Tcs programme SME d perspectives 12.11.2013

1. WELCOME
Executives
From
TCS – Co Plan Countries
10/16/14 1

2. Presentation on
SME Development in India - Perspectives
by
Dr. G.U. K. Rao
Director
School of Enterprise Development
NATIONAL INSTITUTE FOR MICRO, SMALL AND MEDIUM
ENTERPRISES (ni-msme), HYDERABAD, INDIA
10/16/14 2

3. WE WILL DISCUSS
 Importance of MSME
 Evolution of MSMED Act
 MSMED Act – Comparative Analysis.
 Measures and Implementation Plan
Competitiveness of MSME
New Scheme for Technological upgradation
Accomplishments
Status of MSME
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4. Introduction - MSME
• Major plank of India’s Economic Development
• Strategic Importance due to contributions in terms of Output,
Export & Employment
• To sustain & accelerate growth, MSME sector needs to be
thoroughly competitive
MSME’s are supported by Govt. of India FOR
Modernization
• Productivity
• Technological Needs
• Skill Development & Up gradation
• Adequate & Affordable assistance in Finance
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5. Importance of MSME’s
• Labor Intensive
• Short gestation period
• Lowest Administrative cost
• Maximum potential for employment generation
• Assist decentralization of power
• Induce growth of industrially backward regions ensuring
balanced regional development
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6. AN OVERVIEW OF POLICIES
Roadmap & Strategies 10/16/14 6

7. 1948 – 1991
Access to Bank Credit on Priority Basis
Reservation of Products Lines for Exclusive Manufacture
Reservation of Items for Exclusive Purchase by
Govt.Organisations
Price preference up to 15% was allowed for Govt.Purchase
Setting up of Industrial Estates
A Marketing Corporation (NSIC) was established
State Financial Corporations were set up
 District Industries Centres were set up for Single Window
Assistance
 Setting up of SIDBI (Small Industries Bank of India)
 Establishing Training Institutes for Entrepreneurship
Development
 Relief on Excise for Small Scale Units
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8. 1991 – 1999
 Improving Infrastructure, Technology and Quality
 Testing Centres were set up for quality certification
 New Tool Rooms were set up
 Sub-Contracting Exchanges were established
 SIDBI has been created to accelerate finance
 Technology Development Fund was created for Technical Services
 IID Scheme was Launched to set mini-industrial estates for MSE sector
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9. 1999 – 2006
• Strengthening of EDIs
• Enhancement of Delayed Payment Act for ensuring prompt payments
from large units
• Subsidy for participation in International Trade Fairs
• Training Programmes on Export Marketing
• Credit Linked Capital Subsidy Scheme (for technology upgradation & to
modernise the traditional technology)
• Technology up gradation in Industry Specific Clusters
• IT based initiatives for Information Sourcing
• Services given enhanced importance
• 15% Capital Subsidy Scheme for Technological Up gradation
• Credit Guarantee Scheme for loans upto Rs 5.0 Mn particularly to the
first generation entrepreneurs
• Priority Sector Lending – 40% of the NBC (Net Banking Credit) – 10%
for MSE
(to be contd…)
10/16/14 9

10. • Prime Minister’s Rozgar Yojana for Educated Unemployed Youth
• Establishing Specialized SSE bank branches
• Reduction of Subsidies
• De-Reservation on Phased Manner
• Establishing Export Processing Zones
• Strengthen the Export Promotion Councils
• Exemption limit for relief from payment of central excise duty was
raised to Rs 1 lakh
• Marketing and Procurement – 358 items have been reserved
• Establishment of Testing Centres with involvement of Industry
Associations
• Introduction of Credit Cards [Rs.1.00 Mn.]
• Continuing awareness programmes on WTO/IPRs/Bar Coding /Anti-dumping
• Enhancement of investment ceiling in specific product groups
• Assistance to strengthen EDIs at State Level – Assistance up to 50%
with a ceiling of Rs.1 crore (to be contd…)
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11. • SSI – MDA Scheme – Funds up to 90% of airfare for participation in overseas
fairs/trades, funds up to 25% of cost towards publicity material and 50%
funding with a ceiling of Rs.0.1 Mn for contesting anti-dumping case
• SSI policy further liberalized
• Revitalization of Khadi and Village Industries Commission
• Raising the corpus fund for SIDBI to Rs.100,000 Mn.
• ISO 9000/14001 Certification fee Reimbursement (75% of the fee subject to a
maximum of Rs 1 lakh)
• De-reservation from SSEs
• Development of Agro and Food Processing Sectors in Rural and Semi-Urban
Centres
• Allowing 100% FDI in Food Processing Sector
• Establishing 10 mega food parks in the country
• Further investment in Basic Infrastructure including Rural areas through
Bharat Nirman Scheme
• Introducing Credit Rating Scheme by encouraging SSEs Ranking policy
• National Manufacturing Competitiveness Programme (NMCP) – Technology,
marketing and skill upgradation through PPP
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12. Why A New law?
SSIs had no legal backing
- except 2 sections of I (D&R) Act, 1951
SSIs dealt with under multiple Laws
Many Committees & Associations demanded
No Statutory Consultative body existed
Most important policies without statutory basis
There was Need to: Define MSME concept; Simplify
Registration; Promote Services Sector; Strengthen
Delayed Payments Law; Facilitate Closure
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13. Micro, Small and Medium Enterprises
Development (MSMED) Act, 2006
[ENACTED –23rd June ’06;
IMPLEMENTED – 02nd October ’06]
10/16/14 13

14. AIM
To facilitate the
promotion and
development and
enhancing the
competitiveness of
micro, small and
medium enterprises in
the country
AAcchhiieevviinngg
lloonngg tteerrmm
ssuussttaaiinnaabbiilliittyy
10/16/14 14

15. MAIN FEATURES
Establishment of National Micro,
Small and Medium Enterprises
Board
 Classification of Enterprises
 Measures
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16. Establishment of National Board for Micro,
Small and Medium Enterprises
 Chaired by Union MSME Minister
 Vice Chairman: State Minister at the cabinet
 State Ministers (6)
 Members of Parliament (3)
 Member Secretary - MSME
 Secretaries to GoI (5)
 UT Administration (1)
 RBI, SIDBI, NABARD, IBA (4)
 20 representatives of MSME Associations with
not less than 3 of Micro, and not less than three
of Women Enterprises.
 Persons of Eminence (3)
 Central Trade Union Organisations (2)
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17. FUNCTIONS
Statutory, unlike previous SSI Boards
Hold mandatory Quarterly Meetings to
examine factors in MSME development
Helps to Conduct Research Studies
Review Central Policies & Programmes
Make recommendations to Central Govt.
Advise Govt. on Fund(s) for MSME
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18. Classification of Enterprises
NB: Not ‘Industries’ but ‘Enterprises’
Enterprises either:
(i) Manufacture Goods,
or
(ii) Provide Services
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19. Classification Manufacturing
Enterprises*
Service
Enterprises*
Micro Up to Rs.2.5 Mn
($ 41667)
Up to Rs.1.0 Mn
($ 16667)
Small Above Rs.2.5 Mn ($
41667) & up to Rs.
50.0 Mn ($ 0.83 Mn)
Above Rs.1.0 Mn ($
16667) & Up to Rs.
20.0 Mn ( $ 0.33 Mn)
Medium Above Rs. 50.0 Mn ($
0.83Mn) & Up to Rs.
100.0 Mn ( $ 1.67 Mn)
Above Rs. 20.0 Mn ($
0.33 Mn) & Up to Rs.
50.0 Mn ($ 0.83 Mn)
Excluding Land & Building *
@ $ 1 + Rs. 60 (November 2013)
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20. Sl
No
MSMED ACT 2006: A COMPARATIVE ANALYSIS
BASIS OF
COMPARISON
SCENARIO: PRE ENACTMENT OF MSMED
ACT
SCENARIO: POST ENACTMENT OF MSMED ACT
1 Apex statutory body SSI Board is the apex non-statutory advisory body
constituted by the Government of India to render
advice on all issues pertaining to the SSI sector.
Clause 3 of the MSMED Act provides for the establishment
of National MSME Board, hence, it is now a statutory body
that will mandatorily have Quarterly Meetings. This Board
will replace the currently existing non-statutory Small
Scale Industries (SSI) Board. 46 Members on Board, with
specific representation for women.
2 As an ‘entity’ Existing concept of only the ‘Industries’. i.e. the
Small Scale Industries (SSI)
Clause 7(1) introduces the concept of ‘Enterprises’ as
against ‘Industries’. Broadly classified into enterprises
engaged in manufacture/production of goods those
engaged in providing/ rendering services.
3 Classification of
Enterprises
A definition existed only for tiny and small units,
however medium sized enterprises are not defined
either technically or legally. No further
classification as per the definition for
Manufacturing & the Services sector
As per the Clause 7(1) a definition exists for Micro, Small
and Medium units.
4 Establishment
procedure
Two -stage registration process of Micro & Small
industry in place.
As per Clause 8. Filing of memoranda optional for Micro &
Small enterprises in manufacturing & services sector, for
Medium enterprises in services sector but mandatory for
Medium enterprises in manufacturing sector.
5 Procurement Policies Non statutory Clause 11 provides for the notification of preference
policies, by the Central or a State Govt. in respect of
procurement of goods & services, produced and provided
by the MSEs, by its Ministries, departments or its aided
institutions and public sector companies.
6 Delayed Payments
– Repayment,
Penalty
Period of repayment by the supplier – 120
days. Penal interest rate is 150% (or 2 ½ times)
of the PLR.
Clause 15 Period of repayment by the supplier – 45 days.
Clause 16 Penal interest rate is 200% (or three times) of
the Prime Lending Rate (PLR).
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21. Sl
No
BASIS OF
COMPARISON
SCENARIO: PRE ENACTMENT OF MSMED
ACT
SCENARIO: POST ENACTMENT OF MSMED ACT
7 Delayed Payments –
Dispute Resolution
No stipulated time period for a decision on a
reference made to a Industry Facilitation Council.
Reference made to the MSE Facilitation council to be
decided within 90 days from the date of reference, as per
the Clause 18(5)
8 Delayed Payments -
Deduction under the
Income Tax Act, 1961
Amount of interest payable or paid by any buyer
is allowable for the purposes of computation of
income under the Income Tax Act, 1961.
Clause 23 Provides to disallow, for the purposes of
computation of income under the Income Tax Act, 1961,
the amount of interest payable or paid by any buyer,
under or in accordance with the provisions of this Act.
9 Closure of Business Non existent as a statutory requirement Clause 25 provides that the Central Govt. may (within 1
year of the commencement of the Act) notify a scheme
for facilitating closure of business by a micro, small and
medium enterprise.
10 Promotional &
Enabling provisions
Non existent as a statutory requirement Clause 9 provides for notification of programmes,
guidelines or instructions for facilitating the promotion
and development and enhancing the competitiveness of
MSMEs, by the Central Govt. Clause 12 provides for
constitution, by notification, one or more funds, by the
Central Govt.. Clause 13 provides to credit (by the Central
Government) to the fund or funds, such sums as the
Govt. may provide after due appropriation made by
Parliament by law in this behalf. Clause 14 provides to
administer (by the Central Govt. ) the fund or funds for
purpose mentioned in Clause 9 & coordinate and ensure
timely utilization and release of sums with such criteria,
as may be prescribed.
11 Provisions for
facilitating Credit
Non existent as a statutory requirement Clause10 provides that the policies &practices in respect
of credit to the MSMEs shall be progressive and such as
may be specified in the guidelines or instructions issued
by the RBI.
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22. POLICY MEASURES
 Filing of Memoranda:
• No Registration Required: Only Filing of Memorandum
• Memoranda Optional for all, except for Manufacturing Medium
Enterprises
 Central Government to notify Programmes for MSMEs:
 Skill Development, EDP, ESDP
 Technology Upgradation
 Marketing Assistance
 Infrastructure Facilities
 Cluster Development
 IPR and Export Marketing
 TQM
Credit: The Policies & Practices of Credit to MSMEs shall be progressive,
& Specified by RBI Guidelines for:
• Ensuring smooth credit flow to MSMEs
• Ensuring better competitiveness
• Minimizing sickness among them
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23. Procurement Preference Policies: Central Govt. or State Govt. to
notify:
 Preference Policies for procurement of Goods & Services of MSMEs
 Statutory for its Ministries, Departments & Aided Organizations
 Legal force comes in now
 Facilitating Closure of Business
 Long pending need for Exit Policy
 Now introduced for first time
 Central Govt. to Notify Policy soon
Delayed Payments Provisions
• Provisions regarding Micro & Small Enterprises Strengthened
• Payment period now 45 days not 120
• Interest = 3 times RBI Bank Rate & Compounded on Monthly basis
• State Governments must constitute MSE Facilitation Councils (FCs)
• Include MSE Associations in FCs
• Jurisdiction of State Councils up to wherever buyer is located
• Buyers must disclose Outstanding MSE payments in Annual Accounts
• Interest paid/payable to supplier not allowed for IT deduction
• 75% of F C’s decreed amount must be deposited before moving Appellate
Court & Appellate Court may order part payment 10/16/14 from deposit to the MSE23

24. The Implementation Plan
Strengthening Training Institutions and upscaling
training facilitation especially in the rural and remote
areas
Better marketing support to MSMEs and
strengthening/creation of existing/new marketing
support infrastructure/institutions
Technological support to MSMEs;
 Amendments in the MSMED Act, 2006 for providing
an exit mechanism to the MSMEs, making the decision
of the Facilitation Council binding and final, etc.;
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25. Strengthening of District Industries Centres (DICs)
with provision of modern IT-enabled communication
facilities, across the country to improve the delivery of
services at the field level;
Cluster Development Programme would be
strengthened. MSME Associations would be involved
in Cluster Development Programmes;
Strengthening of khadi institutions through
implementation of the Khadi Reform and
Development Programme;
Introduction of a Public Procurement Policy for
MSMEs for assisting the MSMEs in increasing their
market share;
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26. Encouraging corporatisation of the MSME sector;
Introducing a scheme for supporting the States to
set up Rehabilitation Funds and operationalise
appropriate schemes for the rehabilitation of units
temporarily rendered sick due to circumstances
beyond their control;
Up scaling existing schemes or evolving new
schemes to assist MSMEs in acquisition,
adaptation and innovation of modern clean
technologies as well as creation of a Technology
Bank/product specific technology centres to
enable them to move up the value chain;
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27. Encouraging innovations through setting up of large
number of business incubators in educational
institutions of repute;
Expanding the outreach of the major
schemes/programmes of the Ministry, including
National Manufacturing Competitiveness
Programme (NMCP), Prime Minister’s Employment
Generation Programme (PMEGP), Scheme of
Market Development Assistance (MDA) for Khadi,
Micro and Small Enterprises-Cluster Development
Programme (MSE-CDP), Credit Linked Capital
Subsidy Scheme (CLCSS), Credit Guarantee Scheme,
etc.
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28. Competitiveness of MSME’s
To understand competitiveness of MSME’s, one has to look at the issue
in two different areas
• Competitive advantage compared to large enterprises – because of
inherent nature of MSME’s
• International competitiveness – This reflects more on the influence of
policy framework
MSME’s Competitive Advantage:
• That cannot be done more efficiently by a larger unit
• That requires
• Flexibility
• Innovativeness
• Closeness to customers
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29. Policy Environment
For competitiveness on a global scale, the policy
environment can have a supportive or an
inhibiting effect on MSME
• While competing against foreign companies that
enter the home market
• While competing as a MSME in foreign markets
• While becoming part of international value
chains and business relations
Economic policy direction has changed and
there is a commitment to change it further to
promote and enable competitiveness among
MSME’s
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30. New Innovative Schemes for Technology Development of MSMEs
under the National Manufacturing Competitiveness Programmes
(NMCP)
Sl.
No
Scheme Aim Achievement
1. Lean
manufacturing
(2009)
To reduce manufacturing waste,
thereby , increasing competitiveness
and productivity of the MSMEs.
Initially 100 mini clusters have
been selected on pilot basis, over
70 Special Purpose Vehicles have
been formed and 42 Lean
consultants have been selected
2. Design Clinic
Scheme for Design
Expertise
(2010)
Brings design experts on a common
platform to access advise and cost
effective solutions. It has two major
parts: a) Design Awareness and b)
Design Funding (60% of the project
cost)
Introduced in 200 MSME Clusters,
43 seminars have been conducted
in 99 clusters and 15 design
projects have been approved
3. Marketing
Assistance and
technology
Upgradation
(2010)
To improve technology up-gradation
in packaging, developing modern
marketing techniques, state/district
exhibitions, corporate governance
practices, marketing hubs, etc.
10 product groups and 140 units
have been identified for
participation in industry fairs and
exhibitions.
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31. Sl.
No
Scheme Aim Achievement
4. Technology
and Quality
Upgradation
Support
(2010)
To sensitize the manufacturing
MSME sector to upgrade their
technologies of green-house gases,
adoption of other technologies as per
the global standards, improve their
quality and reduce their cost of
production etc., towards becoming
globally competitive
The major activities planned include
capacity building of MSME clusters
for Energy Efficiency/Cleaner
technologies, setting up carbon
credit aggregation centres and
encouraging MSMEs to acquire
Product certification Licenses from
National/ International Bodies. 20
clusters have been identified.
5. Promotion
of ICT in
Indian
manufactur
ing Sector
(2010)
SME clusters, which have quality
production and export potential, shall
be encouraged and assisted in
adopting Information and
Communication Tools (ICT)
applications to achieve
competitiveness in the national and
international markets.
Activities planned: Identifying target
clusters, Setting up of E-readiness
infrastructure, Developing web
portals, Skill development in ICT,
preparation of local soft-ware
solutions, construction of e-catalogue,
e-commerce etc.
Implemented in 100 clusters
6. Mini Tool
Rooms
(2009)
To develop more tool room facilities,
by creating capacities in private
sector for designing and
manufacturing quality tools and also
to provide training facilities in the
related areas. It has three models:
Central PPP model; State PPP model
and Centre-State model
15 Mini tool rooms have been set up
under PPP mode. Government
support is restricted to Rs. 9 Cr up to
40% of the project cost.
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32. Sl.
No
Scheme Aim Achievement
7. Quality
management
Standards and
Quality
Technology Tools
(2009)
Improving the quality of the
products in MSE sector and
inculcates the quality
consciousness in this sector
The major activities of the scheme are: a)
introduction of appropriate modules for
technical institutions (ITIs/Polyclinics); b)
Organizing awareness campaigns; c)
organizing competition watch (c-watch); d)
implementation of Management Standards
and Quality Technology Tools in selected
MSEs; e) monitoring International Study
Missions; and f) Impact Studies of the
Initiatives
8. Building
Awareness on
Intellectual
Property Rights
(2009)
To attain global leadership
position and to empower MSMEs
in using effectively the tools of IPR
of innovative projects
112 Awareness Programmes and 35 Seminars
have been organized along with setting up
of 18 IP Facilitation Centres
9. Marketing
Support/Assistance
(Bar Code) (2010)
To popularise the Bar Code
Registration and motivate MSEs to
adopt bar Code certification on
large scale and to sell their value
added products worldwide and
enable higher export price
realization.
75% of Annual fee of Bar Code Certification
for the first 3 years are reimbursed to MSEs.
About 101 MSMEs have been benefited so
far.
10. Support for
Entrepreneurial
and management
Development
through Incubators
(2009)
Nurturing innovative business
ideas (new/ingenious technology,
process, products, procedures etc.)
which could be commercialised in
a year.
76 Business Incubators have been set up
and 190 ideas approved so far.
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33. MICRO, SMALL AND MEDIUM ENTERPRISES
(MSME) SECTOR: PROFILE
Quick Estimates of 4th Census (2006-07)
· Number of MSMEs 26.1 million
· Number of Manufacturing Enterprises 7.3 million
· Number of Service Enterprises 18.8 million
· Number of Women Enterprises 2.1 million (8%)
· Number of Rural Enterprises 14.2 million (54.4%)
· Employment 59.7 million
· Per unit employment 6.24 million
· Per unit fixed investment Rs.33.78 lakhs
· Per unit original value of Plant & Machinery Rs. 9.66 lakhs
· Per unit gross output Rs.46.13 lakhs
· Employment per one lakh fixed investment 0.19
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34. India’s Manufacturing
Competitiveness
Proven Product
Development
Capabilities
Stable Economic
Policies
Large and
growing
domestic
demand
Availability of
manpower
Proximity to
Proximity to
Markets
High Quality
Standards
Competitive
Manufacturing
Cost
Export Potential
India as a
manufacturing
hub
Indian Manufacturing positioned for a higher growth rate
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