Emergence of

Small & Medium

Enterprises
Definition Of Small & Medium
Enterprises
World Bank since 1996 Firms with fixed assets (excluding
land) less than US$ 250,000 in value
is a small scale enterprise.

UNIDOs definition for Medium Firms with 20-99 workers

Developing Countries
Small Firms with 5-19 workers

UNIDOs definition for Medium Firms with 100-499 workers

Industrialized Countries
Small Firms with < 9 workers

USAID in the 1990s Firms with less than 50 employees

Definition of SMEs in some Asian
Countries
CHINA No. of Employees
Industrial Sector:
Small Enterprises 300 – 2000 employees
Medium Enterprises >2000 employees
Construction Sector:
Small Enterprises 600 – 2000 employees
Medium Enterprises >3000 employees
Wholesale Sector:
Small Enterprises 100 – 200 employees
Medium Enterprises >200 employees
Retail Sector:
Small Enterprises 100 – 500 employees
Medium Enterprises >500 employees
Definition of SMEs in some
Asian Countries
JAPAN No. of Employees
A. Small & Medium Enterprises:
Mining, manufacturing, transportation construction >300 employees
industries

Wholesalers >100 employees

Retailers, Services >50 employees
B. Small Scale Enterprises:

Manufacturing and other Industries >20

Commerce and Services >5
Definition of SMEs in some Asian
Countries
INDIA
 Manufacturing Service Enterprises
 Enterprises
Micro Enterprises up to Rs 25lakh. up to Rs10lakh.

Small Enterprises More than Rs 25lakh More than Rs10lakh

and up to Rs 5Crore and up to Rs 2Crore.

Medium Enterprises More than Rs 5 Crore More than Rs 2 Crore

and up to Rs 10 Crore. and up to Rs 5 Crore.
Significance of SMEs
qProvides low cost employment
q
qAssists in regional and local development
q
qContribute significantly to export revenues
q
qProvide rural people an opportunity
Role of SMEs in Indian Economy

qHave been contributing 5 to 6 percent of

the
 country’s GDP.


qIt provides employment to around 31.3

million people.
q
qIt contributes 34% of Exports.
q
qSMEs have been producing a wide variety
of goods like food products, beverages,
cotton textiles, leather products etc.


Advantages of SMEs

qSmall industries use a high percentage of

local raw materials
q
qSMEs generates cheaper goods and
services to the general population


qSMEs are remarkably flexible

Problems faced by SMEs

qPoor record keeping by SMEs

q
qSkilled Manpower
q
qTechnology
q
qInfrastructure
q
qRaw Material
Performance of SMEs

qOver the last five decades, the small scale

industries sector has acquired a place of
prominence in the economy of the country.
q
qDuring 2000-01 to 2004-05, the average
annual
 growth in the number of units was around 4.1
per cent while employment grew by 4.4 per
cent annually. Further, the average annual
growth in production, at current and constant
prices, was 10.6 per cent and 7.6 per cent
respectively.
Growth of SMEs

qThe number of industries registered has

increased from 79lakhs in 1994-95 to
118lakhs in 2004-05.


qEmployment generation by this sector has

recorded a 59 per cent increase from
84.2lakhs in 1983-84 to 134.0lakhs in
1992-93 and it generated employment of
229lakhs in 1990-2000 and 274lakhs at
end of March 2004.
Sickness in SMEs

qAccording to RBI “a sick unit is one which

incurs cash losses for one year and is
likely to incur cash losses for the current
year as well as for the following year”.


qThe Sick Industrial Companies Act 1985,

defines a sick industry as “an industrial
company which has at the end of any
financial year accumulated losses equal
to or exceeding its entire net worth and
has also suffered from cash losses in such
financial year immediately preceding such
financial year.
q
Symptoms of Industrial Sickness

qDeteriorating financial ratios

q
qDelay & default in the payment of statutory
dues
q
qMorale degradation of employees
q

Causes of Industrial Sickness


qChanges in the industrial policy of

government
q
qFrequent industrial strikes
q
qNatural calamities like drought, floods etc.
q
q
Remedial Measures

qBrain Storm
q
qAdopt better practices, right technology,
better work culture and professional
management
q
qIncentives should be provided to
professional
 managers helping in reviving sick units
q



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You