Micro And Small Scale Industries – Economics Project

INTRODUCTION

Essentially the small-scale industries are generally comprised of those industries which manufacture, produce, and render services with the help of small machines and less manpower. These enterprises must fall under the guidelines, set by the government of India.

The SSIs are the lifeline of the economy, especially in developing countries like India. These industries are generally labor-intensive and hence they play an important role in the crucial sector of the economy both from a financial and social point of view, as they help with per capita income and resource utilization in the economy.

Loss Of Small Scale Industries

In small-scale industries manufacturing industries grow very fast due to the natural supply of raw materials and huge demand in public. In south India, the summit held where KSSIA (Karnataka small scale industries association ) was also present in January 2019 had a motive to discuss the key issues and find a solution to them at the same time provide the right environment. The major small-scale industries in Tamilnadu and small-scale industries in Kerala are spinning and weaving, coconut oil making, cashew nut processing clay products, etc. small scale ancillary industries in Hyderabad have vast employment due to various multinational companies. Foreign investment is essential as it creates a huge no. of ancillary small-scale industries and thereby creating work.

Some examples of small-scale industries are Agarbatti making chalk making Biodiesel production sugar cany manufacturing wood making Rice mill, potato chips making, toys making, microbrewery, liquid soap making, honey processing, slippers making, detergent powder making, fruit juice production plant, spices making and chocolate making. These are some of the ideas from a different industry and a variety of products.

ROLE OF INDIAN ECONOMY

  • EMPLOYMENT: SSI’s are a major source of employment for developing countries like India. Because of the limited technology and resource availability, they tend to use labor and manpower for their production activities.
  • TOTAL PRODUCTION: these enterprises account for almost 40% of services in India. They are one of the main reasons for the growth and strengthening of the economy.
  • MAKE IN INDIA: SSI’s are the best examples for the make in India initiative. They focus on the mission to manufacture in India and sell the products worldwide. This also helps create more demands from all over the world.
  • EXPORT CONTRIBUTION: India’s expert industry majority relies on these small industries for their growth and development nearly half of the goods that are exported from India are manufactured or produced by these industries.
  • PUBLIC WELFARE: these industries have an opportunity to earn wealth and create employment. SSI’s are also important for the social growth and development of our country.

MAJOR CHALLENGES FACED

MSME as a whole has lots of potential for growth, innovation, contribution to the economy, and further job creation. Unfortunately, these enterprises also face challenges that keep threatening their survival and restrict their ability to grow. The key challenges faced by the sectors :

  1. Inadequate access to market: MSME in India has struggled to have access to wide markets for various reasons like lack of adequate capital, inadequate use of marketing tools, lack of awareness of the larger economic environment. They have not been able to scale the business for want of access across the domestic and the global market. The case continues to be so capping the growth potential.
  2. Adoption of technology: Technology advancements can make or break their ability to adopt new technologies can make them more competitive, cost-effective, and accessible to the market can be easier. But day to day urgencies of these businesses hinder their long term perspective lack of adoption will make them absolute and existence will be under threat.
  3. Access to credit: Another significant constraint to the growth of MSMEs is the lack of quality credit infrastructure. Overall credit infrastructure has various bottlenecks; long sanction process high rates, collateral requirements delay in disbursements. The inability to access funds at a good rate and in a timely manner hinders the growth.
  4. Quality human Resources: One of the perennial issues faced by the MSME is their inability to attract and devote quality human Resources to the growth agenda. Most of these MSMEs are often in the stage of frequent fire fighting and shortage of manpower given that they are so thinly staffed. This makes it very difficult for them to allocate these resources to work on long and midterm projects.
  5. Lack of experience in using external experts a good consultant or a vendor often saves time and effort. They help by way of bringing expertise and talent. However, most MSMEs largely depend on the capabilities of the founders of the core team. The common build or buy dilemma makes them feel it is better to do things in-house with their own staff. Many a time in house teams may not have the required experience and knowledge the time, effort and costs escalate.
  1. Over-reliance on existing clients: Some of these companies once having acquired some large or key clients let the business run on autopilot. This can limit their business and ability to maximize their potential. This also results in high concentration risk as overreliance can prove disastrous if the existing clients were to move away. These businesses should always look at add clients across sizes, geographies, industry wherever possible.

IMPACT OF COVID-19 ON MSME

The coronavirus crisis has spelled crisis across the world as several countries now focusing on curbing the rapid spread of the virus while dealing with the economic ramifications. With governments around the world imposing lockdown and social distancing becoming the new norm, the post-pandemic world will take up to a new norm, the post-pandemic world will make up to a new trading culture. On the home grounds, the COVID-19  pandemic has battered all sectors of the economy with the micro small, and medium enterprises (MSMEs) among the worst hit.

Considered as the growth engine of the nation, the MSME sector accounts for 33.4%  of India’s manufacturing output, employing about 120 million and generating 45 % of India’s export. However, the pandemic outbreak and the consequent stoppage of economic activities have triggered panic across the nation. With business activities facing extinction risks. Although some business activities with the non-essential category were resumed as the Lockdown extended, economic activity, except for agriculture and essential activities remains halted.

The MSME sector, the majority of which relies on day to day business to stay afloat, continues to be the most vulnerable owing to the lockdown and a decrease in demand, according to a survey covering 5000 MSMEs, conducted by all Indian manufactures organizations (AIMO) has revealed that 71% of the business weren’t able to pay salaries in March. The survey further revealed that a whopping 43% would shut shop if panic extends beyond eight weeks it is unfathomable that a vast number of MSMEs will be choked, perhaps to the point of permanent closure.

SURVIVAL OF MSME SECTOR THROUGH COVID-19

The MSME sector that forms the backbone of the Indian economy was hit due to the blows of demonetization and GST implementation. However as the situation began to show signs of improvement, the pandemic outbreak, and the consequent lockdown additionally, factors like credit deficit shortage of working capital, and a decrease in demand for no-essential goods paints a grim picture. Despite the fact, the government is taking countermeasures to combat the loss incurred due to the pandemic MSMEs are struggling for stability as sales and revenue remain at a halt. As per, all CEOS snap polls on the impact of COVID-19 on the economy and industry 54% of company heads predict job losses in their respective sectors post the lock-down whereas 45% foresee 15-30% layoffs.

Additionally, 33% of the firms are expecting a fall in revenue for FY21. For instance, auto manufacturers like Maruti Suzuki said the production for April was ‘zero’ whereas, during February the company produced 1,40,933 cars. This is the plight across the manufacturing industries, including textiles, chemicals among others. What makes the situation worse is that with a decrease in demand and no possible rebound in the future it may get increasingly challenging for most of the businesses to adhere to their obligations. According to Trans Union civil, MSME loans worth Rs 2.3 lakh crores are at higher risk of becoming non-performing further, the need for working capital will increase as payment cycles are likely to be extended, generating cashflow issues. The situation is expected to prevail even the government relaxes restrictions.

RECENT DEVELOPMENTS

The number of registered MSMEs in FY20 has increased by 18.49 percent to 23.15 lakh units from 21.21 lakh in FY19, according to government data. The growth rate, however, declined from 39.7 percent in the last financial year that had increased from 15.17 lakh MSMEs registered in FY18 the data shared by the MSMEs Minister Nitin Gadkari in the Rajya Sabha on Monday showed. Overall the number of registered MSMEs in India in the past five years stood at 90.19 lakh. According to the MSME Ministry’s FY19 annual report, the MSME sector is dominated by micro-enterprises.

India has 6.33 crore MSMEs out of which 6.30 crore-99.4 percent are micro-enterprises while 0.52 percent-3.31 lakh are medium and 0.007 percent-5,000 are medium enterprises. While an increase in the registered number of small businesses would help the government in measuring their contribution to the sector’s share in the country’s GDP along with offering various tax investment benefits the current scenario of coronavirus outbreaks might impact MSMEs hard given the disruption caused in the supply chain, warehousing, export credit, etc. also the government’s decision to lockdown 75 districts where coronavirus cases have been reported might prove to be a double whammy for MSMEs. These districts are based in Haryana, Himachal Pradesh, J&K, Karnataka, Kerala, Andhra Pradesh, Delhi, Gujarat, UP, Telangana, Rajasthan, and more.

“The new restrictions on movement within the country will make it even harder. For sectors heavily dependent on labor for manufacturing and production, especially in the largely unorganized MSME sector In the coming months, these firms are likely to suffer a dual shock of supply and demand along with constraints of capital as well as labor, “ Pushkar makeover, Co-Founder, Drip Capital told financial express online. The company offers trade finance to small and medium-sized exporters.

RECENT INITIATIVES BY THE GOVERNMENT

The Government of India has developed key strategies to promote and support the MSME sector to promote competitiveness this has resulted in a dramatic positive change in the sector. Key characteristics of Indian MSMEs such a high contribution to domestic production, significant export earnings, low investment requirements, operational flexibility, location wise mobility, capacities to develop appropriate indigenous technology import substitution, contribution towards defense production, technology-oriented industries, and competitiveness in domestic and export markets help them top opportunities in various sectors. Some of the key announcements for MSMEs in the Union Budget, 2010-11 are :

  • Allocation for MSMEs to be increased from Rs 1,794 crores to Rs 2,400 crore for the year 2011
  • Corpus for microfinance Development and equity fund to be doubled to Rs 400 crore for 2011
  • Extension of existing interest subvention of 2 percent for one more year for exports covering handicrafts, carpets, handlooms, and small and medium enterprises
  • Limit of turnover for the purpose of presumptive taxation of small businesses enhanced to Rs 60 lakh

The increase in the extension of existing interest subvention of 2 percent to the small and medium enterprises is a positive development setting up to a high-level council on MSME to monitor the implementation of the recommendations of the prime minister’s high-level task force and increase in the allocation development of this sector.

BENEFITS OF GETTING Ss1/MSME REGISTERED IN INDIA

  1. Loans without collateral: The government has introduced various initiatives for MSME/ss1 that allow them to avail credit without collateral. One of the best MSME registration benefits, the initiative to provide collateral-free loans is undertaken by G01 (Government of India) SIDBI ( small industries development. Bank of India) and the ministry of micro, small and medium enterprise under the name the credit guarantee trust fund scheme. This is by far the best MSME registration benefit for small business owners.
  2. Subsidy on patent Registration & Industrial promotion: Business enterprises registered under the MSME act are given a hefty subsidy of 50 percent for patent registration. This can be availed by sending an application to the respective ministry. In addition to this one of the great MSME, registration benefits are getting a subsidy for industrial promotion suggested by the government.
  3. Overdraft facility along with interest rate exemption: Businesses or enterprises registered as MSME/ss1 under the MSME act are eligible to avail a benefit of 1% on the overdraft as part of the credit guarantee trust fund scheme. Although this can vary from bank to bank.
  4. Concession on electricity: One of the simplest MSME registration benefits, businesses registered under the MSME act can avail of a concession on electricity bills. All they have to do is submit the bills along with an application and a copy of the registered certificate by MSME.
  5. Protection against delayed payments: Understanding the ambiguity lying with business revenues, the government has extended a helping hand by providing a layer of protection against payments. As of now the ministry of Micro, small and medium enterprises has given business owners and enterprises have given business owners and enterprises to collect interest on payments delayed by the buyer.
  6. ISO certification charges Reimbursement: A registered small or medium enterprise can claim the expenses for reimbursement that were spent on Iso certification. The MSME industry is growing significantly due to the constant support from the Indian government. This has further inspired everyone, especially the youth, to explore their entrepreneurial side and start their own venture. However, in such cases, knowledge regarding MSME and MSME registration benefits is a must to know.

MSME ON THE INTERNET

• Facebook
• Twitter
• The Website
• Youtube

SHARE OF SMALL ENTERPRISES IN THE MARKET

MSMEs constitute over 90 percent of total enterprises in most of the economics and are credited with generating high rates of employment and account for a major share of industrial production and exports in India too, MSMEs play a pivotal role in the overall industrial economy of the country with its agility and dynamism, the sector has shown admirable innovativeness and adaptability to survive the recent economic downturn and recession.

Apart from providing support to large industries, MSMEs have played an important role in the development of states in terms of employment generation. More than 55 % of these enterprises are located in six major states of the country, namely, Utter Pradesh, Maharashtra, Tamil Nadu, West Bengal, Andhra Pradesh, and Karnataka.

The MSME sector has slowly come into the limelight with increased focus from the government and other government institutions corporate bodies and banks. Policy-based changes; investments into the sector; globalization and India’s robust economic growth have opened up several latent business opportunities for this sector.

India also enjoys favorable demographics the working-age population is likely to witness significant growth this year leading to an increase in employment optimism level to 77% in 2011 as compared to 47% in 2019.

The survey also reveals that 93% of Indian business owners expected an increase in revenues in 2010 and about 25% are positive about exports as compared to the global average of 22%.

With all these developments, there is a huge potential for MSME to enter the international markets and create an upsurge in the employment opportunities for India it also provides an opportunity for the sector to go international and market its made in India brand in order to explore more opportunities and enhance possibilities globally.

NEWS AND STATISTICS ABOUT GOVERNMENT BUDGET

UPCOMING DEVELOPMENTS AND POST-PANDEMIC PLAN

Due to the lockdown, the Indian MSME sector suffered the most with its collective production decreasing by more than 90%. This store comprises around 64 million enterprises and employs close to 120 million people. It contributes 30% are women-led enterprises and close to 60% are based in rural areas. Hence its importance to the Indian economy is quite significant and critical for bridging the growing rural-urban divide.

To help businesses get back on track, the prime minister of India announced a host of relief packages to help India become ‘Atmanirbhar Bharat or a self-reliant majority of the relief packages were targeted towards MSMEs. This was either in the form of liquidity support loans and equity infusion support to help MSME expand in size and capacity. Further, the government also provided them with a level playing field by reserving government procurement orders of up to Rs200 crores value and commitment to clear invoices within 45 days. The pandemic exposed issues with India’s fragmented supply chain. As a response, the government is in the process of setting up an online platform that will have a robust listing of businesses and provide the means to directly interact and transact without depending on intermediaries.

Other initiatives like the ONE NATION ONE CARD scheme and the Ajeevika app are in various stages of implementation. This can help employers tap into the locally available labor workforce and restart production activities that were hampered due to the migration of labor to their hometown. The government procurement of goods and services. The MSMEs share in government procurement of goods and services. The MSMEs have benefitted with orders worth Rs20,000 crore since the inception of Gem. Along with the PM’s call for ‘self-reliant India,’ the current face-off between Indian and China has led to an increased demand for locally manufactured goods, unleashing new opportunities for Indian MSMEs. We believe MSME businesses that are willing to reimagine their businesses and evolve with the changing times will be poised to leapfrog on the back of this unique opportunity.

ACKNOWLEDGEMENT

I would like to express my special thanks of gratitude to my teacher as well as our principal of the school who gave me the golden opportunity to do this wonderful project on the topic WASTE MANAGEMENT which also helped me in doing a lot of research and I came to know about so many new things, I am really thankful to them. Secondly, I would also like to thank my parent and friends who helped me a lot In finalizing this project within the limited time frame.

CERTIFICATE

This is to certify that of class, of —— has completed the project under my supervision. He has taken proper care and shown almost sincerity in the completion of this project. I certify that this project is up to my expectations and as per the guidelines issued by CBSE.

Teacher’s Signature

Examiner’s Signature

BIBLIOGRAPHY

  • Internet :
https://en.m.wikipedia.org/wiki/ministry-of-micro-small-and-medium-enterprises
https://www.toppr.com/guides/business-environment/scales-of-business/small-scale-industriws/
https://www.google.co.in/search?q=role+of+micro+=and+small+scale+industries&i.e.=UTF-8&hl=en=in&client=safari
https://www.findevgateway.org/paper/2020/07/impact-covid-19-pandemic-micro-small-and-medium-enterprises-msmes-kenya-report
  • Teachers
  • Friends and family
  • Books and CBSE guidelines

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