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Challenges before Indian SME’s
&Consultancy
interventions neededBy
Dr. Pradeep BavadekarManaging Director,
MITCON Consultancy & Engineering Services ltd.
SME’s play a vital role in Indian
Economic Growth.
40% share in industrial output, produce
8000 + value-added products.
Contribute 35% in direct Indian Exports
45% in the overall exports from India.
Indian SME’s
Biggest employment-providing sector after
agriculture.
Constitute 80% of total number of
industrial enterprises
Forms backbone of industrial development
Their growth is higher than rate of growth
of industry sector as a whole, contributing
7% to our GDP
Indian SME’s
Facing tough competition from their
global counterparts due to liberalization,
change in manufacturing strategies,
turbulent & uncertain market scenario.
Suffer from sub-optimal scale of
operations & technological obsolescence.
Innovation has always been the hallmark
of small and medium enterprises.
Technology & Indian SME’s
SME’s that integrate innovation can reap
significant benefits.
Although Indian SME’s realize importance
of technological innovation, most of them
import technology, rather than developing
it in-house or through / in association with,
National Research & Dev. (R&D) Centers.
Technology & Indian SME’s
Indian SME’s, over years, have ignored R&D.
Not embarked on new product development and
technological up-gradation.
Despite the fact, that India has third largest
pool of technologically trained manpower.
Technology & Indian SME’s
Innovation is the means by which the
entrepreneur creates new wealth producing
resources or endows existing resources with
enhanced potential for creating wealth. Viz.
Product Innovation
Process Innovation
Organizational innovation
Innovation & Indian SME’s
Product innovation : creative development
and commercialization of radically new
products or services, using new technology
and linked to customer requirements.
Process Innovation : development of new
ways of producing or delivering services
that lead to cost efficiencies or speedier
deliveries.
Innovation & Indian SME’s
Organizational innovation : development of new business processes and ways of conducting business, that provide competitive edge.
Indian SME’s finding it difficult to sell their products in domestic & international markets because of increasing competition.
To make their products globally competitive Indian SME’s need to up-grade technology emphasizing on innovation.
Innovation & Indian SME’s
Sharing of information at local and
national clusters mostly informal.
Scant Information regarding latest
development and competency.
Work sharing unknown in local and
national clusters. Fight for same
customer, in same markets.
Limitations of SME’s
Even though product and technology used
could be similar, tendency to share is less
among the cluster participants. Hence need
for new approach of Cluster Development
Can’t match wage rate, job security and
career development opportunities for
employees available in larger organizations
therefore unable to hire skilled & competent
manpower.
Limitations of SME’s
Bottleneck : Just one or two people control the
organisation, at decision making or operations
Keeping them busiest of all handling
everything e.g. payroll, inventory, finances,
personnel, suppliers and customer demands.
No time to think about making major changes
or risk taking, or innovation.
Limitations of SME’s
Small traditional enterprises, with poor
support system and little exposure face
difficulties in the new e-business environment.
SME’s usually are diffident about adopting IT
or solutions based on IT.
Lack of formalized contractual relations and
preferred reliance on cash transactions.
Limitations of SME’s
While SME’s in developed countries have financial & technical capacity to identify technological sources and evaluate alternate technologies that suit them.
Unfortunately, this capacity is missing in most Indian SME’s.
This makes our SME’s an ideal partner for technological up-gradation, through technological cooperation with foreign enterprises.
Capacity of Indian SME’s
All points open opportunities for Consultancy
To enhance capacity
IT Consultancy
Financial Consultancy
Technological Consultancy
R&D Consultancy
Consultancy for Indian SME’s
Government of India, SIDO websites:
www.smallindustryindia.com
www.laghu-udyog.com
NSIC websites:
www.nsicindia.com
www.techshowindia.com
Consultancy to enhance capacity
Government of India provides financial assistance
for surveys, studies, participation in foreign
exhibitions, business meets, marketing assistance,
vender development programme, subcontracting,
Prime Minister’s employment scheme, Small
industry Cluster Development Programme.
Consultancy to enhance capacity
Estimated 400 modern SSE and 2000 rural / artisan based clusters exist in India.
Contributing to 60 % of India’s manufacturing exports.
Some clusters produce 70 to 80 % of total volume of that particular product produced in India.
e.g. Panipat produces 75 % of the total woolen blankets, Tirupur 80% of cotton hosiery.
Consultancy to enhance capacity
Ministry of Small Scale Industries, Govt.
of India has been promoting use of IT in
SME’s, to enhance SME competitiveness,
in view of globalization.
The advisory and mentoring services are
aimed at effectively addressing this
impediment to growth.
IT Consultancy for SME’s
Providing Infomediary services to SSI units.
Hosting sector specific portals for focused
information dissemination.
The portals, targeted at specific sectors, aim
at providing information, facilitation,
transaction and integration services.
IT Consultancy for SME’s
Value-added services. viz :
E-transaction portal
Supply databases
Advisory and Infomediary Services
Market intelligence
Technology providers
Information providers
Linkages with relevant institutions
IT Consultancy for SME’s
Non-availability of institutional finance on affordable and easy terms is hindering SME’s access to new technologies.
In India situation is further complicated as preferred mode of finance is either self or other sources.
Innovation in developing countries is promoted by venture capital, to help indigenous development of technologies.
Financial consultancy for SME’s
Indian Banks provide financial assistance,
for commercialization of indigenously
developed technologies and adoption of
imported technologies for wider domestic
applications through venture capital.
Small Industry Development organization
(SIDO) offers financial services to SMEs.
Financial consultancy for SME’s
Some of its the popular schemes are
Credit Linked Capital Subsidy Scheme
for Technology Up-gradation,
Credit Guarantee Scheme,
ISO 9000 / IS 14001 Certification
Reimbursement,
Integrated Infrastructure
Development Scheme
Financial consultancy for SME’s
Some popular schemes are
Cluster Development program,
Mini Tool Room Scheme etc.
[more details at -
www.smallindustryindia.com and
www.laghu-udyog.com ]
Financial consultancy for SME’s
Recently Government of India has taken
a number of initiatives to help SSI viz.
SED Bill
Credit Rating Scheme
SME Fund
Credit Cards
Financial consultancy for SME’s
Credit Rating Scheme
The scheme has been introduced to encourage the SSI Units to get their credit rating done, by reputed third party credit rating agencies.
The credit rating will facilitate hassle free flow of credit to SMEs, while enhancing comfort-level of lending banks.
Financial consultancy for SME’s
Credit Rating Scheme
The rating will bring out the strengths & weaknesses of unit, provide opportunities to enhance their competitiveness.
Rating will enhance capability and credibility of enterprises, to approach banks and financial institutions for capital and debt servicing on favourable terms, also project its strength before customers.
Financial consultancy for SME’s
Credit Rating Scheme
Government of India will reimburse
75% of the fees charged by the rating
agency subject to a ceiling amount.
SME Fund
SIDBI : principal financial institution for
promoting, financing and development
of industries in the small-scale sector.
Financial consultancy for SME’s
SME Fund
To improve credit availability SME fund of $ 2 billion has been operational since 2004.
Credit Cards
Laghu Udyami Credit Card (LUCC) Scheme (Small Enterpreneur’s Credit Card) has been liberalised.
Credit limit enhanced from $4000 to $20,000 for borrowers with satisfactory track record.
Financial consultancy for SME’s
Credit Cards
Efforts being made to facilitate flow of institutional credit to SSIs on easy terms.
Other Initiatives
Allocation of $87 million towards Technology Upgradation Fund for Textiles
Setting up of Knowledge Commission Institutions of Excellence @ $20 million at IISC, Bangalore
Financial consultancy for SME’s
Other Initiatives
Weighted deduction of 150% of expenditure on in-house research and development facilities of companies, engaged in biotechnology, pharma, electronics, telecommunications, chemical, or other notified products.
Custom duty exempted on capital goods and raw materials to a company for R&D project.
Financial consultancy for SME’s
Technology is the key to enhance the company's competitive advantage in today's dynamic information age.
SMEs need to develop and implement a technology strategy in addition to financial, marketing and operational strategies, and adopt the one that helps integrate their operations with their environment, customers and suppliers.
Technological Consultancy for SMEs
Technology is the harbinger of change
development.
Developed nations spend substantial
amounts on technology.
It is believed that Japan spends not only on
acquisition of technology but also spends
seven times more on adoption of technology.
Technological Consultancy for SMEs
Technology in conjunction with finance
management, marketing capabilities is a
powerful tool of economic development.
Taiwan, which once had a productivity level
equal to Indian SME’s has now enhanced it with
usage of technology.
Technological Consultancy for SMEs
In India, technology used by SME’s ranges from
primitive to sophisticated but Indian SME’s
predominantly preoccupied with finance and
management issues.
Ministry of SSI, Government of India, offers a
number of technical services through NSIC & SIDO.
Technological Consultancy for SMEs
Organizations offering Technology To SME’s:
Council of Scientific & Indl. Research (CSIR),
Indian Institute of Technology (IIT),
Technology Information Forecasting and Assessment Council (TIFAC),
National Research and Development Corporation (NRDC),
National Institute of Design (NID),
Technological Consultancy for SMEs
Organizations offering Technology To SME’s:
Product and Process Development Centers (PPDCs),
Mechanical Engineering Research and Development Organization (MERADO),
National Small Industries Corporation’s (NSIC),
Asia Pacific Center for transfer of Technologies (APCTT)
Technological Consultancy for SMEs
Pace of technological transfer needs to be
increased , linkages streamlined to plug gap.
R&D outputs do not get commercialized for
want of initial investment plus lack of
enabling environment and networking.
DST, Govt. of India, has been focusing
attention on this aspect and has initiated
many institutional based programmes.
R&D Consultancy to Indian SME’s
DST initiatives : Science & Technology
Entrepreneurs Park (STEP) and Technology
Business Incubator (TBI).
National Science and Technology
Entrepreneurship Development Board of
DST played pioneering ,catalytic role in
Indian Business Incubation arena since
2000.
R&D Consultancy to Indian SME’s
15 Technology Business Incubators set
up at various institutions
17 Science and Technology
Entrepreneur's Park
50 other such organisation promoted
pan India
R&D Consultancy to Indian SME’s
Today organizations are knowledge based and their success and survival depend on creativity, innovation, discovery and inventiveness.
An effective reaction to these demands lead to innovative change in the organization, to ensure their existence.
The rate of changes is accelerating rapidly, as new knowledge idea generation and global diffusion are increasing.
Conclusions
Creativity and innovation have a bigger role in this change process for survival.
SMEs have to learn and imbibe the process of innovation, in their day to day working, to remain competitive.
Good Consultants thus shall be in demand to serve various requirements of SME’s.
Conclusions