Entrepreneurship

Development

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DSC - 601
III Year, II Semesterin
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N. Hima Bindu
MA English., MA Philosophy., (PhD)., (MA HRM)
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MA TEFL., PGDELT
Assistant Professor
IMBA
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Vishwa Vishwani Institutions

 Unit 3
Small, Micro, Medium Scale Enterprises

Definition of Small Industry

Small Scale Industries (SSI) are industries that manufacture, produce and render services on a
small or micro scale level. In India, several SSIs exist in various fields such as handicrafts, toys,
weaving, pickle making, food products, etc. These industries make a one-time investment in
machinery, plant, and equipment, but it does not exceed Rs.10 crore and annual turnover does
not exceed Rs.50 crore.

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Introduction of SSI

Essentially the small scale industries are generally those industries which manufacture, produce

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and render services with the help of small machines and less manpower. These enterprises must
fall under the guidelines, set by the Government of India.
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The SSI’s are the lifeline of the economy, especially in developing countries like India. These
industries are generally labor-intensive, and hence they play an important role in the creation of
employment. SSI’s are a crucial sector of the economy both from a financial and social point of
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view, as they help with the per capita income and resource utilization in the economy.
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Characteristics of SSI
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Ownership - SSI’s generally are under single ownership. So it can either be a sole proprietorship
or sometimes a partnership firm.

Management - Generally, both the management and the control is with the owner/owners.
Hence the owner is actively involved in the day-to-day activities of the business.
Labor Intensive - SSI’s dependence on technology is pretty limited. Hence they tend to use
labor and manpower for their production activities.

Flexibility - SSI’s are more adaptable to their changing business environment. So in case of
amendments or unexpected developments, they are flexible enough to adapt and carry on, unlike
large industries.

Limited Reach - Small scale industries have a restricted zone of operations. Hence, they can

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meet their local and regional demand.

Resources Utilisation - They use local and readily available resources which helps the economy

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fully utilize natural resources with minimum wastage.
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Role in the Indian Economy

Employment - SSI’s are a major source of employment for developing countries like India.
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Because of the limited technology and resource availability, they tend to use labour and
manpower for their production activities.
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Total Production - These enterprises account for almost 40% of the total production of goods
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and services in India. They are one of the main reasons for the growth and strengthening of the
economy.

Make in India - SSI’s are the best examples for the Make in India initiative. They focus on the
mission to manufacture in India and sell the products worldwide. This also helps create more
demands from all over the world.
Export Contribution - India’s export industry majorly relies on these small industries for their
growth and development. Nearly half of the goods that are exported from India are manufactured
or produced by these industries.

Public Welfare - These industries have an opportunity to earn wealth and create employment.
SSIs are also important for the social growth and development of our country.

Seedbed for Large Scale Industries - SSI acts as the seedbed for Large Scale Industries (LSI)

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as it provides conducive conditions for the development and growth of entrepreneurs. Small
enterprises require low investment and simple technology and use local resources to meet local
demands through personal contacts. Thus, it creates scope for the growth and development of

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LSI.

Objectives of SSI
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The objectives of the small scale industries are:
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● To create more employment opportunities.
● To help develop the rural and less developed regions of the economy.
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● To reduce regional imbalances.

● To ensure optimum utilization of unexploited resources of the country.
● To improve the standard of living of people.
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● To ensure equal distribution of income and wealth.

● To solve the unemployment problem.
● To attain self-reliance.
● To adopt the latest technology aimed at producing better quality products at lower
costs.
Types of SSI

SSI are primarily categorized into 3 types, based on the nature of work carried out, which are as
follows:

Manufacturing Industries - The manufacturing industries manufacture finished goods for

consumption or used further in processing. Some examples of such SSIs are food processing
units, power looms, engineering units, etc.

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Ancillary Industries - Ancillary industries manufacture components for other manufacturers.
These manufacturers then assemble the final product. Big companies manufacture finished

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goods, but they do not generally make all the parts themselves. The vendors of such big
companies are ancillary industries.
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Service Industries - Service-based industries are not involved in any kind of manufacturing
products. They provide services such as repair, maintenance and upkeep of the products
after-sales.
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Other types of SSIs are as follows:

Export Units - An SSI is considered as an export unit when the exporting is more than 50% of
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its production.

Cottage Units - The cottage units are considered as SSIs when they do not involve a dedicated
facility and are carried out within living spaces or houses of the owners.
Village Industries - An SSI is considered village industries when they are established in rural
areas and are not part of the organized sector. Typically, these industries solely depend on human
labor for production.

Examples and Ideas of SSIs in India

● Bakeries
● School stationeries
● Water bottles

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● Leather belt
● Small toys
● Paper Bags

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● Photography
● Beauty parlors
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● Spinning and weaving industry
● Coconut oil making
● Cashew nut processing
● Clay products
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● Agarbatti making
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● Chalk making
● Biodiesel production
● Rice mill
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● Toys making
● Honey processing
● Slippers making
● Detergent powder making
● Spices making
● Chocolate making
● Water bottles manufacturing
● Toothprick making
 ● Xerox and printing
● Pickle manufacturing industry
● Incense stick manufacturing industry
● Paper plate manufacturing industry
● Candle manufacturing

Update on Small Scale Industries (SSIs):

Earlier industries that manufactured goods and provided services on a small scale or micro-scale
basis were granted Small Scale Industries (SSI) registration by the Ministry of Small Scale

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Industries. However, after the government passed the MSME (Micro, Small and Medium
Enterprises) Act in 2006, the small and micro-scale industries came under the MSME Act.

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On 9 May 2007, subsequent to the amendment of the Government of India (Allocation of
Business) Rules, 1961, the Ministry of Small Scale Industries and the Ministry of Agro and
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Rural Industries were merged to form the Ministry of Micro, Small and Medium Enterprises.
Thus, the SSIs are included under the Ministry of MSME.

Currently, the SSIs are classified as small or micro-scale industries based on the turnover and
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investment limits provided under the MSME Act and they need to obtain MSME registration.
The government provides many benefits to the small scale industries having MSME registration
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at present.

Scope, Role and Importance of Small and Micro Industries

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Small scale industries are those industries in which production, manufacturing and providing the
services are executed on a small or micro scale.

In a country like India, the small scale industries play a very important role in generating
employment, improving the financial status of people, development of rural areas and removing
the regional imbalances.

Let us look into the roles and importance of small scale industries in India:
1. Employment generation: Small scale industries are one of the best sources of employment
generation in India. Employment is one of the most important factors that determines the growth
of a nation. Therefore, development of small scale industries should be encouraged for the
development of more employment opportunities in the nation.

2. Less Capital Requirement: Small scale industries are less capital intensive than the large
scale industries. Capital is scarce in developing countries like India and therefore, small scale
industries are most suitable for maintaining the balance.

3. Use of resources and development of entrepreneurial skills: Small scale industries allow

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for the development of entrepreneurial skills among the rural population which is not having the
scope of large scale industries. These industries help in the appropriate use of the resources
available in the rural areas, which leads to development of rural areas.

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4. Equal income distribution: Small scale industries by generating employment opportunities
create equal income opportunities for the youth of the underdeveloped areas. This leads to the
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growth of the nation in terms of employment, human development.

5. Maintains regional balance: It has been seen that large scale industries are mostly
concentrated in the large cities or restricted to areas which leads to migration of people in search
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of employment to these cities. The result of such a migration is overcrowding of the city and
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damage to the environment. For sustaining a large population, more of natural resources need to
be utilized.

6. Short production time: Small scale industries have a shorter production time than the large
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scale industries which results in flow of money in the economy.

7. Supporting the large scale industries: Small scale industries help in the growth of the large
scale industries by producing ancillary products for the large industries or producing small
components that will be useful for the assembling of final products by the large scale industries.

8. Improvement in Export: Small scale industries contribute to around 40% of the total exports
done by India, which forms a significant part of the revenue earned from the exports. Small scale
industries work towards increasing the forex reserves of the country that reduces the load on
balance of payment of the country.

9. Reduce the dependence of agriculture: Most of the rural population will be dependent on
agriculture and this creates a burden on the agricultural sector. Small scale industries by
providing employment opportunities to the rural population provides more avenues for growth
and also paves way for a more arranged distribution of occupation.

In conclusion, small-scale industries are crucial to India's economic and social fabric. They
address multiple challenges, including unemployment, economic inequality, and rural

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development. Nurturing and supporting SSIs is essential for India's ongoing economic growth,
social development, and the creation of a diversified and resilient economy.

What Is MSME? MSME Meaning, Full Form, Features & Importance

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The Micro, Small and Medium Enterprises (MSMEs) support industries as ancillary units,
thereby contributing enormously to the overall industrial development of the country. These
enterprises are engaged in the production, manufacturing and processing of goods and
commodities. The Government of India has introduced several programs for employment
generation. It has implemented financing schemes to promote businesses and local
manufacturing in India.

Features of MSMEs

MSMEs provide several benefits to the development of the economy. They provide room for
employment for millions of artisans and workers. They also promote entrepreneurship and the

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development of specialized skills. Additionally, they support the development of modernized
technology, infrastructure and the development of the sector as a whole. They help in harnessing
the growth of domestic as well as international markets.

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MSMEs are playing a major role in the Government's 'Make in India' initiative to give an
impetus to manufacturing in India and make India a global manufacturing hub.
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The Growth Opportunities of India's MSME Sector

The employment opportunities in MSME has the potential to escalate by over 50% till the next
decade. Innumerous benefits and growth opportunities will attract huge participation and
registration in the MSME sector.
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● As per India’s population, the country should produce 10 to 15 million employment

opportunities over the next decade. The current employment status in MSME stands at
28% of the total employment.
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● India is proceeding towards a more industrialized economy with sufficient growth in

different sectors. All the economic sectors need to perform well to reflect the stability
in MSMEs’ growth to achieve holistic growth.
● The manufacturing sector has observed a growth rate of 18%, and the services sector
has shown a 34% growth rate in employment.
● The MSME has huge growth potential in the khadi, coir, and village industry.
● 630 lakh micro sector enterprises account for over 99% of the total number of MSMEs,
3.31 lakh small sector and 0.05 lakh medium sector reports for 0.52% and 0.01% of
overall MSMEs respectively.
Sector-wise Focus on MSME’s Growth Opportunities

1. Telecommunications:

India is the second-largest market for the telecommunications industry that had a growth rate of
10% in MSME sectors till the year 2020. There are various areas of growth opportunities for
MSMEs in telecommunications. The boost in domestic manufacturing due to the ‘Self Reliant

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Scheme’ will increase telecom networking appliances. The networking equipment will be
developed through high-tech methods that will require more skilled employees. Better analytical
solutions will enhance the need for advanced data analytics. The huge demand for mobile phones
will trigger more low-cost manufacturing of mobile handsets and other devices, opening another
door of opportunity for MSMEs in the telecommunication sector.

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2. Electronics:
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The government’s initiative to develop 500 MSMEs in the electronics sector will create over 2.5
lakh job opportunities. India will soon join the clan of becoming a leader in electronics
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equipment productions. As the industry moves towards a more functional area, opportunities will
open up for the domestic manufacturing of electronic design systems. A National Electronics
Mission will be formed to enable MSMEs to grow in this area. Multiple electronic equipment
types will be customized for the Indian consumers who will need the MSMEs to create their job
chain. The government will also focus on delivering the products required by our army through
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the products’ domestic manufacturing. The areas of nano-electronics, along with

microelectronics, will also contribute to the growth of MSMEs.
3. Healthcare sector:

The tremendous potential of this sector will increase the growth opportunities in MSMEs. This
industry is estimated to reach Rs.3 trillion marks by 2022 that will grow at a CAGR of 15%. The
changing lifestyle calls for more affordable and user-friendly healthcare services, with the rural
areas being the focal point of growth. The low-cost medical facilities need the hour, which can
be resolved by better quality medical equipment and labs. India will need to manufacture
essentials like surgical gloves, syringes, and other vital equipment required by the healthcare
departments at relatively less cost.

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4. Food and agriculture:

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With the increase in demand for high-quality food, the government has approved over 130 food
processing plans during the year 2020. The fast-paced lifestyle is experiencing the need for more
processed and ready-to-eat food packages, which indicates the industries to improve the
production of such packaged foods. People are now more health-conscious than ever before.
Although they need a quick bite of packaged food, they would still prefer healthier items, so
healthy food and nutritious drinks and poultry and packaged food products services will be
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significant growth areas in the MSME sector.
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5. Real estate:
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This sector has been growing tremendously and has seen a growth rate of 11% until 2020. The
key areas with proper growth opportunities are instant property solutions services, residential
housing developments, and the demand for talented architects specializing in sustainable housing
development. The designers who can create easy yet stylish construction designs have various
opportunities for consultants, project managers, hospitality experts, and hotel projects. There are
many other growth areas like aviation, retail, jewellery, education, automotive, biotechnology,
transport, hospitality, etc. The growth areas are identified through various studies and researches.
The MSMEs will need to adapt to the change and participate more in the government’s skill
development programs.
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The impact of MSME on the Indian economy cannot be emphasized enough. Today’s youth need
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not move too far away from their homes for stable employment. Micro, Small, and Medium
Enterprises (MSMEs) are the new fertile ground for ideas, innovation, and growth.
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These enterprises are at the forefront of driving manufacturing and industrial expansion, job
creation, and GDP growth. However, they confront various challenges, including limited access
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to finance, infrastructure constraints, obsolete technology, regulatory issues, and a shortage of

skilled labor. Addressing these hurdles becomes essential to harness the potential of MSMEs
fully, ensuring they propel India's ongoing economic advancement.

What is MSME Sector in Business?

Based on their size and investment in assets, businesses are classified into micro, medium and
small enterprises, also known as the MSME sector. They chiefly conduct operations in
manufacturing, trade, and services. Their investments and annual turnover vary but are crucial to
their success. MSMEs are known for their immense contribution to the Indian economy and are
heavily encouraged by the Indian government in the form of better assistance programmes, tax
benefits and accessible credit facilities.

How are MSMEs classified?

Though the categorisations of MSMEs vary from country to country, they are classified in India

as follows:

Type of Enterprise Investments (INR) Turnover

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Micro Up to INR 1 crore Less than or equal to INR 5 crores

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Small Up to INR 10 crores
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Medium Up to INR 50 crores Less than or equal to INR 250 crores

The investment in machinery and equipment and annual profits are two critical factors in their
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grouping. This classification helps MSMEs have access to better opportunities.
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What Is the Role Of MSME in the Economic Development of India?

The MSME sector has a substantial impact on various aspects of the Indian economy:
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1. Employment Generation

MSMEs are known for their labor-intensive nature. They provide employment opportunities to a

large population, particularly in rural and semi-urban areas.

2. Promotion of Entrepreneurship

MSMEs encourage entrepreneurship and innovation by creating a fertile ground for individuals

to start and grow their businesses.

3. Regional Development

MSMEs are often in tier-2 and tier-3 cities and rural areas. This promotes local development and

reduces regional economic disparities.

4. Export Promotion

Many MSMEs are involved in export-oriented activities, contributing to India's foreign exchange

earnings.

5. Diversification

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MSMEs are involved in manufacturing, services, agriculture, and trade. This diversification

helps reduce reliance on a single industry and boosts economic resilience.

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6. Innovation

MSMEs can quickly adapt to changing market conditions and consumer demands. They often
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drive innovation in their respective sectors.

7. Reduction of Income Disparities

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MSMEs help reduce financial burden and promote inclusive growth by providing opportunities

for self-employment and wage employment.

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8. Support for Large Industries

MSMEs often serve as suppliers and subcontractors to more prominent industries and contribute
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to the supply chain.

How do MSMEs contribute to the Indian economy?

The idea of MSMEs emerged after the Ministry of Small-Scale Industries merger with the
Ministry of Agro and Rural Industries. With time, the ministry realized the immense potential of
this sector in catering to domestic and international markets.
Today, with almost 63 million MSMEs across the country, their contribution to the GDP is a
whopping 30%. Indian businesses aim to export $400 billion worth of goods and services by the
end of the financial year 2023 and $1 trillion by 2027. MSMEs are believed to play a vital role in
achieving this goal.

MSMEs are owned by women and socially disadvantaged groups in 20.73% and 66.27% of
cases, respectively. This gives the Indian economy a much-needed push.

MSMEs are primarily located in rural and underdeveloped areas, contributing to economic
growth and job creation. They promote innovation and are the backbone of India's startup
ecosystem.

They also play a vital role in the supply chain by providing cost-effective and timely services to

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large corporations.

What are the benefits of an MSME?

The presence of MSMEs is a vital contributor to economic and social interests. Here are some

benefits to consider:

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MSMEs can avail of collateral-free loans, making acquiring inventory easier and boosting

growth. They even have easy access to credit for working capital.

The low capital-output ratio of MSMEs lets them grow more with minimal investments.
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They cater to a diverse market, meaning there are high chances of even the most straightforward
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ideas making good returns.

Good government support, ensuring exposure to various support programs, financial assistance,

incentives, and technical expertise.

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Ample employment opportunities to the semi-urban and rural population.

Subsidies on interest rates, patent registration, and promoting industrial activities.

High adaptability and flexibility help MSMEs survive market uncertainties.

Overall, MSMEs play a vital role in sustaining economic growth, job creation, and fostering

innovation in developing and developed economies.

What are the challenges that this sector faces?

The MSME sector in India deals with certain challenges from time to time that can impact its

long-term growth:

1. Lack of skilled workforce: This can affect the quality of work and productivity.

2. Access to finance: MSMEs often need help accessing finance from financial institutions.

This is due to a need for more collateral, complex loan procedures, and high interest

rates.

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3. Competition: MSMEs face competition from large corporations, e-Commerce ventures,

and others.

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4. Technology: MSMEs often use traditional methods and require more capital to invest in

the latest technologies. Poor technical expertise and inadequate access to technology
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contribute to the problem.

5. Infrastructure: MSMEs are often based in areas with poor infrastructure, such as roads,

electricity, and telecommunications. This can make it difficult for them to transport their
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goods and services.
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6. Regulation: MSMEs often have to comply with a complex set of rules. Being costly and

time-consuming, it can divert resources from core business activities.

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7. Emergencies: MSMEs are also vulnerable to external shocks, such as economic

downturns and natural disasters.

What are the government schemes available to MSMEs?

The Indian government has recognised the importance of the MSME sector and has introduced

various policies, incentives, and support schemes to boost its growth. These include access to

credit, subsidies, and ease of doing business.

 ​ Credit Guarantee Scheme for Micro and Small Enterprises (CGTMSE)

​ Pradhan Mantri Mudra Yojana (PMMY)

​ Micro Units Development and Refinance Agency (MUDRA)

​ Stand Up India

​ Prime Minister's Employment Generation Programme (PMEGP)

​ Skill India

​ Make In India

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Additionally, the government also provides a variety of other support programs to MSMEs,

including marketing assistance, technology support, and infrastructure support.

MSMEs can avail of these schemes and programs by contacting the relevant government

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agencies or financial institutions. They can also visit the government's website for more

information.
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It is important to note that each scheme's eligibility criteria and application process may vary.

MSMEs are advised to carefully review the details of each plan before applying.
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Opportunities in MSME
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Working in the MSME sector opens up the door to new opportunities:

Promoting and boosting Indian products in the international market.

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Access to funding options, including loans and subsidies, to support their growth and

development.

The government actively promotes and supports MSMEs through policies, incentives, and

programs, creating a favorable environment for their success.

MSMEs can cater to the rising demand in the domestic market, with evolving consumer

preferences.

Ease of accessibility to budding entrepreneurs because of low capital requirements.

MSMEs can provide workforce training and skill development opportunities, contributing to

human capital development.

MSME entrepreneurs can take advantage of these opportunities by analyzing market trends,

understanding the needs of their customers, and networking with other MSMEs.

Why are MSMEs so important?

India's most significant advantage over other nations is its substantial human capital. Today, it

houses the world's third-largest pool of MSMEs. Moreover, they significantly contribute to

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India's exports, with 49.5% of products in 2020-21 being MSME-generated.

MSMEs have become the path to driving industrialisation in the rural sectors. By 2025, the

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Indian Government aims to double its economy to $5 trillion. MSMEs play a significant role in

this by creating numerous job opportunities.

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The micro sector, with 630.52 lakh enterprises, employs around 97% of the industry's workforce.

The small sector, with 3.31 lakh MSMEs, employs 2.88% of the workforce, and the medium

sector, with 0.05 lakh MSMEs, employs 0.16% of the total MSME sector workforce.
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Conclusion
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MSMEs play a vital role in India's economic landscape. Being the backbone of the Indian

economy, substantial contributions to GDP, job creation, exports, and innovation are instrumental
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in achieving the government's vision of elevating India into a $5 trillion economy by 2025.
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