Growth of

Micro, Small & Medium Enterprises

in India

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After India’s independence, Cottage and
Small scale sector was given prime
importance in the economic and industrial
policies for:

a) Industrial dispersal

b) Employment creation

2
Specific policy measures initiated for boosting
the growth of tiny, small and cottage industries:

a) Reservation of items for exclusive

manufacturing in small sector
b) Preferential credit support measures
c) Preferential government procurement
policies
d) Fiscal concessions
e) Infrastructural development like development
of industrial estates, testing labs, common
facility centres
f) Entrepreneurship development 3
PERFORMANCE AND CONTRIBUTION OF MSMEs

13 Million MSMEs
> 8000 products

45% industrial
production
MSMEs 40% Exports

For MSEs
31 Million
 Industrial Production – 39%
Employment
 Exports : 34%
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Micro, Small and Medium Enterprises Development
Act 2006 (MSMED)

MSMED Act 2006 promulgated in order to :

1. remove impediments due to multiple laws

2. introduce statutory consultative and recommendatory
bodies on MSME policies
3. improve registration procedures of MSMEs
4. statutory basis for purchase preference and credit policies
5. Improve realisation of payments of MSMEs

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 Micro, Small and Medium Enterprises
Development Act, 2006

Salient Features
1. Industry replaced by enterprise which
include service enterprises also.
2. Ambit of sector enlarged to cover medium
enterprises.
3. Constitution of MSME Board
4. Simplification of registration procedure

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5. Policy of preferential procurement from
MSMEs
6. Progressive credit support
7. Penalty for delayed payments
8. Provision for exit policy

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MSME classification based on investment
limit in plant and machinery:
Manufacturing Enterprises

Micro Rs. 2.5 million (US$ 56000)

Small Rs. 50 million (US$ 1.1 million)
Medium Rs. 100 million (US$ 2.2 million)

Services Enterprises

Micro Rs. 1 million (US$ 22000)

Small Rs. 20 million (US$ 0.4 million)

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Medium Rs. 50 million (US$ 1.1 million)
 Institutional Support Structure for
MSMEs in India
At Federal Level At State Level
1. Ministry of MSMEs 1. Directorate of
Industries
2. Small Industries
Development 2. District Industries
Organisation (SIDO) Centres
3. National Small MSMEs 3. State Finance
Industries Corporation
Corporation(NSIC)
4. State Industrial
4. Khadi & Village Development
Industries Others Corporation
Commission(KVIC)
1. Industry 5. Technical
5. Coir Board Associations Consultancy
Organisations
6. Entrepreneurship 2. NGOs
Development 6. Entrepreneurship
Institutions (EDIs) 3. Banks/Financial Development
Institutions Institutions (EDIs)
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MAJOR SCHEMES
FOR
MSME’s SUPPORT

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 Credit Support
1. Public sector banks advised to double the flow of
credit to MSMEs within 5 years (20% annual
growth)
2. A minimum of 40% of bank credit earmarked for
priority sector lending which includes loans to
MSEs
3. Specialised SME Bank branches in industrial
clusters for smooth flow of credit to MSMEs
4. One Time Settlement (OTS) scheme for settling
NPAs of MSMEs
5. Interest band prescribed 11
Performance and Credit Rating Scheme

1. Helps MSMEs in accessing credits from banks &

financial institutions, orders from foreign buyers
2. Helps in assessing their strengths and
weaknesses.
3. Rating by one of the empanelled national or
international Rating agencies.
4. Government subsidises 75% of the cost of Rating
fee
5. Concessional credits from Banks/FIs to such
rated units 12
Credit Guarantee Fund for Small Enterprises

• Credit Guarantee Fund Trust for Micro & Small

Enterprises (CGFTSI) gives guarantee to its
Member Lending Institutions for their collatoral free
loans to MSEs upto INR 2.5 million (USD 64000).
• Initial guarantee fee at specified rate (1.5% ) of the
credit facility sanctioned shall be paid upfront and
thereafter annual fee.
• Provides comfort to the Banks and Financial
Institutions.

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 Technological Support
1. Credit Linked Capital Subsidy Scheme for Technology
Upgradation
• Scheme meant to improve quality of products by technology
upgradation.
• Investment upto INR 10 million (US$ .250,000) eligible for support
with subsidy upto 15% on investment.

2. Technology Business Incubators for incubating new

enterprises
3. Testing Centres for Quality Certification
4. Tool Rooms and Training Centres for skill upgradation
5. Incentive scheme for obtaining ISO Certification by
MSEs
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 Marketing Assistance and Export
Promotion
1. Support for participation in trade fairs and
exhibitions – national as well as international
2. Training programmes on packaging for exports
3. Purchase preference in Government procurement
4. Market Development Assistance Scheme for
publicity, market studies and adoption of modern
market practices

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 Cluster Development Programme
• Grant upto 80% of Project cost with ceiling of
Rs.100 million to implementing agency for:

 technology upgradation & productivity

improvement
 energy conservation & pollution control
• Rs 1 million assistance for capacity building
activities without fixed assets

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Entrepreneurship Development
Programmes
• Prime Minister’s Employment Generation
Programme – PMEGP

• EDP Institutes

• Incubators

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 International Cooperation Programme

• Provides exposure to MSMEs to the latest

technologies, manufacturing practices
prevalent in their fields in different
countries.

• Encourages their participation in

international exhibitions for exports

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