Yojana November 2017(Summary): Micro, Small & Medium Enterprises (MSME) (Download PDF)

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Key Issues: Aim to build strong industries in India. Employ 11 crore people & 17 % of GDP. Challenges: Untimely access to credit. Lack of infrastructure. Inability to resource technology for upgradation. Access to marketing. Competition from neighboring nations. Poor finance. Limited human resources. Under Credit Guarantee Fund Scheme – limit of loan being doubled from 1 crore to 2 crore rupee.

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Yojana November 2017 Summary: Micro, Small & Medium Enterprises (MSME) (In English)

Dr. Manishika Jain explains Yojana November 2017 Summary: Micro, Small & Medium Enterprises (MSME)

📝 Defining MSME

  • Manufacturing
  1. Micro – upto Rs. 25 lakhs
  2. Small – Rs. 25 lakh to 5 crore
  3. Medium – Rs. 5 crore to 10 crore
  • Service
  1. Micro – upto Rs. 10 lakhs
  2. Small – Rs. 10 lakh to 2 crore
  3. Medium – Rs. 2 crore to 5 crore

Empower MSME

  1. Provide employment
  2. Foster entrepreneurship
  3. Growth led innovation
  4. Includes 90 % of industries with 40 % workforce
  5. Produce 8000 products
  6. Likely to become $5 trillion economy by 2025
  • Budgetary allocation of Rs. 6482 to MSME (as compared to Rs. 3465 before)
  • Govt. Initiatives like Make in India, Skill India, Startup India & Digital India
  • New innovative models for financial complexities & credit related gaps
  • PM Employment Generation Program – microenterprise are set up every year for employment opportunities – During 2014 - 16 – 1,12,883 projects were approved
  • Khadi & Village Industries – low per capita investment
  • Rs. 2200 crore fund from World Bank to support & establish 15 Technology Centers to improve productivity
  • Credit Linked Capital Subsidy Scheme (CLCSS) – upgradation of technology
  • Financial support to MSME in Zero Defect Zero Effect Substitution
  • Cluster based approach to develop MSME – Common Facilities Center & Scheme for Upgradation of Rural & Traditional Clusters
  • 📝 PSE to procure 20 % goods and services (compulsory for 3 years) from MSMEs as part of Public Procurement Policy, 2012 – encourages ST/SC entrepreneurs (separate 4 % procurement from them)
  • National ST-SC Hub launched in 2016 – operational from National Small Industries Corporation – purchase of plants and machinery with upfront capital subsidy of 25%
  • Udyog Aadhaar Memorandum (UAM) – one page single point registration to avoid delay and replace heterogeneity – more than 4.17 lakh MSMEs registered – self certification,
  • National Manufacturing Competitiveness Program – enhance entire value chain of MSME to make it more competitive – 52 programs during 2015 - 16
  • 2015- StandUp India initiative – promote entrepreneurship amongst SC/ST & Women – facilitating bank loans repayable upto 7 years & in between Rs. 10 to 100 lakhs for greenfield enterprises
  • National Institute for MSME
  • Set up as Central Industrial Extension Training Institute in 1960
  • To keep it free from administrative controls – shifted to Hyderabad in 1962 & renamed Small Industry Extension Training Institute
  • 2007 – Name changed to NI-SIET
  • Later name changed to NI-MSME
  • Interface with CFTC, UNESCO, UNDP, USAID, ILO

Aims At

  • Capacity Building
  • Information dissemination & Knowledge Building – online apps
  • Research & Policy Advocacy
  • Networking
  • Mapping of Clusters
  • Livelihood Business Incubation – 80 traders

Promote Avenues for MSMEs

  • MSMED Act 2006 was passed
  • Separate ministry for MSME formed in 2007 by merger of Small Scale Industry & Agro Rural Industries – comprises of 45.3 million units & employ 117 million persons – produces 45 % of total manufacturing & 40 % to exports
  • Promote Khadi, Coir & Village Industries – KVIC – employs 150 lakh persons in rural areas
  • Coir promotion – Kerala, TN, AP, Karnataka, Goa, Odisha, Maharashtra & Gujarat – employs 7 lakh persons and is environmental friendly
  • MSME – awarded ISO 9001 - 2008 certification – to promote MSME
  • 2017 – Corporate tax for MSME with turnover less than Rs. 50 crore was decreased from 30 % to 25%
  • 2015 – ASPIRE – A Scheme for Promoting Innovation & Rural Entrepreneurship was launched - set up technology business incubators, livelihood business incubators

Role of Ministry of MSME

  • Flow of credit
  • Support technology upgradation
  • Integrated infrastructural facilities
  • Modern testing facilities
  • Access to modern management
  • Entrepreneurship development
  • Support for product development
  • Assistance for domestic and export markets
  • Promote capacity building

Enhance Competitiveness by Technology Upgradation

  • In 2015 - 16,51 million enterprises, employed 117 million persons and Rs. 8492 billion of exports with Rs. 18,100 billion worth of output
  • 2014 - 15, MSME accounted for 30.74 % GDP – of which manufacturing accounted for 6.11% & service – 24.63%
  • Technology transfer – knowledge whereby economic efficiency can be improved – includes hard and soft technology
  • Range from - High technology risk decision to develop needed technology internally & move to low technology risk decision to acquire fully functioning technology from another firm
  • Acquire external technology to overcome technological obsolescence
  • Vertical transfer from basic to applied research & from development to production
  • Horizontal transfer – technology used in one place is transferred to another place

📝 ToT – Includes Technology Specific Skills & Know Hows from Lowest Level to Exclusive Technical Staff

  • From university to private enterprise
  • From govt. to private enterprise
  • B/w & within private enterprises

Achievements of ToT – increase new products, shorten product development cycle, increase productivity and sales, expand scale of production, diversified products, better quality

Sources and Channels of Technology Transfer

  • Technology bank maintained by Development Commission for MSME
  • University or engineering Institute
  • Technology Research Center
  • National Research Development Corporation
  • Cluster Development Program of National Manufacturing Competitiveness Program
  • Exhibitions, conferences and reading of technical journals
  • Technology licensing
  • Outright purchase of existing technology

GST

  • Manufacturer & dealers both have 1 % rate & aggregate turnover of Rs. 1.5 crore. File quarterly return form GSTR-1,2 and 3 & pay taxes on quarterly basis
  • 📝 e-way bill system from 1/1/2018 & nationwide on 1/4/2018 (with more than Rs. 50,000 to be pre-registered)

Challenges & Opportunities for MSMEs

  • 📝 Hubanomics - IT is no more the global connect; it is a tool that facilitates ‘hubs’ of economic activity to function
  • Provide employment and extend to villages
  • Purpose of Development is maximize welfare – man at center welfare & defining welfare
  • Human welfare includes economic, social and environmental ingredients
  • Integrated development approach
  1. Political & Administrative Powers: 56th Amendment – village & small scale industries is subject to local governments
  2. Capabilities: Identify project, general information, onward support, documentation and networking
  3. Resources
  4. Development of Synergy - b/w center and state
  • Enterprise Resource Policy – vertical and horizontal strengthening of enterprise
  • Focus on large programs
  • Introduction of MUDRA as specialized window – strengthen bottom of pyramid
  • Promote ancilarization
  • Try to formalize MSMEs – better technology, better organization & better managerial practices
  1. Detailed subsectoral understanding of MSME
  2. Reinterpretation of functioning of economy, finance
  3. Rationalization of role of institutions
  4. Planning of entrepreneurship as critical resource
  • Dual characteristics of vulnerability & substantial inherent strength - policy initiatives like GST, demonetization

📝 Accessing Finance

  • Credit gap for formal & informal sector worldwide at 43.9 trillion of which $2.1 to 2.6 trillion is in emerging markets
  • MSME classified based on investment and machinery & not turnover & employment
  • Number of MSME in India at 5.13 crore with 11.1 crore
  • 4th MSME census – 90 % of MSME are dependent on informal sources for funding
  • MSME total finance requirement – Rs. 32.5 lakh crore
  • Public sector banks – control 70 % of banking system assets – tight govt. control on PSU result in subdued competition & suboptimal outcomes, banks to lend 40 % advances to priority sector, ability to lend for longer period and technical knowledge to understand business cycle
  • Problems – bank hesitate to lend for long term and lack technical expertise

📝 BASEL – II Norms –

  • RBI requires financial institutions to maintain large cash reserves to cover operation risk (makes lending to MSME difficult)
  • In case of failure of financed business entity – bankers find it difficult to take possession of stressed assets inspite of number of legislative remedies
  • Problems include raising risk capital to start business, lack of collateral and high working capital
  • Middle segment of MSME is most stable as Mittlestand – only 25,000 companies out of 5 crore MSMEs

📝 4 Credit Information Bureau – Experian, Equifax, CIBIL & Highmark – Address High Information Asymmetry in MSME Space

  • Central Registry of Securitization Asset Reconstruction (CERSAI) created movable asset registry to help MSME monetize movable assets
  • BSE & NSE allowed to create dedicated SME exchange
  • RBI licensed 3 entities for operating Trade Receivables Discounting System (TReDS)
  • Enactment of Indian Bankruptcy and Insolvency Code, 2016 – stressed assets can be re-possessed and re-deployed by finaciers

Quality Certification: Force for Competitiveness

  • Flexible adaptation to global challenges in changing market conditions
  • MSME – 8 % GDP, 45 % manufacturing output & 40 % exports
  • Create new jobs, new services, products and business model innovations
  • MSME – going for need based quality certification – higher performance and sustainable profitability
  • Quality and technology upgradation are important factors to enhance competitiveness in MSMEs
  • Benefits
  1. Recognize and brand reputation
  2. Continuous improvement
  3. Maintain focus
  4. Confidence
  5. Staff satisfaction
  • National Manufacturing Competitiveness Program (NMCP) – promote ICT & marketing support for SME
  1. Lean Manufacturing Competitive Scheme
  2. Promotion of ICT
  3. Support for Entrepreneurial & Managerial Development – nurture innovative business ideas
  4. Design Clinic Scheme – solution on real time problems and expert advice
  5. Technology and Quality Upgradation Support to MSMEs
  6. Building Awareness for Intellectual Property Rights
  7. Marketing assistance and technology upgradation
  • Credit Linked Capital Subsidy Scheme – technology upgradation of SSI
  • MSE Cluster Development Program – holistic and integrated development of micro and small enterprises in clusters
  • Performance and Credit Based Rating Scheme by NSIC to provide trusted 3rd partyu opinion on capabilities of MSEs
  • International Cooperation Scheme – technology infusion and upgradation of exports
  • 📝 Financial Support to ZED (Zero Defect Zero Effect) Certification Scheme – quality tools and energy efficient manufacturing – 50 parameters for ZED rating & 25 parameters for ZED Defence Rating under ZED Maturity Assessment Model. Quality Council of India is appointed as National Monitoring & Implementing Unit for ZED implementation – aim to certify 22,000 MSMEs with bronze level under ZED scheme - raise quality of MSME and maintain green manufacturing
  • Quality Certification –ISO Certification Assitance – ISO 9001 is most widely recognized Quality Management System – cooperation and feedback from internal and external stakeholders
  • Schemes – ERP system, ISO certification and National and International Certification

Role of MSME in New India

  • MSME have highest rate of employment growth
  • Major share in industrial production and exports
  • Deliver right product, right quality, right service and right solution at competitive price in national and international market
  • Bring socio-economic transformation
  • MSME likely to touch $5 trillion economy by 2025
  • 94 % MSME are unregistered with many in informal and unorganized sector
  • 55 % MSME lie in 6 states of UP, Maharashtra, Tamil Nadu, West Bengal, Andhra Pradesh and Karnataka
  • 7 % MSME owned by women
  • 94 % MSME are proprietorship or partnerships
  • Highest in food products > textile garments > basic metals > chemicals
  • Micro Small & Medium Enterprises Development Act, 2006 – pruning of reserved SSI, advising financial institutions to increase flow of credit to SME
  • 📝 SFURTI – Scheme of Fund for Regeneration of Traditional Industries – organize traditional industries into clusters to make them competitive & provide support for long term sustainability, employment, marketability of products & equip traditional artisans
  • Stand Up India – bank loans between Rs. 10 to 100 lakh to one ST/SC borrower & one woman borrower per bank branch of all scheduled commercial banks to set greenfield enterprise
  • 📝 TREAD – Trade Related Entrepreneurship Assistance & Development Scheme – during 11th plan for economic empowerment of women through development of skills in non-farm activities – GoI grants 30 % cost to NGOs, Govt. grants Rs. 1 lakh per program to train NGOs to impart training, need based GoI grants upto Rs. 5 lakh to National Entrepreneurship Development
  • Aim to increase GDP contribution by MSME to 15 % by 2020
  • Web Portal of Warehousing Development and Regulatory Authority (WDRA) & Electronic Negotiable Warehouse receipt (e-NWR) to simplify warehouse registration rules

📝 Engineering a Difference

  • Promote KVIC – national icons should not be lost and serve the purpose for which they were established
  • Sewapuri, Varanasi Gandhi Ashram at Vadodara was set up in 1946 to promote khadi & employment – 12 acres and 500 people – was closed in 1990 and restarted on September 17 on Sewa Diwas with sanctioned Rs. 5.5 crore for project from REC
  • Train on solar chakras – 2 training centers in Jayapur & Kakrahiya (Varanasi District)
  • 1st ever Lijjat Papad manufacturing unit – Varanasi
  • 1st ever apiary for honey production and training in Varanasi
  • Pampore – Historic town on east side of Jhelum in J & K – known as Safforn Town of Kashmir – destroyed in militancy in 1990
  • Tribal dominated village Vanaj, Gujarat – KVIC provided 25 charkhas & 5 looms
  • Training cum production center at Silimkhowa in Kaziranga National Park
  • KVIC – started Honey Mission – distribute 1 lakh bee boxes this year to farmers
  • KVIC Sayog Program – gave 80 charkhas at Omkareshwar on Narmada river, MP
  • Aim to make Khadi Peter England
  • Use of kahdi at ONGC, JK White Cement, NTPC, railways, Air India ( Rs. 12 crore), for hospital staff ( Rs. 150 crore purchase fom health ministry)
  • All Indian chess players to use khadi as uniform
  • Khadi Reforms and Development Project (KRDP) started in 2010 - 11 but gained momentum recently

Encouraging Environment for Small Enterprises

  • Encourage Make in India
  • Need for separate labour laws – contract labour is exploited – “Micro Small and Medium Enterprises Bill” formulated
  • Restrict flooding and dumping of imports – antidumping duty on 93 products concerning imports from China
  • Easy finance options – MUDRA
  • Preference in Govt. Procurement
  • End Inspector Raj – more than 40 laws & 50 inspectors visiting factories
  • Build Infrastructure

Enabling Ease of Access to MSME Products

  • MSME contribution to GVA is 31.6 % for 2015 - 16
  • As per 4th MSME census – total employment was 8.05 crore
  • Total registered MSME – 65,91,870
  • Revised Market Assistance and Technology Upgradation Scheme – encourage to tap market, adopt bar code on products, facilitate market linkages and create consciousness and educate MSMEs
  • Financial assistance of space rent - 80 % for general category & 100 % for ST/SC/Women
  • 100 % of air fare for all categories subject to maximum of Rs. 1.25 lakh
  • Bar code – 75 % of annual registration fee and annual recurring fee for first 3 years by MSEs gets reimbursed – granted by GS 1 India (formerly EAN India) – autonomous under Ministry of Commerce & Industry
  • Vendor development Program – Bring buyers and sellers together – at national and state level

Other Important Coverages

  • Changpas, nomads of Changthang in Ladakh – survive harsh climate of minus 40 degree Celsius – descedants of shephards who migrated from Tibet- rear sheep and goat – 100 - 150 households
  • Looms of Ladakh – Women Cooperative for finest Pashmina
  • Implement project Laksal in 2016 at villages Stok & Kharnakling to check demand for Pashmina
  • Intensified Mission Indradhanush for full immunization to more than 90 % by Dec 2018 - monitor under PRAGATI (Proactive Governance and Timely Implementation)
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Yojana November 2017 Summary: Micro, Small & Medium Enterprises (MSME) (In Hindi)

Dr. Manishika Jain explains Yojana November 2017 Summary: Micro, Small & Medium Enterprises (MSME)

- Published/Last Modified on: November 24, 2017

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