Entrepreneurship Development and Communication Skills

7.2.1.Definition of Micro, Small and Medium Enterprises in India 

 

There exists several definitions of the term small and medium enterprises (SMEs), varying from country to country and varying between the sources reporting SME statistics . The commonly used criteria at the international level to define SMEs are the number of employees , total net assets, sales and investment level . If employment is the criterion to define, then there exists variation in defining the upper and lower size limit of a SME .

The European Union makes a general distinction between self-employment, micro, small and medium sized businesses based on the number of employees:

0 Self-employed

2 - 9 Micro business

10- 4 9 Small business

50-249 Medium - size business

In the Indian context, micro, small and medium enterprises as per the MSME Development Act , 2006 are defined based on their investment in plant and machinery (for manufacturing enterprise) and on equipments for enterprises providing or rendering services. According to this  a micro enterprise is where the investment in plant and machinery does not exceed twenty five lakh rupees. A medium enterprise is where the investment in plant and machinery is more than five crore rupees but does not exceed ten crore rupees. A small enterprise is where the investment in plant and machinery is more than twenty five lakh rupees but does not exceed five crore rupees .

In the case of the enterprises engaged in providing or rendering of services,

(a) a micro enterprise is where the investment in equipment does not exceed ten lakh rupees .

( b ) a small enterprise is where the investment in equipment is more than ten lakh rupees but does not exceed two crore rupees .

( c ) a medium enterprise is where the investment in equipment is more than two crore rupees but does not exceed five crore rupees.

Before going further, it is important to mention some of the organisations that are associated with small-scale industry/ MSMEs :

(i) Small Industries Development Organisation (SIDO),

(ii) Small Scale Industries Board (SSIB),

(iii) National Small Industries Corporation Ltd. (NSIC),

(iv) Confederation of Indian Industry (CII),

(v) Federation of Indian Chamber of Commerce and Industry (FICCI),

(vi) PHD Chamber of Commerce and Industry (PHDCCI),

(vii)  Associated Chamber of Commerce and Industry of India (ASSOCHAM),

(viii) Federation of Indian Exporters Organisation (FIEO),

(ix) World Association for Small and Medium Enterprises ( WASME),

(x)   Federation of Associations of Small Industries of India (FASII),

(xi)  Consortium of Women Entrepreneurs of India (eWEI) ,

(xii) Laghu Udyog Bharti (LUB),

(xiii) Indian Council of Small Industries (ICSI),

(xiv) Indian Institute of Entrepreneurship (liE),

(xv) National Institute of Small-lndustry Extension Training(NISIET),

(xvi)  National Backward Caste Finance Development Corporation,

(xvii)  National Institute for Entrepreneurship and Small Business Development (NIESBUD),

(xviii) Small Entrepreneurs Promotion and Training Institute (SEPTI),

(xix) Small Industries Development Bank of India (SIDBI) etc .

India went for rapid industrilisation during the II and III Five Year Plans, which was capital intensive in nature and thus could not solve the problem of unemployment . Moreover, it created regional disparity in development outcomes. The Karve Committee Report (1955) was one of the earlies to the exercises, which recommended a protective environment for the growth of small industries in India. Reservation of items for exclusive manufacture in SSI sector statutorily provided for the Industries (Development and Regulation) Act, 1951, has been one of the important policy measures for promoting this sector.

After the liberalisation of the economy, government 's attitude towards the MSME sector changed and many of the products exclusively manufactured by these units earlier, got dereserved. No more the MSME sector continued to be treated as 'infant industry '. Presently , only 21 items are reserved for exclusive manufacturing in the MSE sector. These include bread, pickles, wooden furniture, wax candles , exercise books and registers, safety matches, incense sticks , fireworks, and stainless steel and aluminium utensils. The phased deletion of products from the list of items reserved for the exclusive manufacture by micro and small enterprises is being continued. In October 2008, the government deleted 14 items from this list .

The MSME sector today faces competitive environment owing to:

(a) liberalisation of the investment regime during the 1990s, favouring foreign direct investment (FDI);

(b) the formation of the World Trade Organisation (WTO) in 1995, forcing its member-countries (including India) to drastically scale down quantitative and non-quantitative restrictions on imports, and

 (c) domestic economic reforms.

The MSME Development Act 2006, came into being with effect from 2nd October, 2006, subsequent to which, both the Central and State Governments took effective measures towards implementation of the Act. In order to increase the competitive edge of the MSME s vis - a -vis the multinational corporations (MNCs), the Government of India announced the National Manufacturing Competitive ness Programme (NMCP) during 2005-06. One of the objectives of NMCP is to ensure healthy growth of the MSME sector. Under this Programme, five components have been made operational, which include quality management systems and quality technology tools, building awareness on intellectual property rights, support for entrepreneurial and managerial development through incubators, setting up of new mini tool rooms and marketing assistance/ support to MSEs .

An important component of the NMCP is " Building Awareness on Intellectual Property Rights (IPRs)" for the MSMEs. The objective here is to create and enhance awareness about Intellectual Property Rights (IPRs) among the MSME units so as to enable them to take appropriate measures for protecting their ideas and business strategies and also avoiding infringement of the intellectual property belonging to others. This has been deemed important since India is a signatory of the Trade related Intellectual Property Rights (TRIPs) under the World Trade Organisation (WTO) pact .