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Performance analysis of msme with respect to indian

Oct 20, 2014




Performance Analysis of MSME with respect to Indian context

Performance Analysis of MSME with respect to Indian context



Small and Medium Enterprises play a vital role for the growth of Indian economy by contributing 45% of the industrial output, 40% of exports, 42 million in employment, create one million jobs every year and produces more than 8000 quality products for the Indian and international markets. As a result, MSMEs are today exposed to greater opportunities for expansion and diversification across the sectors. It contributes near about 17% in the Indian GDP.

The Indian market is growing rapidly and Indian industry is making remarkable progress in various Industries like Manufacturing, Precision Engineering, Food Processing, Pharmaceuticals, Textile & Garments, Retail, IT, Agro and Service sectors. SMEs are finding increasing opportunities to enhance their business activities in core sectors.The number of small-scale units has increased from an estimated 0.87 million units in the year 1980-81 to over 4.53 million in the year 2010.

Definition of MSME in India

Manufacturing Sector

Investment in Plant and MachineryMicro EnterprisesDoes not exceed rupees 25 lakh.Small EnterprisesMore than 25 lakh Rupees but does not exceed 5 crore rupees.Medium EnterprisesMore than 5 crore rupees but does not exceed 10 crore rupees.

Service SectorInvestment in EquipmentsMicro EnterprisesDoes not exceed 10 lakh rupeesSmall EnterprisesMore than 10 lakh rupees but does not exceed 2 crore rupeesMedium EnterprisesMore than 2 crore rupees but does not exceed 5 crore rupees

About MSMEs in India

Indian MSMEs represent the model of socio-economic policies of Government, which emphasize job creation at all levels of income stratum and diffusion of economic power in the hands of few thereby discouraging monopolistic practices of production and marketing; and in all prospects contributing to growth of economy and foreign exchange earning with low import-intensive operations.

Indian SMEs also play a significant role in Nation development through high contribution to Domestic Production, Significant Export Earnings, Low Investment Requirements, Operational Flexibility, Location Wise Mobility, Low Intensive Imports, Capacities to Develop Appropriate Indigenous Technology, Import Substitution, Contribution towards Defense Production, Technology Oriented Industries, Competitiveness in Domestic and Export Markets thereby generating new entrepreneurs by providing knowledge and training.

Objectives of Study

To know the factors affecting growth of MSME.To examine position of MSME in India.To find out size of MSME sector of last five years.To examine the efforts taken by the government for MSME growth.To know the amount of employment in MSME sector.

Factors affecting growth of MSME

Lack of knowledge of foreign marketsSMEs need to compete national and internationally as world is a global market.SMEs have in fact helped to earn certain foreign exchange via exports and for that they have to take proactive view on the prevailing opportunities and demand in international market. Proper marketing knowledge and information are two of export problems which revolve around lack of knowledge of foreign markets, business practices, competitions and lack of management to generate foreign sales. Lack of knowledge to locate foreign opportunities and promising markets is perceived to be a major barrier in exporting of SMEs in developing countries (Dymsza, 1983; Bodur, 1986; Karafakioglu, 1986; Weaver and Pak, 1990; Li, 2004).

Furthermore, several publications show that experienced and inexperienced SME exporters in developing countries believe that poor knowledge of potential marketshinders their export activities (Brooks and Frances, 1991; Kaleka and Katiskeas, 1995; Weaver andPak, 1990; Burgess and Oldenboom, 1997).Information about exporting and more specifically market information were mentionedas the most serious problem of manufacturing firms in developing countries (Weaver and Pak, 1990;Figueiredo and Almeida, 1988; Brooks and Frances, 1991; Kaleka and Katsikeas, 1995).

Lack of proper Infrastructure: This includes good means of transport, adequate electricity, proper location of the SME setup. These all factors help in reduce cost of procurement of resources and thus lowering the production cost for the SMEs. The true responsibility in fact does rely on government for better development of infrastructure and amenities in the states.

Availability of Finance: To receive timely and adequate finance at the agreeable conditions is a tedious and cumbersome exercise for both established as well as budding SMEs. According to the Indian government survey, 90%of the total Micro units in India procure funds from friends, lenders and private lenders only. The occurrence of financial barriers, such as difficulty in acquiring the necessary funds to initiate or inance the project is a prime hurdle. As per Weaver and Pak, 1990; Kaleka and Katsikeas, 1995; Dicle and Dicle, 1992, Credit unworthiness and transaction costs are reported as major factors that reduce access to credit.

Knowledge of Prime technology : It is indeed the prime most component in competing in domestic markets as well as the international market.Though Indian government has set up a technology up gradation fund to help the SMEs lagging behind. It is imperative for SMEs to adopt information and communication technology applications. Lack of IT Support is big hurdle which hinders the SMEs in upgrading themselves to complete the global and domestic markets. It is expensive affair and SMEs are unaware of the latest soft wares and up gradations .There is also strong shortage of skilled IT and management personnel who can help SMEs to tide over problems.

Governments Efforts

Central and State government policy for the promotion of Micro and Small EnterprisesThe small scale industry sector output contributes almost 40% of the gross industrial value- added 45 % of the total exports from India ( direct as well as indirect exports) and is the second largest employer of human resources after agriculture the development of small scale sector has . Therefore been assigned an important role in Indias National Plans.In order to protect, support and promote small enterprises as also to help them become self- supporting, a number of protective and promotional measures have been undertaken by the government.

The promotional measures cover

Industrial extension services.Institutional support in respect of credit facilities.Provision of developed sites for construction of sheds.Provision of training facilities.Supply of machinery on hire-purchase terms.Assistance for domestic marketing as well as exports.Special incentive for setting up enterprises in backward areas etc.Technical consultancy and financial assistance for technological up gradation.



All India MSME growth rate (%)

2007-08 to 2008-09


2008-09 to 2009-10


2009-10 to 2010-11


2010-11 to 2011-12


1. Table Showing All India MSMSE Growth Rate

The above diagram shows all India growth of MSME. It shows that from year 2007-08 to 2008-09.The growth rate is of 10.76% .while it shows from year 2008-09 to 2009-10 up to 2009-10 to 2010-11The growth rate is 10.78 % and 10.93 %respectively .There is constant growth in the MSME sector..It shows the highest growth in the year 2010-11 to 2011-12 of 19.06% which is highest among the six years. It shows that MSME sector is growing at faster rate.

2. Table showing Employments in MSME Sector (in Lakhs)








Employments in lakhs








Table no 1 shows that there is a constant growth of MSME sector in India.

Table no 2 shows that the MSME provides an large number of employment opportunity and it growing every year.


Micro, Small and Medium enterprises contribute significantly to economic growth as increasing exports, increasing employment. After this study Researcher found that government has been taken majored decision for sustain growth in this sector. But major problems are lack of awareness among the entrepreneurs.For sustain the growth in this sector government has to develop the channel of providing facilities so that will create more opportunities to MSME.

Thank you.