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INTRODUCTION:
The Micro, Small and Medium Enterprises (MSME) sector has
been recognised as engine of growth all over the world. Many
countries of the world have established a SME Development
Agency as the nodal agency to coordinate and oversee all
Government interventions in respect of the development of
this sector. In the case of India, also Medium establishment
has for the first time been defined in terms of separate Act, governing promotion and development of Micro,
Small and Medium Enterprises (MSME) i.e. Micro, Small and Medium Enterprises (MSME) development
Act, 2006 (which has come into force from 02nd Oct, 2006) the Office of Development Commissioner
(Micro, Small and Medium Enterprises) functions as the Nodal Development Agency under the Ministry of
Micro, Small and Medium Enterprises (MSME).
Office of Development Commissioner (SSI) was established in 1954 on the basis of the recommendations of
the Ford Foundation. Over the years, it has seen its role evolve into an
agency for advocacy, hand holding and facilitation for the small industries
sector. It has over 70 offices and 21 autonomous bodies under its
management. These autonomous bodies include Tool Rooms, Training
Institutions and Project-cum-Process Development Centres. Office of the
Development Commissioner (MSME) provides a wide spectrum of services
to the Micro, Small and Medium Industrial sector. These include facilities
for testing, toolmenting, training for entrepreneurship development,
preparation of project and product profiles, technical and managerial consultancy, assistance for exports,
pollution and energy audits etc. Office of the Development Comm issioner (MSME) provides economic
information services and advises Government in policy formulation for the promotion and development of
SSIs. The field offices also work as effective links between the Central and the State Governments.
Consequent to the increased globalization of the Indian economy, MSMEs are required to face new
challenges. Office of the Development Commissioner (MSME) has recognised the changed environment
and is currently focusing on providing support in the fields of credit, marketing, technology and
infrastructure to MSMEs. Global trends and national developments have accentuated Office of the
Development Commissioner (MSME)'s role as a catalyst of growth of MSMEs in the country.
Small and medium enterprises are the backbone of industrial development. It is very important for both
developed and developing country. Small and medium enterprises always represented the model of
economic development, which emphasized high contribution to domestic production, significant export
earnings, low investment requirements, employment generation, effective contribution to foreign exchange
earning of the nation with low import-intensive operations. The contribution of small scale industries (SSIs)
has been remarkable in the industrial development of the country. It has a share of 40% in the industrial
production. 35% of the total manufactured exports of the country are directly accounted for by this sector. In
terms of employment generated, this sector is next only to agriculture employing approximately 14 million
people. Overall, the small industry sector has done quite well and has enabled the country to achieve
considerable industrial growth and diversification. Small scale industries are less capital intensive and suit
the Indian economic environment with scarce resources and large population base. In addition, it is highly
and has a scope for labour intensive for building upon the traditional skill and knowledge. Small scale
industries have remained high on the agenda of all political parties, intelligentsia and policy makers since
independence as a legacy of Gandhian philosophy.
1.2 OBJECTIVES OF THE STUDY:
1) To study the performance of the SMEs in India.
2) To study the strength and weakness of the SMEs
3) To study the schemes, policies, programmes provided by the government for the growth and support
of SMEs in India.
SCOPE OF THE STUDY:
In today‟s modern SMEs are playing a vital role in Indian economy. Because of liberalisation and
globalisation the small scale industries are growing in large scale. So there is scope to study about
how SMEs are working in India, what are the policies provided by the government to support the
SMEs, and how they perform in the era of global competition.
1.4 RELEVANCE OF THE STUDY:
The present study is purely based on the secondary data collection. The outcome of the study will
definitely useful to study further about SMEs. The study has relevance from the point of view of
people as it clearly gives the picture of SMEs in India.
1.5 DEFINITION OF MICRO, SMALL AND MEDIUM ENTERPRISES:
According to new THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT,
2006 the MSME Definitions are as follows:
In the case of the enterprises engaged in the manufacture or production of goods pertaining to any industry
specified in the first schedule to the Industries (Development and Regulation) Act, 1951, as –
Micro Enterprise - A micro enterprise is, where the investment in plant and machinery does not
exceed twenty five lakh rupees;
Small Enterprise - A small enterprise is, where the investment in plant and machinery is more than
twenty five lakh rupees but does not exceed five crore rupees; or
Medium Enterprise - A medium enterprise is, where the investment in plant and Machinery is more
than five crore rupees but does not exceed ten crore rupees.
The definition of small and medium enterprises varies from country to country. In general, the industries all
over the world are defined in terms of number of employees or capital investment or both. The employment
potential criterion was dropped from Small and Medium Enterprises definition in India due to the following
reasons:
Employment changes seasonally and hence it is difficult to follow this criterion. An employment
limit acts as an incentive to limit employment to remain within Small and Medium Enterprises.
Discrimination between labour intensive and techno sophistication.
ENTREPRENEURSHIP MANAGEMENT – MSMEs IN INDIA 2015-16
M.COM.II (SEM-III) MANAGEMENT ST. JOSEPH COLLEGE, SATPALA Page 4
The role of small and medium enterprises in economic development of a country can be explained with
relevant parameters. “Increase in the number, production, employment, and exports over a period of time
could be common parameters to adjudge the role played by small enterprises in the country.”
1.6 STRENGTH AND WEAKNESSES OF SMEs
Major strengths of Small Medium Enterprises observed are:
Flexibility - Small and Medium Enterprises can easily absorb new innovation and adapt new
method. The cost of changing the existing system is also relatively less.
Owner management - In Small and Medium Enterprises owner management is a possibility, which
ensures quick decision making. This ensures speed and reduces red tapism.
Inexpensive labour and less overhead - The main reason for sickness of large scale industry is its
labour problem and escalating wage bill. Small and medium enterprises strength is its cheap labour
and less overhead.
Favorable capital- output ratio - Small and medium enterprises are labour intensive. Through
proper utilization of resources Small and medium enterprises can keep low level of capital
investment per unit of output.
Major weaknesses of Small Medium Enterprises observed are:
Lack of quality consciousness: It is the major weakness of the small industries. Small and Medium
Enterprises pay less attention to total quality programme and hence importance is less felt leading to
quality problem. Study reports show that underutilization capacity leads to reduction in level of
productivity in Small and Medium Enterprises sector in India .
Lack of Financial Strength: The Small and Medium brand image and hence mobilizing capital
through other sources is a challenge m enterprises depend largely on banking finance. They don‟t
have corporate image.
Lack of Industrial Work Culture: Labours give more weight-age to their personal work and don‟t
maintain regularity, discipline in reporting on time. Getting and continuing with trained workers and
satisfying them is difficult.
Study reports show that in India many small and medium enterprises are sick and some are closing down.
The main reason is lack of quality and increasing competition. It is necessary for Small and medium
enterprises to face new challenges by adopting best strategies. Hence the SMEs should take immediate step
to create quality awareness, and adoption of continuous improvement techniques.
EMPLOYMENT SECTOR
SSI Sector in India creates largest employment opportunities for the Indian populace, next only to
Agriculture. It has been estimated that 100,000 rupees of investment in fixed assets in the small-scale sector
generates employment for four persons.
2.2.1 Generation of Employment – Industry- Group-wise
Food products industry has ranked first in generating employment, providing employment to 0.48
million persons (13.1%).
The next two industry groups were Non-metallic mineral products with employment of 0.45 million
persons (12.2%) and Metal products with 0.37 million persons (10.2%).
In Chemicals & chemical products, Machinery parts except Electrical parts, Wood products, Basic Metal
Industries, Paper products & printing, Hosiery & garments, Repair services and Rubber & plastic products,
the contribution ranged from 9% to 5%, the total contribution by these eight industry groups being 49%.
In all other industries the contribution was less than 5%.
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2.2.2 Per unit employment
Per unit employment was the highest (20) in units engaged in beverages, tobacco & tobacco products mainly
due to the high employment potential of this industry particularly in Maharashtra, Andhra Pradesh,
Rajasthan, Assam and Tamil Nadu.
Next come Cotton textile products (17), Non-metallic mineral products (14.1), Basic metal industries (13.6)
and Electrical machinery and parts (11.2.) The lowest figure of 2.4 was in Repair services line.
Per unit employment was the highest (10) in metropolitan areas and lowest (5) in rural areas.
However, in Chemicals & chemical products, Non-metallic mineral products and Basic metal industries per
unit employment was higher in rural areas as compared to metropolitan areas/urban areas.
In urban areas highest employment per unit was in Beverages, tobacco products (31 persons) followed by
Cotton textile products (18), Basic metal industries (13) and Non-metallic mineral products (12).
2.2.3 Location-wise Employment Distribution –
2.2.3a Rural
Non-metallic products contributed 22.7% to employment generated in rural areas. Food Products accounted
for 21.1%, Wood Products and Chemicals and chemical products shared between them 17.5%.
2.2.3b Urban
As for urban areas, Food Products and Metal Products almost equally shared 22.8% of employment.
Machinery parts except electrical, Non-metallic mineral products, and Chemicals & chemical products
between them accounted for 26.2% of employment.
In metropolitan areas the leading industries were Metal products, Machinery and parts except electrical and
Paper products & printing (total share being 33.6%).
2.2.4 State-wise Employment Distribution
Tamil Nadu (14.5%) made the maximum contribution to employment.
This was followed by Maharashtra (9.7%), Uttar Pradesh (9.5%) and West Bengal (8.5%) the total
ENTREPRENEURSHIP MANAGEMENT – MSMEs IN INDIA 2015-16
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share being 27.7%.
Gujarat (7.6%), Andhra Pradesh (7.5%), Karnataka (6.7%) and Punjab (5.6%) together accounted for
another 27.4%.
Per unit employment was high - 17, 16 and 14 respectively - in Nagaland, Sikkim and Dadra & Nagar
Haveli.
It was 12 in Maharashtra, Tripura and Delhi.
Madhya Pradesh had the lowest figure of 2. In all other cases it was around the average of 6.