Recent Initiatives Taken by

GoI for MSMEs

Submitted To:

Mr. Talha Akbar Kamal

(Guest Faculty)

Submitted By:

Ekhlas Ghani
17MBAB-18
Introduction:

The Micro- Small and Medium Enterprises (MSMEs) are small sized entities, defined in
terms of their size of investment. They are contributing significantly to output,
employment export etc. in the economy. They perform a critical role in the economy by
providing employment to a large number of unskilled and semi-skilled people,
contributing to exports, raising manufacturing sector production and extending support
to bigger industries by supplying raw material, basic goods, finished parts and
components, etc.
As per the ‘MSME at a Glance’ Report of the Ministry of MSMEs, the sector consists of
36 million units and provides employment to over 80 million persons. The Sector
produces more than 6,000 products contributing to about 8% of GDP besides 45% to the
total manufacturing output and 40% to the exports from the country
The Micro Small and Medium Enterprise Sector (MSME) is recognized globally
as a major contribution to GDP and stimulator of an economic growth. The Sector
plays a crucial role in providing employment opportunities to masses, fosters
entrepreneurship and growth led by innovations. The sector also complements
large business requirements and needs, thereby contributing to the socioeconomic
development and inclusive growth of the country.

This Sector occupies a position of high importance. In India, about 90% of the
industrial units belongs to this sector, employing 405 of India’s workforce. This
sector produces more than 8000 products ranging from traditional to high tech
items. With the rising growth of curve of Indian economy which is likely to
become a $ 5 Trillions Economy by 2025, the development of this sector is has
become all the more critical. Thus devising innovative policies, programs and
schemes that can strengthen the entire MSME industry has become a priority for
the government., The budget allocation is all the time high i.e. ₹ 6284 Crores in
The Ministry of MSME.

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Classification of MSMEs
The MSMEs are classified in terms of investment made in plant and machineries if they
are operating in the manufacturing sector and investment in equipment for service sector
companies.
Though the primary responsibility of promotion and development of MSMEs is of the
State Governments, the centre has passed an Act in 2006 to empower the sector and also
has formed a Ministry (Ministry of MSMEs). It was the Micro, Small and Medium
Enterprises Development (MSMED) Act which was notified in 2006 that defined the
three tier of micro, small and medium enterprises and set investment limits.

Classification of MSME
Classification of Ceiling on Investment in Plant and Machinery (In
MSME ₹)
Micro Below 25 Lakhs

Small 25 Lakhs to 5 Crores

Medium 5 Crores to 10 Crores

Schemes of GOI in Respect of MSMEs

1. Prime Minister Employment Generation Programme and Other Credit

Support Scheme
2. Development of Khadi, Village and Coir Industries
3. Technology Upgradation and Quality Certification
4. Marketing Promotion Schemes
5. Entrepreneurship and skill Development Programme
6. Infrastructure Development Programme

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Government Initiatives:

The Indian government has been supporting and developing small unit sectors.
India is focusing on rural industries and cottage industries. According to layman’s
language, a small business is a project or venture that requires a small budget or
is run by small group of people.

Some of the Government Policies made earlier for development and promotion
of Small-Scale Industries in India are:

1. Industrial Policy Resolution (IPR) 1948

2. Industrial Policy Resolution (IPR) 1956
3. Industrial Policy Resolution (IPR) 1977
4. Industrial Policy Resolution (IPR) 1980
5. Industrial Policy Resolution (IPR) 1990.

Both central and state government have been emphasizing more on self-
employment opportunities in rural sectors by providing help and support in
financing in terms of loans, training in terms of programs, infrastructure, raw
materials and technology.

The core purpose of the government is to utilise the local manpower and locally
available resources. Which are further transformed into action by local
departments, agencies, corporations, etc. The support of small industries include:

A. Institutional Support

1. National Bank for Agriculture and Rural Development (NABARD)

NABARD, established by the government in 1982 to give action and to

promote the rural industries. It has adopted multi-purpose strategies in
promoting in rural business in India. It supports small industries, rural
artisans, rural industries, cottage industries along with agriculture. Also,

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 it sets up training and counselling plus it gives development
programmes for rural entrepreneurs.

2. A Rural Small Business Development Centre (RSBDC)

RSBDC is a government centre sponsored by NABARD for micro, small

and medium businesses which is set up by world organization. The
primary purpose of RSBDC is to work for socially and financially
disadvantaged people and groups. RSBDC does many programmes on
skill up gradation, entrepreneurship, awareness, counselling and
training.
These programmes motivate various unemployed youth and young
women learn different trades and introduce them to other good benefits
from it.

3. National Small Industries Corporation (NSIC)

NSIC was set up in 1995 by the government to popularize and support

small businesses focusing on commercial aspects. The important
functions of NSIC are:

• Supply imported goods and machine on hire purchase agreement.

• Procurement of supply imported indigenous raw materials.
• Developing small business by importing their products.
• Supervising services.
• Awareness on technical up gradation.

Also, a new scheme called performance and credit rating for small units
have been started by NSIC, this ensures that the more their credit rating,
the more their financial assistance for their investment and capital
requirement.

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4. Small Industries Development Bank of India (SIDBI)

It is a top government bank to provide direct and indirect financial

support under various schemes to meet credit requirements of various
small businesses.

5. The National Commission for Enterprises in the Unorganised Sector

NCEUS was formed in the September 2004 by the government with

objectives:

• Measures to improve the productivity of small industries in the

informal sector.
• Generation of employment in the rural sector.
• Creating links between small sector and finance, infrastructure, raw
materials and technology.
• To create public and private partnerships for engagement in
imparting skills for the informal sector.
• Providing micro-finance for the informal sector.
• Providing social security for the informal sector.
• To introduce competition of small scale in a global environment.

6. Rural and Women Entrepreneurship Development (RWED)

This is a government organisation that focuses to raise the business

environment for women and to support women’s business initiatives. It
provides manual for training in entrepreneurship and renders advisory
services.

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 7. World Association for Small and Medium Enterprises (WASME)

WASME is an international body that is nongovernmental organisation

of micro, small and medium business units in India which establish an
international committee and focus on rural development and apply
action plan model for sustained growth of rural industries.

8. Scheme of Funds for Re-generation of Traditional Industries

From 2005, the government established a fund to support these

traditional small industries and to facilitate higher productivity and to
enhance their growth and development.

B. Incentives

The government of India focuses more on the economic and industrial

development of backward, hilly and tribal areas of India. Committees have
been established to attest and support the growth of small-scale industries
and business units and to suggest schemes that are needed.

The programs and schemes vary from state to state. Together they form a
package of benefits and incentives to attract industries in the backward
areas. Small industries receive various benefits from the government of
India such as Land, Power, Water, Sales Tax, Octroi, Raw materials,
Finance, Industrial estates and Tax holiday. Even though enough
importance is given to backward areas and small industries, there is still an
imbalance in their economic growth.

C. Future Prospects

World Trade Organisation facilitates the trades of the present era and there
are many reforms as per global expectations. The WTO system contributes
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 to development. On the other hand, developing countries need flexibility
in the time they take to implement the system’s agreements.

India is diligent in the framework of World Trade Organisation as it is one

of the founder members. Because of it, Indian economy is integrated with
the global market and small business can explore capabilities and establish
new markets. Indian businesses have to reform over time to keep up with
the world’s standard.

With the entrepreneurial spirit, small industries have to adapt to the

changing needs of the market driven economy. The government should
explore new strategies that encourage partnership between small and large
industries.

D. StartUp India:
This start-up scheme by the Indian government – aims at facilitating
technology upgradations by providing upfront capital subsidy to small
scale industry (SSI) units, including khadi, village, and coir industrial units,
on institutional finance (credit) availed by them for modernisation of their
production ..Government Loans for Small Business Start-up in India

India continues to be a nation that promotes ideas and the entrepreneurial

spirit, in a 2016 report by NASSCOM India retained the title of the world's
third largest start-up base; this is a testimony to the facts that ideas and
ideators can thrive in the Indian start-up ecosystem and come up with
socially relevant and technologically robust solutions for our country, this
in a time when the start-up scene across the world is not in the best of
health.

In recent years, Startup India is a government campaign is aimed at

promoting bank financing for start-up ventures to boost entrepreneurship
and encourage startups which will contribute to the economy of India. It

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was first announced by Prime Minister Narendra Modi on the 15th of
August, 2015.

The campaign is focused on eliminating red tape and bottlenecks and to

restrict the role of States in policy domain and to get rid of "license raj" and
hindrances like in land permissions, foreign investment proposal,
environmental clearances.

A startup, as defined by Startup India, is an entity that is headquartered in

India, incorporated less than seven years ago and has an annual turnover
which is less than 25 crore rupees. Start Up India will also consider
companies that work towards innovation, development or improvement of
products and processes or are scalable and have high potential to provide
employment.

Through the Startup India initiative, Government of India promotes

entrepreneurship by mentoring, nurturing and facilitating startups
throughout their life cycle. Since its launch in January 2016, the initiative
has successfully given a head start to numerous aspiring entrepreneurs.
With a 360 degree approach to enable startups, the initiative provides a
comprehensive four-week free online learning program, has set up research
parks, incubators and startup centres across the country by creating a strong
network of academia and industry bodies. More importantly, a ‘Fund of
Funds’ has been created to help startups gain access to funding. At the core
of the initiative is the effort to build an ecosystem in which startups can
innovate and excel without any barriers, through such mechanisms as
online recognition of startups, Startup India Learning Programme,
Facilitated Patent filing, Easy Compliance Norms, Relaxed Procurement
Norms, incubator support, innovation focused programmes for students,
funding support, tax benefits and addressing of regulatory issues.

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E. Other Initiatives:
There are several schemes in India that help give wings to the dreams of
entrepreneurs. In India, both the central and the state government have
framed various schemes to cater to the financial requirement of small
businesses segments across the country.

Many public-sector banks like State Bank of India (SBI), Canara Bank,
Allahabad Bank, Andhra Bank, and Bank of Baroda offer various financial
schemes to SME owners. These schemes help entrepreneurs obtain credit
at a low interest rate in a hassle-free manner—provided all your documents
are in place.

In the 2017 Union Budget, the corporate tax for companies was reduced
from 30% to 25%, this is expected to benefit small and medium companies
with an annual turnover lesser than 50 crores INR. Products and services
offered by these banks are—working capital loans, short-term loan,
corporate term loans, line of credit, etc.

The Government of India has undertaken several initiatives and instituted

policy measures to foster a culture of innovation and entrepreneurship in
the country. Job creation is a foremost challenge facing India. With a
significant and unique demographic advantage, India, however, has
immense potential to innovate, raise entrepreneurs and create jobs for the
benefit of the nation and the world.

In the recent years, a wide spectrum of new programmes and opportunities

to nurture innovation have been created by the Government of India across
a number of sectors. From engaging with academia, industry, investors,
small and big entrepreneurs, non-governmental organizations to the most
underserved sections of society.

Recognising the importance of women entrepreneurship and economic

participation in enabling the country’s growth and prosperity, Government
of India has ensured that all policy initiatives are geared towards enabling
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equal opportunity for women. The government seeks to bring women to
the forefront of India’s entrepreneurial ecosystem by providing access to
loans, networks, markets and trainings.

A few of India’s efforts at promoting entrepreneurship and innovation are:

• Make in India:
Designed to transform India into a global design and manufacturing
hub, the Make in India initiative was launched in September 2014. It
came as a powerful call to India’s citizens and business leaders, and an
invitation to potential partners and investors around the world to
overhaul out-dated processes and policies, and centralize information
about opportunities in India’s manufacturing sector. This has led to
renewed confidence in India’s capabilities among potential partners
abroad, business community within the country and citizens at large.
The plan behind Make in India was one of the largest undertaken in
recent history. Among several other measures, the initiative has
ensured the replacement of obsolete and obstructive frameworks with
transparent and user-friendly systems. This has in turn helped procure
investments, foster innovation, develop skills, protect intellectual
property and build best-in-class manufacturing infrastructure.

• Atal Innovation Mission (AIM):

AIM is the Government of India’s endeavour to promote a culture of
innovation and entrepreneurship, and it serves as a platform for
promotion of world-class Innovation Hubs, Grand Challenges, start-up
businesses and other self-employment activities, particularly in
technology driven areas. In order to foster curiosity, creativity and
imagination right at the school, AIM recently launched Atal Tinkering
Labs (ATL) across India. ATLs are workspaces where students can
work with tools and equipment to gain hands-on training in the
concepts of STEM (Science, Technology, Engineering and Math). Atal
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 Incubation Centres (AICs) are another programme of AIM created to
build innovative ideas.

• Loans:
The government of India has partnered with financial bodies to make
credit availability easy for SMEs in the country. If you are planning on
starting something of your own and are in need of money, you can
consider one of these small business loans schemes offered by the
government of India.
Broadly, there are three loan categories that we could borrow into.
These loans are specific to what our business currently needs. You can
also choose on the basis of the stage of business that you’re in.

1. Working Capital Loan:

Working capital is the money you need to meet your day-to-day
business expenses like your monthly electricity bills. All your
operational costs come under working capital and some loans are
crafted to suit your working capital needs alone. The loans are
offered typically for a 12-month tenure and have an interest rate
of 12% to 16%. These can be either secured or unsecured.

2. Corporate Term Loan:

Term loans are used to start a venture or expand a business.
Therefore, if you are starting up, you may want to look at term
loans/funding. These are large sums of money borrowed from
banks or financial institutions that are expected to be repaid over
a longer period of time. These loans are secured (company
assets) and have a longer tenure and the interest rate is
negotiable. They can be converted into equity options and also
have tax benefits.

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3. Term Loan:
These loans are used to buy fixed assets. If you want to put up
an office, you could consider borrowing a term loan. Typically,
these loans are secured with a tenure of 1-10 years and a floating
interest rate between 10 and 20%.

4. The Credit Guarantee Fund Scheme for Micro and Small

Enterprises (CGS)
This scheme is run by the government of India in collaboration
with SIDBI (Small Industries Development Bank of India) to
give unsecured loans to businesses. You can borrow up to
Rs.100 Lakh in term loans or working capital loans as per your
eligibility and feasibility.

5. The MUDRA Loan Scheme

MUDRA stands for Micro Units Development and Refinance

Agency Ltd. It is an agency launched by the government of India
to facilitate corporate term loans to entrepreneurs. The
government has launched the MUDRA Bank, for development
and refinancing activities relating to small and micro units. The
initiative also aims at promoting business among SCs/STs, and
women communities.

6. Stand Up India Scheme

The Stand Up India scheme is a special scheme started by the
government of India to financially empower SC/ST and women
entrepreneurs. You can borrow between ₹ 10 lakh and ₹ 1 CR to
start a manufacturing, trading or service unit, which is to be
repaid in 7 years.
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