Submitted To: Mr. Chaman Lal Submitted By: Harsh Pawar CUHP13MBA30

Presentation on MSME’s

• The definition of MSMEs/SMEs differ from country to country. The commonly used criteria at the international level to define SMEs are:-

• In terms of assets, a few in terms of sales and yet others, in terms of shareholders fund.

• Definition differ across countries, but they have one thing in common; the vast majority of MSMEs are relatively small (in terms of employee strength).

MSME

•Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades

•MSMEs not only play crucial role in providing large employment opportunities at comparatively lower capital cost than large industries

•It also help in industrialization of rural & backward areas, thereby, reducing regional imbalances, assuring more equitable distribution of national income and wealth.

In accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified in two Classes

Manufacturing Enterprises

Micro : Rs. 25 LakhsSmall : Less than 5 CroresMedium : Less than 10 Crores

Services Enterprises

Micro : Less than 10 Lakhs Small : Less than 2 CroresMedium : Less than 5 Crores

MSMEs in India

Creates more than 1 Million

jobs annually.

Contribution to GDP set to expand to 22% by 2012

from current 17%.

Employs – More than 60 Million

40% - Total Exports

45% - Total Industrial Output

1.The contribution of micro, small and medium enterprises (MSME) sector to manufacturing output, employment and exports of the country is quite significant.2.The MSME sector employs about 60 million persons in over 13 million units throughout the country.. 3.There are more than 6000 products, ranging from traditional to high-tech items, which are being manufactured by the Indian MSMEs.

Importance of the MSME sector

1.Born out of individual initiatives &skills2.Greater operational flexibility3.Low cost of production4.High propensity to adapt technology5.High capacity to export6.High employment orientation7.Utilization of locally available human & material resources 8.Critical for poverty reduction

Traditionally Indian SMEs have had the following characteristics:

1.Predominantly rural , traditional household industries,2.Small and medium industries functioning with obsolete technologies3.Modern, small and medium enterprises which are owned and operated by mostly young techno-entrepreneurs operating in relatively newer fields like Bio-technology.

Indian MSMEs can be divided into three classes

1.Introduce statutory consultative and recommendatory bodies on MSME policies.2.Improve registration procedures of MSMEs.3.Statutory basis for purchase preference and credit policies.4.Improve realization of payments of MSMEs

MSMED Act 2006 : Objects

1.Industry replaced by enterprise which include service enterprises also.

2.Ambit of sector enlarged to cover medium enterprises.

3.Constitution of MSME Board.

4.Simplification of registration procedure

5.Progressive credit support

6.Penalty for delayed payments

Salient Features

Credit Support

1.Public sector banks advised to double the flow of credit to MSMEs within 5 years (20% annual growth)

2.A minimum of 40% of bank credit earmarked for priority sector lending which includes loans to MSEs

3.Specialised SME Bank branches in industrial clusters for smooth flow of credit to MSMEs

4.One Time Settlement (OTS) scheme for settling NPAs of MSMEs

MAJOR SCHEMES FOR MSME’s SUPPORT

Technological Support

1.Credit Linked Capital Subsidy Scheme for Technology Up gradation.

2.Scheme meant to improve quality of products by technology up gradation.

3.Investment up to INR 10 million (US$ .250,000) eligible for support with subsidy up to 15% on investment.

4.Testing Centers for Quality Certification in OKHLA (New Delhi).

5.Tool Rooms and Training Centers for skill up gradation in Jamshedpur, kolkata .

6.Incentive scheme for obtaining ISO Certification by MSEs

1.Support for participation in trade fairs and exhibitions – national as well as international.

2.Training programmes on packaging for exports.

3.Purchase preference in Government procurement.

4.Market Development Assistance Scheme for publicity, market studies and adoption of modern market practices

Marketing Assistance and Export Promotion

• Cluster formation has been considered important for MSME development. A cluster may be defined as a local agglomeration of enterprises (mainly SMEs, but often also including some large enterprises), which are producing and selling a range of related and complementary products and services

Cluster Development Programme

1.Accessing adequate and timely financing on competitive terms, particularly longer tenure loans.

2.Accessing credit on easy terms has become difficult in the backdrop of current global financial crisis which has held back the growth of SMEs and impeded overall growth and Development.

3.It has become difficult for lenders to be able to assess risk premiums properly, creating differences in the perceived versus real risk profiles of SMEs.

4.Access to skilled manpower, R&D facilities and marketing channels is limited

Factors affecting MSMEs

5.Availability of finance at cheaper rates, skills about decision-making and good management and accounting practices, and access to modern technology.

6.Bribery & corruption.

1. Problem of skilled manpower.

2.Inadequate credit assistance.

3.Irregular supply of raw material.

4.Absence of organized marketing.

5.Lack of machinery and equipment.

6.Absence of adequate infrastructure.

7.Competition from large-scale units and imported articles..

Challenges For MSMEs

8.Other problems like poor project planning, managerial inadequacies, old and orthodox designs, high degree of obsolescence and huge number of bogus concerns etc.