This presentation explains about MSME and different types of ownership pattern of SSIs

1. SSI

2. SSI’s
• Stands for Small Scale Industries
• MSME in Indian Context
• Governed by MSME Act, 2006

3. Small Scale Industries
• A SSI is an industrial undertaking in which the investment in fixed
assets in plant and machinery, whether held on ownership term or
on lease or hire purchase, does not exceed Rs.1 Crore.
• This investment limit is varied by the government from time to time.
• Entrepreneurs in small scale sector are normally not required to obtain
a licence either from the Central Government or the State
Government for setting up units in any part of the country.
Registration of a small scale unit is also not compulsory.

4. • The ministry of micro, small and medium enterprises acts as the
nodal agency for growth and development of SSIs in the country.
(http://msme.gov.in/Web/Portal/New-Default.aspx)
• Objective: To promote SSIs and enhance their competitiveness Various
public sector enterprises assist it.

5. • Small Industry Development Organization. (SIDO)
- It is the apex body for assisting the government in formulating and
overseeing the implementation of its policies and
programmes/projects/schemes.
• National Small Industries Corporation Ltd. (NSIC):
• It was established by the government with a view to promoting, aiding
and fostering the growth of SSI in the country, with focus on
commercial aspects of their operations

6. Importance of SMEs
• Small and Medium Enterprises (SMEs) are vital for
development of a country
– Helps reshaping the productive sectors
– Generates employment
– Creating an environment for entrepreneurship
– Promotes innovation
• Globally, SMEs contribute over 90% of Business
Enterprises and 50-60% of Total Employment.
(UNIDO Report 2009-10)

7. Facts About MSME
• This sector contributes 8% of India’s GDP.
• It contributes 45% of manufactured output and
40% of its exports.
• It provide employment to about 60 million people
through 26 million enterprises.

8. • The Small Scale Industry Sector holds the Key
to Economic Prosperity of the Indian Economy,
Characterized by abundant Labor Supply,
Unemployment & Under Employment , Scarcity
of Finance, Growing Modern Large Industries
providing scope for development of Ancillary
Industries & so on.
• The Small Scale Industry has grown
phenomenally during the last Six Decades & has
acquired a very prominent place in the Socio –
Economic Development in the Country.
8

9. • The scenario of small scale
sector changed with industrial
policy establishment in 1991
• Liberalization came into
existence
• It was the post liberalization
era (1991 to 2006)
• This reflected the growth of
SSI’s
• In 1991 the growth rate of SSI
was almost 3 times of the total
industrial sector from 1992 to
1995
• However in 1995 the growth
rate was slightly lower but
again it increased in 1996

10. Classification
MSME
Manufacturing
Investment in
Machinery
Service
Investment in
equipment.

11. Definitions After 2nd Oct. 2006
Investment Ceiling for Plant, Machinery or Equipments
Classification Manufacturing
Enterprises
Service Enterprises
Micro Up to Rs. 2.5 million Up to Rs. 1 million
Small Between 2.5 to 50
million
Rs. 1 to 20 million
Medium Rs. 50 million to Rs. 100
million
Rs. 20 to 50 million

13. MANUFACTURING ENTERPRISES
MICRO ENTERPRISE
• Micro enterprise generally refers to a small
business employing 10 people or less
• It is an enterprise in which investments in
plant and machinery is between 5lakh to 25
lakh.
• These enterprises works and operates not by
choice but out of necessity

14. SMALL ENTERPRISE
• Small enterprise generally refers to a
business employing 50 persons or less
• It is an enterprise in which investments in
plant and machinery is between 25 lakh
to 5 crores.
• These enterprise works and operates to
earn a small amount of profit.

15. MEDIUM ENTERPRISE
• Medium enterprise refers to a business
employing maximum to 250 employees
• It is an enterprise in which investment in
plant and machinery is between 5 crores to
10 crores
• These enterprises works and operates to
earn a fair amount of profits to increase their
standard of living.

16. SERVICE ENTERPRISES
MICRO ENTERPRISE
• An enterprise in which investment in plant
and machinery is up to 10 lakhs
SMALL ENTERPRISE
• An enterprise in which investment in plant
and machinery is from 10 lakhs to 2 crores
MEDIUM ENTERPRISE
• An enterprise in which investment in plant
and machinery is from 2crores to 5 crores.

17. Classification of SSIs
TRADITIONAL SSIs
• It includes khadi and
handloom, village
industries,handicrafts,
sericulture, etc
MODERN SSIs
• Modern SSIs produce wide
range of goods from
comparatively simple items
to sophisticated products
such as television sets,
electronics, control system,
various engineering
products etc.

19. Small scale industries
• The definition
– Varies from country to country
– But usually dependent on size of employment it
generates and the investment that is required
19
Type of Industry Capital Investment
required
Small scale industry Not exceeding 100 lacs
Tiny industry < 25 lacs
Ancillary industry Not exceeding 100 lacs
100% Export Oriented
Unit
As permitted by Govt.
of India
Mega project 100 crores and above
Year Capital Investment
in plants and
machinery (lacs)
1950 5 (fixed assets)
1960 5
1966 75
1975 10
1980 20
1985 35
1991 60
1997 100

20. Small scale industries
20
SMALL TINY
ANCILLARY
• Industries producing
components in support of
other industries
COTTAGE
• Employs traditional labour
intensive methods to
produce traditional
products, largely in village
households

21. Product range
• Food preserve products
• Industrial products
• Service products
• Recreation products
Small scale
industries
• Tools
• Jigs
• Moulds
• Spare parts etc.
Ancillary
industries
• Conventional products
• Agro-based products
• Forest based products
• Chemical based products
Khadi and
village
industries
21

22. Ownership patterns
Depends on:
• Nature of business
• Size of business
• Capital required
• Ownership rights
• Anticipated profits
22
Types of
owners
hip
Sole Proprietorship
Partnership
Joint stock company
Co-operative

23. Sole proprietorship• G S Gerstenberg defines it as “that form of business organization
which is started and run by one person who bears profit and losses of
it”
23
Features
• Sole ownership
• No separate entity
• No legal formalities
• Limited capital
• Unlimited liability
• All profits to
proprietor
• Ownership and
management are
different
Pros Cons
Easy and simple to form Limited financial resources
Personal touch with customers Limited managerial ability
Smooth management Unlimited liability
Quick and prompt decisions Lack of continuity
Secrecy Limited size
Social advantages
Tax advantages
Easy dissolution
Incentive to work

24. Partnership
• Sec 4, of Indian partnership act, 1932 – “the relation
between persons who have agreed to share the profits
of business carried on by all or any of them acting for
all”
24
Features
• Two or more persons
• Sharing of profits
and losses
• Unlimited liability
• Voluntary agreement
• Mutual agency
• Existence of lawful
business
• No separate legal
entity
Pros Cons
Easy formation Unlimited liability
Flexibility Limited resources
Pooling of resources and skills Limited life
Division of risks Divided authority
More capital Danger of personal
disagreements
Tax advantages
Encouragement of mutual
trust

25. Joint stock company
• Could be private or public companies per sections
3(i)(iii) and 3(i)(iv) of the companies act 1956
25
Features
• Artificial person
created by law
• Perpetual succession
• Common seal
• Limited liability
• Large membership
• Voluntary
association
• Transferability of
shares
• Separation of
ownership from
management
Pros Cons
Limited liability Lack of secrecy
Perpetual succession Legal restrictions
Representative management Heavy taxation
Expansion potential Legalities of formation
Transferability of shares Management mischiefs
Diffusion of risk Lack of personal interest

26. Public vs private companies
Area Public companies Private companies
Formation • At least 7 members
• Formation is difficult
• Min 3 directors
• No restriction on number of
members
• At least 2 members
• Formation is simpler
• Min 2 directors
• Maximum 50 members
Prospectus • Required with registrar of
companies
Documents • Members have to sign
memorandum
• Same
• Articles of association not
required if table A of
companies act adopted
• Required
Shares • Cannot be allotted till
maximum subscription is
reached
• Can issue only equity and
preference shares
• Same, but with option of
disproportionate voting
rights
• Invitation to public for
shares, debentures or
• No public invitation 26

27. Co-operative society
• Per section 4, Indian co-operative act 1912, “society
which has its objectives, the promotion of economic
interests of its members in accordance with co-
operative principles”
27
Features
• One man one vote
• Voluntary
organization
• Democratic
management
• Service motive
• Governance control
• Distribution of
surplus
Pros Cons
Social service Corruption
State assistance Lack of mutual trust
Democratic management Lack of interest
Perpetual existence Lack of secrecy
Tax benefits Lack of managerial expertise

28. For the purpose of administration of India’s
Micro & Small Enterprises have been divided into
Seven Groups as under into Traditional Sector &
Modern Sector.
Traditional Sector :
1) Handicrafts.
2) Handlooms.
3) Khadi, Village & Cottage Industries.
4) Coir.
5) Sericulture.
28

29. Modern Sector :
6) Power Looms.
7) Residual Micro & Small Enterprises.
29

30. CONTRIBUTION & PERFORMANCE OF
MSME’s
31 Million
Employment
13 Million MSME’s
producing more
than 8000 Products
10 % Exports
45 % Industrial
production MSME’s

31. Leading banks providing loans to MSME’s

32. EMPLOYMENT IN MSME’s SECTOR
0
100
200
300
400
500
600
700
800
2009-10 2010-11 2011-12 2012-13 2013-14
EMPLOYMENT
number in
lakh person
595.66
626.34
695.38
695.40
732.24
YEAR

33. Generation of Employment - Industry Group-
wise
• Food products industry has ranked first in generating
employment, providing employment to 0.48 million persons
(13.1%).
• The next two industry groups were Non-metallic mineral
products with employment of 0.45 million persons (12.2%)
and Metal products with 0.37 million persons (10.2%).
• In Chemicals & chemical products, Machinery parts, Wood
products, Basic Metal Industries, Paper products & printing,
Hosiery & garments, Repair services and Rubber & plastic
products, the contribution ranged from 9% to 5%, the total
contribution by these eight industry groups being 49%.
• In all other industries the contribution was less than 5%.

34. Employment Distribution
Rural
• Non-metallic products contributed 22.7% to employment generated
in rural areas. Food Products accounted for 21.1%, Wood Products
and Chemicals and chemical products shared between them 17.5%.
Urban
• As for urban areas, Food Products and Metal Products almost
equally shared 22.8% of employment. Machinery parts except
electrical, Non-metallic mineral products, and Chemicals & chemical
products between them accounted for 26.2% of employment.
• In metropolitan areas the leading industries were Metal products,
Machinery and parts except electrical and Paper products & printing
(total share being 33.6%).

35. State-wise Employment Distribution
• Tamil Nadu (14.5%) made the maximum
contribution to employment.
• This was followed by Maharashtra (9.7%),
Uttar Pradesh (9.5%) and West Bengal
(8.5%) the total share being 27.7%.
• Gujarat (7.6%), Andhra Pradesh (7.5%),
Karnataka (6.7%) and Punjab (5.6%)
together accounted for another 27.4%.

36. NUMBER OF EMPLYOMENT
GENERATION IN MSME
7%
69%
24%
2009-10
MEDIUM MICRO SMALL

37. SECTOR OF MSME
This chart shows the percentage of types of MSME enterprises
13% enterprises are engaged in service sector and 87 % enterprises are
engaged in manufacturing sector
SERVICE
MANUFACTURING
13%
87%

38. MSME’s CLIPS…..

39. Manipur handicraft factory…..

40. RUGS FACTORY- JAIPUR

41. BANGELS FACTORY……

42. Paper Mache small enterprise

43. Features of SSI
Ownership
Management and Control
Gestation Period
Area of operations
Technology
Resources
Flexibility

44. Characteristics of Small
Enterprises :
• A Small Enterprise is generally a “One Man
Show”.
• Owner himself / herself is also a Manager of the
Enterprise. Thus, a Small Enterprise is managed
in a personalized manner.
• A Small Enterprise has lesser Gestation Period
compared to a Large Enterprise.
• Small Enterprises generally carryout their
operations so as to cater to the Local & Regional
Markets.
44

45. Characteristics of Small
Enterprises :
• Small Enterprises use indigenous resources & therefore can be located
anywhere subject to the availability of these resources like Raw Materials,
Labor, Transport Facilities etc.
• They are fairly Labor Intensive with comparatively smaller Capital
Investment than the Larger Units.
• Using Local Resources, Small Units are decentralized & dispersed to Rural
Areas & Smaller Towns
• Small Enterprises are more susceptible & highly reactive & receptive to
Socio – Economic conditions compared to larger enterprises
45

46. IMPORTANCE OF SMALL SCALE
INDUSTRIES

47. 1. EMPLOYMENT
• SSIs are labor intensive so there is a great employment potential.
• Large-scale industries are capital intensive, hence not in a position to solve
acute unemployment problems in India.
• SSI employed 129.80 lakh people in 1991-92 which increased to 239.09
lakh in 2000-01 and further to 294.91 lakh in 2005-06.
2. CAPITAL LIGHT
• India is a capital scarce country, which is why we need to make optimum
use of all the capital and resources available in terms of employment and
productivity.
• SSIs are capital light and hence more suitable to underdeveloped nations.
• Limited capital is needed to start an SSI, the returns are quick, and those
returns can again be reinvested.

48. 3. SKILL LIGHT AND IMPORT LIGHT
• No technological skill or managerial skill required.
• More suitable to underdeveloped countries where literacy rate is low and
skilled labor is scarce.
• Require less import of machinery, technical skill hence placing little or no
strain on the scarce foreign exchange reserves of developing nations.
4. MOBILIZATION OF CAPITAL RESOURCE AND
ENTREPRENEURIAL SKILL
• Easy mobilization of capital, entrepreneurial skill and other sources all
over the country.
• Savings in rural areas can be mobilized by SSIs more easily then large scale
industries.
• Idle resources can be put to effective use.

49. 5. SUPPORT TO AGRICULTURE AND LARGE-
SCALE INDUSTRIES
• They help supply inputs , processing facilities as well as consumer goods to
rural masses.
• Rural based SSIs help absorb all the surplus labor in villages and towns thus
improving the productivity in the agricultural sector.
• SSIs also help large scale industries by supplying spare parts, components etc.
6. REGIONAL DISPERSAL OF INDUSTRIES AND
BALANCED REGIONAL DEVELOPMENT
• Political, social and economic factors affect the development of all regions.
• Some regions are more developed while others continue to lag behind.
• Large scale industries are mostly centered in some big cities, while SSIs help
decentralize industries thus helping avoid, space crunch, slum development
problems etc.
• Since SSIs are easy to set up, they can be set up anywhere and hence contribute to
a balanced regional development.

50. 7. REDUCTION IN INCOME-INEQUALITIES AND
EQUITABLE DISTRIBUTION OF NATIONAL INCOME
• SSIs help equitable distribution of national income because of 2 reasons:
a) Ownership of SSI is more widespread than large-scale industries.
b) SSIs possess large employment potential.
8. CONTRIBUTION TO EXPORTS AND INDUSTRIAL
OUTPUT
• 45%-50% of the Indian Exports is being contributed by SSI Sector.
• Direct exports from the SSI Sector account for nearly 35% of total exports.
• It is estimated that small scale industrial units contribute around 15% to
exports indirectly.
• The exports from SSI sector has been clocking excellent growth rates
mostly fuelled by the performance of garment, leather and gems and
jewellery units from this sector.
• No. of industrial units has grown from 23.9L in ‘93-94 to 118. 59L in ‘04-05.
Output has increased from 241,648 cr in ‘93-94 to 4,18,263 cr in ‘04-05.

51. 9. LESS INDUSTRIAL DISPUTES
• Do not face problem of frequent strikes and lockouts. Hence no loss of
man-days and output in SSIs.

52. Role of Small enterprises in Indian
economy
Employment Generation
Self Employment
Optimum Use of Capital
Facilitate Entrepreneurial development
Use of local resources

53. Balanced regional development
Conservation of foreign exchange
Equal distribution of Income
Support agriculture & large industries
Increase in Industrial output

54. Role of Small Enterprises in
Economic Development :
54
 Economic Development of a Country can be defined in terms of
Increase in Real Per Capita Income of Persons resulting in Improvement in
Standard of Living. The Development of Small Enterprises contributes to
the Increase in Per Capita Income & leads to Overall Economic
Development.
 It generates Vast Employment Opportunities quickly with relatively
Low Investment , Promotes more equitable distribution of National Income,
makes effective mobilization of Unutilized Capital & Skilled Manpower &
leads to dispersal of Manufacturing Activities all over the Country , leading
to Growth of Villages , Small Towns & Economically Backward Regions.
This leads to Balanced Regional Development throughout the Country.

55. 55
 The Role of Small Enterprises in Economic
Development of our Country can be discussed with
reference to the following parameters during the last
Four Decades :
1) Increase in the Number of Small Enterprises.
2) Increase in the Value of Production in Rupee
Terms.
3) Increase in the Number of People Employed.
4) Increase in the Export Earnings in Rupee
Terms.

56. 56
The Small Enterprises have registered phenomenal growth
in their Number, Production, Employment & Exports over the
Last Four Decades.
In 1950, there were 16,000 Registered Small Scale
Industries & this has increased to 31.21 Lakh Registered SSI’s
during 1998 – 1999.
During 1973 – 74, the Total Value of Production reported
by SSI’s was Rs. 7200 Crores & this has grown phenomenally
by about 75 Times to Rs. 5,38,357 Crores during 1998 – 1999.
As regards Employment, about 40 Lakh People were
employed in SSI Sector during 1973 – 1974 & there is a Four
Fold Increase in Employment during 1998 – 1999, that is 175.2
Lakh People were employed in SSI Sector during 1998 – 1999.

57. EMPLOYMENT IN MSME’s SECTOR
0
100
200
300
400
500
600
700
800
2009-10 2010-11 2011-12 2012-13 2013-14
EMPLOYMENT
number in
lakh person
595.66
626.34
695.38
695.40
732.24
YEAR

58. 58
There is a Phenomenal Growth in Exports Revenue during the
last Four Decades. During 1973 -1974, SSI Sector exported Rs. 393
Crores worth of Goods & Services & this has grown nearly 150
times to Rs. 57, 488 Crores during 1998 -1999.
This statistics shows that the SSI Sector has been contributing
tremendously in overall economic development of the Country by
creating Vast Employment Opportunities , increased Value of
Production, & increased Value of Exports & Foreign Exchange
Earnings.
Another way of looking at the SSI Sector for the Economic
Development of the Country is to look at its Relative Position in
terms of Country’s Total Production, Employment & Exports. It is
encouraging to note that Small Scale Enterprises accounts for 35 %
of the Gross Value of the Output in the Manufacturing Sector , about
80 % of the Total Industrial Employment & about 40 % of the Total
Exports of the Country.

59. Advantages of Small
Enterprises :
59
 They are the Back Bone of the Industrial
Activity in the Country & are playing a very
important role in improving the Socio – Economic
Conditions of the people. Advantages of these
Enterprises are as follows :
1) They create greater Employment
Opportunities thro Labor Intensive processes &
thereby help in tackling the Unemployment
Problem.

60. 2) They have Low Gestation Period & thereby
Expensive Financial Resources are not idled
unproductively for long periods.
3) They can be set up easily in Rural & Backward
Areas.
4) They need Small / Local / Regional Market.
5) They encourage growth of Local Entrepreneurship.
6) They create Decentralized pattern of Ownership.
7) They foster Diversification of Economic Activities.
60

61. 8) They Innovate & Introduce New Products
particularly to cater to Local Needs.
9) They influence & improve Standard of Living
of Local People.
10) They provide equitable dispersal of enterprises
throughout Rural & Backward Areas.
11) They earn Vital Foreign Exchange for the
Country through their Exports of Goods / Services.
12) They Increase Revenue to Central & State
Govts by way of Taxes Paid by them.
61