (SME) Division
► Agro & Rural Industry (ARI) Division.
► The SME Division is allocated the work, inter- alia, of administration,
vigilance and administrative supervision of the National Small Industries
Corporation (NSIC) Ltd., a public sector enterprise and the three autonomous
national level entrepreneurship development/training originations
► ARI division - KVIC ,Coir board and Mahatma Gandhi Institute for Rural
Industrialization (MGIRI).
► It also supervises the implementation of the Prime Minister's Employment
Generation Programme (PMEGP).
Number of micro, small and medium enterprises across India
in financial year 2021, by type(in millions)
Definitions
Problems faced by MSME (Ministry of Micro, Small and Medium
Enterprises, Government of India, July 2019)

► infrastructure bottlenecks
► lack of access to credit and risk capital
► and the perennial problem of delayed payments
► absence of formalization
► inertia to technology adoption
► capacity building
Infrastructure bottlenecks

► the age-old methods of operating business with low levels of technology

adoption deprives them of potential economies of scale.
► Lack of expertise in product development, designing, packaging and
marketing strategy due to their small size add up to the pressure of adapting
to the changing environment around them.
► The strategy for MSMEs should be to gradually expand in size and reduce the
dependence on the incentive structure provided by the Government. Their
aim should be eventually to compete on a global scale.
Access to credit

► Credit plays a vital role in development of MSME sector as funds at a

reasonable cost can increase their competitiveness.
► Credit disbursal to this sector has, however, remained sluggish in recent
periods.
► At an aggregate level, the total credit outstanding from banks and NBFCs to
the MSME sector was approximately ₹16.6 lakh crore as at end of September,
2019.
► Scheduled commercial banks account for 90 per cent of the share of total
credit outstanding.
Delayed payments

► A large number of MSMEs are ancillary units catering to the needs of large industries, both
in the public and private sector.
► delayed payments, affecting their cash flow and working capital availability.
► delay in realisation of such receivables increases their operating cycle and reduces their
ability to procure new orders or fulfil the existing ones.
► A primary survey conducted by Reserve Bank in December 2019 showed that 44 per cent of
MSMEs engaged in manufacturing activities faced delay in payments.
► mainly belonged to basic metal and metal products, engineering, construction and
infrastructure related industries.
► On the other hand, delay in payments was lower at 27 per cent for services sector.
► Here transport operators mostly faced such situations.
► Although Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 contains
provisions related to penalty in case of delayed payments by the buyers,
► weak bargaining power and the fear of losing the business prevents MSMEs to invoke this
provision
absence of formalization

► operate in the informal space, assessing their creditworthiness can be

difficult due to information asymmetry, particularly with respect to the
financial performance of their businesses.
► In the absence
► of collateral
► Furthermore, due to their small-scale operations, MSMEs are not able to raise
risk capital.
► They are also unable to take advantage of most of the Government schemes
which are mostly based on digital infrastructure and require beneficiaries to
have some form of digital identify and presence
The sector

► MSMEs are being encouraged to market their products on the e-commerce

site, especially through Government e-Marketplace (GeM), owned and run by
the government, wherefrom Ministries and PSUs (public sector undertakings)
source their procurement.
► As on November 26, 2021, the GeM portal has served 8.16 million orders
worth Rs. 159,483 crore (US$ 21.38 billion) from
► 3.1 million registered sellers and service providers for 55,929 buyer
organisations.
► MSMEs are rapidly adopting digital payments over cash
► 72% payments done through the digital mode compared with 28% cash
transactions.
► Rise in digital adoption presents prospects for further growth in the sector.
Small & Medium Enterprises (SME) Division
Agro & Rural Industry (ARI) Division.
KVIC

The planning, promotion, organisation and implementation of programs for the

development of Khadi and other village industries in the rural areas in coordination with
other agencies engaged in rural development wherever necessary.

Objective
► The social objective of providing employment.

► The economic objective of producing saleable articles.

► The wider objective of creating self-reliance amongst the poor and building up of a
strong rural community spirit.
Functions

► functions also comprise building up of a reserve of raw materials and implements for
supply to producers,
► creation of common service facilities for processing of raw materials as
semi-finished goods
► provisions of facilities for marketing of KVI products
► training of artisans engaged in these industries and encouragement of co-operative
efforts amongst them.
► To promote the sale and marketing of khadi and/or products of village industries or
handicrafts,
► the KVIC may forge linkages with established marketing agencies
► encouraging and promoting research in the production techniques and equipment
employed in the Khadi and Village Industries sector
Functions

► providing facilities for the study of the problems relating to it

► including the use of non-conventional energy and electric power with a view
to increasing productivity,
► eliminating drudgery and otherwise enhancing their competitive capacity and
arranging for dissemination of salient results obtained from such research.
► providing financial assistance to institutions and individuals for development
and operation of Khadi and village industries
► guiding them through supply of designs, prototypes and other technical
information.
► In implementing KVI activities, the KVIC may take such steps as to ensure
genuineness of the products and to set standards of quality and ensure that
the products of Khadi and village industries do conform to the standards.
► INR 3 lakh crore collateral-free automatic loans for MSMEs to buy raw
material, meet operational liabilities and restart businesses
► Revision of MSME definition to extend maximum benefits to the sector
► Disallowing global tenders in procurements upto INR 200 cr to create
attractive opportunities for domestic players
► Clearing of MSME dues by the Government and Public Sector Units (PSUs)
within 45 days
Schemes

► PrimeMinister’s employment generation scheme -Setup with an aim to

create employment opportunities for MSMEs in the country, the PMEGP is
implemented by Khadi and Village Industries Commission (KVIC) at the
national level while at the state and districts level, it is implemented by State
KVIC Directorates, State Khadi and Village Industries Boards (KVIBs), District
Industries Centres (DICs) and banks.
► Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTMSE) -
Established by M/o MSME and Small Industries Development Bank of India
(SIDBI) to provide collateral free loans (up to INR 1 cr) to individual Micro and
Small Enterprises (MSEs).
► Interest Subsidy Eligibility Certificate (ISEC) - The scheme was introduced as
a funding mechanism for khadi programme undertaken by khadi institutions in
the country. It mobilises funds from banking institutions with an aim to fill
the gaps between availability of funds from budgetary sources and the actual
fund requirement.
► DEVELOPMENT OF KHADI, VILLAGE AND COIR INDUSTRIES

► Market Promotion & Development Scheme (MPDA)

► Revamped Scheme of Fund for Regeneration of Traditional Industries (SFURTI) -
► Coir Vikas Yojana (CVY)
► Export Market Promotion (EMP)
► Domestic Market Promotion (DMP)
► Trade and Industry Related Functional Support Services (TIRFSS)
► Welfare Measures (Pradhan Mantri Suraksha Bima Yojana (PMSBY)
TECHNOLOGY UPGRADATION AND
QUALITY CERTIFICATION
► Financial Support to MSMEs in ZED Certification Scheme -
► A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship
(ASPIRE) –
► Create new jobs
► Promote entrepreneurship
► Boost economic development at grass root level
► Facilitate innovative business solutions
► Promote innovation
► National Manufacturing Competitiveness Programme (NMCP) - An umbrella
scheme which aids MSMEs through the following sub schemes:
► Credit Linked Capital Subsidy for Technology Upgradation (CLCSS)
► Marketing Support/Assistance to MSMEs (Bar Code)
► Lean Manufacturing Competitiveness for MSMEs
► Design Clinic for Design Expertise to MSMEs
► Technology and Quality Upgradation Support to MSMEs
► Entrepreneurial and Managerial Development of SMEs through Incubators
► Enabling Manufacturing Sector to be Competitive through Quality Management
Standards (QMS) and Quality Technology Tools (QTT)
► Building Awareness on Intellectual Property Rights (IPR)
Skill Development Initiatives
► National Skill Development Corporation (NSDC) is a not-for-profit public limited
company incorporated on July 31, 2008 under section 25 of the Companies Act, 1956
(corresponding to section 8 of the Companies Act, 2013). NSDC was set up by
Ministry of Finance as Public Private Partnership (PPP) model.
► NSDC aims to promote skill development by catalyzing creation of large, quality and
for-profit vocational institutions.
► Further, the organisation provides funding to build scalable and profitable
vocational training initiatives.
► Its mandate is also to enable support system which focuses on quality assurance,
information systems and train the trainer academies either directly or through
partnerships.
► NSDC acts as a catalyst in skill development by providing funding to enterprises,
companies and organizations that provide skill training.
► It also develops appropriate models to enhance, support and coordinate private
sector initiatives. The differentiated focus on 37 sectors under NSDC’s purview and
its understanding of their viability will make every sector attractive to private
investment.
Schemes

► Pradhan Mantri Kaushal Vikas Yojana (PMKVY)

► Pradhan Mantri Kaushal Kendra
► India International skill centre network
► Technical intern training program
► Seekho aur kamao
► Skill Loan scheme
► Rural India Skill
Cluster development

► cluster development approach as a key strategy for enhancing the

productivity and competitiveness as well as capacity building of Micro and
Small Enterprises (MSEs) and their collectives in the country.
► A cluster is a group of enterprises located within an identifiable and as far as
practicable, contiguous area and producing same/similar products/services.
► The essential characteristics of enterprises in a cluster are
► (a) Similarity or complementarity in the methods of production, quality
control and testing, energy consumption, pollution control, etc
► (b) Similar level of technology and marketing strategies/practices
► (c) Channels for communication among the members of the cluster
► (d) Common challenges and opportunities
Objectives

i. To support the sustainability and rowth of MSEs by addressing common issues

such as improvement of technology, skills and quality, market access, access to
capital, etc.

ii. To build capacity of MSEs for common supportive action through formation of
self help groups, consortia, upgradation of associations, etc.

iii. To create/upgrade infrastructural facilities in the new/existing industrial

areas/ clusters of MSEs.

iv. To set up common facility centres (for testing, training centre, raw material
depot, effluent treatment, complementing production processes, etc).
Strategy and Approach

► MSE-CDP scheme aims at addressing the needs of the industries, through well
defined clusters and geographical areas.
► This will enable achieving the economies of scale in terms of deployment of
resources as well as focusing on the specific needs of similar industries.
► The capacity building of associations, setting up of special purpose vehicles
(SPVs), consortia, etc. which are integral part of the scheme would enable
the MSEs to leverage their resources and also to have better access to public
resources, linkages to credit and enhance their marketing competitiveness.
Strategy and Approach

► Soft Interventions

This will lead to creation of general awareness, counseling, motivation and trust building,
exposure visits, market development including exports, participation in seminars,
workshops and training programmes on technology upgradation, etc.
► Common Facility Centre (CFC)

This will lead to creation of tangible “assets” as Common Facility Centers (CFCs) like
Common Production/Processing Centre (for balancing/correcting/improving production line
that cannot be undertaken by individual units), Design Centres, Testing Facilities, Training
Centre, R&D Centres, Effluent Treatment Plant, Marketing Display/Selling Centre, Common
Logistics Centre, Common Raw Material Bank/Sales Depot, etc.
► Infrastructure Development Centre (ID)

This will lead to creation of infrastructural facilities like power distribution network, water,
telecommunication, drainage and pollution control facilities, roads, banks, raw materials,
storage and marketing outlets, common service facilities and technological backup services
for MSEs in the new/ existing industrial estates/areas.
Financial assistance under the scheme

►
(i) Preparation of Diagnostic Study Report with Government of India (GoI) grant of maximum
Rs 2.50 lakh.
►
(ii) Soft Interventions with GoI grant of 75% of the sanctioned amount of the maximum
project cost of Rs 25.00 lakh per cluster. For NE & Hill States, Clusters with more than 50%
(a) micro/ village (b) women owned (c) SC/ST units, the GoI grant will be 90%.
(iii) Detailed Project Report (DPR) with GoI grant of maximum Rs 5.00 lakh for preparation
of a technical feasibility and viability project report.
(iv) Hard Interventions in the form of tangible assets like Common Facility Centre having
machinery and equipment for critical processes, research and development, testing, etc.
with GoI grant upto 70% of the cost of project of maximum Rs 15.00 crore. For NE & Hill
States, Clusters with more than 50% (a) micro/ village (b) women owned (c) SC/ST units,
the GoI grant will be 90%.
(v) Infrastructure Development with GoI grant upto 60% of the cost of project of Rs 10.00
crore, excluding cost of land. GoI grant will be 80% for projects in NE & Hill States,
industrial areas/ estates with more than 50% (a) micro (b) women owned (c) SC/ST units.
UNCTAD’s Entrepreneurship Policy
Framework
► aims to support developing-country policymakers and those from economies in
transition
► in the design of initiatives, measures and institutions to promote
entrepreneurship.
► sets out a structured framework of relevant policy areas
► embedded in an overall entrepreneurship strategy that helps guide
policymakers through the process of creating an environment that facilitates
the emergence of entrepreneurs and start-ups
► the growth and expansion of new enterprises.
six priority areas on policy focus

► (1) formulating national entrepreneurship strategy;

► (2) optimizing the regulatory environment;
► (3) enhancing entrepreneurship education and skills;
► (4) facilitating technology exchange and innovation;
► (5) improving access to finance;
► (6) promoting awareness and networking
formulating national entrepreneurship
strategy;
optimizing the regulatory environment;
enhancing entrepreneurship education
and skills;
facilitating technology exchange and
innovation
improving access to finance;
promoting awareness and networking