Signals and Symptoms

Decline in capacity utilization Shortage of funds to meet short-term financial obligation Stock of inventories Frequent breakdown in plant and machinery Decline in the quality of products or services Delay or default in payment of statutory dues Provident fund, Employees State Insurance Decline in technical efficiency Frequent turnover of workers Irregularity in maintaining bank account Delay in submission of data to banks and Financial Institutions

Symptoms
Decline in production or sales Frequent enhancement of credit limit Shortage of cash Deterioration in financial ratios Heavy dependence on external funds Default in payment of statutory dues Delay in audit of accounts Low employee morale

Causes - External
Govt policy Inadequate availability of inputs Recessionary trends Credit squeeze by banks Infrastructural problems

Causes - Internal
Lack of experience of promoters Easy approval Dependence on own funds Improper financial structure Diversion of funds Lack of management experience Non observance of Principles of mgt Delay in payments Marketing Personnel constraints Underutilisation of capacity Delayed recognition Other reasons

Corrective measures
Detection at incipient stage Liquidation rehabilitation Unit-mgt, financial inst, labour co-operation BIFR [Bank for Industrial & Financial Reconstru] Managerial, marketing, power, raw material , besides finance Implementation Periodic review Proper opportunity scanning

Prevention or cure

MSMEs IN INDIA

Kristu Jayanti College Bangalore

Dr. J. Nelson Michael Small Scale Industries in India 1

Max investment Manufacturing Services Rs. 10 lakhs

Micro Enterprises

Rs. 25 lakhs

MSMEs

Small Enterprises

Rs. 5 Crores

Rs. 2 Crores

Medium Enterprises

Rs. 10 crores

Rs. 5 crores

Dr. J. Nelson Michael Small Scale Industries in India

Supervisor

Accounting & Finance

Purchases

Small Entrepreneur

Legal & economic Advisor

Sales Planner & Visionary

Dr. J. Nelson Michael Small Scale Industries in India

Scope
Manufacturing Servicing\repairing Retailing Financial Wholesale business Construction Infrastructure transportation, communication, public utilities
Dr. J. Nelson Michael Small Scale Industries in India 1

Characteristics
Generally a one man show Management Lesser gestation period Localised operation Indigenous resources Labour intensive Decentralised and dispersed to rural areas Reactive to socio-economic change
Dr. J. Nelson Michael Small Scale Industries in India 1

Women Entrepreneurs
A Small Scale Industrial Unit/ Industry related service or business enterprise, managed by one or more women entrepreneurs in proprietary concerns, or in which she/ they individually or jointly have a share capital of not less than 51% as Partners/ Shareholders/ Directors of Private Limited Company/ Members of Cooperative Society.
Dr. J. Nelson Michael Small Scale Industries in India 1

Dr. J. Nelson Michael Small Scale Industries in India

125 120

123.42 118.59 113.95 109.49 105.21 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006

NUMBER IN LAKHS

115 110 105 100 95

YEAR

Dr. J. Nelson Michael Small Scale Industries in India

SSI - Growth
Year 1990-1991 2000-2001 2001-2002 SSI (lakhs) 67.87 101.1 105.21 Fixed Investment (Rs. Crore) 93,555 1,46,845 1,54,349

2002-2003
2003-2004 2004-2005 2005-2006

109.49
113.95 118.59 123.42

1,62,317
1,70,219 1,78,699 1,88,113

Source: Annual Report. Ministry of Small Scale Industries. Govt of India. 2006-2007
Dr. J. Nelson Michael Small Scale Industries in India 1

SSI - Growth
Year 1990-1991 2000-2001 Production (Rs. Crore) 84,728 1,84,401 Employment (lakhs) 158.34 238.73 Exports (Rs. Crore) 9,664 69,797

2001-2002 2002-2003 2003-2004 2004-2005

2005-2006

1,95,613 3,06,771 3,36,344 3,72,938

4,18,884

249.33 260.21 271.42 282.57

294.91

71,244 86,013 97,644 1,24,417

NA

Source: Annual Report. Ministry of Small Scale Industries. Govt of India. 2005-2006
Dr. J. Nelson Michael Small Scale Industries in India 1

India waits for you

Dr. J. Nelson Michael Small Scale Industries in India 1

DISTRIBUTION OF MSMEs, STATE-WISE

STATE
MAHARASHTRA ANDHRA PRADESH KARNATAKA GOA

NO. OF SSIs
803568 875430 658821 7097

% to national total 7.64 8.32 6.26 0.07

KERALA
TAMIL NADU PONDICHERRY

452826
787965 8860
Dr. J. Nelson Michael Small Scale Industries in India

4.30
7.49 0.08
1

Nature of Activity
MANUFACTURING STATE RURAL MAHARASHTRA ANDHRA PRADESH KARNATAKA GOA 16.69 16.41 21.70 30.62 URBAN 17.96 14.20 15.48 21.88 RURAL 3.63 4.30 3.51 6.40 URBAN 6.58 7.25 7.49 8.10 RURAL 24.54 25.30 23.81 10.60 UBAN 30.60 32.52 28.01 22.40 100.00 100.00 100.00 100.00 REPAIR & MAINTENANCE SERVICE TOTAL

KERALA
TAMIL NADU

34.68
6.83

10.37
15.82

3.88
4.52

1.93
7.79

35.11
23.53

14.02
41.52

100.00
100.00

PONDICHERRY

9.16

22.98

1.66

14.07

18.28

33.84

100.00

Dr. J. Nelson Michael Small Scale Industries in India

SSIs, ANCILLARIES, SSSBEs (in %)

STATE MAHARASHTRA

SSIs 6.87 6.54 6.05 0.09 4.62 4.50

ANCILLARIES 13.50 5.86 7.13 0.15 8.04 6.94

SSSBEs 8.20 9.62 6.42 0.05 4.07 9.68

ANDHRA PRADESH
KARNATAKA GOA KERALA TAMIL NADU

PONDICHERRY

0.07

0.24

0.10

Dr. J. Nelson Michael Small Scale Industries in India

Employment
STATE MAHARASHTRA ANDHRA PRADESH KARNATAKA GOA KERALA EMPLOYED 2051494 2139763 1638703 29311 1114661 % to national total 8,23 8.58 6.57 0.12 4.47

TAMIL NADU PONDICHERRY

2018137 35217

8.09 0.14

Dr. J. Nelson Michael Small Scale Industries in India

Overview
Definition Women Entrepreneur Maximum investment Small entrepreneur Characteristics Scope MSMEs Growth Employment Exports MSMEs in Karnataka

Dr. J. Nelson Michael Small Scale Industries in India

Definition
Nature Investment in plant and machinery/equipment (excluding land and building)
Manufacturing enterprises Upto Rs. 25 lakhs More than Rs. 25 lakhs and upto Rs. 5 Crores More than Rs. 5 Crores and upto Rs. 10 crores Service enterprises Upto Rs. 10 Lakhs More than Rs.10 lakhs and upto Rs. 2 Crores More than Rs. 2 Crores and upto Rs. 5 crores.

Micro Small

Medium

MSME Act, 2006

Dr. J. Nelson Michael Small Scale Industries in India 1

Fixed Investment in Rs. In Crores

200000 180000 160000 140000 120000 100000 80000 60000 40000 20000 0 20012002 20022003 20032004 20042005 154349 162533 170726 178920

188113

Fixed Investment in Rs. In Crores

20052006
1

Dr. J. Nelson Michael Small Scale Industries in India

Employment in MSMEs

300 290 280 270 260 250 240 230 220 Employment in lakhs 249.09 260.13 271.36 282.91

294.91

2001-2002 2002-2003 2003-2004 2004-2005 2005-2006

Dr. J. Nelson Michael Small Scale Industries in India

Exports from MSMEs

140000 120000 97644 100000 80000 60000 40000 20000 0 Exports (Rs. In Crores) 48979 54200 69797 71244 86013

124417

1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005

Dr. J. Nelson Michael Small Scale Industries in India

Growth Rates of Production

Year Growth rate of MSME sector (%) 8.68 9.64 10.88 12.32
Dr. J. Nelson Michael Small Scale Industries in India

2002-03 2003-04 2004-05 2005-06

Growth rate of overall industrial sector (%) 5.70 6.90 8.40 8.10
1

Contribution of MSMEs
Year Total industrial GDP production 1999-2000 39.74 5.86 2000-2001 39.71 6.04

2001-2002
2002-2003 2003-2004

39.12
38.89 38.80
Dr. J. Nelson Michael Small Scale Industries in India

5.77
5.91 5.82
1

MSMEs IN INDIA PROBLEMS

Dr. J. Nelson Michael Kristu Jayanti College Bangalore

Problem of Raw Materials

Absolute scarcity Poor quality High cost Local resources - problems Imported resources Govt provisions

RAW

MATERIALS

FINANCE

Problem of Finance
Scarcity of capital

Weak credit worthiness

Under-utilisation of capacity
50-40% underutilisation Reasons
Power supply Lack of alternatives thermal plant

Marketing Problems
No marketing organisation Comparative disadvantage

Reservation 878 items Trade fair authority of India STC

Technological obsolescence Infrastructure Deficient managerial and technical skills

Sickness in MSMEs

Dr. J. Nelson Michael Kristu Jayanti College Bangalore

Definition
Sick Industrial Companies (Special Provisions) Amendment Act, (SICA), 1993: an industrial company (being a company registered for not less than five years), which has at the end of any financial year accumulated losses equal to or exceeding its entire networth.