Growth of

Micro, Small & Medium Enterprises

in India
Editor
HEMANT KUMAR
1

After Indias independence, Cottage and

Small scale sector was given prime
importance in the economic and industrial
policies for:
a) Industrial dispersal
b) Employment creation

Specific policy measures initiated for boosting

the growth of tiny, small and cottage industries:
a) Reservation of items for exclusive
manufacturing in small sector
b) Preferential credit support measures
c) Preferential government procurement
policies
d) Fiscal concessions
e) Infrastructural development like development
of industrial estates, testing labs, common
facility centres
f) Entrepreneurship development

PERFORMANCE AND CONTRIBUTION OF MSMEs

13 Million MSMEs
> 8000 products

45% industrial
production

MSMEs

40% Exports

or MSEs

Industrial Production 39%

Exports : 34%

31 Million
Employment
4

Micro, Small and Medium Enterprises Development

Act 2006 (MSMED)
MSMED Act 2006 promulgated in order to :
1.

remove impediments due to multiple laws

2.

introduce statutory consultative and recommendatory

bodies on MSME policies

3.

improve registration procedures of MSMEs

4.

statutory basis for purchase preference and credit

policies

5.

Improve realisation of payments of MSMEs

Micro, Small and Medium Enterprises

Development Act, 2006
Salient Features
1. Industry replaced by enterprise which
include service enterprises also.
2. Ambit of sector enlarged to cover medium
enterprises.
3. Constitution of MSME Board
4. Simplification of registration procedure

5. Policy of preferential procurement from

MSMEs
6. Progressive credit support
7. Penalty for delayed payments
8. Provision for exit policy

MSME classification based on investment

limit in plant and machinery:
Manufacturing
Enterprises
Micro
Enterprises
Small
Enterprises
Medium
Enterprises
Service Sector
Enterprises
Micro
Enterprises
Small
Enterprises
Medium
Enterprises

Sector
Investment in plant & machinery
Does not exceed twenty five lakh rupees
More than twenty five lakh rupees but does not
exceed five crore rupees
More than five crore rupees but does not exceed ten
crore rupees
Investment in equipments
Does not exceed ten lakh rupees:
More than ten lakh rupees but does not exceed two
crore rupees
More than two crore rupees but does not exceed five
8
core rupees

Institutional Support Structure for

MSMEs in India
At Federal Level

At State Level

1. Ministry of
MSMEs

1. Directorate of
Industries

2. Small Industries
Development
Organisation
(SIDO)

2. District
Industries
Centres

3. National Small
Industries
Corporation(NS
IC)
4. Khadi & Village
Industries
Commission(KV

MSMEs

Others

3. State Finance
Corporation

2. NGOs

4. State
Industrial
Development
Corporation

3. Banks/Financ

5. Technical

1. Industry
Associations

MAJOR SCHEMES
FOR
MSMEs SUPPORT

10

Credit Support
1. Public sector banks advised to double the flow of
credit to MSMEs within 5 years (20% annual
growth)
2. A minimum of 40% of bank credit earmarked for
priority sector lending which includes loans to
MSEs
3. Specialised SME Bank branches in industrial
clusters for smooth flow of credit to MSMEs
4. One Time Settlement (OTS) scheme for settling
NPAs of MSMEs
5. Interest band prescribed
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Performance and Credit Rating Scheme

1. Helps MSMEs in accessing credits from banks &
financial institutions, orders from foreign buyers
2. Helps in assessing their strengths and
weaknesses.
3. Rating by one of the empanelled national or
international Rating agencies.
4. Government subsidises 75% of the cost of Rating
fee
5. Concessional credits from Banks/FIs to such
rated units

12

Credit Guarantee Fund for Small Enterprises

Credit Guarantee Fund Trust for Micro & Small
Enterprises (CGFTSI) gives guarantee to its
Member Lending Institutions for their collatoral free
loans to MSEs upto INR 2.5 million (USD 64000).
Initial guarantee fee at specified rate (1.5% ) of the
credit facility sanctioned shall be paid upfront and
thereafter annual fee.
Provides comfort to the Banks and Financial
Institutions.
13

Technological Support
1. Credit Linked Capital Subsidy Scheme for Technology
Upgradation
Scheme meant to improve quality of products by technology
upgradation.
Investment upto INR 10 million (US$ .250,000) eligible for support
with subsidy upto 15% on investment.

2. Technology Business Incubators for incubating new

enterprises
3. Testing Centres for Quality Certification
4. Tool Rooms and Training Centres for skill upgradation
5. Incentive scheme for obtaining ISO Certification by
MSEs
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Marketing Assistance and Export

Promotion
1. Support for participation in trade fairs and
exhibitions national as well as international
2. Training programmes on packaging for exports
3. Purchase preference in Government procurement
4. Market Development Assistance Scheme for
publicity, market studies and adoption of modern
market practices

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Cluster Development Programme

Grant upto 80% of Project cost with ceiling of
Rs.100 million to implementing agency for:
technology upgradation & productivity
improvement
energy conservation & pollution control
Rs 1 million assistance for capacity building
activities without fixed assets
16

Entrepreneurship Development
Programmes
Prime Ministers Employment Generation
Programme PMEGP
EDP Institutes
Incubators

17

International Cooperation Programme

Provides exposure to MSMEs to the latest
technologies, manufacturing practices
prevalent in their fields in different
countries.
Encourages their participation in
international exhibitions for exports
18

MUDRA Bank
Micro Units Development and Refinance
Agency Bank(MUDRA Bank), is a new
institution setup by the Government of
India for development of micro units and
refinance
of
MFIs
to
encourage
entrepreneurship in India & provide the
funding to the non corporate small
business sector.
19

 There is no fix Interest rate in MUDRA

loan. According to source banks are
charging around Base Rate + 1% to 7%
minimum. The interest rate can be
higher according to risk and customer
profile and it can be different in all
banks. So please check all nearest bank
branches once before apply the MUDRA
Bank Loan.
20

 ecently CentralGovernmentdecides to
provide an additional fund of One Lakhcrore
to the marketand it will be allocate according
to below list.
40,000 Crore Rupee for Mudra Bank Shishu
Loan Scheme.
35, 000 Crore Rupee forMudra Bank
KishorLoan Scheme.
25, 000 Crore Rupeefor Mudra Bank Tarun
LoanScheme.

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THANK YOU

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