MICRO, SMALL AND

MEDIUM INDUSTRIES
CHAPTER 2
 CONTENT

Meaning & Definition, investment limit Ownership Patterns- Micro, Small and Medium enterprise,
Products and services of MSME, Role played by MSME in the development of Indian Economy,
Problems faced by MSME, and the steps taken to solve the problems, Stages in setting up of
MSME.
 Small scale enterprise: Investment in plant and machinery or equipment
does not exceed Rs 10 crore and turnover does not exceed Rs 50 crore

Micro enterprise: Investment in plant and machinery or equipment does

DEFINITIONS not exceed Rs 1 crore and turnover does not exceed Rs 5 crore

AS PER MSME
ACT 2006 Medium enterprise: Investment in plant and machinery or equipment does
not exceed Rs 50 crore and turnover does not exceed Rs 250 crore

Large enterprise: An industrial unit which is not classified as medium

enterprise and with an investment in fixed assets up to Rs 250 crore shall
be classified as large-scale enterprise
 ROLE OF MSME IN INDIA

• Number of Units
• Employment Generation
• Investment
• Output
• Contribution to Exports
• Equitable Distribution of Income
• Mobilization of Capital and Entrepreneurial Skill
• Regional Dispersal of Industries
• Better Industries Relation
 PROBLEM OF MSME INDUSTRIES

• Inefficient Labor
• Defective system of supply of raw materials
• Absence of Credit facility
• Lack if Machinery and equipment
• Huge number of bogus small firms
• Unsuitable location
• Competition from large scale units
• Obsolete Technology
• Absence of organized marketing facility
• Poor recoveries
 REMEDIAL MEASURES TO SOLVE THE
PROBLEM OF MSMES
• Effective planning
• Improvement in techniques of production and proper technology
• Training and development
• Provision of Infrastructural facility
• Regular supply of raw materials
• Adequate credit arrangement
• Effective marketing arrangement
• Development of Suitable machinery
OWNERSHIP PATTERN
 SOLE PROPRIETORSHIP

Sole proprietorship is a form of business organization in which an individual invest his own capital,
uses his owns skill and intelligence in the management of its affairs and is solely responsible for
the results of Its operation
 ADVANTAGES OF SOLE PROPRIETORSHIP

• Easy and simple formation

• Smooth Management
• Promptness in decision-making
• Personal touch with customers
• Secrecy
 DISADVANTAGES OF SOLE
PROPRIETORSHIP

• Limited financial resources

• Limited managerial ability

• Unlimited liability

• Lack of Continuity
 PARTNERSHIP ORGANIZATION

A partnership is a relationship between two or more persons (not exceeding 20) to share the profits
as well as losses of a business. The terms of the partnership are incorporated in an agreement called
a partnership deed. Such a deed indicates the name and location of the business, nature of the
business. share of each partner. powers, duties and obligations of the partners, manner in which
profit / loss would be shared among partners, provisions for retirement / dissolution of partnership.
 ADVANTAGES OF PARTNERSHIP

• Easy formation
• Flexibility
• Pooling of resources and skill etc
• Division of risks
• Less incidence of tax
 DISADVANTAGES OF PARTNERSHIP

• Limited resources
• Unlimited Liability
• Instability
• Lack of harmony on interest
 JOINT STOCK COMPANY

"A company is a voluntary association of persons who contribute to Its capital but their liability
remains limited. It carries on business for profit as a legal entity. It can sue and be sued on its own
name"
 ADVANTAGES OF JOINT STOCK COMPANY

• Limited Liability
• Large financial resources
• Continuity
• Benefits of large-scale operation
• Democratic Ownership
• Professional Management
 DISADVANTAGES OF JOINT STOCK COMPANY

• Difficulty and costly formation

• Excessive government control
• Delay in decision
• Lack of secrecy
• Speculation
 CO-OPERATIVE SOCIETIES

Association of persons, usually of limited means, who voluntarily join together to achieve a
common economic end through the formation of a democratically controlled business organization,
making equitable contribution to the capital required and accepting a fair share of the risks and
benefits of the undertaking the salient features are: (a) Voluntary association (b) Universal
membership (c) Separate legal entity (d) Democratic control (e) Service motive (1) Distribution of
surplus
 ADVANTAGES OF CO-OPERATIVE SOCIETY

• Easy to form
• Open membership
• Limited liability
• Democratic management
• Social Service
 DISADVANTAGES OF CO-OPERATIVE SOCIETY

• Incompetent Management
• Limited resources
• Absence of Motivation
• Lack of secrecy
• Corruption
 IMPORTANCE OF MSME IN INDIAN ECONOMY

• Employment Generation

• Self Employment

• Optimum use of capital

• Facilitate entrepreneurial development

• Use of local resources

 IMPORTANCE OF MSME IN INDIAN ECONOMY

• Balance regional development

• Contribution of foreign exchange

• Equitable spread of income and wealth

• Supporting large scale industries

• Contribution towards national economy

 STEPS TAKEN TO SOLVE THE PROBLEMS OF MSME

• Institution promoting SSI: Small Scale Industries Board (SSIB), Small Industries Development Organization
(SIDO)

• Institutions offering financial support: Small Industries Development Bank of India (SIDBI) Industrial Development
Bank of India (IDBI)

• Institutions offering technical support: Technical Consultancy Organisations (TCOs)

• Institutions offering marketing support: SIDO and Marketing Assistance to Small Scale Industries
 STEPS TAKEN TO SOLVE THE PROBLEMS OF MSME

• Institutions promoting entrepreneurship: National Institute for Entrepreneurship and Small Business Development
(NIESBUD) Entrepreneurship Development Institute of India

• Other supportive measures

• Infrastructural facilities

• Industrial estates

• Industrial reconstruction bank of India

• Sick Industrial Undertaking Cell (SIUC)

 MEASURES FOR PROMOTION AND
DEVELOPMENT OF MSME
• Reservation Policy
• Government’s purchase preference policy for SSI products
• Government’s price preference policy for marketing SSI
• Technical Assistance
• Raw material assistance
• Financial Assistance
• New initiatives
THANK YOU