MSME Sector in india 2020 – A Profile.pptx

MSMES Sector in india

1. MSME Sector – A Profile Dr K Ramesha, Professor

2. Importance of MSMEs Engines of Economic Growth Sources of Innovation Incubators for new entrepreneurs and new workforce Motivators of free market competition Suppliers of materials, components, products and services to other businesses Generators of value addition and export earnings Sources of employment and income distribution They take RISK and spread RISK

3. SMEs – Around the World 99 percent of the world’s economic enterprises are SMEs Around the world, SMEs account for 55-95 percent of country GDP More than 50 percent of world’s labor force is employed by SMEs Globally, SMEs generate largest number of new employment opportunities every year SMEs are the most dynamic components of the world’s economy SMEs are essential for social and economic progress

4. MSMEs in Indian Context Traditionally defined as: Small Scale Industries (SSIs) Small Scale Enterprises (traders and services) Small Road Transport Organisation Professionals Focus primarily on manufacturing and less on servicing Concentration on traditional industry - textile, engineering, jute, auto ancillary

5. MSMEs in Indian Context SME in India characterized by Low capitalization and limited assets Geographical diversity and high mortality Poor access to capital markets Cash intensity in transactions Lack of credit information Poor financial disclosure on account of tax issues Directed lending based on Central Bank guidelines High risk perception has led to high borrowing costs

6. MSMEs – A Profile Both Modern and Traditional MSMEs co-exists Traditional sector has remained stagnant whereas modern sector has shown progress MSMEs are now operating in a highly competitive environment Policies of the Government/s have changed – from that of ‘protectionist’ to that of ‘enabler’ on account of globalization/WTO MSMEs contribute 45% of manufacturing output 40% of total exports Employs 59 million persons

7. MSMEs – Excerpts from 4 th All India Census (2006-07 reference year)

8. MSMEs – 3 rd Census 2001-02

9. MSMEs – Excerpts from 4 th All India Census (2006-07 reference year)

10. Share of MSMEs in GDP

11. MSMEs

12. MSMEs

13. MSMEs

14. MSMEs

15. MSMEs

16. MSMEs – Interesting Information

17. MSMEs – Interesting Information

18. MSMEs – Interesting Information

19. MSMEs – Interesting Information

20. MSMEs – Interesting Information

21. MSMEs – Interesting Information

22. MSMED Act 2006

23. National Board for MSMEs In pursuance of the MSME Development Act, 2006, the National Board for Micro, Small & Medium Enterprises consisting of a total of 47 members has been constituted. The 20 non-official members on the Board represent industry associations of MSMEs from all over the country while the other 27 members comprise of Members of Parliament, Ministers of six State Governments, representatives of RBI, Banks etc. Meetings of the Board are being held regularly and various issues relating to development of MSMEs are discussed and remedial measures are undertaken in consultation with the concerned departments/agencies.

24. National Commission for Enterprises in Unorganized Sector The Government of India had constituted the National Commission for Enterprises in the Unorganised Sector (NCEUS) to examine the problems of the enterprises in the unorganized/informal sector. The Commission has made recommendations to provide technical, marketing and credit support to these enterprises and submitted 11 Reports to the Government. The Commission completed its term on 30th April, 2009.

25. NCEUS - Reports

26. National Manufacturing Competitiveness Program

27. National Manufacturing Competitiveness Program

28. Institutional Finance to MSMEs

29. Financing Constraints of SMEs in Developing Countries (Beck 2007) Key Findings: Capital access and costs are ranked as one of the most constraining features of SMEs; Smaller firms report higher financing obstacles along the capital structure spectrum than larger firms; Banking systems systematically underserve the SME sector relativeto larger firms (30% of large firms use bank finance to finance new investment relative to 12% of smaller firms); Smaller firms’ financing obstacles have almost twice the effect on their growth as larger firms’ capital constraints; Export, leasing, and long-term finance are also scarcer for SME firms. Source: Beck, Thorsten. “Financing Constraints of SMEs in Developing Countries: Evidence, Determinants, and Solutions.” Working Paper. World Bank, April 2007.

30. Credit – A Major Constraint

31. Committee on FSA

32. Increasing Credit-gap in MSME Sector

33. Bank Finance to MSMEs

34. Bank Finance to MSMEs

35. Bank Finance to MSMEs - PSBs

36. Bank Finance to MSMEs – Pvt SBs

37. Bank Finance to MSMEs – Foreign Banks

38. Micro-enterprises Receive Small Portion of MSME Credit

39. Bank Finance to MSMEs MSME Lending - Past Priority Sector Concept - Tandon/Chore Committees Nayak Committee and several committees SSI Branches MSME Lending - Present Internal compulsions Competition for SME finance Cluster Approach Bank Selection by SMEs and Banking Relationship Risk Management in SME Finance

40. How to Improve Flow of Credit? First Step is to Understand SMEs SMEs prefer.. Loyal and lasting banking relationships Doorstep banking Reliable Service Quality Comfort/ Relationship with bank staff Proximity to delivery channels Low delivery cost Combination of personal and business banking

41. Improving the Flow of Credit to MSMEs PM’s Task Force

42. Improving the Flow of Credit to MSMEs PM’s Task Force Recommends Extend stimulus package as applicable to MSMEs upto 2011 Banks must increase credit by 20 percent per annum with 60 percent of which should go to micro-enterprises Special Fund for Micro-enterprises – shortfall in bank lending to MSMEs must be contributed to this fund Govt spend at least 5000 crores to improve infrastructure for MSMEs Measures to ensure transition of unorganized micro-enterprises into organized

43. Thank you,