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Government: For The SMEs

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The importance and contribution of the SME sector to the economic growth and prosperity is well established. Their role in terms of employment creation, upholding the entrepreneurial spirit and innovation has been crucial in fostering competitiveness in the economy. India has nearly three million small and mid-sized enterprises (SMEs), which account for almost 50 per cent of the country's industrial output. SMEs are also the second largest provider of employment after agriculture, and contribute to 40 per cent of total exports directly and even more exports indirectly. SMEs are dominant players in some of India's major export sectors, including textiles and garments; leather products; sports goods; gems and jewelry; and handicrafts, among others. They also contribute substantially in industrial goods segments in sectors such as electrical, engineering, rubber, and plastics. The small and medium units in the country have contributed 40% towards creation of jobs after the economic slowdown, and 10 lakh jobs each year.

Contrary to common perceptions, these companies are leading the way in innovation, competition, efficiency, productivity, and operational flexibility. They are clocking astounding growth rates, globalizing their operations, establishing their own brands, and have come to be recognized as a formidable force in the Indian growth story. Fuelled by the entrepreneurial transformation in these companies and the incorporation of global best practices, these companies have made significant improvement in areas like financial governance, scale and outlook. Consequently, spectacular tales of inspiration, self-motivation and sheer performance have become common introductory notes to people associated with this community. In brief, SMEs in India present a huge opportunity for global investors looking to access the growing market in India.
There are more than 100 lakh SME units in India with investment of above Rs. 1 lakh crore. The sector has recorded double digit growth during last four years. It contributes 40 per cent  to industrial production and 6 per cent to GDP.

Towards meeting the National developmental objective of a growth rate of over 8 per centon a sustained basis, it is imperative for the industrial sector to grow at a faster pace supported by a vibrant SME sector.

Towards this, Government of India has been extremely alert and proactive. The Government's policy initiatives like enactment of the new Micro Small and Medium Enterprises Development Act, 2006, pruning of reserved SSI list, advising FIs to increase their flow of credit to the SME sector, are all initiatives towards boosting entrepreneurship, investment and growth. The schemes comprise of bank credit facilitation, Export credit Insurance, SME Credit Rating, Bill discounting schemes, Government stores purchase programme, infomediary services, facilitating marketing support, technology support and other support services.

The schemes have been formulated at both national as well as International level.

There are certain schemes which National Small Industries Corporation carries forward to assist small enterprises with a set of specially tailored schemes designed to put them in a competitive and advantageous position.

Besides these schemes, the Government of India also runs an International Cooperation Scheme for Technology infusion and/or up gradation of Indian MSMEs, their modernisation and promotion of their exports are the principal objectives of assistance under the International Cooperation Scheme. Deputation of MSME business delegations to other countries for exploring new areas of technology infusion/up gradation, facilitating joint ventures, improving market of MSMEs products, foreign collaborations, etc. Participation by Indian MSMEs in international exhibitions, trade fairs and buyer-seller meets in foreign countries as well as in India, in which there is international participation. Holding international conferences and seminars on topics and themes of interest to the MSME have been focused upon.
Here are various schemes run by the Indian Government to boost the SME's in the country to help them become more innovative, efficient and competitive. The enactment of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 was a landmark initiative taken by the Government of India to enable the SMEs' competitive strength, address the issues and challenges and reap the benefits of the global market. SME policy initiatives at the national and state level are aimed at strengthening the role of SMEs at the base as well as at the higher level.

The Ministry of Micro, Small and Medium Enterprises (MSME) is implementing the promotional schemes for the development of micro, small and medium enterprises. The schemes and programmes generally focus on capacity building in states and regions, nevertheless, there are a few schemes and programmes, which are individual beneficiary-oriented.

  •  Scheme of Surveys, Studies and Policy Research

  • Entrepreneurship Development Institution Scheme

  • Scheme of Fund for Regeneration of Traditional Industries (SFURTI)

  • Rajiv Gandhi Udyami Mitra Yojana (RGUMY)

  • Marketing Assistance Scheme (Implemented through NSIC)

  • Performance and Credit Rating Scheme (Implemented through NSIC)

  • Prime Minister's Employment Generation Programme (PMEGP) (Implemented through KVIC)

  • Product Development, Design Intervention and Packaging (PRODIP) (Implemented through KVIC)

  • Khadi Karigar Janashree Bima Yojana for Khadi Artisans (Implemented through KVIC)

  • Interest Subsidy Eligibility Certification (ISEC).

Udayami Helpline — Prime Minister, Dr Manmohan Singh, inaugurated call centre 'Udyami Helpline' which will provide all the relevant information and details to the interested entrepreneurs regarding the scope of the business operations they may want to venture into, loan facilities, government schemes  and other modalities of setting small units. With the initiation of toll free number 1800-180-6763, the government primarily aims to serve the needs of the entrepreneurs who face problems on a wide range of issues which include - credit availability, technology, marketing, various MSME schemes and other important subjects through a single point facility. This will further strengthen the reach of the government all across the country. The services are available on this number between 6 am in the morning to 10 pm in the night everyday all throughout the year including Sundays and holidays. The facility that would be available in both the languages - English and Hindi would also help in registering complaints and grievances with various central and state government agencies dealing with MSMEs, including banks.

IPR Facilitation Center - Apex industry chamber, FICCI, launched an IPR facilitation centre at Federation House (FICCI), New Delhi, in association with the ministry of Micro-Small and Medium Enterprises (MSME). The FICCI-IPR facilitation centre is equipped to offer quality services in all areas of Intellectual Property Rights and comprises of a panel of technical and legal experts having extensive knowledge in the field of Intellectual Property Rights.

In addition to providing general advisory about IPRs, such as, patents, trademarks, designs and copyrights, these centres will also provide services related to patent searches, patent drafting, patent prosecution, facilitation in commercialisation of inventions, trademark prosecution matters etc.

Protection of the produce will promote further innovations and will provide a competitive edge to every enterprise, especially to those who belong to MSMEs units. The ministry of micro, small and medium enterprises expects to achieve the target towards setting up 40 intellectual property facilitation centers (IPFC) in the country before the end of the eleventh five-year plan in 2012.

Marketing Intelligence cell for MSME — The National Small Industries Corporation (NSIC) has set up the MSME — Marketing Intelligence cell for the assistance of micro, small and medium enterprises in the country. This has been done following the recommendation of the Task Force set up by Prime Minister Dr. Manmohan Singh. This Marketing Intelligence cell will collect and circulate domestic as well as international marketing intelligence to MSMEs which would improve their market capabilities and further boost their competitiveness.
Apart from the lack of access to credit, one of the biggest challenges facing the Indian MSMEs is that of marketing as they struggle to grow and develop in an increasingly competitive and globalised economy, wherein, they not only face competition from the large domestic industries but also from companies based abroad.

 Such an initiative is expected to play an important role in marketing the SME sector, so that it can attract investment in this sector and make it financially lucrative one.
The marketing intelligence cell will create awareness about various programs and schemes for MSMEs and will particularly maintain database and disseminate information on the following categories-

  •  Data base of bulk buyers (product wise) and buyers in government / PSU's; 

  • Data base of rate contracts of various government departments & PSUs;

  • Information on tenders floated by government departments and PSUs; 

  • Database of Indian exporters  to various countries with products;

  • Database  of international buyers with products; 

  • Database of technology suppliers & projects for MSMEs and a list of all the micro &  small enterprises registered with NSIC for govt. purchase, raw material assistance, performance & credit rating  schemes.

Upgrading technological solutions and bringing in new, modern and innovative ideas is a key step forward towards strengthening the growth of this sector and such strides are a positive movement to boost the growth of the SME segment.

Government Policies: What's In It For SME'S?
The Government has proposed various policy initiatives in Budget 2011. Some of the key initiatives taken by government towards the development of different sectors are mentioned below:

  • The Government is considering extending the nutrient based subsidy policy, implemented in the financial year 2010-11, to cover urea as well.

  • To provide further impetus to the development of the food processing sector, the Government has approved 15 more mega food parks taking the total number of mega food parks to 30.

  • The Government will launch a national mission for hybrid and electric vehicles in collaboration with all stakeholders to provide green and clean transportation for the masses.

  • The Ministry of Textiles in consultation with the Planning Commission will formulate a scheme to allocate Rs 30 billion (proposed to be provided to NABARD) for handloom weaver co-operative societies which have become financially unviable due to non repayment of debt by handloom weavers facing economic stress.

  • The Government will set up seven mega clusters for leather products during financial year 2011-12.

  • The Government will include capital investment in fertilizer production, cold chain and post harvest storage as an infrastructure sub-sector.

  • The Government will allocate RS 2,140 billion towards the infrastructure sector which is about 48.5 per cent of the total planned allocation.

  • Various Government undertakings will issue tax free bonds of Rs 300 billion to boost infrastructure development in railways, ports, housing and highways.

  • The Government has increased the disbursement target of India Infrastructure Finance Company Limited by RS 50 billion to provide long term financial assistance to infrastructure projects. Further, the amount to be sanctioned for takeout financing scheme has been pegged at RS 50 billion.

  • To attract investment in cold storage projects, capital investment will be eligible for viability gap funding scheme of the Finance Ministry.

  • The Government will raise the total limit available to FIIs for investment in corporate bonds to $ 40 billion in order to enhance the flow of funds to the infrastructure sector. FIIs would also be permitted to invest in unlisted bonds with a minimum lock-in period of three years. FIIs will however be permitted to trade among themselves during the lock-in period.

  • The Government will allocate an additional Rs 20 billion to the corpus of Rural Infrastructure Development Fund to create warehousing facilities.

  • The Companies Bill will be introduced in the Lok Sabha during the current session.

  • The Government has taken concrete measures to improve the agricultural productivity, some of which include:
    1. The increase in allocation to the ongoing Rashtriya Krishi Vikas Yojana from RS 67.55 billion in the financial year 2010-11 to RS 78.60 billion in the financial year 2011-12.
    2. Allocate Rs 3 billion to promote 60,000 pulses villages in rain fed areas to increase crop productivity and to strengthen market linkages.
    3. Increase the target of credit flow to the farmers from RS 3,750 billion in the financial year 2010-11 to RS 4,750 billion in the financial year 2011-12.
    4. Provide interest subvention of 3 per cent in the financial year 2011-12 (increased from 2 per cent in the last financial year) to farmers who repay their short term crop loans on time.

  • The Government expects the share of manufacturing in GDP to increase from 16 per cent to 25 per cent over a period of 10 years and to achieve this goal will come out with a comprehensive manufacturing policy.

  • The Government will introduce National Food Security Bill in the Parliament during the financial year 2011-12.

  • The Government will provide RS 267 billion towards health sector.

All these measures clearly show that most of the institutional support services incentives are provided by the Central Government, in varying degrees to attract investments and promote industries with a view to enhance industrial production. SME policy initiatives at the national and state level are aimed at strengthening the role of SMEs at the base as well as at the higher level.

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