The Role of Government Policy for the Growth of Entrepreneurship in the Micro Small and Medium sized Enterprises

in India: An Overview
Dr. C. Swarnalatha Professors & Head, Department of Management Studies Anna University of Technology Madurai, M. Tharani Full time Research Scholar Anna University of Technology Madurai, Email id: tharani1771@gmail.com

Abstract: The Micro, Small and Medium sized Enterprise (MSMEs) Sector continue to be a vibrant sector of the Indian economy. It is estimated that there are about 12.8 million units (over 90 per cent of total industrial units) in this sector employing nearly 31 million people. This sector contributes nearly 39 per cent of the total industrial production and accounts for approximately 33 per cent of the total exports. This sector has consistently registered a higher growth rate than the rest of the industrial sector. There are over 6500 products ranging from traditional to high-tech items, which are being manufactured by the small enterprises in India. After agriculture, the MSMEs sector provides the maximum opportunities for both selfemployment and jobs in the country. The small enterprises sector in India holds great potential for further expansion and growth in the future. In fact, the employment potential of the sector is un-matched by any other sector of the economy. This paper evaluates the government policies with respect to the MSMEs and the performance of these enterprises in relation to these policies and assistance. In particular, the article concentrates on the growth of entrepreneurship within the Micro, Small and Medium-sized enterprises (MSMEs) in India. In addition, it also considers the contribution of MSMEs towards country's employment generation. The global market has changed considerably as also the activities of Micro, Small and medium enterprises. Today, for businesses to survive, dynamism and entrepreneurship must exist in its fullest degree. We found in the past record of MSME development that, those countries have succeeded in achieving higher growth of MSME, who have given much more emphases on Entrepreneurship Development Program. Keywords: Entrepreneurship, Micro Small and Medium sized Enterprises, Government policy, Employment, India. Introduction The planned economic system has been adopted in India since P' April, 1951 and completed 10 five year plans with some annual plans. Now India is in 12th five years plan that has begun from 1st April, 2012. No doubt, lots of achievements have been made in various sectors of Indian economy through revolutions in agriculture, industry and service sector in these planning periods. However, India still remained as developing country and it is facing problems like unemployment, under employment, low per capita income, low capital formation, rising

trade deficit and considerable percentage of population below poverty line, etc. Around 80s, China and India were almost equal in economic development and now the growth rate of the economy of China is far ahead than that of India. The present markets are in jittery, and for valid reasons. The rupee has hit an all-time low of Rs. 53 and macroeconomic indicators of the economy are sagging. Industrial production is on a downward spiral. Policymaking is ground to an apparent halt, and the rollback of the decision to open up multi-brand retail has sapped investor confidence. The negative growth registered in industrial production in October, a sharp 5.1% decline, and shows that industrial productivity is slowing far more rapidly than expected. All these pose greater risks for overall economic growth in 2011-12, already watered down to 7.6%, with further downward revision on the cards. For now, slowdown worries take their toll on capital goods and company stocks. Its impact is going to be more severe on micro, small and medium enterprises (MSMEs), which have been already running through bad time a rough patch, affected with huge financing gap and consistent decline in global demand for their products. Literature Review Micro, Small- and medium-sized enterprises are a vibrant and growing sector in most economies round the world. (Levy et al, 2005) Audretsch et al. (2006) explains that creating supportive environments for entrepreneurship and MSME development

has become a top policy priority in almost every country around the world. (Audretsch et. al. 2006) Lester et al. (2007) claims that There is broad agreement on the merits of devising policies to enhance the contribution of MSMEs to global trading, since it is widely recognized that MSMEs are underrepresented in the global economy. For example MSMEs typically contribute some 50 per cent of GDP in the developed economies and some 60 per cent of total employment, yet MSMEs contribute only around 30 per cent of exports and even less in terms of flows of international investment. In India also, the role of micro, small and medium enterprises (MSMEs) in the economic and social development is well established. (Report of the Task Force on MSME, 2010) especially since the commencement of planning for economic growth, adequate emphasis has been given on the development of MSMEs by policy makers, politicians and the intelligentsia alike. The multi pronged objectives of increased industrial output, generation of employment, dispersal of industrial activities across regions and development of entrepreneurship has been successfully met through the propagation of MSMEs. (Gupta, 2006) (Banerjee, 2005) The MSME sector is a nursery of entrepreneurship, often driven by individual creativity and innovation. This sector contributes 8 per cent of the countrys GDP, 45 per cent of the manufactured output and 40 per cent of its exports. The MSMEs provide employment to about 60 million persons through 26 million enterprises. The labor to capital ratio in MSMEs and the overall growth in the MSME sector is much higher than in the large industries. (Report of the Task Force

on MSME, 2010). Government Schemes for SMEs There are various schemes run by the Indian Government to boost the SME's in the country to help them become more innovative, efficient and competitive. The enactment of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 was a landmark initiative taken by the Government of India to enable the SMEs' competitive strength, address the issues and challenges and reap the benefits of the global market. SME policy initiatives at the national and state level are aimed at strengthening the role of SMEs at the base as well as at the higher level. The Tamil Nadu Government formulating an exclusive policy for micro, small and medium enterprises sector to encourage agro-based industries is a recent example of the changes taking place at the ground level. Some of the salient features of this policy include formation of multi-storied and flatted industrial estates for micro industries, liberal floor space index in plotted development of 1.5 to 1.75 for industrial sheds and 2.5 for multi-storied industrial units, 50% rebate on stamp duty and registration charges for micro and small enterprises in industrial estates and industrially backward areas. The Ministry of Micro, Small and Medium Enterprises (MSME) is implementing the promotional schemes for the development of micro, small and medium enterprises. The schemes and programs generally focus on capacity building in states and regions, nevertheless, there are a few schemes and programs, which are individual beneficiary-

oriented. Some of the schemes are by The Ministry of Micro, Small and Medium Enterprises (MSME) are as below. Scheme of Surveys, Studies and Policy Research Entrepreneurship Development Institution Scheme Scheme of Fund for Regeneration of Traditional Industries (SFURTI) Rajiv Gandhi Udyami Mitra Yojana (RGUMY) Marketing Assistance Scheme (Implemented through NSIC) Performance and Credit Rating Scheme (Implemented through NSIC) Prime Minister's Employment Generation Programme (PMEGP) (Implemented through KVIC) Product Development, Design Intervention and Packaging (PRODIP) (Implemented through KVIC) Khadi Karigar Janashree Bima Yojana for Khadi Artisans (Implemented through KVIC) Interest Subsidy Eligibility Certification (ISEC). While there are no specific reservations for women, in the latter, there are some concessions/incentives available under these programs for the benefit of women entrepreneurs. In respect of entrepreneurship/skill development training programs, under the National Awards for Entrepreneurial Development (Quality Products) and Trade Related Entrepreneurship Assistance and Development (TREAD) Program for women, the necessary guidelines have been issued and specific reservation provided for

women. Similarly, under two employment generation programs being implemented by the Ministry like Rural Employment Generation Programme (REGP) and Prime Minister's Rozgar Yojana (PMRY), some concessions have been provided for women beneficiaries. Besides, the Coir Board is implementing the Mahila Coir Yojana, which is a women oriented self-employment program. There are certain schemes which National Small Industries Corporation carries forward to assist small enterprises with a set of specially tailored schemes designed to put them in a competitive and advantageous position. The schemes comprise of bank credit facilitation, Export credit Insurance, SME Credit Rating, Bill discounting schemes, Government stores purchase program, informatory services, facilitating marketing support, technology support and other support services. Besides these schemes, the Government of India also runs a International Cooperation Scheme for Technology infusion and/or upgrade of Indian MSMEs, their modernization and promotion of their exports are the principal objectives of assistance under the International Cooperation Scheme.

in the form of new target markets, possibilities to exploit technological advantage, etc., the challenges in this process have flowed mainly from their scale of operation, technological obsolescence, and inability to access institutional credit and intense competition in marketing. The Government of India is fully aware of the challenges of globalization and has taken appropriate measures for preparing the Micro & Small Enterprises (MSEs) to meet the challenges of liberalization and globalization. Taking a view of the whole situation, the Government has put in place several measures to help small enterprises to become globally competitive. These include schemes /programs for technology upgrade, development of clusters of such industries, making collateral free bank credit available upto US $1,25,000 creating awareness among these industries regarding exportrelated issues, etc. The Ministry of Micro, Small & Medium Enterprises (MSME) in India also conducting workshops on various aspects of WTO, Anti-dumping seminars, IPR, etc. to sensitize the MSEs entrepreneurs and other stakeholders about the likely impact of liberalization and globalization. The Micro Small and Medium Enterprises Development (MSMED) Act, 2006 has been formulated as a response to the longstanding demand of the MSEs sector, the emergent need to provide a legal framework to address the developmental concerns of what is globally known as small and medium enterprises. The Act, inter-alia, provides the first-ever legal framework to facilitate the promotion and development of

Challenges of Globalization & Liberalization for MSEMs in India With the liberalization and globalization of the Indian economy, the small enterprises in India have unprecedented opportunities on the one hand, and face serious challenges, on the other. While access to global market has offered a host of business opportunities

micro, small and medium enterprises (MSME), which comprises both manufacturing and services entities. It defines medium enterprises for the first time and seeks to integrate the three tiers of these enterprises, namely, micro, small and medium. Establishment of specific Funds for the promotion, development and enhancing competitiveness of these enterprises, notification of schemes/ programs for this purpose, progressive credit policies and practice, more effective mechanism for mitigating the problems of delayed payments to MSEs, etc. are some of the other features of this Act. The Ministry of MSME has also taken a view, in the light of liberalized provisions of the MSMED Act, 2006 to do away with the restrictive 24 per cent ceiling prescribed for equity holdings by industrial undertakings, whether domestic or foreign, in the erstwhile Small Scale Industries (now SMEs). This coupled with an expected legislation on Limited Liability Partnership (introduced in the Parliament by the Ministry of Corporate Affairs) is expected to pave the way for greater corporatization of the Small & Medium Enterprises- thereby enhancing their access to equity and other funds from the markets of these products in keeping with the global standard.

Conclusion Micro, Small and medium enterprises (MSMEs) as the most common form of enterprises in many countries are very significant for the development of their market economies. They are the main creators of the new working places and they present a vital core of the market economy. The experiences of well-developed countries show that the sector of Micro, small and medium enterprises is a basic link to the growth and development of their public economy. Policymaking in the entrepreneurship field is complex and messy. Many areas of Government policy affect levels of entrepreneurial activity. The mix of policy options will depend on a number of factors, including the prevailing attitudes of the population towards entrepreneurship, the structure of the labor force, the size and role of Government, the prevalence of existing level of entrepreneurial activity and the existing MSMEs. It is commonplace for Governments to have policies to encourage the growth of local Micro, small and medium enterprises (MSMEs) as they can help to directly alleviate poverty by increasing income levels and creating jobs.