PRESENTATION ON DEVELOPMENT OF SMEs IN INDIA & RETAIL INDUSTRY

CONTRIBUTION OF SMEs TO THE ECONOMY -

REGIONAL DEVELOPMENT COMPLEMENTARY ROLE TO SUPPORT THE LARGE SECTOR BASIS FOR INNOVATIONS AND ADAPTATIONS EMPLOYMENT GENERATION DIRECT MULTIPLIER EFFECT OF THE PERFORMANCE ON THE GROWTH OF THE NATIONAL ECONOMY
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PREDOMINANT ROLE OF SMEs IN THE ECONOMY DUE TO

ITS NUMBER VARIETY INVOLVEMENT IN ALL ASPECTS OF THE ECONOMY

INDIAN DEFINITION OF SMALL SCALE INDUSTRY (SSI)

INVESTMENT IN PLANT AND MACHINERY DOES NOT EXCEED Rs. 10 MILLION (US$1-Rs.49) WHETHER HELD ON OWNERSHIP/LEASE/HIRE PURCHASE

THE THIRD ALL-INDIA CENSUS OF SMALL SCALE ALLINDUSTRIES (AUGUST 2004)

Size approx.10.52 million units compared to 80,000 units in the late 1940s Total employment contribution contribution of 2.37 Export contribution 24.93 million with a per unit

    

Rs.14,199 crores 50,606

Number of exporting units Contribution to GDP 7%

Approx. 7,500 different products produced by SSIs in India Out of 878 items reserved for the sector, only 672 are actually produced by SSIs
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Based on products, SMEs in India can be broadly classified into the following groups:
     

Food products Chemicals and chemical products Basic metal industry Electrical machinery and parts Rubber and plastic products Machinery and parts excluding electrical goods Hosiery and garments Wood products Nonmetallic mineral products

          

Paper products and Printing Transport equipment and parts Leather and leather products Miscellaneous manufacturing industries Other services and products Beverages, tobacco / tobacco products Repair services Cotton textiles Wool, silk and synthetic fibre textiles Jute, hemp and mesta textiles Other services
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Contributions of Indian SSIs to total exports by sector (%)

Product
Sporting goods ReadyReady-made garments Woollen garments, knitwear Processed foods Marine Products Leather products Plastic products Cosmetics, basic chemicals & pharmaceuticals Engineering goods

SSI share in total exports

100 90 35 65 29 80 45 55 30

Indian Governments development strategy

Protective discrimination e.g. reservation, priority-sector lending Integration between large and small e.g. subcontracting, ancillarization and vendor development Institutional support through a network of testing centres, tool rooms, entrepreneurship development institutes The setting up of a separate Ministry of Small Scale Industries in 1999 marked a major step towards providing a policy platform for the SME sector.
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CHALLENGES FACED BY SME SECTOR IN INDIA

The term economic globalization implies an evolving pattern of cross-border enterprise activities. It implies a change, broadly on the following lines :
Pre-Globalisation Post-Globalisation

Local/National Investment Collaborations Single-firm activity Manufacturing for selfidentified market Local market Rigid production system Limited economic interest Protective policies Strategic alliances Outsourcinglocal/international World market Flexible production system Focus on growth Survival of the fittest
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NEED FOR NEW APPROACH

New policy for development of SMEs in regional setting by encouraging Foreign Direct Investment Innovative bottom-up development policies endowing bottomindividuals, firms and territories with factors to place their skills, products or services in the global competitive market Encouraging Private-public partnerships which will generate Privateemployment and stimulate economic activity Modernizing the export-oriented clusters for enhancing global exportcompetitiveness Consortia approach for enhancing exports from SMEs Fostering linkages between Indian SME clusters and similar product cluster overseas for mutual benefit Organizing product specific trade fairs with international participation Concentrate on developing and promoting service sector
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RETAIL INDUSTRY IN INDIA

Some countries include retailing in its definition of SMEs alongwith manufacturing and services Indian retailing largest industry 14% of GDP  Second largest source of employment next to agriculture  Organized retailing accounts for just 3% of the total retail market; projected to grow at 25-30 per cent a year 25 Annual growth rate of 8.5% and amounting to Rs. 200 billion in 2003-04 2003 Untapped segment amounts to a whopping Rs. 9,800 billion (approx.$222 billion)  Indias estimated total retail market to be around $202.6 billion which is expected to grow at a compounded 30% over the next five years Government unlikely to announce any decision on allowing FDI in retail. Revised safeguards for ensuring livelihood protection to mom & pop stores are yet to be finalized FDI regime would provide opportunity for joint ventures, ease financial crunch, bring in technical know-how and best management practices know-

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ALL INDIA ASSOCIATION OF INDUSTRIES Building bridges of prosperity through Industry

Serving industry since 1956 Indias premier business networking organisation and a centre for excellence for international trade Membership - open to all sectors of the industry including agriculture, service, entertainment, finance and also to professionals Representation - AIAI has representations on various national and regional governmental bodies and financial institutions to address the issues of its members. Agreements for co-operation The All India Association of Industries (AIAI) has signed agreements for co-operation with 70 international Trade Promotion Organizations and Chambers of Commerce across the globe to promote bilateral trade, exchange of trade-related information, trade delegations, joint ventures and technology transfers
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OVERSEAS MEMBERSHIP of All India Association of Industries

Our Overseas Membership scheme allows non-Indian based companies with no Indian registered office to : Make new contacts by being part of one of Indias biggest business organisations Use AIAIs Members Lounge as your base and meeting place and enjoy a range of member benefits when visiting India. Located in the heart of the business capital, the Members lounge offers a space from where you can work, connect your laptop, use the internet or invite your Indian clients for meetings. Refreshments available. Raise your company profile by association with the recognised and respected AIAI brand Receive the AIAI Newsletter AIAIs team can help you identify organisations in India which can help you with your business Make new business contacts and gain information by participating in AIAIs programme of networking events and seminars How much does it cost ? Our Overseas Membership costs US$ 225/- per annum. Payment must be made on-line by credit card Terms and conditions Only non-Indian companies with no office in India may apply for overseas membership AIAI reserves the right to refuse an application from any overseas company at our discretion AIAI reserves the right to revoke membership at any point without refund AIAI is not responsible for the conduct or actions of its members
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ECONOMIC INDICATORS (2004-2005) (2004       

Population GDP (in $ billion) GDP growth rate (%) Foreign Exchange Reserves (US$ billion) Inflation (%) Agriculture (% of GDP) Industry (% of GDP) Services, etc. (% of GDP)
Source : Tata Services

1 billion+ 520 7.0 143.5 4.0 22 28 48

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MARKET OPPORTUNITIES

  

 

Womens wear - 37.5% of the clothing market US$3.93bn Womens western wear - $ 157 million Organized apparel retailing to grow 5 times over next 5 years Fire fighting equipment estimated at about $34-40 million $34E-commerce
  

PC penetration 14 million users (March 2005) E-commerce activity in 2004 US$ 350 million (NASSCOM) B2C E-commerce to grow to $489 million by end of 2006 E-

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INDIA
      

OFFERS

Good command on English language Large, well-trained, low-cost workforce welllowVery good pool of engineers, accountants, technicians Well developed R & D Infrastructure Well established legal system/courts Mature, nation-wide distribution system nationForeign Investment regulations that provide freedom of entry, investment, location, choice of technology for import & export Current account convertibility, capital account convertibility for foreign investors Investment & tax incentives for exports

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Why you can t ignore India

  

 

A bridge between East and West Vast market: a fast-growing consumer market Growing economy: from agriculture to industry and now to services, the Indian economy is acquiring depth and maturity Legal System: Well laid out legal procedures & systems Systems in place : India is one of those rare third world countries where democratic systems are all in place, and though it takes some time, the rule of law prevails Market-friendly approach : Successive governments from across the political spectrum have committed themselves to a marketfriendly economic approach

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