SMALL SCALE
INDUSTRY (MSME)
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MSMEs
Micro, Small and Medium Enterprises (MSME) sector is the
backbone of our economy and plays a significant role in economic
development.
It is acknowledged worldwide that MSMEs are important
contributors to a nation's economic and social development.
In India, The MSME sector contributes to 45% of the total
manufacturing output, 40% of the total export, 6% of the
manufacturing GDP and 24.63% of the GDP from service activities,
employs over 8 crore people and produces over 8000 products.
Not only it supports large industries with their inputs but also it
Ensures inclusive growth of the nation by supporting the rural
economy. Most of the MSMEs are situated in rural areas and
employ rural manpower.
Role and Importance of MSMEs for Indian
Economy
1. Employment: It is the second largest employment generating sector after
agriculture. It provides employment to around 120 million persons in India.
2. Contribution to GDP: With around 42 million units throughout the
geographical expanse of the country, MSMEs contribute around 6.11% of
the manufacturing GDP and 24.63% of the GDP from service activities.
MSME ministry has set a target to up its contribution to GDP to 50% by
2025 as India becomes a $5 trillion economy.
3. Exports: It contributes around 45% of the overall exports from India.
4. Inclusive growth: MSMEs promote inclusive growth by providing
employment opportunities in rural areas especially to people belonging to
weaker sections of the society. For example: Khadi and Village industries
require low per capita investment and employs a large number of women in
rural areas.
5. Promote innovation: It provides opportunity for budding entrepreneurs
to build creative products boosting business competition and fuels
growth.
6. Plays an important role in making “Make in India” possible: Since
the MSME is the backbone in making this dream a possibility, the
government has directed the financial institution to lend more credit to
enterprises in MSME sector.
7. Poverty alleviation: by providing employment to a large number of
people in india, MSMEs are helping people in earning money to survive
and come out of poverty.
8. Rural Development: MSMEs are mostly situated in rural areas and are
helping in rural development.
Definition of SSI
Conventional Definition: cottage and handicraft industries that
employ conventional labour–oriented methods to produce
conventional products, mainly in the rural areas. Some examples
are handloom and handicrafts.
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CHARACTERISTICS OF SSIs
i. Capital investment is small and most of them have small number of
workers.
ii. Generally owned by a single or at the most two persons and
engaged in production of small goods.
iii. Most of them are family owned industries.
iv. Workers are not well recognize and they may do different types of
works as need arises.
v. Funded by owner’s savings or short-term loans.
vi. Small-scale industrial activity is mainly dependent on owner’s
entrepreneurship.
vii. Exploitation of natural resources and human resources
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NEED AND RATIONALE OF SSIs
i. Innovative
ii. Self satisfaction
iii. Caters to individual taste and styles
iv. Small in operation
v. Strength of nation
vi. Spread over wide areas
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OBJECTIVES OF SSIs
i. Creation of employment opportunity
ii. Improvement of output , income and better standard of living
iii. Elimination of economic backwardness of rural and
underdeveloped areas.
iv. To reduce regional imbalance
v. To provide employment and means of a regular source of
income to the needy people living in rural and semi-urban
areas
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vi. To improve the quality of industrial products produced in
cottage industries and increase production and profits.
vii. To facilitate import substitution.
viii. To encourage entrepreneurship and self-reliance.
ix. To mobilize regional resources of capital
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Ancillary Industry
•Ancillary industries are small industries having investment in fixed assets,
plant and machinery not exceeding Rs.75 lakhs and engaged in (a)
manufacturing of parts , components , sub assemblies ,toolings or
intermediates or (b) the rendering of services , supplying ,rendering or
proposing to supply or render 30% production of the total services .
•All the service –oriented enterprises are now eligible for registration as
SSIs and are entitled for the same concessions and incentives that are
offered for SSIs.
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Several clarifications are issued on the above definitions of ancillaries by
government from time to time. Some of them are:
[Link] calculations of plant and machinery , the original price paid by owner
irrespective of new or old is to be considered for accounting.
[Link] cost of equipment such as tools, jigs and fixtures , dies and moulds,
maintenance spares, consumables , generators sets etc., are included in
accounting for value of plant and machinery.
[Link] producing intermediates are considered as ancillaries.
[Link] providing service facilities like machining , pressure cleaning , sand
blasting etc., are recognized as ancillaries.
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Advantages of Ancillary Units
i. Indirect development of business activities in areas where ancillary
industries have been set up.
ii. Creating cadres of single disciplined experts.
iii. Providing an effective solution to the marketing problems of SSIs
iv. Complementary with regard to output and enable reduction in the
production cost.
v. Employment generation and utilization of money in untapped
hands.
vi. Reduction in gestation period of production.
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Objectives of Ancillary Industires
i. Development of employment opportunities
ii. Help the medium and large scale industries with, specialized
functions.
iii. Increase the production of SSIs
iv. Develop single or multi-discipline expertise in different fields
v. Provide an effective solution to the marketing problems of SSI during
their initial stage.
vi. Growth of low cost economy
vii. Dispersal of industrial activities in various regions resulting in
equitable distribution of economy.
viii. Tapping the funds from untapped sources.
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Tiny Industry:
A unit is treated as Tiny Industry where investment in plant and
machinery does not exceed Rs.5lakhs.
The growth in Tiny industries –facilitates self –employment ,
results in wider dispersal of industrial and economic activities and
ensures maximum utilization of local resources.
ADVANTAGES
[Link] of local resources like men and material
[Link] capital to start the industry
[Link] risk involved
[Link] gestation period
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v. Production of goods as per choice of consumers
vi. Exports, there by earning foreign exchange
vii. Employment generation to rural people
viii. Regional development
ix. Entrepreneurial development
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Government schemes to
promote MSMEs
1. Udyami Mitra Portal : launched by SIDBI to improve accessibility of credit and
handholding services to MSMEs.
2. MSME Sambandh: To monitor the implementation of the public procurement
from MSMEs by Central Public Sector Enterprises.
3. MSME Samadhaan: MSME Delayed Payment Portal will empower Micro and
Small entrepreneurs across the country to directly register their cases relating
to delayed payments by Central Ministries/Departments/CPSEs/State
Governments.
4. Digital MSME Scheme : It involves usage of Cloud Computing where MSMEs use
the internet to access common as well as tailor-made IT infrastructure
5. Prime Minister Employment Generation Programme : It is a credit linked
subsidy program under Ministry of MSME.
6. Revamped Scheme of Fund for Regeneration Of Traditional Industries (SFURTI)
: organizes traditional industries and artisans into clusters and make them
competitive by enhancing their marketability & equipping them with improved
skills.
7. A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship
(ASPIRE): creates new jobs & reduce unemployment, promotes
entrepreneurship culture, facilitates innovative business solution etc.
8. National Manufacturing Competitiveness Programme (NMCP): to develop
global competitiveness among Indian MSMEs by improving their processes,
designs, technology and market access.
9. Micro & Small Enterprises Cluster Development Programme (MSE-CDP) -
adopts cluster development approach for enhancing the productivity and
competitiveness as well as capacity building of MSEs.
10. Credit Linked Capital Subsidy Scheme (CLCSS) is operational for upgradation of
technology for MSMEs.