© 2018 IJRAR December 2018, Volume 5, Issue 4 www.ijrar.

org (E-ISSN 2348-1269, P- ISSN 2349-5138)

MICRO SMALL AND MEDIUM ENTERPRISES IN

WEST BENGAL: AN EMPIRICAL STUDY
Dipankar Dutta
Assistant Professor
Department of Commerce
Balurghat College
Balurghat, Dakshin Dinajpur
West Bengal, India

Abstract: The Micro Small and Medium Enterprises (MSMEs) have been regarded as an important propeller of
economic growth of a country. In Indian economy too, MSME sector plays a pivotal role for faster, sustainable and
overall socio-economical augmentation due to its notable contribution towards industrial production, employment
generation, exports and developing the entrepreneurial foundation. With more than 44.7 million enterprises*, this
sector generates more than one hundred and one million jobs*.With its over eight thousands products ranging from
traditional to high- tech items; it contributes 40% of total industrial output and 43% of India’s total exports. Realizing
the importance of this sector the government of West Bengal, with its synergistic approach, facilitates a better and
more encouraging business environment for this sector to make the State emerges as the MSME leader in the country
the years to come. The present paper tries to make an endeavor to study the performance of MSME sector in West
Bengal and to analyze the extent and magnitude of institutional financing to this sector mostly made by the West
Bengal Financial Corporation. The study is based on secondary data obtained from the annual reports of the Ministry
of MSME Govt. of India as well as Govt. of West Bengal.

Key Words: - MSMEs, Growth Performance, Employment Generation, Financial Assistance

*Annual Reports of the ministry of MSMEs

Introduction

Micro, small and Medium Enterprises (MSMEs) are one of the most vibrant and sensitive sectors and act as the
catalyst of socio-economic development of the Indian economy. The importance of Micro, Small and Medium
Enterprises (MSMEs) is attributable to its ability of employment generation, low capital and technology requirement,
use of traditional or inherited skill, use of local resources, mobilization of resources and exportability of products.
With more than 44.7 million enterprises, this sector generates more than 101 million jobs; the second largest sector
after agriculture. With its over eight thousands products ranging from traditional to high- tech items, it contributes
40% of total industrial output and 43% of India’s total exports. In modern era, with the development of Indian
economy and rapid expansion of trade, this sector has emerged as an fervent and dynamic segment in the process of
industrialization which is considered not only as a key factor to lift up the per capita income but also a vital
mechanism for a larger transformation of Indian economy.

‘Micro’ ‘Small’ and ‘Medium’ enterprises are wide outlined in the Micro, Small and Medium Enterprises
Development (MSMED) Act, 2006. The Act provides the first-ever legal framework for recognition of the thought of
“enterprise”. Under this Act, enterprises have been classified broadly into those engaged in manufacturing and those
providing/rendering services. Both the classes have been further classified into micro, small and medium enterprises

IJRAR1944795 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 952
© 2018 IJRAR December 2018, Volume 5, Issue 4 www.ijrar.org (E-ISSN 2348-1269, P- ISSN 2349-5138)

based on their investment in plant and machinery (for manufacturing enterprises) or in equipment (in case of
enterprises providing or rendering services).
Limit of Investment

Manufacturing Service
Enterprise
(Type) Investment in Investment in
Plant & Machinery Equipment

Up to Rs 10
Micro Up to Rs 25 lakhs
lakhs

Above Rs 10
Above Rs 25 lakhs
Small lakhs
up to Rs 5 crore
up to Rs 2 crore
Above RS 2
Above Rs 5 Crore
Medium crore
up to Rs 10 crore
up to Rs 5 crore

Source: MSMED Act, 2006

Brief Profile of West Bengal

West Bengal is a state in eastern India, stretches from the Himalayas in the north to the Bay of Bengal in the south.
On 1st May 1960 West Bengal was given the status of a separate state in the Indian union, purely on linguistic basis.
It is bordered by Nepal and Bangladesh and the states of Orissa, Jharkhand, Bihar, Sikkim, Assam, and Meghalaya in
different directions. Being in the western part of the undivided Bengal province, it has been given the name ‘West
Bengal’. Kolkata is the capital of West Bengal. In respect of area, West Bengal (WB) is 13th among the Indian states.
It covers an area around 88,752 sq. km. which is 2.7 per cent of the total India’s land area. West Bengal has plentiful
natural resources of minerals and suitable agro-climatic conditions for agriculture, horticulture and fisheries. West
Bengal also has a prosperous hinterland of some mineral rich states like Jharkhand, Bihar and Orissa.

MSMEs in West Bengal

West Bengal has major advantages of easy availability of raw materials, a comfortable power situation, skilled
human resources, stable socio-political environments which are the basic needs in the industrial development. West
Bengal has the potential to become the leading state in coming future in terms of MSME productivity within India So
far the 4th Census of MSMEs is concerned West Bengal Occupies 6th position in terms of numbers of small scale
enterprises. Presently West Bengal occupies 2nd position in India in respect of numbers of MSMEs (Annual Report of
MSME (Govt.of India). Here the MSMEs account for nearly 90% of industrial units and more than 50% of industrial
production. The government of West Bengal, with its synergistic approach, facilitates a better and more encouraging
business environment for this sector to make the State emerges as the MSME leader in the country the years to come.
Supported by an enabling business environment and a synergistic approach facilitated by the government this will
create scale up operation for the MSMEs in the state. Incentives for energy efficient and cutting edge technology tied
with thrust on skill development as provided by this Policy will accelerate the process making MSMEs of the State to
reach the desired standards of quality and cost. As the MSMEs have been the green field for nurturing entrepreneurial
talent, first generation entrepreneurs should be facilitated in access to the desired finance through creation of
IJRAR1944795 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 953
© 2018 IJRAR December 2018, Volume 5, Issue 4 www.ijrar.org (E-ISSN 2348-1269, P- ISSN 2349-5138)

guarantee funds. Finance mustn't solely be timely however conjointly efficient. As the access of MSMEs to capital
markets is very limited, they largely depend on borrowed funds from banks and financial institutions. While
investment credit to MSMEs is provided by financial institutions, commercial banks extend working capital.

Role of State Financial Corporation (WBFC)

The financing of the MSMEs sector has received some attention since independence. A multi-level institutional
structure exists for financing of small enterprises and non-farm enterprises in India. This consists of Commercial
Banks, Cooperative Banks, Regional Rural Banks (RRBs), State Financial Corporation (SFCs). Credit to small
enterprises comes under priority sector lending programmee of banks. The Reserve Bank of India (RBI) constantly
reviews the flow of credit to this sector. In order to provide medium and long-term credit to industrial units, Industrial
Financial Corporation of India (IFCI) was set up under the Industrial Finance Corporation Act I 948. The objective
was mainly to provide the credit to those undertakings, which fall outside the normal banking activity. The West
Bengal Financial Corporation (WBFC) was established in 1954. WBFC is committed to help genuine entrepreneurs
in the micro, small, and medium sector enterprises in achieving their goals in setting up new manufacturing and
service industries or modernizing and or/expanding their existing units, by providing timely financial inputs at
reasonable interest rates. It also helps such entrepreneurs to receive assistance from other departments of the central
and state governments in obtaining allied services for realization of their dreams.

Review of Literature

Sonia and Kansai Rajeev (2009) studied the effects of globalization on Micro, Small and Medium Enterprises
(MSMEs) during pre and post liberalization from 1973-74 to 2008-09. They used four economic parameters namely
number of units, production, employment and export and interpreted study results based on Annual Average Growth
Rate (AAGR) calculation. AAGR in pre liberalization period (1973-74 to 1989-90) was higher in all selected
parameters than that of post liberalization period (1991-92 to 2007-08). They concluded that MSMEs failed to put up
an impressive performance in post reform era. Bhavani T.A. (2010) highlights the issue of quality employment
generation by the SSIs and negates the short term attitude of increasing the volume of employment generation
compromising with quality. The author argues that employment generation by the SSIs may be high in quantitative
term but very low in quality. Technological up gradation would enable the small firms to create quality employment
improving remuneration, duration and skill. This structural shift may reduce the rate of employment generation in the
short run but would ensure high-income employment generation in the long run. Subrahmanya Bala (2011) has
probed the impact of globalization on the exports potentials of the small enterprises. The study shows that share of
SSI export in total export has increased in protection period but remain more or less stagnated during the
liberalization period. However, the correlation co-efficient in liberalization period is higher than that of protection
period suggesting that the relationship between the total export and SSI export has become stronger in liberalization
period. This may be due to the drastic change in composition of SSI export items from traditional to non-traditional
and growth in its contribution to total export through tradinghouses, export houses and subcontracting relation with
large enterprises. Thus, the current policy of increasing competitiveness through infusion of improved technology,
finance, and marketing techniques should be emphasized. Ganguly.S. (2013) also showed the importance of MSMEs
in West Bengal. The MSMEs (basically micro and small enterprises) in West Bengal face very tough situation due to
utmost competition in national and international level from large industries due to lack of infrastructure, lower
volume of capital, lack of product standardization, lack of access to modern technology etc. Another important
problem of MSMEs in West Bengal is the number of unregistered MSMEs is much higher than the registered units.
Lahiri. R. (2014) analyzed the ground reality of MSMEs at Howrah district in West Bengal. He tried to find out the
scenario of institutional credit support by the banks and rank the major problems faced by the MSMEs. He explored
that the most vital problems of MSMEs at Howrah are poor banking support, obsolete technology, competition, labor
problems, infrastructural deficiency, etc. Sathish. A. (2014) showed the trend of MSME in terms of number of unit,
IJRAR1944795 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 954
© 2018 IJRAR December 2018, Volume 5, Issue 4 www.ijrar.org (E-ISSN 2348-1269, P- ISSN 2349-5138)

employment and investment in Goa from 2007-08 to 2013-14. He also briefly discussed the issues related to closure
of units.Rangacharya. K. (2014) attempted to analyses the growth trends of SMEs in Karnataka after enactment of
MSMED Act 2006, and discussed the investment, employment, production and export performance of the SMEs in
Karnataka state.

Objectives of the Study

The objectives of the study are as under.

(i) The present paper attempt to study the growth and performance of micro, small and medium enterprises in
West Bengal out of top ten States in India in terms of numbers of units and employment potentiality of
this sector.
(ii) To know the extent and magnitude of financial assistance made by West Bengal Financial Corporation to
MSMEs sector of the State.

Period of the Study

The growth and performance of micro, small and medium enterprises in West Bengal are studied during the period of
2007-08 to 2014-15 and to state the financial assistance, the annual reports of WBFC for the period of 2014 to 2016
are taken into account.

Sources of Data

The study is based on secondary data obtained from the annual reports of the Ministry of MSMEs Govt. of India as
well as Govt. of West Bengal and from the official website of West Bengal Financial Corporation. Besides these, the
4th and 6th all India Census Report of MSME and Economic Review of different years of Govt. of West Bengal are
also consulted for the study.

Analytical Tools

For the purpose of the study simple bar diagrams used to show and represent data. Simple statistical tools and
techniques have been used for the purpose of analysing the data.

Analysis and Interpretation

Growth of MSMEs

table:-1 no of (em ii) filled in west bengal

for the period 2007-08 to 2014-15

Year Micro Small Medium Total

2007-08 16510 1108 0 17618
2008-09 12470 945 13 13428
2009-10 10934 734 17 11685
2010-11 9504 595 10 10109
2011-12 12736 723 11 13470
2012-13 9728 602 12 10342
2013-14 10651 729 0 11380
2014-15 14323 899 22 15244
(Upto 30th
June,2015)

IJRAR1944795 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 955
© 2018 IJRAR December 2018, Volume 5, Issue 4 www.ijrar.org (E-ISSN 2348-1269, P- ISSN 2349-5138)

Source: Annual reports of the Ministry MSME.

Entrepreneur Memorandum –II (EM-II) states the information relating to how many entrepreneurs are registered with District
Industries Centre. EM-II is replaced by Udyog Addhar Memorandum in September, 2015. Its main intend is to promote ease
for doing business. Since UAM has introduced recently, it will gives us the present scenario of India as well of the States. But
EM-II will help to discover spatial scenario of States. Presently the number of UAM registration in West Bengal has changed
very significantly to 124368 units as per annual report of the ministry of Micro, Small and Medium Enterprises (2016-17), of
Govt. of India.
table: - 2 position of west bengal (out of top ten states)
in registered msme units (em-ii filled)
Growth
Rate
Year Micro Small Medium Total Position (%)
2007-08 16510 1108 0 17618 3 NA
2008-09 12470 945 13 13428 8 -23.78
2009-10 10934 734 17 11685 8 -12.98
2010-11 9504 595 10 10109 9 -13.49
2011-12 12736 723 11 13470 8 33.25
2012-13 9728 602 12 10342 9 -23.22
2013-14 10651 729 0 11380 9 10.04
2014-15 14323 899 22 15244 8 33.95

Source: Annual reports of the Ministry MSME 2007-08 to 2014-15

40
33.25 33.95

30

20

10.04
10 Position

Growth Rate
0 (%)
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

-10

-12.98 -13.49
-20

-23.78 -23.22
-30

fig-1 position and growth rate of msmes in west bengal

The data relating to the number of EM-II filled as per table 2 are represented by column chart in Fig-1 showing the
position and growth of MSMEs out of top ten States in West Bengal. It is seen that Tamilnadu has occupied the
leading position in most of the year under study so far EM-II filling is concerned. But the status of West Bengal in
this phenomenon is not satisfactory. It ranks again and again 8th and/or 9th usual throughout the study except in the
year 2007-08 (3rd position). With the paradigm shift from EM-II to UAM the position of West Bengal does not

IJRAR1944795 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 956
© 2018 IJRAR December 2018, Volume 5, Issue 4 www.ijrar.org (E-ISSN 2348-1269, P- ISSN 2349-5138)

change to a notable class. Now Bihar has positioned at the top in terms of UAM filled, whereas its status was very
much deplorable in EM-II registration.
60
44.51
40

20
5.57
0
-0.43
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Position
-20
-24.68
-40
Growth
-47.40 Rate
-60 -51.48
(%)
-80

-100 -89.19

fig-2 position and growth rate of employment generation in west bengal

Employment generation by Prime Minister Employment Generation Programme (PMEGP) is implemented with the
objectives of generating employment opportunities and increasing wage-earning capacity rural and urban areas of
India through setting up of new self-employment ventures, projects, and micro enterprises. The PMEGP of
employment generation in West Bengal exhibit a negative rate of growth in more or less all the year during the study
period except 44.51% in 2011-12 and only 5.57% in 2013-14. In the year 2007-08 west Bengal fails to secure any
position out of thetop ten leading states in generating employment opportunities. Its ranks 1st out of the top ten states
in the year 2011-12 only.

WBFC Assistance to MSME Sector

30000.00 28008.72

25000.00 23183.49

19916.64
20000.00

15411.19 Loan
15000.00 13307.50 Sanctioned
12202.52
Loan
Disbursed
10000.00

5000.00

0.00
2014-15 2015-16 2016-17

fig-3 loan sanctioned and disbursed by wbfc

It is quite clear that the percentage of disbursement against sanction of financial assistance by WBFC increases
considerably during the study period. Such percentage is more than 100% (109.06%) in the year 2016-17 due to
disbursement of previously sanctioned loan.
IJRAR1944795 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 957
© 2018 IJRAR December 2018, Volume 5, Issue 4 www.ijrar.org (E-ISSN 2348-1269, P- ISSN 2349-5138)
table: - 3 purpose-wise effective sanctioned (amount in lakhs)

2014-15 2015-16 2016-17 Since Inception

Nature
of Assistance No.
No. No. No.
Amount Amount Amount of Amount
of Units of Units of Units
Units
New Project 104 16837.58 77 13990.16 28 5618.80 17277 217148.82
Expansion 72 4522.37 75 13298.95 44 6390.62 5524 125257.50
Diversification 1 74.96 0 0 0 0 57 1571.11
Rehabilation 0 0 2 250.01 1 12.30 73 2383.61
Moderanisation 10 1529.36 3 456.00 3 159.80 318 17117.78
Source: Annual reports of WBFC

From table 3 it has been found since inception WBFC provided most assistance to new project units. In the financial
year 2015-16, 77 new project units were benefited with an amount of Rs. 13990.16 lakhs, although the amount was
notably higher in the previous year 2014-15. On the other hand, 75 units received financial assistance for their
expansion need with an amount of Rs. 13298.95 lakhs in 2015-16 as compare to 72 units with a significantly low
amount of Rs 4522.37 laks in the earlier year, whereas the extent of such assistance i.e. assistance for expansion
purpose reduces in the year 2016-17 ( 44 schemes with amount of Rs. 6390.62 lakhs). During the study period only
single unit has got financial assistance alone in 2014-15 for its diversification purpose with an amount of Rs 74.96
lakhs. Since inception till the financial year 2016-17 almost 23,429 MSMEs benefited from the WBFC with an
amount of Rs 363478.82 lakhs.

table:- 4 districts' share in effective sanction and disbursement of loan (rs. in lakhs)

District Name of Effective Sanction Effective Disbursement

Group the District
2014-15 2015-16 2016-17 2014-15 2015-16 2016-17
A Kolkata 3134.40 624.40 38.10 1530.52 1635.20 202.78
24
1955.03 2408.40 1639.46 2134.94 2229.24 1438.83
Pargana(N)
24
2255.96 2289.00 104.00 753.00 1060.05 1224.17
Pargana(S)
Howrah 5640.58 4382.01 2828.00 3549.56 5499.58 1808.00
B
Hooghly 3155.70 2001.00 154.00 610.81 972.40 1109.42
Burdwan 1058.85 5449.40 2593.80 1171.00 3272.97 2939.03
Nadia 232.72 431.35 121.00 183.10 124.19 153.85
Purba
25.00 120.00 350.00 100.00 65.00 120.00
Midnapore
Murshidabad 57.21 344.52 955.00 577.44 113.99 636.36
Birbhum 64.00 1753.30 277.50 97.50 928.60 467.90
C Malda 104.80 255.60 38.00 525.63 155.98 53.00
Jalpaiguri 104.00 761.00 941.66 363.85 727.93 1033.49
Darjeeling 967.31 821.20 125.00 950.80 519.57 0.34
Purulia 278.00 995.00 0.00 172.66 113.00 215.00
Bankura 3392.59 3363.18 446.00 1551.60 1666.61 622.18
D Pachim
337.75 1255.00 1208.00 522.25 566.75 1018.50
Midnapore
Uttar
58.70 955.60 0.00 393.67 55.60 1.65
Dinajpur

IJRAR1944795 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 958
© 2018 IJRAR December 2018, Volume 5, Issue 4 www.ijrar.org (E-ISSN 2348-1269, P- ISSN 2349-5138)

Dakshin
219.98 0.00 0.00 128.00 91.98 0.00
Dinajpur
Coochbehar 140.91 100.00 383.00 94.86 118.00 263.00
Total 23183.49 28309.96 12202.52 15411.19 19916.64 13307.50

Table 4 exhibits that Howrah district occupies 1st position in the year 2014-15 so far the amount of loan sanctioned is
concerned. But in the same year, status of Kolkata district changes from 4th position to 1st position so far the amount
of loan sanctioned and disbursement taken together. In the year 2015-16 the performance of Howrah district is quite
satisfactory as it holds good ranking in this phenomenon as well as Kolkata district is able to continue same level of
efficacy in utilizing the financial assistance obtained from WBFC. Again Howrah district gets more financial
assistance from the institution in 2016-17, but Burdwan district proves its performance with regards to deployment of
financial assistance from WBFC. Amount of loan sanctioned to Purba Midnapore district is the lowest throughout the
study period but with regards to disbursement of such loan, it is 4 times higher than sanction in 2014-15. It is
noteworthy to highlight that no amount has been sanctioned to Dakshin Dinajpur district for the two consecutive
years i.e. 2015-16 and 2016-17. When the amount of loan disbursed is expressed as a percentage of loans sanctioned
to different districts of West Bengal under study it is more than hundred percent of loan sanctioned in the case of
some district due the fact of utilizing the financial assistance which were previously obtained.

Conclusion

The contribution of MSME in the economic growth of a country like India could not be denied. This sector paves the
path of faster, sustainable and overall inclusive socio-economical growth of our country. The study reveals that the
micro enterprises occupied the leading position in West Bengal. Though registration through UAM has shown a
rocket speed but people are far behind of registration may be due to lack of awareness at the rural setup or they are
unwilling to register their units to escape tax. Govt. of West Bengal through its MSME Policy (2013-18) put
emphasis on this sector for efficient utilization of resources and widens the area of operation to make the State
emerge as a leader in this sector. In generating employment opportunities the role of MSMEs sector of this State is
deplorable. Govt. of West Bengal needs to address the issue with the utmost importance. Care should be taken to
motivate the youth to enter into the new ventures. WBFC has been catering to the financial needs of tiny, small and
medium scale units within the state of West Bengal through its well-knit branch network. It helps the micro, small
and medium enterprises to implement their new projects, expansion of the existing projects and modernization or
technological up-gradation of their schemes. WBFC’s financial assistance in a different arena of MSME sector of the
State is remarkable in the district like Howrah, Kolkata, and Burdwan but at the same time few districts are neglected
in this angle like Dakshin Dinajpur, Coochbehar and Purba Midnapore. This lead to regional disparity in financial
assistance by the corporation. Therefore, proper planning with both financial and non-financial incentives and
program to augment the flow of credit are necessary to be undertaken not only to arrest the benefits of MSMEs but
also make these available to every corner of the State.

IJRAR1944795 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 959
© 2018 IJRAR December 2018, Volume 5, Issue 4 www.ijrar.org (E-ISSN 2348-1269, P- ISSN 2349-5138)

References

[1] Annual Reports (2007-08 to 2015-16) of The Ministry of MSME Govt. of India and Govt. of West Bengal.

[2] Annual Reports MSME- Development Institute of Kolkata. www. Msmedkolkata.gov.in

[3] Economic Review of West Bengal 2014-15.

[4] Annual Reports of West Bengal Financial Corporation 2014-2017 www.wbfconline.org.in

[5] Development Commissioner, Ministry of MSME www.dcmsme.gov.in

[6] Ganguly, S. (2013). Micro, Small and Medium Enterprises in West Bengal: An Evaluation. International Journal
of Research in Commerce and Management Volume No. 4 Issue No. 10 http://ijrcm.org.in/

[7] Gupta, S. (2009). Future Prospects of Small Scale Industrial Sector of Punjab: an Empirical Assessment. IBIMA,
Volume 7, ISSN: 143-776

[8] Kanrar, S. (2013). Disparity in Institutional Financing in the Development of MSME in West Bengal: A Case
Study on West Bengal Financial Corporation. The Management Accountant. Vol. 48, No. 5.www.icmai.in

[9] Lahiri, R. (2014). A Case Study on the Opportunities and Challenges of Micro, Small and Medium Enterprises
(MSMEs) at Howrah District in West Bengal. International Journal of Management Research and Business Strategy.
Vol. 3, No. 4.www.ijmrbs.com.

[10] Mukherjee, N. (1997). Small Scale Industries- Problems and Prospects in West Bengal with Special Reference to
Darjeeling District (1951- `85). Kolkata: Progressive Publishers. www.globalbizresearch.org

[11] Mukherjee, R., Das, P.K., Batyacharya, U. (1999). Small Scale Industries in West Bengal 1971-97. EPW.
Vol.XXXIV, No. 48.p.M157-162. [12]Rangacharya, K. (2014). Role of SMEs in Development of Karnataka
Economy. Indian Streams Research Journal. V olume-3, Issue-12.www.isrj.net.

IJRAR1944795 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 960