ASSIGNMENT ON BUSINESS

COMMUNICATION AND
MANAGERIAL SKILL
DEVELOPMENT
Report on MSME contribution to
domestic market & Business

SUBMITTED BY
SATYAPRIYA PANGI
19/06/DBM/28
1st semester(2nd mid-semester)
Objective:
1) To study the fundamentals, sectors of MSME.

2) To overview the impact over domestic market and industries by

MSME.

Introduction:
In recent years, all micro, tiny, small and medium enterprises are clubbed in
one broad group as Micro, Small and Medium Enterprises (MSMEs). After the
enactment of Micro, Small and Medium Enterprises Development (MSMED)
Act, 2006, the small and medium sector has been clearly defined as micro,
small and medium enterprises with effect from 2nd October, 2006.

Moreover, separate investment limits have been prescribed for manufacturing

and service enterprises.

The new definition so prescribed is as follows:

(A) Manufacturing Enterprises:
Manufacturing enterprises include:
(i) A micro enterprise, whose investment in plant and machinery does not
exceed Rs 25 lakh;

(ii) A small enterprises, whose investment in plant and machinery is more than
Rs 25 lakh but does not exceed Rs 5 crore; and

(iii) A medium enterprise, whole investment in plant and machinery is more

than Rs 5 crore but does not exceed Rs 10 crore.

(B) Services Enterprises:

Service enterprises include:
(i) A micro enterprise, whose investment in equipment does not exceed Rs 10
lakh;

(ii) A small enterprise whose investment in equipment is more than Rs 10 lakh

but does not exceed Rs 2 crore;
(iii) A medium enterprise, whose investment in equipment is more than Rs 2
crore and does not exceed Rs 5 crore.

Manufacturing enterprises of MSME category constitute 31.8 per cent of MSME

sector and service enterprises account for the remaining 68.2 per cent of
MSME sector. About 55.3 per cent of these MSME enterprises are located in
rural areas. The MSME sector achieved consistent growth of more than 11 per
cent every year till 2010-11, whereas in 2012-13 growth rate of this sector was
19 per cent and in 2013-14 nearly 14 per cent.

At present, there are about 3.61 crore number of MSMEs, which are
contributing 37.5 per cent of the GDP of the country. MSMEs have a critical
role in boosting industrial growth and ensuring the success of the ‘Make in
India’ programme.

Small scale industries are now defined under the Micro, small and Medium
Enterprises Development Act, 2006, which has specifically categorized small
scale sector enterprises based on the value of investment in plant and
manufacturing and investment in equipment for service sector.

Sectors involved in MSME:

(i) Pickles and chutneys;

(ii) Bread:

(iii) Mustard oil (except solvent extracted);

(iv) Ground nut oil (except solvent extracted);

(v) Wooden furniture and fixtures;

(vi) Exercise books and registers;

(vii) Wax candles;

(viii) Laundry soap;

(ix) Safety matches;

(x) Fireworks;
(xi) Agarbattis;

(xii) Glass bangles;

(xiii) Steel Almirah;

(xiv) Rolling shutters;

(xv) Steel chair all types;

(xvi) Steel table all other types;

(xvii) Steel furniture all other types;

(xviii) Padlocks;

(xix) Stainless steel utensils; and

(xx) Domestic utensils aluminium.

All undertakings other than small scale industries undertakings engaged in the
manufacture of items reserved for manufacture in the small sector are required
to obtain an industrial license and undertake an export obligation of 50 per
cent of the annual production. The condition of licensing is, however, not
applicable to those undertakings operating under 100 Export Oriented
Undertakings Scheme, the Export Processing Zone (EPz) or the Special
Economic Zone Scheme (SEZs).

Present performance & position of MSME sectors:

In a country like India, the position of small scale industry is quite worth
mentioning. The number of small scale units has been increasing in a
comprehensive manner in recent years, more particularly after the introduction
of economic reforms.

There were all total 79.60 lakh SSI units in the country in 1994-95, out of which
11.61 lakh were registered units and 67.99 lakh were unregistered units.

Again total number of such SSI units in 2004-05 increased to 118.59 lakh,
showing a growth of 4.1 per cent over the previous year, out of which 17.53
lakh were registered units and 101.06 lakh were unregistered units. It is
estimated that the number of SSI units during 2006-07 has increased to 128.44
lakh registering a growth rate of 4.1 per cent over the previous year.

The value of production of SSI units in India at current prices has increased
from Rs 2,98,886 crore in 1994-95 to Rs 4,18,263 crore in 2004-05 and then to
Rs 4,76,209 crore in 2005-06, registering a growth rate of 16.9 per cent and 13.9
per cent respectively over the previous year. Again total value of production of
SSI sector at constant prices has increased from Rs 2,66,054 crore in 1994-95
to Rs 2,51,511 crore in 2004-05 and then to Rs 2,77,668 crore in 2005-06,
registering a growth rate of 10.0 per cent and 10.4 per cent respectively over
the previous year.

Again total value of production of SSI sector calculated at 2001-02 prices

increased to Rs 4,71,663 crore registering a growth rate of 12.6 per cent over
that of previous year. Total number of persons employed in these SSI units
has also increased from 146.56 lakh in 1994-95 to 271.36 lakh in 2004- 05 and
then to 312.52 lakh in 2006-07, showing a growth of 4.1 per cent and 4.2 per
cent respectively over the previous year.

In recent years, the importance of Micro, Small and Medium Enterprises

(MSME) sector has increased considerably. The MSME sector now contributes
8 per cent to India’s Gross Domestic Product (GDP) and 45 per cent to
manufactured output of the country. The sector also provides employment to
over 8 crore people engaged in more than 8.6 crore MSME units, producing
more than 6,000 products.

Again exports emanating from the SSI sector account for about 35 per cent of
the total value of exports of the country. Total value of exports of SSI unit in
India has increased from Rs 29,068 crore in 1994-95 to Rs 1, 50,242 crore in
2005-06 registering a growth of 20.8 per cent over the previous year.

Again, the total value of exports in US dollar terms from the SSI sector has
increased from $ 8.07 billion in 1993-94 to $ 10.90 billion in 1995-96 and then to
$ 13.13 billion in 2000-01.

Earlier, the share MSMEs in the country’s total exports was 40 per cent but
now it has reduced to 36 per cent due to demand slowdown in western
markets. But the contribution is likely to be upto 50 per cent by 2017.
Roles of MSME :
Small scale and cottage industries have been playing an extremely important
role in Indian economy in terms of employment generation and growth. It is
estimated that this sector has been contributing about 40 per cent of the gross
value of output produced in the manufacturing sector and the generation of
employment by the small scale sector is more than five times to that of large-
scale sector.
The Second Plan rightly emphasised the role of small scale and village
industries on the growth of; (i) employment generation, (b) equitable
distribution of income, (c) mobilisation of capital, (d) mobilisation of
entrepreneurial skill, and (e) regional dispersal of industries.

Impact on domestic market & Industries:

(i) Number of Units:
Total number of registered small scale units has been increasing rapidly from
16,000 in 1950 to 36,000 in 1961 and to 8.53 lakh units in 1985-86 and then
finally to 20.32 lakh in 2006- 2007. Moreover, there were about 108.12 lakh
unregistered small scale units in India. In 2006-2007 the total number of small
scale units further increased to 128.4 lakh.

But as per the census of SSI units, 1987-88, about 30 to 40 per cent of these
registered units might be non-functional. The second all-India census of
registered small scale industrial units was conducted by Small Industries
Development Organisation (SIDO) in 1987-88. This report shows that out of
9.87 lakh registered SSI units as on 31.3.88 included in the frame 3.05 lakh
units (31 per cent were closed and another 57,000 units were not traceable).

(ii) Employment Generation:

Small scale industries are labour-intensive and thus are generating a huge
number of employment opportunities. Total employment generated by these
small scale industries has increased from 39.7 lakh in 1973-74 to 96.0 lakh in
1985-86. Estimated employment of the small scale sector has again increased
from 129.8 lakh in 1991-92 to 312.5 lakh in 2006-2007, showing an increase of
about 4.2 per cent over the previous year.
(iii) Investment:
Investment in the small scale sector has been increasing at a faster rate. As
per the statistics made available by SIDO, total amount of investment in the
small scale units of India has increased significantly from Rs 2,233 crore in
1972-73 to Rs 4,431 crore in 1978-79 and then to Rs 9,585 crore in 1985- 86.

(iv) Contribution to Exports:

The contribution of SSI sector towards export has been increasing at a faster
rate. The value of exports of the products produced by the small scale sector
has increased from Rs 393 crore in 1973-74 to Rs 9,100 crore in 1990-91 and
then to Rs 1,50,242 crore in 2005-2006.

Conclusion :
Micro, Small and Medium-sized Enterprises (MSME) are one among the most
important sectors, forming the backbone of the Indian economy. This sector
has been instrumental in the growth of the nation, leveraging exports, creating
huge employment opportunities for the unskilled, fresh graduates, and the
underemployed, also extending the opportunities to banks for giving more
credit to enterprises in this sector. The government should take utmost care of
this sector in terms of providing more and more MSME Registration benefits
through better regulations, Government simply , and enabling financial
institutions to lend more credit at less interest rate for sustainability of this
sector.

Literature Review:
Chandra S. Small Industries Development Organization (SIDO) in Global
perspective. Laghu Udyog Samachar: Journal of Small Scale Industries. 2004;
28-29(12-2):249–53.

2. Rai D. Development Policies for Micro, Small and Medium Enterprises

(MSMES) in India. Laghu Udyog Samachar: Journal of Small Scale Industries.
2009; 34(9-11):3–7.

3. Laforet S. Organizational innovation outcomes in SMEs: Effects of age,

size, and sector. Journal of World Business. 2013; 48:490–502. Crossref

Limitations:
Data were Extracted from the Third Parties and due to the time constraints
are not properly verified.

The certain information are based on historical facts.