Introduction to msme sector

INTRODUCTION to MSME Sector
Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant
and dynamic sector of the Indian economy over the last five decades. MSMEs not only
play crucial role in providing large employment opportunities at comparatively lower
capital cost than large industries but also help in industrialization of rural & backward
areas, thereby, reducing regional imbalances, assuring more equitable distribution of
national income and wealth. MSMEs are complementary to large industries as ancillary
units and this sector contributes enormously to the socio-economic development of the
country.
The ‘Micro, Small and Medium Enterprises Development Act, 2006’, came into force
from 2nd October 2006.
The Micro, Small and Medium enterprises (MSMEs) have been accepted as the engine
of economic growth and for promoting equitable development in all over the world. Let
there be any category of countries (Developed, Developing and Under Developed), the
existence of MSMEs is inevitable. The major advantage of the sector is its pivotal role
through its contribution in Industrial output, Exports, and majorly in Employment
generation at low capital cost. The labour intensity of the MSME sector is much higher
than that of the large enterprises. The MSMEs constitute over 90% of total enterprises
in most of the economies and are credited with generating the highest rates of
employment growth and account for a major share of industrial production and exports.
In India, the MSMEs contribution is highly remarkable in the overall industrial economy
of the country. In recent years the MSME sector has consistently registered higher
growth rate compared to the overall industrial sector. With its agility and dynamism, the
sector has shown admirable innovativeness and adaptability to survive the recent
economic downturn and recession. In Indian market, MSMEs rapid growth could be
seen as Indian entrepreneurs are making remarkable progress in various Industries like
Manufacturing, Precision Engineering Design, Food Processing, Pharmaceutical,
Textile & Garments, Retail, IT and ITES, Agro and Service sector. The sector not only
serves for urban market but also helps in industrialization of rural and backward areas,
reducing regional Imbalances and assuring more equitable distribution of national
income and wealth. MSMEs complement large industries as ancillary units and
contribute enormously to the socioeconomic development of the country. MSMEs
account for 45% of India’s manufacturing output, about 40% of India’s total exports;
employ about 73 mn people in more than 31 mn units spread across the country,
manufacture more than 6,000 products ranging from traditional to high tech items
(MSME report 2011). The report also projects the total production coming from the

MSME sector at 10,957.6 bn in FY11, an increase of more than 11% over the previous
year contribution.
Though, MSMEs contribution is phenomenal in the growth of Indian economy,
Simultaneously, MSMEs are facing intense pressure and constraints to sustain their
competitiveness in globalized world. Some other issues such as recession, low
demand, finance, heavy competition from MNCs etc. are becoming conspicuous
dilemma to MSMEs in India. In this competitive world, MSMEs need to be able to
confront the increasing competition from developed and emerging economies and to
plug into the new market opportunities, provided by these countries. There is a direct
link between internationalization and increased MSMEs performance. International
activities reinforce growth, enhance competitiveness and support the long term
sustainability of companies. Yet Indian MSMEs still depend largely on their domestic
markets despite the opportunities brought by the enlarged single market and by
globalization at large. De-reservation of items which were earlier reserved for MSMEs,
increasing competition by liberalizing the policies and allowing foreign companies to
operate in Indian market are some of the emerging challenges before MSMEs.
 THE MICRO, SMALL & MEDIUM ENTERPRISES ACT, 2006
THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006
An ACT to provide for facilitating the promotion and development and enhancing the
competitiveness of micro, small and medium enterprises and for matters connected
therewith or incidental thereto.
The conceptual and legal framework for small scale and ancillary industrial undertakings
is derived from the industries Development and Regulation Act, 1951. The Act provided
the necessary powers to the central govt. to amend the provisions of this act from time
to time so as to encourage small scale and ancillary undertakings. The Small and
Medium Enterprises Development Bill, 2005 which was enacted in June 2006 was
renamed as “Micro, Small and Medium Enterprises Development Act, 2006” aims at
facilitating the promotion and development of small and medium enterprises. Various
notifications issued by the Central Government from time to time relating to increase in
slap rate of investments in plant and machinery for manufacturing enterprises and
equipments in service enterprises provides a clear cut proof that the economy of our
country is striving towards achieving the economies of scale by increasing the volume of
production of goods. The Micro, Small and Medium Enterprises Development Act, 2006
(MSMEDA) extends the scope to accomplishes many long standing goals of the
government and stakeholders in the MSME sector including the service sector.

DEFINITION OF MSME-
Ministry of AGRO and RURAL Industries and Ministry of Small Scale Industries have
been merged into a single Ministry, namely “Ministry of Micro and Small and Medium
Enterprises”
Definition of MSME is given by MSME Act, 2006-
In India, the enterprises have been classified broadly into two categories:
(i) Manufacturing; and
(ii) Those engaged in providing/rendering of services.
Both categories of enterprises have been further classified into micro, small and
medium enterprises based on their investment in plant and machinery (for
manufacturing enterprises) or on equipments (in case of enterprises providing or
rendering services). The present ceiling on investment to be classified as micro, small
or medium enterprises is as under:
Types of Enterprises Eligible to be Registered under MSME Act, 2006
All classes of enterprises, whether Proprietorship, Hindu undivided family, Association
of Persons, cooperative society, Partnership firm, Company or Undertaking, by
whatever name called can apply for the registration and get qualified for the benefits
provided under the Act.

Registration of MSME :
1) Voluntary and not compulsory with respect to Micro and Small Enterprises.
2) DIC is the primary registering centre.
3) Two types:
 Provisional Registration.
 Permanent/Final Registration.
Continuous Disclosure –
a. Change in the investment in plant and machinery or in equipment, the enterprise who
have already filed Entrepreneurs Memorandum should inform the District industries
Centre of the same in writing within 3 month of the change in investment.
b. Change of products and that of services or addition in products or services. The
enterprises which have already filed Entrepreneurs Memorandum should inform the
District industries Centre of the same in writing within 3 month of the change.
Note- EM PART – II to be filed within 2 years or else the EM PART – I filed by a person
will become invalid.

ON-LINE Registration of MSME-
The online service is introduced mainly to help the entrepreneurs to obtain
acknowledgement to EM.
Part 1 readily without contacting the General Managers of District Industries Centres
(DIC) and Regional Joint Director.
MSME Registration
MSME stands for micro, small and medium enterprises and any enterprise that falls
under any of these three categories can apply for registration. MSME registration that
falls under the MSMED Act facilitates promotion and development of enterprises and
improves its functioning. Any type of enterprise can apply for SME registration. These
includes proprietorship enterprises, enterprises managed by Hindu undivided family,
enterprises run by association of individuals, co-operative societies, partnership firms
and enterprises managed by companies or undertakings etc. After registration, an
enterprise becomes eligible to get the benefits under the MSMED Act. There are two
stages of registration-provincial and permanent (final). An enterprise is granted
provincial registration when it is at a pre-investment stage. After getting provincially
registered, an enterprise can apply for permanent registration just before launching its
production facilities. However, an enterprise that is already functioning need not have to
apply for provincial registration as it is eligible to apply for permanent registration.
Enterprises falling under the three categories (micro, small and medium) are further
categorized into two types of industries- manufacturing industry and service industry.
The status of an enterprise under the MSMED Act is determined according to the
investment slab under which an enterprise falls.
Benefits of MSME Registration in India
The MSME registration process in India has been conceptualized to provide maximum
benefits to all types of enterprises. After registration, any enterprise becomes qualified
to reap the benefits offered under the MSMED Act. For example, after provincial
registration an enterprise can seek financial credit and also other facilities like land,
industrial set-up, and water/electricity/telephone connections. After getting registered
under a competent authority, an enterprise is allotted a MSMED
registration/entrepreneurs memorandum (EM) number. The concerned enterprise
should get the number printed on letter heads, invoices, bills, supply order sheets and
other necessary documents. The EM number helps in identification of MSE suppliers
and in this case an enterprise becomes an authorized MSE supplier after registration.

The registration scheme has no statutory basis. Units would normally get registered to
avail some benefits, incentives or support given either by the Central or State Govt.
Benefits available under the MSMED Act Registration of Micro, Small and Medium
(MSM) Enterprises under MSMED Act is a very powerful medium to enjoy the regime of
incentives offered by the Centre generally contains the following:
Micro and Small Enterprises:
 Easy finance availability from Banks, without collateral requirement
 Protection against delay in payment from Buyers and right of interest on delayed
payment
 Preference in procuring Government tenders,
 Stamp duty and Octroi benefits,
 Concession in electricity bills
 Reservation policies to manufacturing / production sector enterprises
 Time-bound resolution of disputes with Buyers through conciliation and
arbitration
 Reimbursement of ISO Certification Expenses
 Credit prescription (Priority sector lending), differential rates of interest etc.
 Excise Exemption Scheme
 Exemption under Direct Tax Laws.
 Statutory support such as reservation and the Interest on Delayed Payments Act.
 Subsidy on ISO Certifications
 Subsidy on NSIC Performance and Credit ratings
 Participation in Govt. Purchase registrations
 Registration with NSIC
 Counter Guarantee from Govt. of India through CGSTI
 Waiver in Earnest Money (Security Deposit ) in Govt. tenders
 15% weight age in price Preference.
 Reduction in rate of Interest from banks (Subject to ratings)
 Free of Cost Govt. tenders
(It is to be noted that the Banking Laws, Excise Law and the Direct Taxes Law have
incorporated the word SSI in their exemption notifications. Though in many cases they
may define it differently. However, generally the registration certificate issued by the
registering authority is seen as proof of being SSI).

States/UTs have their own package of facilities and incentives for small scale. They
relate to development of industrial estates, tax subsidies, power tariff subsidies, capital
investment subsidies and other support. Both the Centre and the State, whether under
law or otherwise, target their incentives and support packages generally to units
registered with them.
Medium Enterprises:
 Easy finance availability from Banks, without collateral requirement
 Preference in procuring Government tenders
 Reservation policies to manufacturing / production sector enterprises
 Time-bound resolution of disputes with Buyers through conciliation and
arbitration
The Buyers have to ensure whether those suppliers of goods and services are under
the purview of MSMED Act i.e. the Buyers have to confirm the registration of the
suppliers under the MSMED Act.
The Buyer should ensure the payment before the end of credit period decided else the
interest would be payable.
In case of disputes, application to Micro and Small Enterprises Facilitation Council
(MSEFC) would trigger the conciliation and arbitration process. Once the application is
done under MSEFC, there is no provision to withdraw the proceedings. Therefore, the
Buyer should ensure the best ways to resolve the disputes, if any, instead approaching
to MSEFC in the initial stages of dispute.
The Buyers need to ensure that the Buyer does not owe any outstanding amount
including interest due to MSM Enterprises for more than 15 days. Otherwise, the Buyer
needs to disclose this non-payment in the Annual Financials of the Buyer.
GOVERNMENT POLICIES AND SUPPORT MEASURES: BRIEF
HISTORY –
The evolution of the policy framework and support measures of the Government can be
broadly grouped into the following three periods:
1948-1991: In all the Policy Resolutions from 1948 to 1991, recognition was given to the
micro and small enterprises, termed as an effective tool to expand employment
opportunities, help ensure equitable distribution of the national income and facilitate

effective mobilization of private sector resources of capital and skills. The Micro, Small
and Medium Enterprises Development Organisation [earlier known as Small Industries
Development Organization (SIDO)] was set up in 1954 as an apex body for sustained
and organized growth of micro, small and medium enterprises. Within next two years,
the National Small Industries Corporation, the Khadi and Village Industries Commission
and the Coir Board were also set up. The era provided the supportive measures that
were required to nurture MSEs, in the form of reservation of items for their exclusive
manufacture, access to bank credit on priority through the Priority Sector Lending
Programme of commercial banks, excise exemption, reservation under the Government
Purchase Programme and 15% price preference in purchases, infrastructure
development and establishment of institutes for entrepreneurial and skill development.
MSME – Development Institutes [earlier known as Small Industries Service Institute
(SISI)] were set up all over India to train youth in skills/entrepreneurship. Tool Rooms
were established with German and Danish assistance for providing technical services
essential to MSEs as also for skill-training. At the State level, District Industries Centres
were set up all over the country.
1991-1999: The new Policy for Small, Tiny and Village Enterprises of August, 1991 laid
the framework for government support in the context of liberalization, which sought to
replace protection with competitiveness to infuse more vitality and growth to MSEs in
the face of foreign competition and open market. Supportive measures concentrated on
improving infrastructure, technology and quality. Testing Centres were set up for quality
certification and new Tool Rooms as well as Sub-contracting Exchanges were
established. The Small Industries Development Bank of India (SIDBI) and a Technology
Development and Modernization Fund were created to accelerate finance and technical
services to the sector. A Delayed Payment Act was enacted to facilitate prompt
payment of dues to MSEs and an Industrial Infrastructure Development (IID) scheme
was launched to set mini industrial estates for small industries.
1999 onwards: The Ministry of MSME [earlier known as Ministry of Small Scale
Industries and Agro & Rural Industries (SSI & ARI)] came into being from 1999 to
provide focused attention to the development and promotion of the sector.
The new Policy Package announced in August, 2000 sought to address the persisting
problems relating to credit, infrastructure, and technology and marketing more
effectively. A Credit Linked Capital Subsidy Scheme was launched to encourage
technology up gradation in the MSE sector and a Credit Guarantee Scheme was started
to provide collateral-free loans to micro and small entrepreneurs, particularly the first
generation entrepreneurs. The exemption limit for relief from payment of Central Excise

duty was raised to Rs.1 crore ($0.25 million) and a Market Development Assistance
Scheme for MSEs was introduced. At the same time, consultations were held with
stakeholders and the list of products reserved for production in the MSE sector was
gradually reduced each year. In 2006, the long-awaited enactment for this sector finally
became a reality with the passage of the Micro, Small and Medium Enterprises Act. In
March, 2007, a third Package for the Promotion of Micro and Small Enterprises was
announced which comprises the proposals/schemes having direct impact on the
promotion and development of the micro and small enterprises, particularly in view of
the fast changing economic environment, wherein to be competitive is the key of
success.
PRESENT POLICY FRAMEWORK AND FOCUS AREAS
Micro, Small and Medium Enterprises Development Act, 2006 The Micro, Small and
Medium Enterprises Development (MSMED) Act, 2006 seeks to facilitate the
development of these enterprises as also enhance their competitiveness. It provides the
first-ever legal framework for recognition of the concept of “enterprise” which comprises
both manufacturing and service entities.
It defines medium enterprises for the first time and seeks to integrate the three tiers of
these enterprises, namely, micro, small and medium. The Act also provides for a
statutory consultative mechanism at the national level with balanced representation of
all sections of stakeholders, particularly the three classes of enterprises; and with a
wide range of advisory functions.
Establishment of specific Funds for the promotion, development and enhancing
competitiveness of these enterprises, notification of schemes/programmes for this
purpose, progressive credit policies and practices, preference in Government
procurement to products and services of the micro and small enterprises, more effective
mechanisms for mitigating the problems of delayed payments to micro and small
enterprises and assurance of a scheme for easing the closure of business by these
enterprises are some of the other features of the Act.
Foreign Direct Investment (FDI) Policy
With the promulgation of the MSMED Act, 2006, the restrictive 24% ceiling prescribed
for equity holding by industrial undertakings, whether domestic or foreign, in the MSEs
has been done away with and MSEs are defined solely on the basis of investment in
plant and machinery (manufacturing enterprises) and equipment (service enterprises).
Thus, the present policy on FDI in MSE permit FDI subject only to the sectoral equity
caps entry routes and other relevant sectoral regulations.

Limited Liability Partnership (LLP) Act, 2008
The salient features of the proposed LLP Act, 2008 are as under:
(i) LLP shall be a body corporate and a legal entity separate from its partners. It will
have perpetual succession. Indian Partnership Act, 1932 shall not be applicable to
LLPs, since LLP shall be in the form of a body corporate.
(ii) An LLP has to be incorporated with a minimum of two persons. The Act does not
restrict the benefit of LLP structure to certain classes of professionals only and would be
available for use by any enterprise which fulfills the requirements of the Act.
(iii) The LLP will be an alternative corporate business vehicle that would give the
benefits of limited liability but would allow its members the flexibility of organizing their
internal structure as
a partnership based on an agreement.
(iv) On registration LLP shall be capable of:
(a) Suing and being sued; and
(b) Acquiring, owning, holding and developing or disposing off property.
(v) A person may cease to be a partner of a LLP in accordance with an agreement with
the other partners or in absence of agreement with the other partners, by giving a notice
in writing of not less than 30 days of his intention to resign as partner.
(vi) In the event of an act carried out by a LLP, or any of its partners, with intend to
defraud creditors of the LLP or any other person or for any fraudulent purpose, the
liability of the LLP and partners, who acted with intend to defraud creditors or for any
fraudulent purpose shall be unlimited for all or any of the debts or other liabilities of the
LLP.
(vii) A contribution of a partner may consist of tangible, movable or immovable or
intangible property or other benefits to the LLP including money, promissory notes, and
other agreements to contribute cash or property, and contracts for services performed
or to be performed.
(viii) While the LLP will be a separate legal entity, liable to the full extent of its assets,
the liability of the partners would be limited to their agreed contribution in the LLP.
Further, no partner would be liable on account of the independent or unauthorized
actions of other partners, thus allowing individual partners to be shielded from joint
liability created by another partner's wrongful business decisions or misconduct.

(ix) An LLP shall be under obligation to maintain annual accounts reflecting true and fair
view of its state of affairs.
(x) Provisions have been made in the Act for corporate actions like mergers,
amalgamations etc.
(xi) There is a provision of voluntary winding up as well as winding up by the Tribunal
.
(xii) There are provisions for inter conversion of LLP into private company etc.
The LLP Act should pave the way for greater corporatization of the Small and Medium
Enterprises – thereby enhancing their access to equity and funds from the market.
De-reservation
The issue of de-reservation has been a subject of animated debate within government
for the last twenty years. The Approach to the Eleventh Five Year Plan notes the
adverse implications of reservation of products for exclusive manufacture by the MSEs
and recommends the policy of progressive dereservation.
To facilitate further investments for technological up gradation and higher productivity in
the micro and small enterprises, 654 items have been taken off the list of items reserved
for exclusive manufacture by the manufacturing micro and small enterprises in the last
few years – reducing it to 21 at present. This has helped the sector in enlarging the
scale of operations and also paved the way for entry of larger enterprises in the
manufacture of these products in keeping with the global standards.
Credit/Finance
Credit is one of the critical inputs for the promotion and development of the micro and
small enterprises. Some of the features of existing credit policy for the MSEs are:
 Priority Sector Lending—Credit to the MSEs is part of the Priority Sector
Lending Policy of the banks. For the public and private sector banks, 40% of the
net bank credit (NBC) is earmarked for the Priority Sector. For the foreign banks,
however, 32% of the NBC is earmarked for the Priority Sector, of which 10% is
earmarked for the MSE sector. Any shortfall in such lending by the foreign banks
has to be deposited in the Small Enterprise Development Fund (SEDF) to be set
up by the Small Industries Development Bank of India (SIDBI).

 Institutional Arrangement The SIDBI is the principal financial institution for
promotion, financing and development of the MSE sector. Apart from extending
financial assistance to the sector, it coordinates the functions of institutions
engaged in similar activities. SIDBI's major operations are in the areas of :
(i) Refinance assistance
(ii) Direct lending, and
(iii) Development and support services.
Commercial banks are important channels of credit dispensation to the sector
and play a pivotal role in financing the working capital requirements, besides
providing term loans (in the form of composite loans). At the State level, State
Financial Corporation’s (SFCs) and twin-functional State Industrial Development
Corporations (SIDCs) are the main sources of long-term finance for the MSE
sector.
Recognizing the importance of easy and adequate availability of credit in
sustainable growth of the MSE sector, the Government has announced a 'Policy
Package for Stepping Up Credit to Small and Medium Enterprises (SMEs)', with
the objective of doubling the flow of credit to this sector within a period of five
years. To ensure better flow of credit to MSEs, the Ministry of MSME is also
implementing the following major schemes:
 Credit Guarantee Scheme-
To ensure better flow of credit to micro and small enterprises by minimizing the
risk perception of banks/financial institutions in lending without collateral security,
the Government launched Credit Guarantee Fund Scheme for Micro and Small
Enterprises in August 2000.
The scheme covers collateral-free credit facility extended by eligible lending
institutions to new and existing micro and small enterprises for loans up to
Rs.100 lakh ($250,000) per borrowing unit. The guarantee cover is up to 75 per
cent of the credit sanctioned [85% in respect of loans up to Rs.5 lakh ($12,500)
and 80% for loans provided to MSEs owned/operated by women and all loans in
the North- East Region].
 Performance & Credit Rating Scheme
The Performance & Credit Rating Scheme for manufacturing MSEs was launched in
April, 2005 with the objective of assisting the MSEs in obtaining performance-cum-credit
rating which would help them in improving performance and also accessing bank credit
on better terms if the rating is high. Under the scheme (implemented by the National
Small Industries Corporation in conjunction with reputed rating agencies), 75% of the

fee charged by the rating agency is reimbursed by the Government subject to a
maximum of Rs.40,000 ($1,000).
 Emerging Sources
Faced with increased competition on account of globalization, MSMEs are
beginning to move from an obsession with bank credit to a variety of other
specialized financial services and options. In recent years, the country has
witnessed increased flow of capital in the form of primary/secondary securities
market, venture capital and private equity, external commercial borrowings,
factoring services, etc. More advanced MSMEs have started realizing the
importance of these alternative sources of funding to raise resources and the
need for adopting better governance norms to take advantage of these funding
sources. The enactment of the Limited Liability Partnership Act, 2008 is expected
to provide a thrust to the MSMEs in their move towards corporatization.
 Competitive Technology
In today's fast paced global business scenario, technology has become more
vital than ever before. With a view to foster the growth of MSME sector in the
country, Government has set up ten state-of-the-art Tool Rooms and Training
Centres. These Tool Rooms provide invaluable service to the Indian industry by
way of precision tooling and providing well trained craftsmen in the area of tool
and die making. These Tool Room are highly proficient in mould and die making
technology and promote precision and quality in the development and
manufacture of sophisticated moulds, dies and tools.
The Tool Rooms are not only equipped with the best technology but are also
abreast with the latest advancements like CAD/CAM, CNC machining for tooling,
Vacuum Heat Treatment, Rapid Prototyping, etc. The Tool Room & Training
Centres also offer various training programmes to meet the wide spectrum of
technical manpower required in the manufacturing sector.
The training programmes are designed with optimum blend of theory and
practice giving the trainees exposure on actual jobs and hands on working
experience. The Tool Rooms have also developed special training programmes
to meet the requirements at international level, which are attended by
participants from all over the globe.

The Ministry of MSME implements the following schemes and programmes for
the up gradation of technology of the MSMEs:
ISO 9000/14001 Certification Fee Reimbursement Scheme
To enhance the competitive strength of the MSEs, the Government introduced a
scheme to incentives technological up gradation, quality improvement and better
environment management by the MSEs. The scheme reimburses 75% of the fees,
subject to a maximum of Rs.75,000 ($2000), for acquiring Quality Management System
(QMS)/ISO 9000 certification and/or Environment Management System (EMS)/ISO
14001 certification by the MSEs.
Micro and Small Enterprises Cluster Development Programme
The Micro and Small Enterprises Cluster Development Programme (MSECDP) is
implemented for holistic development of clusters of MSEs. The programme envisages
measures for capacity building, skill development, technology up gradation of the
enterprises, improved credit delivery, marketing support, setting up of common facility
centers, etc., based on diagnostic studies carried out in consultation with cluster units
and their collectives and management of cluster-wide facilities by the cluster collectives.
Credit Linked Capital Subsidy Scheme
The Credit Linked Capital Subsidy Scheme (CLCSS) aims at facilitating technology up
gradation by providing 15% upfront capital subsidy w.e.f. 29th September, 2005 to
manufacturing MSEs, on institutional finance up to Rs.1 crore ($0.25 million) availed of
by them for induction of well established and improved technologies in the specified
sub-sectors/products approved under the scheme.
National Manufacturing Competitiveness Programme
The National Manufacturing Competitiveness Programme is the nodal programme of
the Government of India to develop global competitiveness among Indian MSMEs.
Conceptualized by the National Manufacturing Competitiveness Council, the
Programme was initiated in 2007-08.
There are ten components under the NMCP targeted at enhancing the entire value
chain of the MSME sector. These are:
(a) Building Awareness on Intellectual Property Rights for the Micro, Small &
Medium Enterprises (MSMEs): The scheme for “Building Awareness on Intellectual
Property Rights (IPR), for the Micro, Small & Medium Enterprises (MSMEs) has been
launched to enable Indian MSMEs to attain global leadership position and to empower

them in using effectively the tools of Intellectual Property Rights (IPR) of innovative
projects.
The main features of the scheme are:
(i) Awareness/Sensitization Programmes on IPR;
(ii) Pilot Studies for Selected Clusters/Groups of Industries;
(iii) Interactive seminars/Workshops;
(iv) Specialized Training;
(v) Assistance for Grant on Patent/GI Registration;
(vi) Setting up of IP Facilitation Centre (IPFC); and
(vii) Interaction with International Agencies. These initiatives are being developed through
Public-Private Partnership (PPP) mode.
(b) Scheme for Providing Support for Entrepreneurial and Managerial
Development of SMEs through Incubators:
The scheme aims at nurturing innovative business ideas (new/indgenious technology,
processes, products, procedures, etc.), which could be commercialized in a year. Under
the scheme, various institutions like Engineering Colleges, Research Labs etc. will be
provided funds up to Rs.6.25 lakh for handholding each new idea/ entrepreneur. The
incubator will provide technology guidance, Workshop and Lab support and linkage to
other agencies for successful launching of the Business and guide the entrepreneur in
establishing the enterprise.
(c) Enabling Manufacturing Sector be Competitive through Quality Management
Standards (QMS) and Quality Technology Tools (QTT):
During the year 2008-09, GoI launched a scheme, 'Enabling Manufacturing Sector be
Competitive through Quality Management Standards (QMS) and Quality Technology
Tools (QTT)' in order to improve quality and productivity in the MSE sector. The scheme
is aimed at improving the quality of the products in the MSE sector and inculcates the
Quality consciousness in this sector. The major activities under this scheme are:
(i) Introduction of Appropriate Modules for Technical Institutions;
(ii) Organizing Awareness Campaigns for MSEs;
(iii) Organizing Competition-Watch (C-Watch);
(iv) Implementation of Quality Management Standards and Quality Technology Tools in
selected MSEs;
(v) Monitoring International Study Missions; and
(vi) Impact Studies of the initiatives.

(d) Mini Tool Rooms under PPP mode:
Under the scheme, 'Mini Tool Rooms under PPP mode', 15 Mini Tool Rooms will be set
up during the 11th Plan period. Competitive bidding from entrepreneurs and
Associations will be invited to set up Tool Rooms with Government support up to Rs.9
crore. They will be more competitive and user friendly as they will not be bound by the
Government procedure and competitiveness will be the only criteria for selection of
promoters of these Tool Rooms. The approved Plan expenditure under the Scheme is
Rs. 135 crore
(e) Marketing Assistance/support to MSEs (Bar Code):
The objective of the 'Marketing Assistance/ Support to MSEs' scheme of NMCP is to
popularize the Bar Code registration and motivate the Small and Micro- Manufacturing
Enterprises to adopt the Bar Code Certification on large scale and to sell their value
added products worldwide and enable higher export price realization. It also helps in
domestic marketing (wholesale & retail). 75% of annual fee (recurring) of Bar Code
certification for the first three years are reimbursed to Micro & Small Entrepreneurs,
under the Scheme.
(f) Lean Manufacturing Competitiveness Programme for MSMEs:
Under the Lean Manufacturing Programme (LMP), MSMEs will be assisted in reducing
their manufacturing costs, through proper personnel management, better space
utilization, scientific inventory management, improved process flows, and reduced
engineering time and so on. LMP also brings improvement in the quality of products and
lowers costs which are essential for competing in national and international markets.
The total GoI contribution is stipulated as Rs. 28.60 crore (approx.) for this scheme. The
broad activities planned under the scheme include Total Productive Maintenance
(TPM), 5S, Visual Control, Standard Operation Procedures, Just in Time, Kanban
System, Cellular Layout, Poka Yoke, TPM, etc. The Scheme has been approved as a
pilot project for Lean Techniques interventions in 100 Mini Clusters.
(g) Promotion of Information & Communication Tools (ICT) in Indian MSME
Sector:
The objective of this programme envisages that some of those clusters of SMEs, which
have quality production and export potential, shall be identified & encouraged and
assisted in adopting ICT applications to achieve competitiveness in the national and
international markets. The total GoI contribution is stipulated as Rs. 160 crore (approx.)
for this scheme. The broad activities planned under the scheme include, identifying
target clusters for ICT intervention, setting up of e-readiness infrastructure, developing

web portals for clusters, skill development of MSME staff in ICT applications,
preparation of local software solutions for MSMEs to enhance their competitiveness,
construction of e-catalogue, e-commerce, etc. and networking MSME cluster portals on
the National Level Portals in order to outreach MSMEs into global markets.
(h) Design Clinics Scheme for MSMEs:
The main objective of the scheme is to bring the MSME sector and design expertise into
a common platform and to provide expert advice and solutions on real time design
problems, resulting in continuous improvement and value-addition for existing products.
It also aims at value-added cost effective solutions. The GoI contribution is stipulated as
Rs.50 crore for this scheme. The broad activities planned under the scheme include
creation of Design Clinics Secretariat along with regional centers for intervention on the
design needs of the MSME sector.
(i) Marketing Assistance and Technology Up gradation Scheme for MSMEs:
The objective of this scheme is to identify and encourage those clusters of MSMEs,
which have quality production and export potential and assist them to achieve
competitiveness in the national and international markets. The scheme aims at
improving the marketing competitiveness of MSME sector by improving their techniques
and technology for promotion of exports. The GoI contribution is stipulated as Rs.19
crore for this scheme. The broad activities planned under the scheme include
technology up gradation in packaging, development of modern marketing techniques,
competition studies, etc.
(j) Technology and Quality Up gradation Support to MSMEs:
The objective of the Scheme is to sensitize the manufacturing (MSME) sector in India to
upgrade their technologies, usage of energy efficient technologies to reduce emissions
of Green House Gases, adoption of other technologies mandated as per the global
standards, improve their quality and reduce cost of production, etc., towards becoming
globally competitive.
The major activities planned under the scheme include Capacity Building of MSMEs
Clusters for Energy Efficiency/Clean Development Interventions, Implementation of
Energy Efficient Technologies in MSME sector, Setting up of Carbon credit aggregation
centers and encouraging MSMEs to acquire product certification licences from
National/International bodies.
Skill Development: The Ministry of Micro, Small & Medium Enterprises promotes the
development of micro and small enterprises in the country with the objective of creating
self employment opportunities and upgrading the relevant skills of existing and potential
entrepreneurs. The entrepreneurship and skill development scheme is implemented by

Office of the DC (MSME) through its network of 58 MSME-DIs and their branches. The
programmes are conducted include Entrepreneurship Development, Entrepreneurship
and Skill Development, Management Development and Business Skill Development.
These programmes are of short duration and the curriculums based on needs of the
industry and are customized, if required by the clients. 20% of the targeted training
programmes are conducted exclusively for the weaker sections of the society
(SC/ST/Women/Physically Handicapped), for which no fee is charged. Besides, a
stipend of Rs.500/- p.m. is provided.
The office of the DC (MSME) also conducts vocational and educational training through
its Regional Testing Centres, Field Testing Stations and autonomous bodies like Tool
Rooms and Technology Development Centres (TDCs).
This long term, short term, trade/field-specific and industry-specific tailor-made courses
also include specialized programmes for Engineers, Diploma holders so that their
absorption by the industry is immediate. A good number of trainees have set up their
own enterprises in creating employment opportunities.
The Ministry is at present training about 3 lakh persons per annum both for business
and technical skill development, which is among the largest programme by any single
Ministry in India. The Ministry is also focusing on socially backward groups and on least
developed areas under its 'Outreach Programme'.
Marketing and Procurement
Under Government Stores Purchase Programme, various facilities are provided to
enterprises registered with National Small Industries Corporation (NSIC) in order to
assist them for marketing their products in competitive environment.
These facilities are:
(i) issue of Tender Sets free of cost;
(ii) Exemption from payment of Earnest Money Deposit;
(iii) Waiver of Security Deposit up to the Monetary Limit for which the unit is registered;
and
(iv) price preference up to 15% over the quotation of large-scale units. In addition to
these facilities/benefits, 358 items have also been reserved for exclusive purchase from
the MSE Sector. However, as these guidelines were/are not of a mandatory nature, the
same has failed to achieve the desired results. To assist the MSEs in marketing of their
products, Section 12 of the new MSMED Act enjoins the formulation of a scheme of
preferential procurement of goods/services produced/rendered by MSEs both at the
Central and State/UT levels. Once formulated, the procurement scheme may be more
effective in providing the much-needed marketing support that MSEs seek so
desperately. Each Ministry/Department, CPSU, etc., would have to make specific
mention of the compliance of the preference policy in its Annual Report to be tabled in
Parliament.

Export Promotion
Export promotion from the MSE sector has been accorded a high priority. To help MSEs
in exporting their products, the following facilities/incentives are provided:
(i) Products of MSE exporters are displayed in international exhibitions and the
expenditure incurred is reimbursed by the Government;
(ii) To acquaint MSE exporters with latest packaging standards, techniques, etc.,
training programme on packaging for exporters are organized in various parts of the
country in association with the Indian Institute of Packaging;
(iii) Under the MSE Marketing Development Assistance (MDA) Scheme, assistance is
provided to individuals for participation in overseas fairs/ exhibitions, overseas study
tours, or tours of individuals as member of a trade delegation going abroad.
The Scheme also offers assistance for :
(a) Sector specific market study by MSE Associations/Export Promotion
Councils/Federation of Indian Export Organisation;
(b) Initiating/contesting anti-dumping cases by MSE Associations; and
(c) Reimbursement of 75 per cent of the one time registration fee and annual fee
(Recurring for first three years) charged by GSI India (formerly EAN India) for
Adoption of Bar Coding.
Infrastructure Development
For setting up of industrial estates and to develop infrastructure facilities like power
distribution network, water, telecommunication, drainage and pollution control facilities,
roads, banks, raw materials, storage and marketing outlets, common service facilities
and technological back up services, etc., for MSMEs, the Integrated Infrastructural
Development (IID) Scheme was launched in 1994. The scheme covers rural as well as
urban areas with a provision of 50 per cent reservation for rural areas and 50 per cent
industrial plots are to be reserved for the micro enterprises .
The Scheme also provides for up gradation/strengthening of the infrastructural facilities
in the existing industrial estates. The estimated cost (excluding cost of land) to set up an
IID Centre is Rs.5 crore ($1.25 million). Central Government provides 40 per cent in
case of general States and up to 80% for North East Region (including Sikkim), J&K,
H.P. and Uttarakhand, as grant and remaining amount could be loan from
SIDBI/Banks/Financial Institutions or the State Funds. The IID Scheme has been
subsumed under the Micro and Small Enterprise Cluster Development Programme
(MSECDP). All the features of the IID Scheme have been retained and will be covered
as “New Clusters” under MSECDP.

Fiscal Concessions
Under the General Excise Exemption Scheme, full excise exemption up to turnover of
$375 thousand per annum is provided to enterprises having annual turnover of up to $1
million. However, the limits of excise exemptions has encouraged tendency among
MSEs is to go in for horizontal expansion (i.e., fragmentation) rather than vertical
expansion and upward graduation into medium and large enterprises. For incentivizing
such graduation of small to medium/large enterprises so as to enable them to achieve
economies of scale, extension of excise exemptions to the graduating medium
enterprises on a tapering scale is under consideration of the Government.
Strengthening of Database
A reliable database is the key input in any policy decision-making process. This is more
so for the MSME sector in view of its large size and wide disparity among the
enterprises within the sector. The Ministry has so far conducted three Census in the
year 1971-72, 1992-93 and 2002 03 for strengthening/updating the database on MSE
sector. However, the long gap between the Census has limited the reliability of the MSE
database. To strengthen the database for the MSME Sector, statistics and information
will now be collected in respect of number of units, employment, rate of growth, share of
GDP, value of production, extent of sickness/closure, exports and all other relevant
parameters of micro, small and medium enterprises, including khadi and village
industry, through annual sample surveys and quinquennial census. The quinquennial
census and annual sample surveys of MSMEs will also collect data on women-owned
and / or managed enterprises.
Inclusiveness
The Ministry of MSME launched a special programme, namely, 'Outreach Programme
for Skill Development in Less Developed Areas' in September, 2006. Under this
programme, the field offices of the Ministry organize short-term skill development
programmes in the less developed areas. Such short-term courses are tailor-made for
these areas so as to enable trainees to get employment or start self-employment
ventures. These programmes are of short duration of 1-3 weeks and the activity
selected for trainees are relevant to the local requirement. The target group consist
wholly or partly of disadvantaged sections.
Further, under the recently announced Promotional Package for MSEs, 20% of Skill
Development Programmes have been reserved for weaker sections along with the
provision of a stipend of Rs.500 per capita per month exclusively for SCs/STs, women
and physically handicapped. In case of the regular EDP/MDP/Skill Development
programmes, a nominal fee of Rs.100 is charged. However, there is no fee for SCs/STs,
women and physically handicapped candidates.

India's pioneering policies for the development of MSEs offers case studies for the
developing world. Government has moved away, though not yet fully, from its role of
direct interventions to that of a friend and facilitator. There is growing realization that
protection in the form of reservation needs to be replaced with easy access to capital,
technology and skill development to integrate the MSMEs more firmly with the domestic
and global economy. And these are now the specific target areas of the Ministry of
MSME.
INDIAN MSMEs: AREAS OF COOPERATION
India benefited immensely from experience of several countries, especially in the field of
technology. However, the rich Indian experience gained in the last sixty years in the
MSME sector could also be of equal use for both developing as well as developed
countries.
Some of the areas that offer ample opportunities for cooperation in the MSME sector
are:
 Fee-based consultancy services and training in the following areas:
i. Capacity Building of Entrepreneurs and Technical Manpower of SMEs;
ii. Policy & Institutional Framework for SME Promotion, Development and
Enhancing Competitiveness;
iii. Entrepreneurship Development; and
iv. Business Development Services.
 Establishment of Turnkey Projects for setting up manufacturing MSMEs on
commercial terms.
i. Skill up gradation programmes in selected areas such as CNC Machining, Sheet-
Metal Technologies, CAD & CAM Designing, Wool Processing & Weaving,
Leather Technology, Plastic Technology, Wood Working, etc.
ii. Conducting surveys and studies to identify the tooling and related skill
requirements in specific areas or regions like hilly/backward/indigenous.
iii. Providing turnkey assistance to set up Tool Rooms & Training Centres.
iv. Providing consultancy to existing manufacturing SME in upgrading their
production facilities, selection of machine tools, design consultancy for tools,
moulds, dies, jigs & fixtures, etc.
v. Providing specialized/tailor-made training courses for specific target groups.
vi. Providing consultancy to existing training institutes in course design and
curriculum development including trainers training programmes.
vii. Assistance in product design, tool design and manufacturing of intricate toolings.
viii. High precision tools, moulds, die, jigs & fixtures etc. as per design/specifications
of local industry.
ix. Product development & rapid prototyping services.
INDIAN MSMEs: AREAS OF COO

INITIATIVES OF THE MINISTRY OF MICRO, SMALL AND MEDIUM
ENTERPRISES (MSME)IN RECENT YEARS
1. Promulgation of MSMED Act, 2006
In a significant policy initiative, the Government has enacted ‗Micro, Small and Medium
Enterprises Development Act, 2006‘, which aims to facilitate the promotion and
development and enhance the competitiveness of MSMEs. The Act, which came into
force from 2nd October 2006, fulfilled a long-cherished demand of this sector. Apart
from giving legal strength to the definitions of micro, small and medium enterprises, this
Act also contains penal provisions relating to the delayed payment to these enterprises.
2. Khadi and Village Industries Commission Act, 1956
The Khadi and Village Industries Commission Act, 1956 has been comprehensively
amended in 2006, introducing several new features to facilitate professionalism in the
operations of the Commission as well as field-level formal and structured consultations
with all segments of stakeholders. A new Commission has also been constituted in Nov.
2011.
3. Prime Minister’s Employment Generation Programme
A national level credit linked subsidy scheme, namely, ‗Prime Minister‘s Employment
Generation Programme (PMEGP) ‘was introduced in August 2008 by merging erstwhile
PMRY and REGP schemes of this Ministry. Under this programme, financial assistance
is provided for setting up of micro enterprises each costing up to Rs.10 lakh in service
sector and Rs.25 lakh in manufacturing sector. The assistance is provided in the form of
subsidy up to 25 per cent (35 per cent for Special category including weaker sections)
of the project cost in rural areas while it is 15 per cent (25 per cent for Special category
including weaker sections) for urban areas.
During 2012-13, disbursements were made in 56,997 cases utilizing Rs.1078.61 crore
as margin money subsidy. The estimated employment generation is 4.28 lakh persons.
An amount of Rs.1418.28 crore including Rs.1380 crore margin money subsidy has
been provided in BE 2013-14.

4. Procurement Policy for MSEs
A Public Procurement Policy for MSEs was notified in March 2012. The policy
envisages that every Central Ministry/PSU shall set an annual goal for procurement
from the MSE sector with the objective of achieving minimum 20% of the total annual
purchases from MSEs in a period of three years. Of this, 4% will be earmarked for
procurement from MSEs owned by SC/ST entrepreneurs. The policy will help to
promote MSEs by improving their market access and competitiveness through
increased participation by MSEs in Government purchases and encouraging linkages
between MSEs and large enterprises.
5. Task Force on MSMEs
A Task Force under the chairmanship of the Principal Secretary to Prime Minister was
constituted to address the issues of MSME sector. The Task Force, in its Report, has
made recommendations in the areas of credit, marketing, labour, rehabilitation and exit
policy, infrastructure, technology, skill development, taxation and development of
MSMEs in the North-East and Jammu & Kashmir. A large number of recommendations
have been implemented. A Council on MSMEs under the chairmanship of Hon‘ble
Prime Minister has been constituted to lay down the broad policy guidelines and review
the development of the MSME sector. For ensuring timely/speedy implementation of the
recommendations of the Task Force and follow-up on the decisions of the Prime
Minister‘s Council on MSMEs, a Steering Group under the chairmanship of Principal
Secretary to the Prime Minister has also been constituted.
6. 4th All India Census of MSMEs
The 4th All India Census of MSMEs (2006-07), which was launched in May 2008, were
released during 2011-12. The results reveal that there are 36.2 crore MSMEs in 2006-
07, providing employment to over 80 crore persons. This is the first Census after the
enactment of the MSMED Act, 2006 and includes, for the first time, medium enterprises
also.
7. Enhanced Credit Flow to the MSE Sector
For strengthening the delivery of credit to the MSEs, the Government announced a
‗Policy Package for Stepping up Credit to Small and Medium Enterprises (SME)‘ in
August 2005 for doubling the credit flow to this sector within a period of five years. This
has resulted in a significant increase in the credit flow from Public Sector Banks (PSBs)
to the micro and small enterprises (MSE) sector — with the outstanding credit of public
sector banks increasing from Rs.1,02,550 crore at the end of March 2007 to
Rs.2,78,398 crore at the end of March 2010. It has further enhanced to Rs.3,96,343
crore at the end of March 2012. With constant monitoring and efforts made by the
Government, the credit flow from Public Sector Banks (PSBs) to the MSE sector has

registered a growth of 47.4%, 26.6% and 45.4% during 2007-08, 2008-09 and 2009-10
respectively — higher than the stipulated 20% in the Policy Package. The growth of
credit during 2011-12 and 2012-13 have been 5% and 25% respectively.
8. Credit Guarantee Scheme
The Government has set up a Credit Guarantee Fund to provide relief to those micro
and small entrepreneurs who are unable to pledge collateral security in order to obtain
loans for the development of their enterprises. The guarantee cover provided is up to
75% of the credit facility up to Rs. 50 lakh(85% for loans up to Rs. 5 lakh provided to
micro enterprises, 80% for MSEs owned/operated by Women and all loans to NER)with
a uniform guarantee at 50% of the credit exposure above Rs. 50 lakh and up to Rs. 100
lakh. A composite all-in annual guarantee fee of 1.0 % per annum of the credit facility
sanctioned (0.75% for credit facility up to Rs. 5 lakh and 0.85% for above Rs.5 lakh and
up to Rs.100 lakh for women, micro enterprises and units in NER including Sikkim) is
now being charged. As a result, the scheme has been able to overcome the initial
inhibition of bankers and is steadily gaining in acceptance. Further, efforts made to
enhance the awareness have led to the coverage of 14,19,807 proposals ( for
guarantee cover for a sanctioned loan amount of Rs. 70026.28 crore) at the end of
March 2014. The Government is making concerted efforts to further enhance the
awareness of the scheme throughout the country for enhancing the coverage of the
Scheme.
9. National Manufacturing Competitiveness Programme
Ensuring the growth of Small Scale Sector at a healthy rate is crucial for the overall growth of
Manufacturing Sector as also the National Economy. For this to happen the small scale sector
has to become competitive. In the 2005-06 Budget, the Government announced formulation of a
National Competitiveness Programme, particularly to support the Small and Medium Enterprises
(SMEs) in their endeavor to become competitive. Accordingly, the National Manufacturing
Competitiveness Council (NMCP) has finalized a five year National Manufacturing
Competitiveness Programme (NMCP).
The National Manufacturing Competitiveness Programme (NMCP) highlights the needs
for enhancing the competitiveness of Indian Manufacturing sector. This is determined by
measuring the productivity vis-à-vis the use of its human capital and natural resources.

10. MICRO & SMALL ENTERPRISES CLUSTER DEVELOPMENT PROGRAMME
(MSE-CDP)
The Micro and Small Enterprises – Cluster Development Programme (MSE-CDP) is
being implemented for holistic and integrated development of micro and small
enterprises in clusters through Soft Interventions (such as capacity building, marketing
development, export promotion, skill development, technology up gradation, organizing
workshops, seminars, training, study visits, exposure visits, etc.), Hard Interventions
(setting up of Common Facility Centers) and Infrastructure Development
(create/upgrade infrastructural facilities in the new/existing industrial areas/ clusters of
MSEs).
Assistance is provided for the following activities under the scheme-
(i) Preparation of Diagnostic Study Report with Government of India (GoI) grant of
maximum Rs 2.50 lakh (Rs.1.00 lakh for filed offices of the Ministry of MSME).
(ii) Soft Interventions with GoI grant of 75% of the sanctioned amount of the maximum
project cost of Rs 25.00 lakh per cluster. For NE & Hill States, Clusters with more than
50% (a) micro/ village (b) women owned (c) SC/ST units, the GoI grant will be 90%.
(iii) Detailed Project Report (DPR) with GoI grant of maximum Rs 5.00 lakh for
preparation of a technical feasible and financially viable project report.
(iv) Hard Interventions in the form of tangible assets like Common Facility Centre having
machinery and equipment for critical processes, research and development, testing, etc.
with GoI grant upto 70% of the cost of project of maximum Rs 15.00 crore. For NE & Hill
States, Clusters with more than 50% (a) micro/ village (b) women owned (c) SC/ST
units, the GoI grant will be 90%. 7
(v) Infrastructure Development with GoI grant of upto 60% of the cost of project of Rs
10.00 crore, excluding cost of land. GoI grant will be 80% for projects in NE & Hill
States, industrial areas/ estates with more than 50% (a) micro (b) women owned (c)
SC/ST units.
(vi) The GoI assistance shall also be available to Associations of Women Entrepreneurs
for establishing exhibition centres at central places for display and sale of products of
women owned micro and small enterprises @ 40% of the project cost.
Cluster Development: A total of 921 interventions in various clusters spread over 28
States and 1 UTs in the country have so far been taken under the programme for
Diagnostic Study, Soft Interventions and Hard Interventions (CFCs). Further, 170
projects have been taken up for infrastructure development under the scheme.
PERATION

11. Technology Centre Systems Programme (TCSP)
Ministry of Micro, Small and Medium Enterprises, Government of India have established
18 Technology Centres (TCs) earlier known as Tool Rooms (10 Nos) and Technology
Development Centres (8 Nos) spread across the country. The Technology Centers’
primary focus is to support industries particularly MSMEs in the country through access
to advanced technologies & providing technical advisory support as well as skilled
manpower by offering opportunities for technical skill development to the youth at
varying levels ranging from School Dropouts to Graduate Engineers.
Recent evaluation studies of TCs have found a strong need to replicate them at more
places. In view of important role played by these Centres for providing thrust to
manufacturing sector, Government is considering to upgrade and expand network of
MSME Technology Centres at an estimated cost of Rs. 2200 crore with World Bank
funding.
Towards achieving this objective, Ministry of MSME, Government of India is in the
process of establishing 15 Technology Centers (TCs) and upgrading / modernizing the
existing TCs under Technology Centre Systems Programme (TCSP).
The Programme is expected to improve the competitiveness of Micro, Small and
Medium Enterprises (MSMEs) in key manufacturing industries across India by
facilitating improved access to technology and business advisory services as well as
skilled workers through systems of financially sustainable Technology Centres.
The Proposed Program will reinforce the technical capability of the Technology Centers
as well as industry sector to perform well at both National and International levels.
12. Credit Linked Capital Subsidy Scheme
The Ministry of Micro, Small and Medium Enterprises is operating a Scheme, namely,
Credit Linked Subsidy Scheme (CLCSS) for technology up gradation of Micro and Small
Enterprises (MSEs). The Scheme aims at facilitating technology up gradation of Micro
and Small Enterprises by providing 15% Capital Subsidy (limited to maximum Rs. 15.00
lakh) for purchase of plant and machinery. Maximum limit of eligible loan for calculation
of subsidy under Scheme is Rs. 100.00 lakh. Presently, 51 well established and
improved technologies/Sub-Sectors have been approved under the Scheme. For
effective and transparent implementation of the Scheme, Ministry has started ―online
Application and Tracking system‖ w.e.f 01.10.2013 for online lodgment of subsidy
claims by nodal banks. Since inception of the Scheme, 28,287 units have availed
subsidy of Rs. 1,619.33 crore up to 31.03.2014.

13. Entrepreneurship and Skill Development
In today‘s fast paced economic and industrial scenario, technology has become more
vital than ever before. Its development and absorption are key ingredients for the overall
economic development of a nation. This is even more relevant in the context of
developing countries like India where technological development and employment
generation have to go hand to hand. Thus the Ministry of MSME, which has the overall
mandate for the development of MSMEs, has been undertaking a number of
programmes for encouraging entrepreneurship and skill development amongst youth to
fulfill the need of skilled manpower by the industry. These programmes are conducted
through a nationwide network of establishments under office of Development
Commissioner (MSME), Khadi and village Industries Commission (KVIC), National
Small Industries Corporation (NSIC), Coir Board and various other organizations under
the Ministry.
14. Rajiv Gandhi Udyami Mitra Yojana
The scheme aims to promote and support establishment of new micro and small enterprises
through handholding of potential first generation entrepreneurs, who have already
successfully completed Entrepreneurship Development Programme (EDP)/ Skill
Development Programme (SDP) / Entrepreneurship-cum-Skill Development Programme
(ESDP) of at least two weeks‘ duration, or have undergone vocational training (VT) from
ITIs. One of the main objectives of handholding is to guide and facilitate the potential
entrepreneurs in dealing with various procedural and legal hurdles and completion of
various formalities which are required for setting up and running of enterprise
successfully and to save them from harassment at the hands of various regulatory
agencies for want of required compliances. It will not only increase the proportion of
potential entrepreneurs trained under various EDPs/ SDPs/ESDPs/ VT in setting up
their enterprises, more importantly, it will also enhance survival / success rate of newly
set up enterprises.
15. Performance and Credit Rating Scheme
To sensitize the MSE sector on the need for credit rating and encourage the MSEs to
maintain good financial track record enabling them to earn higher rating for their credit
requirements, the Government in April 2005 launched the ‗Performance and Credit
Rating Scheme‘. The implementation of the scheme is through National Small Industries
Corporation (NSIC). Reputed Rating Agencies have been empanelled by NSIC from
which the MSEs can select the one to be engaged by it for obtaining the rating. The

Ministry of MSME subsidises the cost of rating by sharing 75% of the fee charged by the
Rating Agency, subject to a ceiling of Rs.40,000.
16. National Small Industries Corporation (NSIC)
National Small Industries Corporation Ltd. (NSIC), is an ISO 9001:2008 certified
Government of India Enterprise under Ministry of Micro, Small and Medium Enterprises
(MSME). NSIC has been working to fulfill its mission of promoting, aiding and fostering
the growth of small industries and industry related Micro, Small and Medium Enterprises
in the country. Over a period of five decades of transition, growth and development,
NSIC has proved its strength within the country and abroad by promoting
modernization, upgradation of technology, quality consciousness, strengthening
linkages with large medium enterprises and enhancing exports – projects and products
from small enterprises.
NSIC operates through countrywide network of offices and Technical Centres in the
country. To manage operations in African countries, NSIC operates from its office in
Johannesburg, South Africa. In addition, NSIC has set up Training cum Incubation
Centre & with a large professional man power; NSIC provides a package of services as
per the needs of MSME sector.
NSIC carries forward its mission to assist small enterprises with a set of specially
tailored schemes designed to put them in a competitive and advantageous position. The
schemes comprise of facilitating marketing support, credit support, technology support
and other support services.
17. Khadi Reform Development Programme (KRDP)
In order to revitalize and reform the traditional khadi sector with enhanced sustainability
of khadi, increased artisans welfare, increased incomes and employment opportunities
for spinners and weavers with lesser dependence on Government grants, a Khadi
Reform and Development Programme was formulated by the Ministry of MSME in
consultation with Khadi and Village Industries Commission (KVIC), Asian Development
Bank (ADB), Department of Economic Affairs (DEA) and M/s Price Waterhouse
Coopers (PWC). This programme is proposed to be implemented in 300 selected khadi
institutions willing to undertake the identified reforms. The DEA has arranged a sum of
US$ 150 million equivalent to Rs.717 crore (approx.) from ADB to be given to KVIC as
grant in four tranches over a period of 36 months. After completion of procedural
formalities, and signing of necessary agreement and announcement by ADB, the first
tranche of Rs.96 crore was released to KVIC in February, 2010. ‗Khadi Mark‘, a mark
to establish genuineness of Khadi was launched in September 2013 under the KRDP.

18. Market Development Assistance (MDA) Scheme
The scheme has been introduced w.e.f. 01.04.2010 and envisages financial assistance
@ 20% on value of production of khadi and polyvastra which will be shared among
artisans, producing institutions and selling institutions in the ratio 25:30:45. The scheme
has been introduced on the basis of recommendations of several committees
constituted during the past few decades and after running several pilot projects in the
past. The need had arisen because Khadi production so far was not based on market
demand or performance and the rebate system did not benefit the spinners and
weavers.
Also KVIC was constrained to devote most of its resources for administration of rebate;
to the detriment of its remaining responsibilities regarding development of the sector.
MDA seeks to rectify this imbalance and provide flexibility/ freedom to the khadi
institutions to take innovative measures to improve its marketing infrastructure such as
renovation of outlets, training sales persons, computerization of sales, design
improvement, publicity, discount to customers, improved equipments of production,
training of artisans and capacity building so that khadi can attract more customers not
just because of discount, but because of its quality design and appeal. Most importantly,
for the first time a definite share of 25% of MDA has been earmarked for spinners and
weavers which will give them a prominent role in the entire khadi chain of activities. An
amount of Rs.126.94 crore has been released to KVIC during 2013-14 towards MDA.
19. Workshed Scheme for Khadi Artisans
Under this scheme, assistance is provided for construction of Worksheds for Khadi
artisans for better work environment. Financial assistance of Rs.8.23 crore for
establishment of workshed has been provided to 4444 artisans in 2013-14.
20. Scheme for Enhancing Productivity & Competitiveness of Khadi Industry and
Artisans
The scheme aims to provide financial assistance to 200 of the ‗A+‘ and ‗A‘ category
khadi institutions of which 50 institutions would be those which are managed exclusively
by beneficiaries belonging to Scheduled Castes/Scheduled Tribes to make them
competitive with more market driven and profitable production by replacement of
obsolete and old machinery and equipment.

21. Scheme for Rejuvenation, Modernization and Technological Up gradation of
Coir Industry
Under the scheme being implemented since 2007-08, assistance is provided to
spinners and tiny household sector for replacement of outdated ratts/looms and for
constructing work sheds so as to increase production and earnings of workers.
22. Scheme of Fund for Regeneration of Traditional Industries (SFURTI)
This Scheme was launched in 2005 for regeneration of traditional industries identified
clusters in khadi, village industries and coir sectors with a view to make these industries
more productive and competitive and increase the employment opportunities in rural
and semi-urban areas. The objective of the Scheme is to establish a regenerated,
holistic, sustainable and replicable model of integrated cluster-based development of
traditional industries in khadi, village and coir sectors. So far 96 clusters (khadi – 29,
Village Industries – 47 and Coir - 20) have been developed under SFURTI.
It is proposed to develop 800 clusters during the XII Plan.
23. Mahatma Gandhi Institute for Rural Industrialization (MGIRI)
A national level institute named MGIRI has been established at Wardha, Maharashtra
as a society under Societies Registration Act, 1860 by revamping Jamnalal Bajaj
Central Research Institute has in association with IIT, Delhi for strengthening the R& D
activities in khadi and village industry sectors. The main objectives of the institute are as
under:
co-exists with the main stream.
s to Gram Swaraj

24. National Board for MSMEs
The Government has set up for the first time, a statutory National Board for Micro, Small
and Medium Enterprises so as to bring together the representatives of different sub-
sectors of MSMEs, along with policy-makers, bankers, trade unions and others — in
order to move towards cohesive development of the sector. The Board has been
meeting periodically. The Board has recently been re-constituted on 27th May 2013.The
deliberations and directions of the National Board pave the way to guide and develop
enterprises in this sector — to become more competitive and self-reliant.
25. Announcements for MSME sector in Union Budget,2013-14
Hon‘ble Union Finance Minister, while presenting Union Budget 2013-14 to the
Parliament, made various announcements specifically for MSME sector, as under:
 Micro, small and medium enterprises (MSME) have a large share of jobs,
production and exports. Too many of them do not grow because of the fear of
losing the benefits associated with staying small or medium. To encourage them
to grow, the benefits or preferences enjoyed by them will now stay with them for
upto three years after they grow out of the category in which they obtained the
benefit. To begin with, the non-tax benefits would be made available to an MSME
unit for three years after it graduates to a higher category.
 To provide greater support to MSMEs, the refinancing capability of SIDBI has
been enhanced from the current level of Rs.5,000 crore to Rs.10,000 crore per
year.
 SIDBI set up the India Microfinance Equity Fund in 2011-12 with budgetary
support of Rs.100 crore to provide equity and quasi-equity to Micro Finance
Institutions (MFI). An amount of Rs.104 crore has been committed to 37 MFIs.
Earlier Rs.100 crore were allocated to the IME Fund in the budget and now
another sum of Rs.100 crore has been provided in present budget for the Fund.
 The Factoring Act 2011 has been passed by Parliament. A provision of a corpus
of Rs.500 crore to SIDBI has been made in the present budget to set up a Credit
Guarantee Fund for factoring.
 Tool Rooms and Technology Development Centres set up by the Ministry of
Micro, Small and Medium Enterprises have done well in extending technology

and design support to small businesses. Finance Minister has proposed to
provide, with World Bank assistance, a sum of Rs.2,200 crore during the 12th
Plan period to set up 15 additional Centres.
 Incubators play an important role in mentoring new businesses which start as a
small or medium business. The new Companies Bill obliges companies to spend
2 percent of average net profits under Corporate Social Responsibility (CSR).
The Ministry of Corporate Affairs will notify that funds provided to technology
incubators located within academic institutions and approved by the Ministry of
Science and Technology or Ministry of MSME will qualify as CSR expenditure.
Appropriate action has been initiated by the concerned Govt. agencies for
implementation of these announcements.
26. Launch of MSME Virtual Clusters
An initiative of Ministry of Micro, small and Medium Enterprise, Virtual Clusters during
the Presentation Ceremony of National Awards to Micro, Small and Medium Enterprises
at a function organized in Vigyan Bhavan, New Delhi.
An Initiative of Ministry of Micro, Small and Medium Enterprises, virtual Clusters
conceived as supplementing Physical Clusters, is a dedicated Web-portal which will
enable the small businesses located anywhere in the country as well as the other
stakeholders; Banks and other financial institutions; Central State and other
Government bodies; NGO, Industry Experts, Consultants and trainers; Academia;
Research & Technical Institutions etc. to register instantly thereon and avail prompt
linkages with each other.
This Web-platform would facilitate the stakeholders to leverage the expertise of each
other for their mutual growth and benefit. The web portal would be administered by the
National Institute for Entrepreneurship and Small Business Development (NIESBUD),
an organization of the Ministry of MSME.
27. Inter-Ministerial Committee for Accelerating Manufacturing in MSME
An Inter-Ministerial Committee for Accelerating Manufacturing in MSME was set up
under the Chairmanship of Secretary (MSME). The Committee submitted its report in
September 2013. The Committee has made a number of recommendations covering
issues of regulation, finance, infrastructure, technology and market through the different
stage of the life cycles of MSMEs.

Introduction to msme sector

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