SMALL SCALE INDUSTRIES

IN INDIA

ROLE
AND
GOVERMENT POLICY

MADE BY:
ITEE BERI
MBA 1ST SEM.
ROLL NO. 16
FMS-BHU
 DEFINITION OF SSI
• . SSIs
1950

not using power

with the
using power with employee strength
less than being
50 employees more than 50 but
less than 100
YEAR INVESTMENT LIMITS
1960 Upto Rs 5 lacs in Plant & Machinery
1966 Upto Rs 7.5 lacs in Plant & Machinery

1975 Upto Rs 10 lacs in Plant & Machinery

1980 Upto Rs 20 lacs in Plant & Machinery

1985 Upto Rs 35 lacs in Plant & Machinery

1991 Upto Rs 60 lacs in Plant & Machinery

1997 Upto Rs 100 lacs in Plant & Machinery

1999 Upto Rs 100 lacs in Plant & Machinery

 CLASSIFICATION OF SSIs

TRADITIONAL MODERN

•KHADI •TV sets

•HANDLOOM •ELECTRONICS
•VILLAGE INDUSTRIES •CONTROL SYSTEMS
•HANDICRAFTS •ANCILLARY INDUSTRIES
•SERICULTURE
80%
74%
70%

60%

50% 56%
40%

30% EMPLOYMENT
20%
OUTPUT
10% 33%

0%
TRADITIONAL

13%

MODERN
 ROLE OF SSIs IN INDIAN
ECONOMY
• PRODUCTION

• EMPLOYMENT

• EXPORT

• OPPORTUNITIES

• WELFARE PROMOTING.
 PRODUCTION
• Contributes almost 40% of the gross
industrial value.

• Value of production at current prices are to

increase to Rs.4,97,842 crore .
 EMPLOYMENT
• Creates largest employment
opportunities for the Indian populace,
next to Agriculture.

• It has been estimated that Rs. 1 lakh of

investment in fixed assets in the small-
scale sector generates employment for
four persons.
 EXPORT
• 33% of the Indian Exports is contributed by SSI Sector.

• non-traditional products account for more than 95% of

the SSI exports.

• mostly fuelled by the performance of garments, leather

and gems and jewellery units from this sector.
 OPPORTUNITY
FACTORS
• Less Capital Intensive
• Extensive Promotion & Support by
Government
• Reservation for Exclusive Manufacture
by small scale sector
• Funding - Finance & Subsidies
• Machinery Procurement
• Raw Material Procurement
• Manpower Training
• Technical & Managerial skills
• Tooling & Testing support
• Reservation for Exclusive Purchase by
Government
• Export Promotion
• Growth in demand in the domestic market size
due to overall economic growth
• Increasing Export Potential for Indian products
 Opportunities
 Fashion Technology
 Information Technology
 Design Technology
 Health Technology
 Bio Technology
 WELFARE
• Increases income levels.

• Equitable distribution of income.

• Reduction of regional disparities.

• Preservation of inherited skills.

 COMPARATIVE GROWTH RATES OF SSI
SECTOR AND TOTAL INDUSTRIAL SECTOR

Year SSI Sector Growth Rate Total Industrial Sector Growth

Rate

2000-01 8.04 5.00

2001-02 6.06 2.70

2002-03 7.68 5.70

2003-04 8.06 6.09

2004-05 9.96 8.04

Source: SIDO Half Century by DCSSI, Govt. of India 2004 and Annual Report of the Ministry of SSI
2005-06
 COMPARATIVE GROWTH RATES

10
9.96
9
8
7
7.68 8.06 8.04
6 8.04
5
4
5.7 6.09
3 6.06
2 5 SSI
1
0 SSI
2.7
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05 INDUSTRY

Source: SIDO Half Century by DCSSI, Govt. of India 2004 and Annual Report of
the Ministry of SSI 2005-06
 INDIAN SME SECTOR – AT A
GLANCE 2005-06
• SSI units : 12.3 million
• Employment generated in
SSIs : 29.5 million
• Production : At current
Prices Rs. 4762.01 billion
• Exports : Rs. 1215 billion
• SSI account: • Produces Diverse range of
Industrial Production : 40%
Exports : 35% (50% of
Direct & Indirect)
GDP Share : 7%
• Ownership pattern :
– Proprietorships : 78%
– Partnerships : 16%
– Corporate & Others : 6%
• Industrial Units : 96%
• Service Enterprises : 3%
• Ancillary Units : 1%
products (more than 8000-
consumer items, capital
goods and intermediates)
 DISABILITIES
• OUTPUT vs EMPLOYMENT

• ADVERSE IMPACT ON CAPITAL FORMATION.

• INEFFICIENT PRODUCTION

• LARGE SICKNESS.

• SEVERAL DIFFICULTIES.
 AIMA –Impact Assessment
IMPEDIMENTS TO GROWTH

Problems Faced by SSIs as Barriers to Growth

Market Related 70%

Finance Related 25%

Government Policy Related 12.78%

Power Related/Infrastructure 14.0%

Technology 14.60%
 TRENDS OF LENDING BY BANKING
SECTOR TO SSI
Rs. in Crores

As at end March Total advances byTotal Advances to Proportion of SSI to

Banking Sector SSI Sector Total Advances
1999 246203 42674 17.30

2000 292943 45788 15.63

2001 469153 56002 1.94

2002 536727 57199 10.66

2003 669534 60394 9.02

2004 764383 65855 8.62

2005* 972587 76114 7.83

Source : RBI Report on Trend and Progress of Banking in India

* Provisional
 MEASURES

• CREDIT RATING SCHEME

• MARKETING ASSISTANCE SCHEME
• TECHNICAL ASSISTANCE
• MEASURES FOR EXPORT PROMOTION
• INFRASTRUCTURE DEVELOPMENT
• ENTREPRENEURSHIP ANK SKILL
DEVELOPMENT
MSME DEVELOPMENT ACT,2006
SALIENT FEATURES OF MSMED ACT -
2006
• Manufacturing enterprises defined in terms of investment in Machinery
and Equipment (excluding land and building) classified into

a. Micro enterprises - investment upto Rs 25 lakhs,

b. Small enterprises - investment above Rs 25 lakhs and upto Rs 5 crore

c. Medium enterprises - Investment above Rs 5 crores and upto Rs 10

crores

• Service enterprises defined in terms of their investment in equipment

(excluding land and building) classified into

a. Micro enterprises-investment upto Rs 10 lakhs

b. Small enterprises-investment above Rs 10 lakhs and upto Rs 2 crore

c. Medium enterprises-investment above Rs 2 crores and upto Rs 5

crores
 MSMED Act – 2006 and its Impact
Clause Salient Features Impact

1. Establishment of National 1. Specific representation for Statutory Status, compact board

Small and Medium Women and quarterly meetings will
Enterprises Board – 2. Mandatory Quarterly address problems of SMEs
Maximum No. of members Meeting immediately to take corrective
47 action

2. Concept of Enterprises Clear-cut demarcation of Facilitates SMEs to enter into

manufacturing/production service enterprises aggressively
and rendering services

3. Definition of Enterprises Specific ceiling limit for Existing small units can
manufacturing/production graduate into Medium units and
and service enterprise avail facilities under the act.
definition for Medium
enterprises

Contd/----
 MSMED Act – 2006 and its IMPACT
Clause Salient Features Impact

4.Delayed Payment Penalty & •Period of payment by the SMEs can plan their cash
dispute resolution procuring organizations – 45 flow/financial requirement
days
•Penal interest 200% of PLR

5. Dispute Resolution Establishment of MSE Easy financial planning and

facilitation Council; 90 days no waste of human
framework for dispute resources for
resolution chasing/follow up.

Contd/-
 REFERENCE
 INDIAN ECONOMY by RUDDAR DATT AND K.P.M.
SUNDHARAM
 INDIAN ECONOMY by A.N. AGRAWAL
 INDIA 2008 by MINISTRY OF INFORMATION AND
BROADCASTING
 Websites:
 http://indiabudget.nic.in
 http://dcmsme.gov.in/ssiindia