PROMOTION AND DEVELOPMENT OF MICRO, SMALL AND MEDIUM ENTERPRISES IN TAMIL NADU A STUDY ON THE SUPPORT SERVICES OF SMALL

L INDUSTRIES DEVELOPMENT BANK OF INDIA

SYNOPSIS SUBMITTED TO MADURAI KAMARAJ UNIVERSITY IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE DEGREE OF

DOCTOR OF PHILOSOPHY IN COMMERCE BY M.MUTHU GOPALAKRISNAN

REEARCH GUIDE AND SUPERVISOR Dr.C.LAKSHMANAN HEAD, RESEARCH CENTRE IN COMMERCE VIVEKANANDA COLLEGE (AUTONOMOUS) TIRUVEDAKAM WEST, MADURAI

AUGUST - 2009 SYNOPSIS INTRODUCTION In the Indian instance, the relevance of small-scale units is not an issue. By reason of sheer magnitude, the number of small-scale units that operates in the economy offers the requisite rationale. They are vital to economic development as they are more likely to become economically viable in a short period and offer an incremental boost to the local economy. The role of small scale industries in economic development is the same as the role of agriculture, large scale industry, trade, transportation and education. The small scale sector has played a very important role in the socio-economic development of the country during the past 60 years. It has significantly contributed to the overall growth in terms of the Gross Domestic Product (GDP), employment generation and exports. The performance of the small scale sector, therefore, has a direct impact on the growth of the overall economy. The performance of the small scale sector in terms of parameters like number of units, production, employment and exports is acting as the catalyst for the socio economic development of the country. It has contributed about 40 per cent towards the industrial production as a whole and 35 per cent of direct exports from the country. The Government has been taking various measures from time to time in order to enhance the productivity, efficiency and competitiveness of the SSI sector.

MICRO SMALL AND MEDIUM ENTERPRISES (MSMEs) Worldwide, the micro and small enterprises (MSMEs) have been accepted as the engine of economic growth for promoting equitable development. The MSMEs constitute over 90% of total enterprises in most of the countries and are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports. In India too, the MSMEs play a pivotal role in the overall

industrial economy of the country. It is estimated that in terms of value, the sector accounts for about 39% of the manufacturing output and around 33% of the total export of the country. Further, in recent years the MSME sector has consistently registered higher growth rate compared to the overall industrial sector. The major advantage of the sector is its employment potential at low capital cost. As per available statistics, this sector employs an estimated 31 million persons spread over 12.8 million enterprises and the labour intensity in the MSME sector is estimated to be almost 4 times higher than the large enterprises. For the development of such MSMEs, there are number of organizations promoted in India. The important one among them is Small Industries Development Bank of India (SIDBI). SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA The Small Industries Development Bank of India (SIDBI) was established in the year 1992. It has been at the centre-stage of building a vibrant small and medium sector in the country. The role of SIDBI is envisaged as the principal financial institution for the promotion, financing and development of MSMEs and to coordinate the functions of the Institutions engaged in similar activities. The small and medium sectors have been getting lot of attention from successive Governments. SIDBI is playing a vital role in supplementing the Government's efforts to augment the flow of credit to this sector. Besides direct lending, SIDBI provides refinance to State Financial Corporations (SFCs) and commercial banks for their lending to SSIs. It is also the principal coordinating body for new initiatives in SSI sector. That was the time when SIDBI expanded the direct lending portfolio. It has been lending to SSIs or large corporates which source goods from SSI industries financed by it. These include BHEL, Escorts, Bajaj Electricals, Hero Cycles and Atlas Cycles among others. It is also lending to infrastructure sector projects such as those in the power and roads sector that help in promoting SSI clusters and the service sector that have linkages to the SSI sector such as multiplexes, shopping malls etc. STATEMENT OF THE PROBLEM

In the recent past, Indian economy has seen a phenomenal growth and paradigm shift in the micro, small & medium enterprises sector. There has been a perceptible change in recent times in the concept of Small Scale Industry. The immense growth of small units led to the recognition of micro industry, which found shape in the Micro, Small and Medium Enterprises Development Act, 2006. The Government has taken several steps during 2007 that have gone a long way to help the Micro, Small & Medium Enterprises sector. Ministry of Agro and Rural Industries and Ministry of Small Scale Industries were merged into a single Ministry, namely, Ministry of Micro, Small and Medium Enterprises in Pursuant to the amendment of Government of India (Allocation of Business) Rules, 1961 under Notification of the president dated 9th May 2007. Promotion and Development of MSMEs and the support services of SIDBI for such development in Tamil Nadu are studied in the project. An assessment on the performance of SIDBI for the development of MSMEs is considered socially relevant for the study. SCOPE OF THE STUDY The study of industrial finance has always been the subject matter of wide interest in the finance domain. This proposed study has a wide scope by means of micro level study to cover the enterprises which fall under Micro, Small & Medium Enterprises Development Act, 2006. For developing those enterprises, number of financial institutions is functioning in the financial system. But SIDBI is the principal financial institution for the promotion, financing and development of industry in small scale and to coordinate the functions of the institutions engaged in the similar activities. Considering the significance of rapid growth of MSMEs in Tamil Nadu and the crucial role of SIDBI in the development of such enterprises, the proposed study is restricted to the role of SIDBI in the development of MSMEs in Virudhunagar District of Tamil Nadu. The purview of the study lies on the promotional, developmental. Operational and financial performance of SIDBI, the form and structure of SIDBI aided units and the impact of SIDBI on the development of MSMEs.

OBJECTIVES OF THE STUDY The study is undertaken with the following objectives in view. To study the policy perspectives of the government towards MSMEs To study the promotion and development of MSMEs in Tamil Nadu To study the origin and development of SIDBI To study the support services of SIDBI to MSMEs in Tamil Nadu To assess the perception of SIDBI aided entrepreneurs towards SIDBI To offer valid suggestions and recommendations to SIDBI and MSMEs

METHODOLOGY The study is based on both primary and secondary data. Primary data are to be collected from the entrepreneurs to assess their perception on the services of SIDBI through interview schedule. Secondary data are to be collected from the available records with the office of SIDBI, Journals, Industry Magazines and RBI Bulletin, SIDBI Annual Reports, Publications of Ministry of MSMEs, Publications by National Institute of Small Industry Extension Training, Reports of the Study Group, Report of IDBI, Books and Journals, Related websites. The researcher intends to collect primary data directly from the selected sample entrepreneurs. A comprehensive interview schedule will be prepared and administered of course after pretest. A pilot study will be undertaken to strengthen the interview schedule. SAMPLING DESIGN The researcher will use stratified sampling to collect data from the Entrepreneurs of Micro Small and Medium Enterprises. PERIOD OF THE STUDY The proposed study covers a period of 10 years during 2000 and 2010 during which MSMEs are subject to lot of changes in the frame work, operation and competition due to

the introduction of New economic Policy in 1991 and amendment of Government of India (Allocation of Business) Rules, 1961 in the year 2007. TOOLS FOR ANALYSIS The Res earcher w ill us e the follow ing s tatis tical tools and techniques to arrive at conclus ion. P ercentage, S imple and Compound grow th rate Correlation co efficient Chi- Square Tes t Ranking M ethod S caling Technique

S C HEME OF C HA PTERI S A TI ON The propos ed s tudy captioned PROMOTION AND DEVELOPMENT OF MICRO, SMALL AND MEDIUM ENTERPRISES IN TAMIL NADU A STUDY ON THE SUPPORT SERVICES OF SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA is planned to branch off into 8 chapters . They are briefed below . CHAPTER I - INTRODUTION AND DESIGN OF THE STUDY CHAPTER II - REVIEW OF LITERATURE CHAPTER III - POLICY PERSPECTIVES OF GOVERNMENT TOWARDS MSMEs CHAPTER IV - PROMOTION AND DEVELOPMENT OF MSMEs CHAPTER V - ORIGIN AND DEVELOPMENT OF SIDBI CHAPTER VI - SUPPORT SERVICES OF SIDBI TO MSMEs CHAPTER VII - PERCEPTION OF SIDBI AIDED ENTREPRENEURS TOWARDS SIDBI CHAPTER VIII - SUMMARY OF FINDINGS, SUGESSTIONS AND CONCLUSION