Small Scale Industries in India

SMALL SCALE INDUSTRIES SMALL SCALE INDUSTRIES IN INDIAIN INDIA

ROLE ROLE ANDAND

GOVERMENT POLICYGOVERMENT POLICY

MADE BY:MADE BY: ITEE BERIITEE BERI

MBA 1ST SEM.MBA 1ST SEM. ROLL NO. 16ROLL NO. 16

FMS-BHUFMS-BHU

DEFINITION OF SSIDEFINITION OF SSI

• ..

using power withusing power withless thanless than

50 employees50 employees

not using powernot using power with thewith the

employee strengthemployee strength beingbeing

more than 50 but more than 50 but less than 100less than 100

SSIsSSIs

19501950

YEARYEAR INVESTMENT LIMITSINVESTMENT LIMITS 19601960 Upto Rs 5 lacs in Plant & Machinery Upto Rs 5 lacs in Plant & Machinery 19661966 Upto Rs 7.5 lacs in Plant & Machinery Upto Rs 7.5 lacs in Plant & Machinery

19751975 Upto Rs 10 lacs in Plant & Machinery Upto Rs 10 lacs in Plant & Machinery

19801980 Upto Rs 20 lacs in Plant & Machinery Upto Rs 20 lacs in Plant & Machinery

19851985 Upto Rs 35 lacs in Plant & Machinery Upto Rs 35 lacs in Plant & Machinery

19911991 Upto Rs 60 lacs in Plant & Machinery Upto Rs 60 lacs in Plant & Machinery

19971997 Upto Rs 100 lacs in Plant & Machinery Upto Rs 100 lacs in Plant & Machinery

19991999 Upto Rs 100 lacs in Plant & Machinery Upto Rs 100 lacs in Plant & Machinery

CLASSIFICATION OF SSIsCLASSIFICATION OF SSIs

TRADITIONALTRADITIONAL MODERNMODERN

•KHADIKHADI•HANDLOOMHANDLOOM•VILLAGE INDUSTRIESVILLAGE INDUSTRIES•HANDICRAFTSHANDICRAFTS•SERICULTURESERICULTURE

•TV setsTV sets•ELECTRONICSELECTRONICS•CONTROL SYSTEMSCONTROL SYSTEMS•ANCILLARY INDUSTRIESANCILLARY INDUSTRIES

0%

10%

20%

30%

40%

50%

60%

70%

80%

TRADITIONAL MODERN

EMPLOYMENT

OUTPUTOUTPUT

56%56%

13%13%

33%33%

74%74%

ROLE OF SSIs IN INDIANROLE OF SSIs IN INDIAN

• PRODUCTIONPRODUCTION

• EMPLOYMENTEMPLOYMENT

• EXPORTEXPORT

• OPPORTUNITIESOPPORTUNITIES

• WELFARE WELFARE

PROMOTINGPROMOTING..

ECONOMYECONOMY

PRODUCTIONPRODUCTION

• Contributes almost 40% of the gross Contributes almost 40% of the gross industrial value.industrial value.

• Value of production at current prices are to Value of production at current prices are to

increase to Rs.4,97,842 crore .increase to Rs.4,97,842 crore .

EMPLOYMENTEMPLOYMENT

• Creates largest employment Creates largest employment opportunities for the Indian populace, opportunities for the Indian populace, next to Agriculture.next to Agriculture.

• It has been estimated that Rs. 1 lakh of It has been estimated that Rs. 1 lakh of investment in fixed assets in the small-investment in fixed assets in the small-scale sector generates employment for scale sector generates employment for four persons. four persons.

EXPORTEXPORT• 33% of the Indian Exports is contributed by SSI 33% of the Indian Exports is contributed by SSI

Sector. Sector.

• non-traditional products account for more than 95% non-traditional products account for more than 95%

of the SSI exportsof the SSI exports..

• mostly fuelled by the performance of garments, mostly fuelled by the performance of garments, leather and gems and jewellery units from this sector. leather and gems and jewellery units from this sector.

OPPORTUNITYOPPORTUNITY

FACTORSFACTORS

• Less Capital Intensive Less Capital Intensive

• Extensive Promotion & Support by Extensive Promotion & Support by Government Government

• Reservation for Exclusive Manufacture Reservation for Exclusive Manufacture by small scale sector by small scale sector

• Funding - Finance & Subsidies Funding - Finance & Subsidies

• Machinery Procurement Machinery Procurement

• Raw Material Procurement Raw Material Procurement • Manpower Training Manpower Training • Technical & Managerial skills Technical & Managerial skills • Tooling & Testing support Tooling & Testing support • Reservation for Exclusive Purchase by Reservation for Exclusive Purchase by

Government Government • Export Promotion Export Promotion • Growth in demand in the domestic market size Growth in demand in the domestic market size

due to overall economic growth due to overall economic growth • Increasing Export Potential for Indian products Increasing Export Potential for Indian products

Opportunities

Fashion Technology

Information Technology

Design Technology

Health Technology

Bio Technology

WELFAREWELFARE

• Increases income levels.

• Equitable distribution of income.

• Reduction of regional disparities.

• Preservation of inherited skills.

COMPARATIVE GROWTH RATES OF SSI SECTOR AND TOTAL INDUSTRIAL SECTOR

Year SSI Sector Growth Rate Total Industrial Sector Growth Rate

2000-01 8.04 5.00

2001-02 6.06 2.70

2002-03 7.68 5.70

2003-04 8.06 6.09

2004-05 9.96 8.04

Source: SIDO Half Century by DCSSI, Govt. of India 2004 and Annual Report of the Ministry of SSI 2005-06

0

1

2

3

4

5

6

7

8

9

10

2000-01

2001-02

2002-03

2003-04

2004-05

SSI

SSISSI

INDUSTRYINDUSTRY

COMPARATIVE GROWTH RATESCOMPARATIVE GROWTH RATES

Source: SIDO Half Century by DCSSI, Govt. of India 2004 and Annual Report of the Ministry of SSI 2005-06

8.04

56.06

2.7

7.68

5.7

8.06

6.09

9.96

8.04

• SSI units : 12.3 millionSSI units : 12.3 million

• Employment generated in Employment generated in SSIs : 29.5 millionSSIs : 29.5 million

• Production : At current Production : At current Prices Rs. 4762.01 billionPrices Rs. 4762.01 billion

• Exports : Rs. 1215 billionExports : Rs. 1215 billion

• SSI account:SSI account:Industrial Production : 40%Industrial Production : 40%Exports : 35% (50% of Exports : 35% (50% of

Direct & Indirect)Direct & Indirect)GDP Share : 7%GDP Share : 7%

• Ownership pattern : Ownership pattern : – Proprietorships : 78% Proprietorships : 78% – Partnerships : 16%Partnerships : 16%– Corporate & Others : Corporate & Others :

6%6%• Industrial Units : 96%Industrial Units : 96%

• Service Enterprises : 3%Service Enterprises : 3%

• Ancillary Units : 1% Ancillary Units : 1%

• Produces Diverse range of Produces Diverse range of products (more than 8000- products (more than 8000- consumer items, capital consumer items, capital goods and intermediates)goods and intermediates)

INDIAN SME SECTOR – AT A INDIAN SME SECTOR – AT A GLANCE 2005-06GLANCE 2005-06

DISABILITIESDISABILITIES

• OUTPUT vs EMPLOYMENT

• ADVERSE IMPACT ON CAPITAL FORMATION.

• INEFFICIENT PRODUCTION

• LARGE SICKNESS.

• SEVERAL DIFFICULTIES.

AIMA –Impact AssessmentAIMA –Impact AssessmentIMPEDIMENTS TO GROWTHIMPEDIMENTS TO GROWTH

Problems Faced by SSIs as Barriers to Growth

Market Related 70%

Finance Related 25%

Government Policy Related 12.78%

Power Related/Infrastructure 14.0%

Technology 14.60%

TRENDS OF LENDING BY BANKING TRENDS OF LENDING BY BANKING SECTOR TO SSISECTOR TO SSI

Rs. in Crores

As at end MarchAs at end March Total advances by Total advances by Banking SectorBanking Sector

Total Advances to Total Advances to SSI SectorSSI Sector

Proportion of SSI to Proportion of SSI to Total AdvancesTotal Advances

19991999 246203246203 4267442674 17.3017.30

20002000 292943292943 4578845788 15.6315.63

20012001 469153469153 5600256002 1.941.94

20022002 536727536727 5719957199 10.6610.66

20032003 669534669534 6039460394 9.029.02

20042004 764383764383 6585565855 8.628.62

2005*2005* 972587972587 7611476114 7.837.83

Source : RBI Report on Trend and Progress of Banking in IndiaSource : RBI Report on Trend and Progress of Banking in India

* Provisional* Provisional

MEASURESMEASURES

• CREDIT RATING SCHEME• MARKETING ASSISTANCE SCHEME• TECHNICAL ASSISTANCE• MEASURES FOR EXPORT PROMOTION• INFRASTRUCTURE DEVELOPMENT• ENTREPRENEURSHIP ANK SKILL

DEVELOPMENT

MSME DEVELOPMENT ACT,2006MSME DEVELOPMENT ACT,2006

SALIENT FEATURES OF MSMED ACT - 2006

• Manufacturing enterprises defined in terms of investment in Machinery

and Equipment (excluding land and building) classified into

a.  Micro enterprises - investment upto Rs 25 lakhs,

b.  Small enterprises - investment above Rs 25 lakhs and upto Rs 5 crore

c. Medium enterprises - Investment above Rs 5 crores and upto Rs 10

crores

• Service enterprises defined in terms of their investment in equipment

(excluding land and building) classified into

a. Micro enterprises-investment upto Rs 10 lakhs

b. Small enterprises-investment above Rs 10 lakhs and upto Rs 2 crore

c. Medium enterprises-investment above Rs 2 crores and upto Rs 5

crores

MSMED Act – 2006 and its ImpactMSMED Act – 2006 and its Impact

Clause Salient Features Impact

1. Establishment of National Small and Medium Enterprises Board – Maximum No. of members 47

1. Specific representation for Women

2. Mandatory Quarterly Meeting

Statutory Status, compact board and quarterly meetings will address problems of SMEs immediately to take corrective action

2. Concept of Enterprises Clear-cut demarcation of manufacturing/production and rendering services

Facilitates SMEs to enter into service enterprises aggressively

3. Definition of Enterprises Specific ceiling limit for manufacturing/production and service enterprise definition for Medium enterprises

Existing small units can graduate into Medium units and avail facilities under the act.

Contd/----

MSMED Act – 2006 and its IMPACTMSMED Act – 2006 and its IMPACTClause Salient Features Impact

4.Delayed Payment Penalty & dispute resolution

•Period of payment by the procuring organizations – 45 days•Penal interest 200% of PLR

SMEs can plan their cash flow/financial requirement

5. Dispute Resolution Establishment of MSE facilitation Council; 90 days framework for dispute resolution

Easy financial planning and no waste of human resources for chasing/follow up.

Contd/-

REFERENCEREFERENCE

INDIAN ECONOMY by RUDDAR DATT AND K.P.M. SUNDHARAM

INDIAN ECONOMY by A.N. AGRAWAL INDIA 2008 by MINISTRY OF INFORMATION AND

BROADCASTING Websites:

http://indiabudget.nic.in http://dcmsme.gov.in/ssiindia