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International Journal of Business and Management Tomorrow

Vol. 3 No. 1

Micro, Small, and Medium Enterprises: An Overview


Mr. Jitender Kumar Tiwari, Assistant Professor, Sri Sai University, Palampur Mr. Guru Swarup, Assistant Professor, Sri Sai University, Palampur

Abstract
Micro, Small and Medium Enterprises (MSMEs), are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports. They also play a key role in the development of economies with their effective, efficient, flexible and innovative entrepreneurial spirit. Government of India has developed key strategies to promote and support the MSME sector to promote competitiveness, quality upgrading, finance, technology, etc. This has resulted in a dramatic positive change in the sector. The present article deals with the role of Micro, Small, and Medium Enterprises in the economic growth, employment generation, production and exports. The period of the study is from 2001-2011 and based on secondary information. This paper is an attempt to throw some light on the facts and figures related to MSMEs over last ten years. It has been observed that with the passage of time, there is an increase in the total number of MSMEs, with the increase in employment opportunities and exports. Keywords: MSME (Micro, Small and Medium Enterprises), MSE (Micro and Small Enterprises), SME (Small and Medium Enterprises), SSI (Small Scale Industry), NPA (Non-Performing Asset)

1. Introduction
Micro, Small and Medium Enterprises (MSMEs), are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports. They also play a key role in the development of economies with their effective, efficient, flexible and innovative entrepreneurial spirit. The socio-economic policies adopted by India since the Industries (Development and Regulation) Act, 1951 have laid stress on MSMEs as a means to improve the countrys economic conditions.

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Ministry of Small Scale Industries was first created on 14th October 1999 and, on 6th September 2001, further bifurcated into two separate ministries, namely, the Ministry of Small Scale Industries and the Ministry of Agro and Rural Industries. Subsequent to enactment of Micr o, Small and Medium Enterprises Development Act, 2006 by the Parliament, the President under Notification dated 9th May, 2007 has amended the Government of India (Allocation of Business) Rules, 1961. Pursuant to this amendment, Ministry of Agro and Rural Industries and Ministry of Small Scale Industries were merged into a single Ministry, namely, Ministry of Micro, Small and Medium Enterprises. The salient features of this MSME Act include: Setting up of a National Board for MSMEs Classification of enterprises Advisory Committees to support MSMEs Measures for promotion, development and enhancement of MSMEs Schemes to control delayed payments to MSMEs Enactment of rules by State Governments to implement the MSMED Act, 2006 in their respective States

1.1 Definitions of MSMEs as per the MSME Act 2006


Micro-Enterprise - A micro-enterprise is one where the investment in plant and machinery (their original cost excluding land, building and items specified by the Ministry of Small Scale Industries in its notification No. S.O. 1722(E) dated October 5, 2006) does not exceed Rs.25 lakh. Small enterprise - A small enterprise is one where the investment in plant and machinery (their original cost excluding land, building and items specified by the Ministry of Small Scale Industries in its notification No. S.O. 1722(E) dated October 5, 2006) is more than Rs.25 lakh but does not exceed Rs.5 crore. Medium enterprise - A medium enterprise is one where the investment in plant and machinery (their original cost excluding land, building and items specified by the Ministry of Small Scale Industries in its notification No. S.O. 1722(E) dated October 5, 2006) is more than Rs.5 crore but does not exceed Rs.10 crore.

The definition of MSMEs in the service sector is: Micro-enterprise: Investment in equipment does not exceed Rs.10 lakh. Small enterprise: Investment in equipment is more than Rs.10 lakh but does not exceed Rs.2 crore. Medium enterprise: Investment in equipment is more than Rs.2 crore.

1.2 Opportunities for MSMEs in India


Government of India has developed key strategies to promote and support the MSME sector to promote competitiveness, quality upgrading, finance, technology, etc. This has resulted in a dramatic positive change in the sector. Over the years, this sector in India has progressed from the production of simple consumer goods to the manufacture of many sophisticated and precision products like electronics control systems, micro wave components, electro medical equipment, etc. MSMEs in India are considered to be important members within the supply chain and are established in almost all major sectors in Indian industry such as: Food Processing, Agricultural Inputs, Chemicals & Pharmaceuticals, Engineering; Electricals; Electronics, Electro-medical equipment, Textiles and Garments, Leather and leather goods, Meat products, Bio-engineering, Sports goods, Plastics products, Computer Software, etc.

1.3 Policy Package for Stepping up Credit Flow


The Government announced a Policy Package for Stepping 4p Credit to Small and Medium Enterprises (SMEs) on 10 August 2005. The measures in the Policy Package to increase the quantum of credit to SMEs (including Micro and Small Enterprises-MSEs) include: Public sector banks to fix their own targets for funding SMEs in order to achieve a minimum 20 percent year-on year growth in credit to the SMEs sector. Public sector banks to follow a transparent rating system with cost of credit linked to the credit rating of the enterprises. Commercial banks to make concerted efforts to provide credit cover on an average to at least 5 new tiny, small and Medium Enterprises at each of their semi-urban/urban branches per year. The Reserve Bank of India (RBI) to issue detailed guidelines relating to debt restructuring mechanism so as to ensure restructuring of debt of all eligible Small & Medium Enterprises. Introduction of one-time settlement scheme to apply to MSE Non-Performing Asset (NPA) accounts in the books of the banks as on March 31, 2004.

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Taking the exiting RBI guidelines as indicative minimum, banks to formulate a comprehensive and more liberal policy relating to advances to the SME sector. Banks to adopt cluster based approach for SME financing. The RBI to constitute empowered committees with the Regional Director of RBI as the chairman to review the progress in SME financing and rehabilitation of sick Small & Medium Enterprises. Boards of Banks to review the progress in achieving the self-set targets as also rehabilitation and restructuring of SME accounts on a quarterly basis.

The RBI issued circular dated 19th August 2005 to all the public sector banks and 25th August 2005 to all private banks/foreign banks/ RRBs, advising them to implement the measures announced in the Policy Package. The RBI has also circulated the guideline on One-Time Settlement (OTS) Scheme for SME accounts to public sector banks on 3rd September 2005 and the detailed guidelines on debt restructuring mechanism for SME to all the commercial banks on 8th September 2005. Further, the RBI has constituted empowered Committees with the Regional Director of the RBI as the chairman to review the progress in SME financing and coordinate with other banks/financial institutions and the State Government in removing bottlenecks, if any, to ensure smooth flow of credit to the sector. As per the RBI data on credit flow to MSE sector, the Public Sector Banks have consistently registered year-onyear growth of over 20% in advances to the MSEs during the period 2005-06 to 2008-09.

2. Review of Literature
2.1. For the first time, J.M. Keynes (1936)1 has focused his attention on the forces that determine employment policy followed in industrialization. He propounded the theory that entrepreneurs will offer the amount of employment which maximizes their output and profit. Here he stressed the productivity of labour as the determining factor of the level of employment. There is a positive relationship among productivity of labour, output and employment. According to Keynes employment can only increase pari-pasu with an increase in investment. 2.2 According to the Village and Small scale Industries Committee Report (1955)2, popularly known as Karve Committee Report, since a substantial number of employed and underemployed belongs to the village and small industries group, setting up of small scale and village industries will provide employment to them in occupations in which they have been traditionally trained and for which they possess equipments. The committee realizes the necessity of introducing better techniques in the village industry, so that they can keep pace with the progressively expanding economy and do not become unsuitable tomorrow. 2.3. Prasad (1983)3 in his study found that the small scale industrial sector is an integral part of not only the industrial sector, but also of the countrys economic structure as a whole. If small scale industries are properly developed, they can provide a large volume of employment, can raise income and standard of living of the people in lower income group and can bring about more prosperity and balanced economic development. Small scale industrial sector has vast potential in terms of creating employment and output, promotion of export, expansion of base for indigenous entrepreneurship and dispersal of industries and entrepreneurship skills in both rural as well as backward areas. On the basis of Review of Literature, it is observed that Researchers have emphasized on the importance of the employment generation opportunities through MSMEs, their role in the economy upliftment and in export.

3. Objectives of the Study


The paper is attempted with main objectives to study the number of MSMEs working in India and their impact on employment opportunities, production and Export potential.

4. Importance of the Study


In the previous studies it has been observed that inspite of promising potential, ample opportunities, people are reluctant to grab these opportunities. Therefore the study is important to prove that MSMEs are for helping the people.

5. Research Methodology
The data for the present study has been used from secondary sources. In consonance to the objectives of study, the secondary data has been collected from the published Annual Reports of the MSMEs and from the related

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government websites. The tabulated data as per the requirements of the objectives of the study has been analysed with appropriate methodology.

6. Result/Interpretations of Data
The data collected is discussed in the following tables along with their results and interpretations. 6.1. Total working MSMEs From the given table 1.1, it can be seen that the number of MSMEs have increased from 105.21 lakhs to 311.52 lakhs, showing almost three times increasing from 2001-2011, with every year increase in other years. Table 1.1 5 6 2005200606 07 123.42 261.12

Sr. No. Year Total working MSMEs(In Lakhs)

1 200102 105.21

2 200203 109.49

3 200304 113.95

4 200405 118.59

7 200708 272.79

8 200809 285.16

9 200910 298.08

10 201011 311.52

The data of Table 1.1 is depicted in the following figure 1.1. Figure 1.1
T otal working M S M E s(In Lakhs) 350 300 250 200 150 100 50 0 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 201002 03 04 05 06 07 08 09 10 11 T otal working M S M E s(In Lakhs)

6.2. Employment From the given table 1.2, it can be seen that the employment opportunities have increased from 249.33 lakhs to 732.17 lakhs, showing almost three times increasing from 2001-2011, with every year increase in other years. Table 1.2 4 5 2004200505 06 282.57 294.91

Sr. No. Year Employment (In Lakhs)

1 200102 249.33

2 200203 260.21

3 200304 271.42

6 200607 595.66

7 200708 626.34

8 200809 659.35

9 200910 695.38

10 201011 732.17

The data of Table 1.2 is depicted in the following figure 1.2. Figure 1.2
E m ploy m ent (In Lakhs) 800 700 600 500 400 300 200 100 0 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 201002 03 04 05 06 07 08 09 10 11

E m ploy m ent (In Lakhs)

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International Journal of Business and Management Tomorrow Correlation Coefficient-Deviations taken from Assumed Mean (Total generation opportunities) Table: 1.2 (A) Year Working Employment dx dx2 MSMES(In opportunities( in lacs) x lacs) Y 2001-02 105.21 249.33 -155.91 24307.9 2002-03 109.49 260.21 -151.63 22991.6 2003-04 113.95 271.42 -147.17 21659 2004-05 118.59 282.57 -142.53 20314.8 2005-06 123.42 294.91 -137.7 18961.29 2006-07 261.12 595.66 0 0 2007-08 272.79 626.34 11.67 136.19 2008-09 285.16 659.35 24.04 577.92 2009-10 298.08 695.38 36.96 1366.04 2010-11 311.52 732.17 50.4 2540.16 dx = - dx2 = 611.9 112854.9

Vol. 3 No. 1

working MSMEs and Employment

dy

dy2

dx.dy

-346.33 -335.45 -324.24 -313.09 -300.75 0 30.68 63.69 99.72 136.51 dy =1289.3

119944.5 112526.7 105131.6 98025.3 90450.6 0 941.3 4056.4 9944.1 18635 dy2 =559655.5

53996.3 50864.3 47718.4 44624.7 41413.3 0 358 1531.1 3685.6 6880.1 dx.dy = 251071.8

r = +0.99 Employment generation is directly proportional to the increase in no of MSMEs. A positive co relation has been observed when No of working MSMEs and Employment opportunities were studied. This is shown in Table 1.2(A).

6.3. Production
From the given table 1.3, it can be seen that the total value of production has increased from 282270 crores to 1095758 crores, showing almost four times increasing from 2001-2011, with every year increase in other years. Table 1.3 5 200506 49784 2

Sr. No. Year Productio n (In Crore)

1 200102 28227 0

2 200203 31485 0

3 200304 36454 7

4 200405 42971 6

6 200607 70939 8

7 200708 79075 9

8 200809 88080 5

9 200910 98291 9

10 2010-11 109575 8

The data of Table 1.3 is depicted in the following figure 1.3. Figure 1.3
P ro d u c tio n (InC ro re ) 1 2 0 0 0 0 0 1 0 0 0 0 0 0 8 0 0 0 0 0 6 0 0 0 0 0 4 0 0 0 0 0 2 0 0 0 0 0 0 2 0 0 1 - 2 0 0 2 - 2 0 0 3 - 2 0 0 4 - 2 0 0 5 - 2 0 0 6 - 2 0 0 7 - 2 0 0 8 - 2 0 0 9 - 2 0 1 0 0 2 0 3 0 4 0 5 0 6 0 7 0 8 0 9 1 0 1 1 P ro d u c tio n (InC ro re )

6.4.Export
From the given table 1.4, it can be seen that the total value of Export has increased from 71244 crores to 202017 crores, showing almost three times increasing from 2001-2008, with every year increase in other years. ISSN: 2249-9962 January|2013 www.ijbmt.com Page | 5

International Journal of Business and Management Tomorrow Sr. No. Year Export (In Crore) 1 200102 71244 2 200203 86013 3 200304 97644 Table 1.4 4 200405 124417 5 200506 150242 6 200607 182538 7 200708 202017 8 200809 *

Vol. 3 No. 1 10 2010-11 *

9 200910 *

* Data not available. The data of Table 1.4 is depicted in the following figure 1.4. Figure 1.4
E x p ort (In C ro re ) 25 000 0 20 000 0 15 000 0 E x po rt (In C rore) 10 000 0 5 000 0 0 20 01-02 20 02-03 20 03-04 2 004 -0 5 2 005 -0 6 2 006 -0 7 2 007 -0 8

7. Findings of the Study


7.1 It is observed that there is steady increase in the number of working MSMEs. 7.2 It is clear that there is steady increase in the employment opportunities with the increase in the number of working MSMEs from 2001-2011. 7.3 There is increase in the production by MSMEs from 2001-2011. 7.4. It is clear that there is increase in Export from 2001-2008.

8. Conclusion
From the figures stated above it is clear that the number of working MSMEs, employment opportunities provided by MSMEs, Production in MSMEs and Export has shown an increasing trend from 2001-2011.

9. Suggestions
At present there are less awareness programs or counselling cells provided by the government which will answer the questions in the minds of people about the consequences of MSMEs. Therefore it is suggested that govt. should come with the more awareness camps and programmes in the public. For providing a better understanding on MSMEs the govt. should continuously conduct a research to know the requirements and the problems faced by the people in order to resolve their problems and for further guidance. Mr. Jitender Kumar Tiwari, Assistant Professor, Sri Sai University, Palampur Mr. Guru Swarup, Assistant Professor, Sri Sai University, Palampur

References
1. 2. 3. 4. 5. 6. 1 Keynes, J.M. (1936): The General Theory of Employment, Interest and Money, Harcourt Brace & Co, New York. Report of the Village and Small Scale Industries (Second Five Year Plan) Committee (1955), commonly known as the Karve Committee Report. Government of India. Prasad, L. (1983): Industrialization- Concept and Issues, S. Chand and Co. New Delhi. Annual Report 2008-09, Govt. of India, Ministry of Micro, Small and Medium Enterprises Annual Report 2009-10, Govt. of India, Ministry of Micro, Small and Medium Enterprises Micro, Small & Medium Enterprises Development (MSMED) Act, 2006

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Websites: 1.) http://www.msme.nic.in 2.) http://msme.gov.in 3.) http://dcmsme.gov.in/ssiindia/msme_in.htm 4.) http://dcmsme.gov.in/publications/circulars/GazetteNot.htm 5.) http://www.rbi.org.in/scripts/FAQView.aspx?Id=84 6.) http://msme.gov.in/msme_ars.htm 7.) http://www.dnb.co.in/SME_cluster_series2012_Indore/PDF/MSMEs_in_India.pdf Tables: 1.1, 1.2, 1.2(A), 1.3, 1.4. Figures: 1.1, 1.2, 1.3, 1.4.

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