A STUDY ON INTERFACE BETWEEN GOVERNMENT AND SME's

A STUDY ON INTERFACE BETWEEN GOVERNMENT AND SME’s
CHAPTER - 1
INTRODUCTION
INTRODUCTION
SME’s contributes in production, employment and export of the country. It plays a prominent
role in the development of the country. It contributes currently around 6.11% of the
manufacturing GDP and 24.63% of service sector GDP. SME output, 45% of the total Indian
manufacturing output. SME exports 40% and up to 60% of total employment in India.
Government has an important part on the development of small scale industries are the hubs
for innovation invention and employment. Small scale industries work for growth of the
economy in that account government have introduced different policies which helps in
growth of small scale industries. The government through the ministry of SME’s has been
executing various plans with the goals of having an energetic SME’s segment through the
advancement of development and improvement of miniaturized scale little and medium
venture including khadi, coir business in collaboration with concerned ministers department
state government and different partners by offering help to existing under takings and
empowering production of new enterprises. This exploration is to distinguish the connection
between government arrangements and SME’s. Numerous areas of government policies
influence level of entrepreneurial activity like labour market policies, regional development
policies, social policies and gender policies it is essential for government to introduced
policies to improve the growth of small scale industries as the help in removable of poverty
by raising income levels and generating jobs so the main purpose of research is to analysis
the relationship between government policies and small scale industries.
DEFINITION
This definition is provided in section seven of Micro, Small and Medium Enterprises

Development Act 2006 (MSMED ACT) and was notified in Sept 2006. The Act provides for
classification of enterprises supported their investment size and therefore the nature of the
activity undertaken by that enterprises. As per MSMED Act, enterprises are classified in to
2 classes - producing enterprises and repair enterprises.
CANARA BANK SCHOOL OF MANAGEMENT STUDIES, BENGALURU Page 1

 Manufacturing enterprises: are the enterprise engaged in the manufacture or production or

goods pertaining to any industry specified in the first schedule to the Industries
(Development and Regulation) Act 1951
 Service Enterprise: are the enterprises engaged in providing or rendering of services and
are defined in terms of investment in equipment.
Manufacturing enterprise –Investment in Plant Service Enterprise – Investment In

& Machinery Equipment’s
Description INR Description INR
Micro Enterprise Up to Rs.25 Lakh Micro Enterprises Up to 10 Lakh
Small Enterprises Above Rs.10
Small Enterprises Above Rs.25 Lakh & up Lakh up to Rs.
to Rs.5crore. 2 Crore
Medium Enterprise Above Rs.5 Crore & up Medium Enterprises Above Rs. 2
to 10 Crore. Crore & up to
Rs. 5 Crore
CHARACTERISTICS OF
SME’s
1. Limited Investment: In a Small business enterprise, capital is supplied by an individual or a

small low cluster of people.. As per a census of small scale units in India, mostly small
business enterprises are run as sole-proprietorship and partnership..
2. Personal Character/ Owner Management: A small business is known with its owners; who
themselves officers. Managers intrinsically most motivation to work; as they themselves
happen to be the owners also, at the same time.
3. Labour intensive: Small business enterprises as principally and equipment used are not
very refined and are operated manually.
4. Unrecognised Labour: Small business enterprises use less range r of staff as compared with
big business enterprises. Workers of these units do not form labour unions and remain
unprotected.
5. Local area of operation: The area of operation of small units is mostly native as they need
less capital and less marketing facilities at their disposal. There is a local touch between

employer and employees; and between employer and customers through products of some
small scale enterprises are exported to several countries of the world.
IMPORTANT SMEs ROLE IN INDIA
Micro, Small and Medium Enterprises (MSME) sector has emerged as an extremely spirited
and dynamic sector of the Indian economy. MSME’s are essential for economic process and
Development as a result of they encourage entrepreneurship. MSMEs have contributed to
economic development by produce employment for rural and urban. MSMEs in India have
utilized additional labor hard production processes than large enterprises accordingly. SME
has compete a important role in the development of the country in terms of making
employment opportunities –MSME has employed more than fifty million people, scaling
manufacturing capability, curtailing local disparities, complementary the distribution of
wealth, and contributing to the GDP- MSME sector forms 8% of GDP. Through India is still
facing infrastructural problems, lack of proper market linkages, and challenge in terms of
flow of institutional credit, it has seen a tremendous growth in this sector.
The advantage of this sector is it requires less investment, thus creating employment
problems, more over this sector has survived almost all threats promising out of still
completion from both domestic and international market.
Importance of MSME ACT 2006:
With the introduction of MSME proceed in the year 2006, the service sector that was not yet
included in this sector was integrated in the definition Micro, small and Medium sized
Enterprises building a historic change to this Act, thus leveraging the scope of the sector even
currently government simplified the MSME registration Online with the paperless work.
Share of MSME in manufacturing, Exports and Employment sector in India:
Sector Percentage (%) share

Manufacturing 45
Exports 40
Employment 69

80
70
Percentage(%) of share
60
50
40
30
20
10
0
Manufacturing Exports Employment
Sector
The contribution of MSME to other sectors has been massively instrumental. It is the biggest
employer after agriculture sector’s contribution to GDP is less than MSME. While it
contributes about 45% to manufacturing sector, and maybe 40% to exports, it forms the
highest share of employment sector in India, contributing around 69% to it.
Government has introduced various institution to support small scale

industries like,
1. National Bank for Agriculture and Rural Development (NABARD):

NABARD founded by the government in 1982 to give activity and to advance the
rural industries. It has adopted multi-purpose strategies in promoting in rural business
in India. It supports small industries, cottage industries along with agriculture.
Additionally, it sets up preparing and directing in addition to it gives development
programmes for rural entrepreneurs.
2. A Rural Small Business development Centre (RSBDC):

RSBDC is an administration centre supported by NABARD for smaller scale, small
and medium business which is set by world organization. RSBDC does many
programmes on skill up gradation, these programmes motive various unemployed
youth and young women learn different trades and introduce them to other good
benefits from it.

3. National Small Industries Corporation (NSIC):

NSIC was created in 1995 by the administration to market and bolster personal
corporations concentrating on business viewpoints. The many components of NSIC
are:
 Supply foreign goods and machine on contract buy understandings.
 Procurement of supply Imported indigenous raw materials.
 Developing small business by importing their products and services.
 Awareness on specialized up gradation.
4. Small Industries Development Bank of India (SIDBI):

It is a high government bank to offer direct and indirect cash connected facilitate
under various style to meet credit condition of independent venture.
5. The National Commission for Enterprises in The Unorganized Sector(NCEUS):
NCEUS formed with in the September 2004 by the administration with goals.
 Measures to enhance the productivity of small industries in the informal

sector.
 Generation of employment in the rural sector.
 To create open and personal associations for commitment in granting aptitudes
for the casual division.
 Giving smaller scale account to the casual space.
 Providing social insurance for the informal sector.
 To introduce competition of small scale during a international setting.
6. Rural and Women Entrepreneurship Development(RWED): This is often

associated government organisation to concentration to raise the business
environment for women and to help women’s business activities. It gives manual to
preparing in business and renders advisory services.
7. World Association for small and medium Enterprise (WASME): WASME could

be a international body that's Non-Government association of micro scale, small and
medium business units in Republic of India that created a universal committee and

focus rural development and apply activity set up model for supported development
of small business.
8. Scheme for funds for Re-generation of Traditional Industries: From 2005, the
administration created a reserve to assist these standard small ventures and to
encourage higher productivity and to upgrade their development and improvement.
Key Importance of this sector in the development of India both in terms of

economic, and social development
1. Creates large scale employment:

Since the enterprises falling during this sector require low capital to begin the business, it
creates large employment opportunities for many unemployed youth. India produces about
1.2 Million Graduates per year, of the total number about 0,8 Million are engineers. And,
there is no economy in the world that can provide jobs to so many fresh graduation in one
year. MSME is the boon for many of these fresh manpower.
2. Economic stability in terms of Growth and leverage Exports:

MSME is a vital growth driver in India, with it contributive to the tune of 8% to GDP. As
mentioned in the table, exports sector in India constitutes about 40% of contribution from
MSME alone. Looking at the kind of contribution of MSME to manufacturing, exports and
employment, other sectors are also benefitting from MSME. MNCs today are buying semi-
finished and auxiliary products from small enterprises. After the implementation of the GST
40% MSME sector also applied GST registration that increase the government revenue by
11%.
3. Encourages Inclusive Growth:

About 50% of wealth India hand by just hundred people which is due to unequal distribution
of wealth. Inclusive growth is on top of the agenda of ministry for micro small and medium
enterprises for many years. While poverty under deprivation are a deterrent to the
development of India, including marginalized sections of society is a key challenge lying
before the ministry of MSME.

4. Cheap labor and minimum overhead:

In large scale organization, one of the key challenges is to retain the women resource through
effective human resource management professional manager. However just in case of
MSME, the requirement of labor is less and it does not need extremely skilled laborer. Hence
the indirect expenses incurred by the owner is additionally low.
5. Simple management Structure for Enterprises:

MSME do not require large capital to begin with restricted resource accessible inside the
management of the owner, decision making becomes simple and economical. As in case of a
large corporation wherein a specialist is required for every departmental function because of
complex organizational structure, a small enterprise does not need to hire an external
specialist for its management. The owner himself or herself can manage it. Therefore it can
be run single handedly.
6. Plays an important role in making “Make in India” possible:

Post the origin of ‘Make in India’ a signature initiative by the prime minister of India, the
process of incorporating a replacement business has been made easy. Since the MSME is the
backbone making this dream a possibility, the government has directed the financial
institution to lend more credit to enterprises in MSME sector.
Micro, Small and Medium Enterprises (MSME) are one along with the most important sector,
forming the main of the Indian economy. This sector has been instrumental in the growth of
the nation, leveraging exports, creating massive employment opportunities for the without
skilled, new graduates, and the underemployed, also extend the opportunities to banks for
giving more credit to enterprises in this sector. The government should be take utmost care of
this sector in terms of providing more and more MSME registration benefits through better
regulations, Government simply, and sectional financial organization to lend additional credit
less. Charge per unit for property.

Composition of major sector in which Indian SME’s operate (%)
Retail trade Manufacture of wearing

apparel; dressing and
dyeing
Manufacture of food other services
products and beverages
other business activitees hotels and restaurants
Sale, maintenance and Furniture
repair of motar vehicles
other
Government Loan Schemes for SMEs in India:
India was recently termed as the only, truly talented market in the world as the moment. A
part of this growth is fueled by the Micro, Small and Medium enterprise of the country.The
SME sector contributes over 40% of the total GDP and remains a critical sources of
employment for the India’s growing population. Recognizing the importance of SME growth
in the post-demonetization era, The government has started some new business loan schemes
found boosted other existing ones. Here are the top five business loan schemes from the
government of India that you can avail for SME finance.
1. MSME Business Loans in 59 Minutes:
Perhaps the most talked about business loan scheme right now is the MSME Business Loans
in 59 Minutes, a scheme first announced in September 2018. The loans under this scheme are
given for financial assistance and encouragement of MSME growth in the country. Both new
and existing business can utilize the scheme for financial assistance up to Rs one crore. The
actual process takes 8-12 days to complete, while the approval or disapprovals granted within
the first 59 minutes of application. It is a refinancing scheme, where in five allowed public

sector banks will grant the funds. The interest rate depends on the nature of your business an
credit rating. No information has been given on subsidize the principle amount or Interest
subvention.
To apply for business Loan under this scheme, you need GST verification, Income tax
verifications, bank account statements for the last 6-months, ownership related
documentation, and KYC detail, more information on application and approvals can be
sought by visiting the SIDBI portal for this business loan.
2. MUDRA LOANS:
MICRO- Units Development and Refinance Agency (MUDRA) is an organization

established by the government of India to provide business finance to micro- business units.
The loans under the scheme are given on the pretext of ‘Funding the unfunded’. Since small
companies and startups are often left to their own devices for financing their venture, the
government has created the concept of low-cost credit to such undertakings. MUDRA Loans
are also a refinanced business loans, approved and disbursed through public sector banks,
Private sector banks, co-operative societies, small banks, scheduled commercial banks and
rural banks that come the scheme. The loans are generally given to micro or small businesses
operating in the manufacturing, trading and services sector. The MUDRA Loans are
structured as under,
1) Sishu Loans up to Rs. 50000/-

2) Kishor Loans up to Rs. 500000/-
3) Tarun loans up to 1000000/-
3. Credit Guarantee Fund Scheme for Micro and Small Enterprises:
The Credit Guarantee Fund Scheme for SMEs was first launch in the year 2000 as a monetary
support scheme for micro and small enterprises. It offers collateral-free credit for both new
and existing business units that satisfy it’s eligibly criteria. The scheme provides working
capital loans up to Rs.10 lakhs without any collateral. However, For all credit specialties
above Rs.10 Lakhs and up to Rs 1 crore only primary security or mortgage of land and
building associated with the building is obtained and such eligible accounts are covered under
credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).Asset created
through the credit facility which are associated with the business unit are also considered as
security when the loan amount exceeds Rs 10 Lakhs.

The business loans under this scheme are finished by various public and private sector banks
covered under the scheme.
National Small industries Corporation Subsidy for small business offers two kinds of
financial benefits – Raw Material Assistance and Marketing Assistance. Under the raw
material assistance scheme of National Small Industries Corporation (NSIC), both indigenous
and imported raw materials are covered. Under the marketing support, funds are given to
SMEs for enhancing their products and services. The NSIC is mainly focused on funding
Small and Medium Enterprises who wish to grow their manufacturing quality and quantity.
4. Credit Link Capital Subsidy for Technology up gradation:
This scheme allows small business to up gradation their process by financing technological
up gradation. The technological up gradation can be related numerous processes within the
organization, such as manufacturing, marketing, supply chain etc. Through the CLCSS
scheme, the government aims to reduce the cost of production of goods and services for
Small and Medium enterprises, thus allowing them to remain price competitive in local and
international markets. The scheme is run by the Ministry of Small scale industries. The credit
Link Capital Subsidy Scheme for Technology Up gradation offers an up-front capital subsidy
of 15% for eligible business. However. There is a cap to the maximum amount that can be
availed as subsidy under the scheme, which is set at Rs 15 lakhs. Sole proprietorship,
partnerships firms, co-operative, private and public limited companies come under the ambit
of this business loan scheme.
5. An Alternative: Quick Business Loans from Lending kart:
While all this scheme show the commitment of the past and present Indian governments for
developing the economy of the nation, there is much that needs to be done to make the
schemes effective. For example, the refinancing and subsidy model used by government takes
away the ‘quick factor’ from business loans touted by the schemes. Since these loans are
essentially founded by the government sponsored banks, the turnaround time is in weeks or
even months, which is detrimental for a small business finance. Even the most ambitious of
all these schemes, the 59 Minutes Loan for MSMEs, takes up to 2 weeks reality.
0n opposite hand, MSME finance by non-banking financial companies like lending kart is
approved and disbursed within 72 hours. This can by combining business analytics and online
technologies for loan approval and disbursal instead of relying on paperwork and age-old

processing techniques. For example, lending kart offers business loan, get a same –day
approval, accept the quote and upload your documents digitally for verification. The entire
process hardly takes 10 minutes for your time and the verification is completed within 3
working days by lending kart. So, have the funds ready for use within a sector of the time it
takes a government scheme to disburse a loan.
6. Mini tools room and training center scheme:
The government has decided to assist state governments to set up Mini Tool Room and
Training Centers. One such center can be set up at an estimated cost of around Rs.15 crore.
The Central assistance will be in the form of one time grant in aid equal tom 90 percentage of
the cost machinery or equipment restricted to Rs 9 crore in each case in the case of New Mini
tool room, and 75 percent of the cost restricted to Rs 7.50 crore in case of an existing room to
be upgraded.
The objective this scheme are to manufacture jigs, fixtures cutting tools, forging dies and
pressure casting dies, among other tools. It also aims at providing training facility in tool
manufacturing and tool design to generate a workforce of skilled workers, supervisors,
engineers or designers etc. The schemes another objective is to work as a nucleus centers for
providing consultancy, information services, documentation. Etc, for resolving issues related
to tooling’s of industries in the region.
7. National award scheme:
The ministry of SME gives away national award annually to selected entrepreneurs and
enterprises under this scheme.
This are awarded every calendar year to deserving entrepreneurs of MSMEs having
permanent registration. Those who have field Entrepreneurs Memorandum with the
authorities notified respective state governments in accordance with the provisions contained
in the MSMED act 2006 are also eligible. The MSMEs should have been in continuous
production or services for four years.

8. Market Development assistance Scheme for MSME:
The scheme offers funding for the participation by manufacturing SMEs in international trade
fairs under MSME India stall. It also offers funding for the sector- specific market studies by
industry association or export promotional councils.
This scheme also lends for initiating anti-dumping cases by MSME associations. Under this
scheme, reimbursement fee and 75 percent of one time registration fee and 75 percent of
annual fees (recurring) paid to GSI by Small and Micro units for the first three years of bar
code.
Government has introduced various institution to support small scale

industries like,
1. National Bank for Agriculture and Rural Development (NABARD):

NABARD founded by the government in 1982 to give activity and to advance the
rural industries. It has adopted multi-purpose strategies in promoting in rural business
in India. It supports small industries, cottage industries along with agriculture.
Additionally, it sets up preparing and directing in addition to it gives development
programmes for rural entrepreneurs.
2. A Rural Small Business development Centre (RSBDC):

RSBDC is an administration center supported by NABARD for smaller scale, small
and medium business which is set by world organization. RSBDC does many
programmes on skill up gradation, these programmes motive various unemployed
youth and young women learn different trades and introduce them to other good
benefits from it.
3. National Small Industries Corporation (NSIC):

NSIC was created in 1995 by the administration to market and bolster personal
corporations concentrating on business viewpoints. The many components of NSIC
are:
 Supply foreign goods and machine on contract buy understandings.
 Procurement of supply Imported indigenous raw materials.
 Developing small business by importing their products and services.

 Awareness on specialized up gradation.
4. Small Industries Development Bank of India (SIDBI):

It is a high government bank to offer direct and indirect cash connected facilitate
under various style to meet credit condition of independent venture.
5. The National Commission for Enterprises in The Unorganized Sector(NCEUS):
NCEUS formed with in the September 2004 by the administration with goals.
 Measures to enhance the productivity of small industries in the informal

sector.
 Generation of employment in the rural sector.
 To create open and personal associations for commitment in granting aptitudes
for the casual division.
 Giving smaller scale account to the casual space.
 Providing social insurance for the informal sector.
 To introduce competition of small scale during a international setting.
6. Rural and Women Entrepreneurship Development (RWED): This is often

associated government organisation to concentration to raise the business
environment for women and to help women’s business activities. It gives manual to
preparing in business and renders advisory services.
7. World Association for small and medium Enterprise (WASME): WASME could

be a international body that's Non-Government association of micro scale, small and
medium business units in Republic of India that created a universal committee and
focus rural development and apply activity set up model for supported development
of small business.
8. Scheme for funds for Re-generation of Traditional Industries: From 2005, the
administration created a reserve to assist these standard small ventures and to
encourage higher productivity and to upgrade their development and improvement.

Interact with NSIC and MSME In Rajajinagar industrial area

VARIOUS INSTITUTIONS
N S I C (National Small Industrial Corporation)

National small industrial corporation ltd. (N S I C) an I.S.O 9001 certified company which is
incorporated in the year 1995 which is continuously engaged to promote the growth of micro
and small enterprises, since its establishment in 1995. With enactment of Micro small and
medium enterprise development (MSMED) Act 2006 medium enterprise also come into his
ambit.
NSIC operates through it is countrywide network of offices and technical centres in the
country. In addition, NSIC has set up training –cum –incubation centres in different parts of
the country.
Schemes of NSIC
1. Marketing support:
Marketing support has been considered as one of the most significant devices for the
improvement of any business. It is important tools for the development and survival of
micro small and medium enterprises in the present competitive market.
 MSME Global Mart B2B web portal for MSME’s:
The Internet is driving a swift change in the way of doing business. Today more and
more B2B (Business to Business) companies are searching the internet for direct deal,
instant searching of buyers/suppliers, better pricing, increased services and location –
specific partners.
Major features of MSME Global Mart are:
 Interactive database of MSME’s
 National and State Tender Notices.
 Self-Web development tool.
 Trust Seal of NSIC.
 Multiple Language Support.
 Discussion Board.
 Call centre support.
 Payment Gateway membership subscription.

 Single Point Registration For Government Purchase:

NSIC operates a Single Point Registration Scheme under the Government Purchase
Programme, wherein the MSE’s are enlisted after third party Technical Inspection of
Certification of their competency/qualitative capacity.
 Consortia and tender marketing:

Micro and small enterprises in their individual limit experience a few issues in order
to procure and deliver large requests, which refute them a level playing field. National
small industries corporation structures consortia of MSEs fabricating the equivalent or
comparative item or items in this way consolidating in their ability. National small
industries corporation applies the tenders for the benefit of single micro and small
enterprise consortia of micro and small enterprise for verifying request for them.
 Marketing intelligence:
Disseminate and gather both universal just as household showcasing knowledge to
support micro and small enterprises. This marketing intelligence cell, apart from to
spreading awareness around a few plans for MSMEs will keep up a database in detail
and appropriate data.
 Exhibition and Technology Fairs:

To feature the canter capabilities of Micro and Small Enterprises in India and to
underwrite advertising openings, National Small Industries Corporation takes an
interest in National and International Trade Fairs and exhibition consistently. National
small industries corporation encourage the cooperation of the MSE’s by offering
concessions in rental and so on.
2. Credit support:
National Small Industries Corporation enables credit requirements of MSE’s in the
following areas;
Financing Procurement of raw materials and Marketing Activities:
NSIC facilities MSME’s in their raw material requirement by making arrangements and
The plan confined by National Small Industries corporation for the help of Raw Material

helps MSE’s by method for financing the obtained of raw material. The salient features
are as follows:
 Bulk purchase of basic raw material at competitive rates.
 Financial Assistance for Raw Materials procurement up to 90 days.
 National Small Industries Corporation takes overall care of scares raw material.
 National Small Industries Corporation takes overall care of all the documentation,
procedure and issuance of a letter of credit in case of imports.
 Meeting Credit needs of MSME’s through Tie up with Banks:

NSIC has entered into tie up arrangements with public sector and private sector banks
for helping MSME’s in accessing term and working capital loans. NSIC operates as
‘one stop shop’, aggregating financing options from various banks under this unique
tie up arrangement.
 Financing for Marketing Activities:

National Small Corporation gives help with the financing of promoting actives, for
examples, Exports, Internal Marketing and Bill Discounting.
Credit Rating scheme and performance for small industries:
The need of Credit Rating Mechanism and performance evaluation for MSME’s was
featured in union budget’04-05. A scheme for MSME’s has been drafted in
consultation with rating agencies and IBA (Indian Banks’ Association). National
Small Industries Corporation has been selected the nodal office for the execution of
this plan through empanelled offices.
3. Technology Support
NSIC provides small enterprises various support services through its technical service
Canters.
 Material testing through licensed researched canters.

 Instruct on application with respect to new methods.
 Basic office support in machining, EDM, CNC, and so forth.
 Product design including CAD.
 Condition and environment services at selected centres.

 Classroom and practical training for skill upgrading.
MSME DEVELOPMENT INSTITUTION
Introduction
It is involved with promote and improvement of Micro, Small and Medium Enterprises. This
organisation work directly under the influence of additional secretary and development
commissioner. Minister of MSME Government of India, MSME Development Institute
Bangalore was set up during 1956-1957. This foundation helps MSME’s monetarily through
the plans and improve specialized aptitudes through skill up gradation/training programs.
This Institution also focuses on young entrepreneurs through different mechanical inspiration
and enterprise improvement programs.
MAIN ACTIVITIES
1) Support rendered to exiting units.

2) Preparation of State Industrial Profiles.
3) Preparation of District industrial possible Surveys.
4) Collection of Production Index Statistics.
5) Organizing Skill development Programs.
6) Organizing industrial awareness and motivation campaigns.
7) Promote and encourage energy protection and encourage trader development and
associate contracting,
8) Provide common facility training and laboratories.
9) Preparation of directly of Specific industry and Intensive technical assistance..
SCHEMES FOR THE MSME DEVELOPMENT INSTITUTION
1. Credit Guarantee Trust fund scheme for Micro and Small Enterprises:
 75% Guarantee cover of credit facility up to Rs 50 lakh.
 80% Guarantee cover for women owned or operated MSE’s.
 85% Guarantee cover loans up to Rs 5 lakh for micro enterprises

 Uniform guarantee at 50% for entire amount if credit exposure is above Rs.50
lakh and up to Rs.100 lakh (upper ceiling limit is enhanced to Rs 200 lakhs).
2. Credit Linked capital subsidy Scheme for Technology Up gradation of

MSE’s:
 15% capital subsidy for purchase of plant and machinery Maximum Rs 5 lakh.
(Loan ceiling Maximum Rs.1crore)
Public procurement policy – MSE’s 2012
 20% mandatory annual procurement for MSE’s by Central Government Ministers,

Department.
 20% out of 20% =4% from SC/ST Entrepreneurs.
3. Infrastructure development:
 60% grant of project cost.
 80% for cluster with > 50% micro or village or women owned or sc and set units.
 Maximum Rs, 10 crore
4. DESIGN CLINIC – Design clinic scheme for design expertise to MSME’s

Manufacturing sector (DESIGN):
Design project to finding professionals:
 75% of project cost or Rs. 15 lakh (For individual Micro Unit or Group of up to 3
Micro units).
 75% project cost or Rs.25 lakh (For group of more than 3 Micro units).
 60% cost project cost or Rs.25 lakh (For individual SME unit or group of up to 3
SME Units).
 60% project cost or Rs. 40 lakh (For group of more than 3 SME units ).
5. NATIONAL AWARD Scheme:
Cash prise, Certification and trophy for award winner

MSME Development Institution, Bangalore organize the following training

programmes for the benefit of MSMEs Young Entrepreneurs and Start- ups:
 Technology Transfer Meet

 Detergent and Allied products
 Garment Manufacturing Technology
 Solar Energy Technology
 Bags Manufacturing
 Gold Appraisal
 Export Management
 Digital Marketing
 Six Sigma- Black Belt and Green Belt
 Sales and Marketing
 Export marketing
There are all Training programmes conducted by MSME Development Institution in different
branches. It is very useful to new or young entrepreneurs for start a business or enterprises.
Registration procedure for MSMEs
UDYOG AADHAAR REGISTRATION
Website www.udyogaadhaar.gov.in
MSME DATA BANK REGISTRATION
Website www.msmedatabank.in

CHAPTER 2
RESEARCH DESIGN
NEED FOR THR STUDY
 Most of the people are aware of the various business opportunity but not the
government policies that can help them to establish their business.
 This study will be helpful for the entrepreneur to implement the government policies
at the time of establishment or expansion of the business.
STATEMENT OF THE PROBLEM
Many SME’s had to face a lot of problems regarding the facilities and the projects provided
by the government. It takes a lot of time for the process reach the SME’s resulting in the
corruption in facilities and funds to start-ups. This results SME’s in fearing about to start up
the business.
OBJECTIVES
 To know the important of SME’s role in India.

 To analyse the policies and schemes of government towards SME’s.
SCOPE OF THE STUDY
1) This study is concerned on with the different schemes of central and state
government.
2) To determine the relationship between Govt and SMEs
3) The study on SMEs helps to government to provide different kinds of services to the
entrepreneurs to expand their entrepreneurial activities..
4) To study support by various government institution.

LIMITATIONS OF THE STUDY
1) The study on major concerned with secondary data.

2) The research is conducted within the short time as there is lack of time constrain.
3) This report prepared on only interact with two government offices (NSIC and MSME
DEVELOPMENT INSTITUTION) for the purpose of the primary data collection.
SOURCES OF DATA COLLECTION
PRIMARY DATA COLLECTION
Direct interact with National Small scale Industries Corporation (NSIC) and Micro, Small
and Medium Scale Enterprises Development Institutions offices in Rajajinagar Industrial
area.
SECONDARY DATA COLLECTION
 Website
 News paper
 Magazines

CHAPTER 3
SWOC ANALYSIS
STRENGTH 0F SME’s
1) Independence:
Independence is the one of basic strength of owning a SMEs. One survey of small
business owner showed that 38% of those who left their jobs at other companies
said their main reason for living was that they wanted to be their own bosses.
Freedom to operate independently is a reward for small business owners.
2) Good Customer Relationship:

SMEs proprietor tend to be personal with their customer and clients which results
in greater responsibility and development. They usually offer a more personalized
approach to interacting with customer. Customers who are treated like family are
more likely to return to that business in the future.
3) Innovation and Creation:

They are able to innovate and create new products and services more quickly and
creatively than larger companies that are held up in bureaucracy. Whether reacting
to changes in fashion, demographics, or a competitors advertising, a small firm
usually can make decisions in days- not months or years.
4) Less bureaucracy:
In Small business, the whole problem can be understood readily, a decision can be
taken quickly ant the results checked easily. But in a multinational company, bogus
management structure can lead to delay in taken action and bureaucratic influence.
5) Greater motivation:
Key management of small enterprises normally consists of the owner. They work
harder, longer and with more personal involvement. Profits and losses have more
meaning to them than salaries and bonuses have to the employees of a
multinational company.

6) Greater flexibility:
SMEs has the major advantage of flexibility. A big company cannot stop operation
without opposition from organised labour, or even increase the price of their
product without possible intervention from the government.
STRENGTH OF GOVERNMNET
1) Multiple financial institutions:
Government has different types of financial institutions like NABARD, RSBDC,
NSIC, SIDBI, RWED, WASME There are helpful to SME’s.
2) Various schemes:
Government should provide various schemes like MSME Business loan, Mudra
loans, credit guarantee fund scheme, Mini tools room and training canter scheme,
National award scheme.
3) Impetus to MSME sector by the present Government:

MSEME’s expect MODI, what is now needed is a big push to promote fintech in
areas such as MSME lending and export finance, to help solve the credit gap
problem for the MSME sector”, he said, adding that Public Sector Under Takings
PSUs are indeed mandate to ensure that 25% of their purchases are from MSME’s.
this will give the sector some much needed impetus.
WEAKNESS OF SME’s
1) Financial limitation:
Small enterprises find it difficult to get enough funds for their operations. Unlike
multinational, they do not receive red carpet treatment by financiers when asking
for a loan.
2) Staffing Problems:
SME cannot pay salaries and provide opportunities and status normally associated
with big companies. Small enterprises owners must concentrate on the day to day
problems of running the business and have little time left to think about objectives.

3) High direct cost:

A small enterprises cannot buy large raw materials, machinery or suppliers as
cheaply as a large company or obtain large producers economies of scale.
4) Lack of credibility:
The public accepts a large companies products because its name is well known.
SME’s needs to struggle to prove itself each time it offers a new product or enters
a new market. Its reputation and past success in the market place seldom carry
weight.
5) Difficult to reach Customer: It can be difficult to reach enough potential

customers to establish a successful base of customers. Possible customer might be
less likely to do business with a small business that does not offer a well-known
brand of products or services.
6) Marketing: Marketing one of the weakness of SME. They face many problems in
marketing like Lack of standardisation, Poor designing, Poor quality, Lack of
Quality control, Poor bargaining, power Brand, preferences Competition, Scale of
production Distributing contacts, Ignorance of potential Market.
WEAKNESS OF GOVERNMENT
1) Economic slowdown:
The present Union finance Minister Nirmala Sitharaman said the government
giving sector specific solutions to fight the slowdown in economic growth.
Economic slowdown is one of the weakness of government towards SME’s.
2) Delay in receiving funds:

MSME’s by specifying the maximum credit period and higher penal interest if
delayed beyond that period. If there government delay funds companies will have to
mention the reason for such delay in the statement of accounts.
3) Corruption:
Political corruption is the use of power by government officials or their network
contacts for illegitimate private gain. Corruption biggest weakness by government.

OPPORTUNITIES OF SME’s
1) Influencing the e-commerce trend:

SMEs now can build their existence in the online world by going digital. For a long
time, The SME sector was battling with the extreme competition, yet going digital
can give them the required edge.
2) The implementation of technology:

Since mobile phones, social media, and take help of these platforms Inserting the
social and cloud platform will open up huge open doors for income development
and optional productivity.
3) Taking the preferred standpoint of Government plans:

SMES need to get advantages of Government activities, for example, ‘Making in
India’, ’Start-up India’. These are plans presented by the government are expected
to evaluate an enterprising society to development the current SME status.
OPPOTUNITIES OF GOVERNMENT
1) To provide loans as soon as possible through possible mechanisms:

Government should provide the loans for SME’s to helpful for the mechanisms.
2) Digitization:
Digitize India Platform (DIP) is an initiative of the Government of India under the
Programme to provide digitization services of converting data and information into
digital formats. Digitization makes it convenient and easier to access, share and
preserve information and data.
CHALLENGES OF SME’s
1) Scarcity of Resources:
One of the most important challenge faced by SMEs in India is scarcity of resources
such as raw material and labour. Due to bidding corruption the government invests
the public resources in uneconomic high profile projects such as infrastructure
development or development of rural India.

2) Lack of foreign direct investment:

Due to high influence of Multinational Corporation over the Micro sectors and
SMEs in India the foreign investors hesitate to invest in projects of SMEs. Lack of
FDI in the Indian economy can be seen by the fact that through the FDI rules have
been eased by the Indian Government in the recent past but we are yet to see its
benefits for India in long term.
3) Lack of Finance:
It is emerged as the most challenging barrier for perfect utilization and competing
market in micro sector. SMEs are not able to raise funds from banks and
government especially for high risk projects. Insufficient basic infrastructure
facilities like regular power and water supply, bad road and railway connectivity etc
are some of the factors that lowers the growth process of SMEs in India.
4) Lack of technology:
One of the crucial factor that decides the success or failure of an enterprises is the
use of technology for the production. The best technology helps the enterprise
productivity and brings efficiency, but SMEs fails to cope with the latest technology
due to lack finance in India.
5) Bad Economic Environment:

Another external factor that hampers the growth of a small business is that
corruption creates a bad economic environment in the country. A lot of money is
spent on corruption activities and that money drains out to the economy and thus
leaves the country to face shortage of cash flow.
6) Lack of Marketing Assistance:

When it comes to marketing of products or service internationally, any Small and
Medium company is always hit by its scarcity of budgets, which in turn limits its
growth. A B2B (Business to Business) market is a platform where sellers can list
their businesses free of cost and use the power of internet.

CHALLENGES OF GOVERNMNET
1) Frauds:
Government organisation lose a median an employee commits fraud, These case
may involve a number of different violations such as labour and environmental
statutes. In the Government had frauds in all department so government schemes is
not reach on time of right person. Fraud controlling one of the challenges to
government.
2) Too many formalities:

Government has so many formalities for giving any loans are schemes.
Government ask different types of documents to provide their schemes and loans.

CHAPTER 4
OUTCOME OF STUDY
OUTCOMES OF THE STUDY

 There are various financial institutions are supported to the SME’s at the time of
loan requirement.
 Majority of employment opportunity are generated by SME’s.
 SME’s has major role in development of backward area
 SME’s reduce dependents on agriculture
 This study shows there are various government policies by both state and central
government which is not reached SME’s.
 There should be need of education for people about various government policies
available.
 They are highly flexible and able to explore new concepts and methods in the hunt
for performance and efficiency.
 It support by lending loans to start up and initial stage enterprise which focuses on
innovation and technology.
 SME’s are one of the important sector for promoting economic growth and
reduction in poverty
 Regular empowerment of SME’s will facilitate them to gain high and continues
improvement in the long term.
 SME’s increases household income of the people who are part of it
 SME’s are the extensive source of entrepreneurial skills, Innovation and
employment.
 There are some loans provided for financial assistance for SME’s.
 There is performance and credit rating scheme for SME’s by ministry of MSME
which help the SME’s to get accepted by the public.
 Many start-up have been recognized and promoted by providing advisory services
on business plan and many have received reduction in patent fees and income tax.

CHAPTER 5
EXPERIENCE AND LEARNIGS
EXPERINCE
Before doing this project my knowledge and experience about Interface between government
and SME’s was limited. It was my opportunity to meet and communicate with representative
working in MSME Development institution and NSIC in Rajajinagar Industrial area. In the
process of the project I met Mrs. Suman Raju assistant director of MSME development
institution. She gave many information about schemes available for developing SME’s.
LEARNINGS
 The study helps know the Small and Medium Enterprises its major role played to
developing Indian economy.
 SME’s also faced many problems to survival of business.
 Government also provided many scheme for the growth of SME’s.
 It is helps known the Government and SME’s swot in the India.
 Government can also provide different types of financial institution for the
promoting SME’s.
 SME’s enterprisers are improving their skill by utilization of government polices
and schemes.
CONCLUSION
The main intention of the study is to know the relation between SME’s and Government,
Small and Medium scale enterprisers can adopt the government rules and regulation for
developing their business. SME’s are changing in nature of output and their characteristics.
SME’s also contributed in the development of the country. Government can provide the
schemes and polices to SME’s in order to promote and also survive to fight against the big
sized companies. Given the large scale attempts to promote industrial clusters in the SME,
they can consider supply chain management as a strategic weapon to improve their
performance in competitive market

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A STUDY ON INTERFACE BETWEEN GOVERNMENT AND SME’s

This definition is provided in section seven of Micro, Small and Medium Enterprises

CANARA BANK SCHOOL OF MANAGEMENT STUDIES, BENGALURU Page 1

 Manufacturing enterprises: are the enterprise engaged in the manufacture or production or

Manufacturing enterprise –Investment in Plant Service Enterprise – Investment In

1. Limited Investment: In a Small business enterprise, capital is supplied by an individual or a

CANARA BANK SCHOOL OF MANAGEMENT STUDIES, BENGALURU Page 2

IMPORTANT SMEs ROLE IN INDIA

Importance of MSME ACT 2006:

Share of MSME in manufacturing, Exports and Employment sector in India:

Sector Percentage (%) share

CANARA BANK SCHOOL OF MANAGEMENT STUDIES, BENGALURU Page 3

Government has introduced various institution to support small scale

1. National Bank for Agriculture and Rural Development (NABARD):

2. A Rural Small Business development Centre (RSBDC):

CANARA BANK SCHOOL OF MANAGEMENT STUDIES, BENGALURU Page 4

3. National Small Industries Corporation (NSIC):

4. Small Industries Development Bank of India (SIDBI):

5. The National Commission for Enterprises in The Unorganized Sector(NCEUS):

 Measures to enhance the productivity of small industries in the informal

6. Rural and Women Entrepreneurship Development(RWED): This is often

7. World Association for small and medium Enterprise (WASME): WASME could

CANARA BANK SCHOOL OF MANAGEMENT STUDIES, BENGALURU Page 5

Key Importance of this sector in the development of India both in terms of

1. Creates large scale employment:

2. Economic stability in terms of Growth and leverage Exports:

3. Encourages Inclusive Growth:

CANARA BANK SCHOOL OF MANAGEMENT STUDIES, BENGALURU Page 6

4. Cheap labor and minimum overhead:

5. Simple management Structure for Enterprises:

6. Plays an important role in making “Make in India” possible:

CANARA BANK SCHOOL OF MANAGEMENT STUDIES, BENGALURU Page 7

Composition of major sector in which Indian SME’s operate (%)

Retail trade Manufacture of wearing

Government Loan Schemes for SMEs in India:

1. MSME Business Loans in 59 Minutes:

CANARA BANK SCHOOL OF MANAGEMENT STUDIES, BENGALURU Page 8

MICRO- Units Development and Refinance Agency (MUDRA) is an organization

1) Sishu Loans up to Rs. 50000/-

3. Credit Guarantee Fund Scheme for Micro and Small Enterprises:

CANARA BANK SCHOOL OF MANAGEMENT STUDIES, BENGALURU Page 9

4. Credit Link Capital Subsidy for Technology up gradation:

5. An Alternative: Quick Business Loans from Lending kart:

CANARA BANK SCHOOL OF MANAGEMENT STUDIES, BENGALURU Page 10

6. Mini tools room and training center scheme:

7. National award scheme:

CANARA BANK SCHOOL OF MANAGEMENT STUDIES, BENGALURU Page 11

8. Market Development assistance Scheme for MSME:

Government has introduced various institution to support small scale

1. National Bank for Agriculture and Rural Development (NABARD):

2. A Rural Small Business development Centre (RSBDC):

3. National Small Industries Corporation (NSIC):

CANARA BANK SCHOOL OF MANAGEMENT STUDIES, BENGALURU Page 12

 Awareness on specialized up gradation.

4. Small Industries Development Bank of India (SIDBI):

5. The National Commission for Enterprises in The Unorganized Sector(NCEUS):

 Measures to enhance the productivity of small industries in the informal

6. Rural and Women Entrepreneurship Development (RWED): This is often

7. World Association for small and medium Enterprise (WASME): WASME could

CANARA BANK SCHOOL OF MANAGEMENT STUDIES, BENGALURU Page 13

Interact with NSIC and MSME In Rajajinagar industrial area

N S I C (National Small Industrial Corporation)