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 - Enterprises qualify as micro, small and medium-sized enterprises (SMEs)
if they fulfill the criteria in the table below. In addition to the staff headcount ceiling, an
enterprise qualifies as an SME if it meets either the turnover ceiling or the balance sheet
ceiling, but not necessarily both.

  
    

medium-sized < 250 ” ¼ 50 million ” ¼ 43 million
small < 50 ” ¼ 10 million ” ¼ 10 million
micro < 10 ” ¼ 2 million ” ¼ 2 million

Small and medium enterprises (SMEs), particularly in developing countries, are the
backbone of the nation's economy. They constitute the bulk of the industrial base and also
contribute significantly to their exports as well as to their Gross Domestic Product (GDP) or
Gross National Product (GNP). It has played a very important role in socio-economic
development of the country by contributing significantly to the overall growth in terms of
the GDP, employment generation and exports. It is the back bone of Indian economy. It
contributes to about 8%-9% of India¶s GDP by providing employment to more than 40
million people in course of producing about 8,000 products. It comprises 45% of the
industrial output in the country and contributes to about 40% of India¶s exports. According
to ASSOCHOM, currently there are 3.5% of public procurements by the government of India
and its various arms are in forms of SMEs . According to Ministry of SMEs, India, the total
numbers of registered & unregistered SSI units all over India are in census 2004 -2005 are
16.38 lakh and 102.15 lakh respectively.

Special roles for SMEs were earmarked in the Indian economy with the advent of planned
economy from 1951 and the subsequent industrial policy followed by government. By and
large, SMEs developed in a manner, which made it possible for them to achieve the
objectives of:

’? High contribution to domestic production

’? Significant export earnings

’? *ow investment requirements

’? Operational flexibility

’? *ow intensive imports

’? Capacity to develop appropriate indigenous technology

 ’? Import substitution

’? Technology-oriented industries

’? Competitiveness in domestic and export markets.

A !" #$%%&'%()

’? oNumber of SMEs - 26.1 million

’? oNumber of Manufacturing Enterprises - 7.3 million

’? oNumber of Service Enterprises - 18.8 million

’? oNumber of Women Enterprises - 2.1 million (8%)

’? oNumber of Rural Enterprises - 14.2 million (54.4%)

’? oEmployment - 59.7 million

’? oPer unit employment - 6.24

’? oPer unit fixed investment - Rs.33.78 lakh

’? oPer unit original value of Plant & Machinery - Rs.9.66 lakh

’? oPer unit gross output - Rs.46.13 lakh

’? oEmployment per one lakh fixed investment - 0.19


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Small scale industrial units are those engaged in the manufacture, processing or
preservation of goods and whose investment in plant and machinery (original cost) does not
exceed Rs.1 crore. These would, inter alia, include units engaged in mining or quarrying,
servicing and repairing of machinery. In the case of ancillary units, the investment in plant
and machinery (original cost) should also not exceed Rs. 1 crore to be classified under
small-scale industry.

The investment limit of Rs. 1 crore for classification as SSI has been enhanced to Rs.5 crore
in respect of certain specified items under hosiery, hand tools, drugs & pharmaceuticals,
stationery items and sports goods by the Government of India.

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The status of µTiny Enterprises¶ may be given to all small scale units whose investment in
plant & machinery is up to Rs. 25 lac, irrespective of the location of the unit.
-./


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Industry related service and business enterprises with investment up to Rs. 10 lac in fixed
assets, excluding land and building will be given benefits of small scale sector. For
computation of value of fixed assets, the original price paid by the original owner will be
considered irrespective of the price paid by subsequent owners.

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I.? !



a.? Current SSI / Tiny industries definition will continue.

b.? Units with investment in plant and machinery in excess of SSI limit and up to
Rs.10.00 crore will be treated as Medium Enterprises.

c.? Only SSI financing will be included in priority sector.

II.? 
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a.? 10% of the total advance will be deployed in the SME Sector.

b.? Advances to the SME Sector will be doubled by 2009-2010 with minimum
20% year on year growth in credit in this sector.

III.? ,    .

a.? Working Capital requirement of the SME with projected annual turnover upto
Rs.5.00 crore will continue to be assessed on the basis of the Nayak
Committee recommendations.

b.? Composite loan limits upto Rs.1.00 crore may be sanctioned to an eligible unit
to enable it to avail working capital and term loan requirement through µsingle
window¶.

c.? For credit limits upto Rs.5.00 lac to an SME there will be no stipulation of any
collateral security. In respect of accounts with good track record and sound
financials requirement of collateral may be dispensed for loans upto Rs.15.00
lac.

d.? Greater availment of the Credit Guarantee Fund Scheme for Small Industries
for increasing credit to the sector.

IV.?  

 a.? One branch in each lead district will be designated as a specialised SME
branch.

b.? Each urban / semi urban branch will be required to extend credit to at least
five (5) new tiny, small and medium enterprises every year.

c.? The bank will increasingly adopt cluster based approach for SME financing. In
each district where the bank has lead district responsibility at least one
cluster will be adopted by the bank.

d.? Better co-ordination between the branches of the bank and the branches of
SIDBI located at 50 clusters under the scheme for Small Enterprises Financing
Centres.

e.? The bank will encourage the SMEs to have their units rated by the accredited
Credit Rating Agencies under the scheme launched by NSIC. The units
obtaining better credit rating will receive better credit support from the bank.

V.? !

a.? All loan applications for limits upto Rs.50, 000/- shall be disposed within 2
weeks, those upto Rs.15.00 lac within 3 weeks and those beyond Rs.15.00 lac
within 4 to 6 weeks.

b.? Each branch will maintain a register recording the date of receipt, sanction,
rejection and disbursement of the loan proposals received from the SMEs.

c.? No fresh proposal will be rejected without the approval of the next higher
authority.

VI.? !c 

VII.? 4 !



The proposed Debt Restructuring mechanism for the SMEs based on the guidelines issued
by the Reserve Bank of India vides DBOD.BC.No.34 / 21.04.132 / 2005-06 dated 8.9.2005.

,+
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SSI Sector in India creates largest employment opportunities for the Indian populace, next
only to Agriculture. According to the SSI Sector survey conducted by the Ministry and
National Informatics Centre with the base year of 1987-88, the following interesting
observations were made related to employment in the small scale sector.

*  !   'c *'5

 Food products industry has ranked first in generating employment, providing employment
to 4.82 lakh persons (13.1%).

The next two industry groups were Non-metallic mineral products with employment of 4.46
lakh persons (12.2%) and Metal products with 3.73 lakh persons (10.2%).

In Chemicals & chemical products, Machinery parts and except Electrical parts, Wood
products, Basic Metal Industries, Paper products & printing, Hosiery & garments, Repair
services and Rubber & plastic products, the contribution ranged from 9% to 5%, the total
contribution by these eight industry groups being 49%.

In all other industries the contribution was less than 5%.

1    

Per unit employment was the highest (20) in units engaged in Beverages, tobacco & tobacco
products mainly due to the high employment potential of this industry particularly in
Maharashtra, Andhra Pradesh, Rajasthan, Assam and Tamil Nadu.

Next came Cotton textile products (17), Non-metallic mineral products (14.1), Basic metal
industries (13.6) and Electrical machinery and parts (11.2.) The lowest figure of 2.4 was in
Repair services line.

Per unit employment was the highest (10) in metropolitan areas and lowest (5) in rural
areas.

However, in Chemicals & chemical products, Non-metallic mineral products and Basic metal
industries per unit employment was higher in rural areas as compared to metropolitan
areas/urban areas.

In urban areas highest employment per unit was in Beverages, tobacco products (31
persons) followed by Cotton textile products (18), Basic metal industries (13) and Non-
metallic mineral products (12).

1

The small scale industries sector plays a vital role for the growth of the country. It
contributes 40% of the gross manufacture to the Indian economy.

It has been estimated that a lakh rupees of investment in fixed assets in the small scale
sector produces 4.62 lakhs worth of goods or services with an approximate value addition of
ten percentage points. The small scale sector has grown rapidly over the years. The growth
rates during the various plan periods have been very impressive. From the year 1990-91
this sector has exhibited a comparatively lower growth trend (though positive) which
continued during the next two years. However, this has to be viewed in the background of
the general recession in the economy. The transition period of the process of economic
reforms was also affected for some period by adverse factors such as foreign exchange
constraints, credit squeeze, demand recession, high interest rates, shortage of raw material
etc. When the performance of this sector is viewed against the growth in the manufacturing
and the industry sector as a whole, it instills confidence in the resilience of the small scale
sector. The estimates of growth for the year 1995-96 have shown an upswing. The growth
of SSI sector has surpassed overall industrial growth from 1991 onwards. The positive trend
is likely to strengthen in the coming years. This trend augurs a bright future for the small
scale industry.

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1.? Pickles & Chutneys,

2.? Bread

3.? Confectionery (Excluding Choclates,Toffees and chewing gum)

4.? Rapeseed Oil (except solvent extracted)

5.? Ground and processed spices other than spice oil and Oleo resin spices

’?
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1.? Cotton Cloth knitted

2.? Woollen cloth knitted

’? 
9 '+4

1.? Art Silk / Man-Made Fibre Hosiery

2.? Synthetic knitted outerwears such as jersey slipover, pullover, cardigans and
jacket.

3.? Readymade garments

4.? Belt lacing

5.? Measuring Tapes Cotton

 ’? † †1

-.? Sawn timber,

$.? Wooden crates 

/.? Tea chest plywood 

".? Seasoned wood 

:.? Wooden storage cupboards

’? 11

1.? Waxed paper

2.? Bitumenised water-proof paper

3.? Decorative papers

4.? Paper Bags

5.? Gummed paper for stamps

6.? Exercise books and registers

7.? Transfer labels

8.? Sanitary towels

’? , ,1  +5

1.? *eather pickers and other leather Accessories for textile industry

2.? Vegetable tanned hides and skins Semifinished

3.? Chrome tanned hides & skins semifinished

4.? *eather washers and laces

5.? Industrial leather gloves

6.? *eather shoes

 ’? 441

1.? Rubberised cloth by doctor's blade technique

2.? Canvas hoses

3.? Microcellular sheets

4.? *atex foam & latex products (Except synthetic rubber coats and aprons and
lubricating pads)

5.? Rubber thread (Except bare rubber thread of over 80 gauges and heat
resisting rubber thread)

’? 1

1.? Full PVC footwear chappals, sandals & shoes

2.? Blow moulded plastic- Hd PE-PVC containers upto 5 litre capacity excluding
stretch blow moulded plastic containers

3.? Fibre Glass reinforced plastic produts other than the following:
(a) SMC & DMC and its mouldings
(b) Continuous Filament Winding (Pipes above 600 mm diameter)
(c) Pultruded products
(d) FRP sheets by continuous process

4.? Hessian, paper and cloth to polythylene laminations-Straight and sandwiched

by extrusion coating process except paper to polythelene laminations for
integrated packing

2'c6  
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The small scale operation of Indian SME apparel manufacturers gives them the flexibility to
service custom-made orders at low cost. It is likely that India will become a preferred
destination for global manufacturers and retailers as well, and big opportunities for SMEs
are forthcoming.

Today, apart from the big Indian textile manufacturers like Gokuldas Exports, Alok
Industries, Raymonds, Welspun India, Arvind Mills and Madura Garments, several small and
medium sized apparel manufacturers have also become significant contributors to the total
apparel exports of the country. Cotton knitwear suppliers of Tirupur, hosiery suppliers of
*udhiana and suppliers of home textiles from Tamil Nadu, Kerala and Punjab, among others,
have been accepted as high quality and cost effective apparel suppliers in international
markets.

These regions are also SME dominated textile clusters that have emerged either due to
market access, availability of raw material or private initiatives. The textile industry of India
operates largely in the form of clusters -- mostly natural clusters -- with roughly 70 textile
clusters producing 80% of the country¶s total textiles. Based on a UNIDO study conducted
on SME clusters in India, some noteworthy textile clusters include:

’? Panipat, accounting for 75% of the total blankets produced in the country
’? Tirupur, responsible for 80% of the country¶s hosiery exports
’? *udhiana, which accounts for 95% of the country¶s woollen knitwear produced.

,

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In spite of some natural advantages such as low costs and flexibility, the SMEs suffer from
disadvantages of being in a relatively isolated environment. The Government of India¶s
cluster development initiatives, involving technical assistance, subsidies for technology up
gradation and marketing support, have strengthened the competitiveness of the SMEs,
which has also consolidated their position in the global value chain. A case in point is the
initiative undertaken by the Textile Committee under the Ministry of Textiles, which has
undertaken a cluster-based programme for capacity building in textile and clothing SMEs in
across 20 clusters in the country.

Some key benefits of a cluster based approach for developing SMEs are:

’? Networking among enterprises

’? Economies of scale
’? Improved bargaining power
’? Technology and skill upgradation
’? Global visibility and being part of the value chain
’? Easier access to finance
’? Greater institutional support.

Among the successes of the Textile Committee¶s cluster development initiatives has been
the acquiring of intellectual property rights protection for the Pochampally Ikat tie-and-dye
sari, from Andhra Pradesh. It is the first traditional Indian craft to receive this status of
VIII geographical branding, and is expected to benefit at least 100,000 weavers in the
state. The powerloom clusters in Sholapur and Salem are also following suit in acquiring
geographical indications protection.

Another successful initiative is seen in the Terry Towel cluster of Solapur, where some major
interventions were undertaken by the committee such as setting up of a polytechnic
institute, acquiring quality certifications for some of the units, setting up an export
consortium and establishing networks.

The concentration of textile firms in the form of clusters is to a natural advantage for
adopting a cluster-based development approach of the textile SME segment. International
and domestic experience has proved that this approach has helped firms in attaining
competitiveness -- a requisite in today¶s new market.

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Small and Medium Enterprises (SMEs) are often confronted with following problems:

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Enhancement of the technical capabilities of SMEs, through a greater and more diffusion of
sophisticated technology among them, is often an effective way to improve their
productivity and competitiveness. In spite of the availability of various assistance programs
technology acquisition and skills enhancement programs, the effectiveness of technology
adoption among SMEs is an issue of great concern.

,!+ 1  

Most SMEs do not have formal procedure or often these are not documented. Furthermore,
there is tendency for these procedures to change frequently. This makes it difficult for third
party and newcomer to understand the existing business practices and match them with the
IT process.

     


To avoid academic discussion, management is here simply defined as the way a

commercial/business activity is organized. The very ownership of a business tends to create
elitist attitudes and self-orientation. It imposes a monocular vision which limits the
company's capacity to respond positively and aggressively to business opportunities and
changing business conditions.

,!+  

As a SME/SMI, financial resources are often limited. This often forces company to select a
solution, which appear to be cheap initially. However, the hidden costs will start to emerge
during implementation. This sometime causes the project to be abandoned or sometime
sent the company into further financial crisis.
,!  

Implementations of some bigger scale IT project especially those that involve business
process across different departments or require large amount of initial data entries require
human resource during the implementation. Some SMEs are often in the stage of frequent
fire fighting and shortage of manpower. This makes it very difficult for them to allocate
time to carry out implementation. Furthermore, there is always a conflict between getting
the daily routing work going and to do the ³Extra´ IT implementation.

†2

Due to lack of adequate information, SMEs in India are facing a lot of quandaries. Once
SMEs start the business, they may require the entire information related to suppliers,
specific machinery e.t.c. on grassroots level, which is rarely available in India. There is a
strong need to find ways to manage modern technology and labor market constraints, which
impede the productivity of SMEs.

Due to the global slowdown, the number of firms coming for credit rating was not high in
2009-10. The National Small Industries Corporation (NSIC) has set a target to provide
credit rating to over 9,000 micro and small enterprises (MSMEs) in 2010-11. With the
revival in the economy, more units in the micro and small enterprises are expected to opt
for their rating this fiscal.

Participation in fairs - both domestic and international - is of utmost importance for the
MSMEs. It is a great platform to meet prospective buyers/ sellers. It also gives the
opportunity to know what the competitors are doing. However in several cases, the MSME
holders are unable to attend these fairs owing to financial crunch. Despite the fact that
there are several grants provided by the government, they are not enough. We need to give
them more grants to facilitate their participation in not only domestic but also international
fairs. This will give them the exposure they need.

Overall, the small scale industry in India is achieving well and has facilitating the country to
achieve substantial industrial growth and diversification.