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INTERNATIONAL DELEGATES INTERNATIONAL DELEGATES

Prof. N. R. Prasad ReddyProf. N. R. Prasad Reddy

FacultyFaculty

School of Enterprise DevelopmentSchool of Enterprise Development

INDIAN INDUSTRIALIZATION – INDIAN INDUSTRIALIZATION – a Retrospecta Retrospect

Small and Medium Industry sector in India which started with Small and Medium Industry sector in India which started with simple beginnings in the early 1950’s has grown into simple beginnings in the early 1950’s has grown into prominence over years through its multi – faceted contribution prominence over years through its multi – faceted contribution and role.and role.

Definitions of village and Small Industries have changed over Definitions of village and Small Industries have changed over yearsyears

Micro, Small and Medium Industries sectors have been Micro, Small and Medium Industries sectors have been divided into different sub sectors.divided into different sub sectors.

Variety of programmes have been evolved to meet the needs Variety of programmes have been evolved to meet the needs of existing units and prospective entrepreneurs in these of existing units and prospective entrepreneurs in these categories.categories.

EARLIER DEFINITIONS ON SMALL INDUSTRIESEARLIER DEFINITIONS ON SMALL INDUSTRIES

January 6, 1955January 6, 1955A unit employing less than 50 persons if using power, and less A unit employing less than 50 persons if using power, and less than 100 persons without the use of power, and with capital assets than 100 persons without the use of power, and with capital assets not exceeding Rs.0.5 million.not exceeding Rs.0.5 million.

March 18, 1959March 18, 1959Undertakings which employ per shift less than 50 persons when Undertakings which employ per shift less than 50 persons when using, power and less than 100 persons when not using powerusing, power and less than 100 persons when not using power

January 4, 1960January 4, 1960Small Scale Industries include all industrial units with capital Small Scale Industries include all industrial units with capital investment of not more than Rs.0.5million, irrespective of the investment of not more than Rs.0.5million, irrespective of the number of persons employed.number of persons employed.

(Capital investment includes land, building, machinery (Capital investment includes land, building, machinery equipment)equipment)

October 31, 1966October 31, 1966Small Scale Industries include all industrial units with Small Scale Industries include all industrial units with capital investment not more than Rs.750,000 irrespective capital investment not more than Rs.750,000 irrespective of the number of persons employed. Investment in plant of the number of persons employed. Investment in plant and machinery only is considered for this purposeand machinery only is considered for this purpose

May 1, 1974May 1, 1974Undertakings leaving investment in fixed assets in plant Undertakings leaving investment in fixed assets in plant and machinery not exceeding Rs.1.0millionand machinery not exceeding Rs.1.0million

July 23, 1980July 23, 1980The limit of investment in fixed assets in plant and The limit of investment in fixed assets in plant and machinery has been raised from Rs.1.00 Million to machinery has been raised from Rs.1.00 Million to Rs.2.00 MillionRs.2.00 Million

March, 1985March, 1985a) SSI, limit of investment in fixed assets in plant and machinery a) SSI, limit of investment in fixed assets in plant and machinery not exceeding Rs.6.00million.not exceeding Rs.6.00million.b) Ancillary and export oriented units, the limit of investment in b) Ancillary and export oriented units, the limit of investment in

fixed assets in plant and machinery not exceeding Rs.7.5million.fixed assets in plant and machinery not exceeding Rs.7.5million.c) Tiny Industries, the limit of fixed assets in plant and machinery not c) Tiny Industries, the limit of fixed assets in plant and machinery not

exceeding Rs.0.5millionexceeding Rs.0.5million

July, 1966July, 1966 Small Scale Industries limit Rs.30.00millionSmall Scale Industries limit Rs.30.00million Ancillary Industries limit Rs.30.00millionAncillary Industries limit Rs.30.00million Export oriented units limit Rs.30.00millionExport oriented units limit Rs.30.00million Tiny Industries limit Rs.2.5millionTiny Industries limit Rs.2.5million

July, 2001July, 2001 Small Scale Industries limit Rs.50.00millionSmall Scale Industries limit Rs.50.00million Medium Enterprise limit Rs.100.00millionMedium Enterprise limit Rs.100.00million Export oriented units limit Rs.50.00millionExport oriented units limit Rs.50.00million Tiny Industries limit Rs.2.5millionTiny Industries limit Rs.2.5million

June 26, 2006June 26, 2006

Classification of enterprises broadly into (i) Manufacturing/Production of Classification of enterprises broadly into (i) Manufacturing/Production of goods and (ii) Providing/rendering of services which are defines as:goods and (ii) Providing/rendering of services which are defines as:

(i)(i) Manufacturing enterprises in terms of investment limit in plant and Manufacturing enterprises in terms of investment limit in plant and machinery (excluding land and building which one further classified into:machinery (excluding land and building which one further classified into:

Micro Enterprises : Micro Enterprises : Investment limit Rs.2.5 millionInvestment limit Rs.2.5 millionSmall Enterprises: Small Enterprises: Investment alone Rs.2.5million and upto Investment alone Rs.2.5million and upto

Rs.50.00millionRs.50.00millionMedium Enterprises: Medium Enterprises: Investment alone Rs.50.00million upto Investment alone Rs.50.00million upto

100.00million100.00million

(ii)(ii) Service Enterprises: In terms of investment in equipment (excluding land Service Enterprises: In terms of investment in equipment (excluding land & building) which one further classified into:& building) which one further classified into:

Micro Enterprises : Micro Enterprises : Investment upto Rs.1.00millionInvestment upto Rs.1.00millionSmall Enterprises : Small Enterprises : Investment alone Rs.1.0million upto Investment alone Rs.1.0million upto

Rs.20.00millionRs.20.00millionMedium Enterprises : Medium Enterprises : Investment alone Rs.20.00million upto Investment alone Rs.20.00million upto

Rs.50.00millionRs.50.00million

Small Scale sector has an active and critical role in generating and providing employment opportunities at lower capital cost, establishing wide entrepreneurial base, dispersal of industries in rural/ backward areas, reduction of disparities equitable distribution of national income

Small and medium enterprises falling under the preview of the Development Commissioner, MSME, Govt. of India, MSME (DI) at the state level and DC (MSME) at the National level provide extension support to this sector.

Some interesting facts about Indian MSMEsSome interesting facts about Indian MSMEs 8% contribution towards Indian GDP8% contribution towards Indian GDP Accounts 45% manufacturing outputAccounts 45% manufacturing output More than 29.8 million spread over the countryMore than 29.8 million spread over the country

Percentage of Micro, Small and Medium enterprisesPercentage of Micro, Small and Medium enterprises:: Micro : 94.94%Micro : 94.94% Small: 4.89%Small: 4.89% Medium : 0.17%Medium : 0.17% % of women enterprises 13.72% of women enterprises 13.72 Producing 6000+ProductsProducing 6000+Products Employment 69 million peopleEmployment 69 million people 67% of manufacturing enterprises67% of manufacturing enterprises Share of 40% to National exports Share of 40% to National exports Currently organizing 35% over the last 2 years Currently organizing 35% over the last 2 years

Some interesting facts about Indian MSMEsSome interesting facts about Indian MSMEs

Percentage distribution by type of OrganizationPercentage distribution by type of Organization

Proprietary : 90.08Proprietary : 90.08 Partnership : 4.01Partnership : 4.01 Private company: 2.78Private company: 2.78 Public limited company : 0.83Public limited company : 0.83 Cooperatives and other : 2.30Cooperatives and other : 2.30

OVERVIEW OF THE MSME SECTOROVERVIEW OF THE MSME SECTOR

The MSME sector contributes significantly to the manufacturing The MSME sector contributes significantly to the manufacturing output, employment and exports of the country. It is estimated that output, employment and exports of the country. It is estimated that in term of value, the sector accounts for about 45 percent of the in term of value, the sector accounts for about 45 percent of the manufacturing output and 40 percent of the total exports of the manufacturing output and 40 percent of the total exports of the country. The sector is estimated to employment 59 million persons country. The sector is estimated to employment 59 million persons in over 26 million units through out the country. Further, this sector in over 26 million units through out the country. Further, this sector has consistently registered a higher growth rate than the rest of the has consistently registered a higher growth rate than the rest of the industrial sector. There are over 6000 products ranging from industrial sector. There are over 6000 products ranging from traditional to high-tech items, which are being manufactured by the traditional to high-tech items, which are being manufactured by the MSMEs in India. It is well known that the MSME sector provides MSMEs in India. It is well known that the MSME sector provides the maximum opportunities for both self employment and jobs after the maximum opportunities for both self employment and jobs after agriculture sectoragriculture sector

List of items reserved for exclusive manufacture by Micro and Small List of items reserved for exclusive manufacture by Micro and Small enterprise sectorenterprise sector

Total 21 products have been reserved for exclusive manufacture of Total 21 products have been reserved for exclusive manufacture of Micro and Small enterprise sector Micro and Small enterprise sector

PRODUCTS OF MSMEs PRODUCTS OF MSMEs (more than 6000 products)(more than 6000 products)

Food products (14.26%)Food products (14.26%) Weaving Apparel ( 13.67%)Weaving Apparel ( 13.67%) Fabricated metal products (8.96%)Fabricated metal products (8.96%) Repairs and maintenance of personal & Repairs and maintenance of personal &

household goods; retail trade (8.46%)household goods; retail trade (8.46%) Textiles (6.78%)Textiles (6.78%) Furniture (6.36%)Furniture (6.36%) Machinery & equipment (4.66%)Machinery & equipment (4.66%) Other non metallic mineral products (3.77%)Other non metallic mineral products (3.77%) Repair and Maintenance of motor vehicles, retailRepair and Maintenance of motor vehicles, retail Sale of automotive fuel (3.72%)Sale of automotive fuel (3.72%) Wood and wool products (3.53%)Wood and wool products (3.53%) Others (25.82%)Others (25.82%)

SourceSource: : Final report of Fourth All India Census of MSMEs 2006-07: Registered sectorFinal report of Fourth All India Census of MSMEs 2006-07: Registered sector

NUMBER OF ENTERPRISES IN MSMEs SECTORNUMBER OF ENTERPRISES IN MSMEs SECTOR

* Projected data for the year 2009-10 to 2010-11

EMPLOYMENT IN MSMEs SECTOREMPLOYMENT IN MSMEs SECTOR

* Projected data for the year 2009-10 to 2010-11

FIXED INVESTMENT IN MSMEs SECTORFIXED INVESTMENT IN MSMEs SECTOR

*: Projected data for the year 2009-10 to 2010-11

PRODUCTION IN TERMS OF GROSS OUTPUT IN MSMES SECTORPRODUCTION IN TERMS OF GROSS OUTPUT IN MSMES SECTOR

*: Projected data for the year 2009-10 to 2010-11.

COMPARISON OF THE MICRO AND SMALL ENTERPRISES (MSEs) COMPARISON OF THE MICRO AND SMALL ENTERPRISES (MSEs) SECTOR WITH THE OVERALL INDUSTRIAL SECTORSECTOR WITH THE OVERALL INDUSTRIAL SECTOR

YearYear Growth rates of SSI Growth rates of SSI Sector Sector

[2001-02 base IIP [2001-02 base IIP (%age)](%age)]

Over all Industrial Over all Industrial Sector Sector

Growth rates (%age)#Growth rates (%age)#

2004-20052004-2005 10.8810.88 8.48.4

2005-20062005-2006 12.3212.32 88

2006-20072006-2007 12.612.6 11.911.9

2007-20082007-2008 13.00*13.00* 8.78.7

2008-20092008-2009 **** 3.23.2

2009-20102009-2010 **** 10.510.5

2010-20112010-2011 **** 7.87.8

* : Projected, IIP - Index of Industrial Production. # : Source- M/o Statistics and PI website- http://www.mospi.nic.in

** : Due to revised de nation of MSMEs Sector, methodological revisions are under progress.

CONTRIBUTION OF MSEs IN GDPCONTRIBUTION OF MSEs IN GDP

YearYear

Contribution of MSEs (%) at 1999-2000 Contribution of MSEs (%) at 1999-2000 prices inprices in

Total Total Industrial Industrial ProductionProduction

Gross Domestic Product Gross Domestic Product (GDP)(GDP)

2004-20052004-2005 38.6238.62 5.845.84

2005-20062005-2006 38.5638.56 5.835.83

2006-20072006-2007 45.6245.62 7.27.2

2008-20092008-2009 44.8644.86 8.728.72

The data for the period upto 2005-2006 is for Small Scale Industries (SSI)

MSMEs Performance: Units, Employment, Investments, Production & Exports.MSMEs Performance: Units, Employment, Investments, Production & Exports.

S.NoS.No YearYear

Total Working MSMEs Total Working MSMEs Employment Employment Fixed Fixed

InvestmInvestmentent

Production Production (Cuurrent (Cuurrent Prices)Prices)

ExportsExports

(Lakh numbers)(Lakh numbers) (Lakh Persons)(Lakh Persons) (Rs. In (Rs. In Crore)Crore)

11105.21105.21 249.33249.33 154349154349 282270282270 7124471244

2001-022001-02 (-4.07)(-4.07) (-4.44)(-4.44) (5.11)(5.11) (8.03)(8.03) (2.07)(2.07)

22 2002-032002-03109.49109.49 260.21260.21 162317162317 314850314850 8601386013

4.074.07 4.364.36 5.165.16 11.5411.54 20.7320.73

33 2003-042003-04113.95113.95 271.42271.42 170219170219 364547364547 9764497644

4.074.07 4.314.31 4.874.87 15.7815.78 13.5213.52

44 2004-052004-05118.59118.59 282.57282.57 178699178699 429796429796 124417124417

4.074.07 4.114.11 4.984.98 17.917.9 27.4227.42

55 2005-062005-06123.42123.42 294.91294.91 188113188113 497842497842 150242150242

4.074.07 4.374.37 5.275.27 15.8315.83 20.7620.76

66 2006-072006-07261.12261.12 595.66595.66 500758500758 709398709398 182538182538

111.57111.57 101.98101.98 166.2166.2 42.4942.49 21.521.5

77 2007-082007-08272.79272.79 626.34626.34 558190558190 790759790759 202017202017

4.474.47 5.155.15 11.4711.47 11.4711.47 10.6710.67

88 2008-092008-09285.16285.16 659.35659.35 621753621753 880805880805 N.AN.A

4.534.53 5.275.27 11.3911.39 11.3911.39   

9*9* 2009-102009-10298.08298.08 695.38695.38 693835693835 982919982919 N.AN.A

4.534.53 5.465.46 11.5911.59 11.5911.59   

10#10# 2010-112010-11311.52311.52 732.17732.17 773487773487 10957581095758 N.AN.A

4.514.51 5.295.29 11.4811.48 11.4811.48   The gures in brackets show the percentage growth over the previous year. The data for the period up to 2005-06 is Small Scale Industries (SSI). Subsequent to 2005-06, data with reference to Micro, Small and Medium Enterprises are being compiled. The growth for the year 2010-11 is based on the average growth rate for the previous three years. * : Provisional, # : Projected, N. A. : Not Available.

CHALLENGES FACED BY THE MSME SECTORCHALLENGES FACED BY THE MSME SECTOR

Lack of availability of adequate and timely creditLack of availability of adequate and timely credit

High cost of creditHigh cost of credit

Collateral requirementsCollateral requirements

Limited access to equity capitalLimited access to equity capital

Procurement of raw material at a competitive costProcurement of raw material at a competitive cost

Problems of storage, designing, packaging and product displayProblems of storage, designing, packaging and product display

Lack of access to global marketsLack of access to global markets

CHALLENGES FACED BY THE MSME SECTORCHALLENGES FACED BY THE MSME SECTOR

Inadequate infrastructure facilities, including power, water, Inadequate infrastructure facilities, including power, water, roadsroads

Low technology levels and lack of access to modern Low technology levels and lack of access to modern technologytechnology

Lack of skilled manpower for manufacturing, services, Lack of skilled manpower for manufacturing, services, marketing, etcmarketing, etc

Multiplicity of labour laws and complicated procedures Multiplicity of labour laws and complicated procedures associated with compliance of such laws Despite the various associated with compliance of such laws Despite the various challenges it has been facing, the MSME sector has shown challenges it has been facing, the MSME sector has shown admirable innovation, adaptability and resilience to survive the admirable innovation, adaptability and resilience to survive the recent economic downturn and recession.recent economic downturn and recession.

THANK YOUTHANK YOU