An Assignment On Indian Legal System In Respect To The SME Sector

By: Abhra Mukherjee Roll No: 11MBA0026 Batch 1 DEFINITION OF SME:

value-adding processing activities in agriculturallybased economies. but not necessarily both. PRESENT SCENARIO OF SME’S IN INDIA: . RISE OF SME IN INDIA: With the advent of planned economy from 1951 and the subsequent industrial policy followed by Government of India.SME basically stands for Small and Medium-sized Enterprise. • nurture entrepreneurship. The term refers to the small and medium sized industries or businesses present in a country. both planners and Government earmarked a special role for small-scale industries and medium scale industries in the Indian economy. because they: • tend to use more labour-intensive production processes than large enterprises. Basically SMEs are the lifeblood of most economies. and • support the building up of systemic productive capacities and the creation of resilient economic systems. Category Micro Enterprises Small Enterprises Medium Enterprises Investment (Plant & machinery) Less than 25 lakhs Less than 5 Crores Less than 10 Crores Services Less than 10 lakhs Less than 2 Crores Less than 5 Crores IMPORTANCE OF SME TO A COUNTRY: It is necessary to know why small and medium sized businesses are important to a country. an enterprise qualifies as an SME if it meets either the turnover ceiling or the balance sheet ceiling. small and medium-sized enterprises (SMEs) if they fulfill the criteria laid down in the Recommendation which are summarized in the table below. In addition to the staff headcount ceiling. and particularly for small scale industries from 1951 to 1991. through linkages between small and large enterprises. boosting employment and leading to more equitable income distribution. Due protection was accorded to both sectors. • provide livelihood opportunities through simple. they represent over 90% of enterprises in a nation and account for 50-60% of employment at a national level. In India enterprises qualify as micro. till the nation adopted a policy of liberalization and globalization. On average. SMEs are particularly important in supporting economic growth and livelihoods in developing countries.

inadequate marketing support in an increasingly competitive environment. 2006 and its revisions have also provided a framework in protecting and guiding the micro and small scale sectors. Enactment of new Micro. Some of the major challenges faced by SMEs include lack of access to finance. SMEs in India.SME sector of India is considered as the backbone of Indian economy contributing to over 40% of the industrial output of the country and also to over 35% of India’s industrial exports. The Micro Small and Medium Enterprises Development (MSME) Act. The sector is growing at a rate of 8% per year. They suffer from problems of suboptimal scales of operations and technological obsolescence. namely the Government of India. and are not covered by annual formal data collection exercise like the Annual Survey of Industries. providing employment to over 28 million people in India and generating 1. Around 97 per cent of them are either proprietorship or partnership enterprises. the sector is largely informal. are still in technological backwaters. low R&D investment. lack of product innovation. INDIAN LEGAL SYSTEM AND ITS NEED TO SME’S: As the process of globalisation and liberalisation gathers momentum across the globe. the government has and is taking different measures so as to protect the small and medium enterprises. pruning of reserved SSI list. 90 per cent of the units are not registered.2 million jobs annually. The small and fragmented structure makes these units more vulnerable. Thus this sector needs to be protected and safeguarded by respective authority. Despite their immense contribution. etc. RECENT POLICY REFORMS OF SME SECTOR IN INDIA: . Small and Medium Enterprises Development Act. Policies have been framed under the Indian Judicial System as per directions of the Indian Government giving protection and privileges to the SME sector since1948. advising investors to increase their flow of credit to the SME sector and other initiatives to boost entrepreneurship in the sector are some of the steps taken so far in this respect. Currently there are over 11 million SMEs in our country that produce over 8000 different products. Accordingly. SMEs are facing tremendous challenges to survive and sustain. 2006. Thus a brief overview of the policies and the MSME act is necessary. According to the Third Census of Small Scale Industries (SSI). which constitute more than 80 per cent of the total number of industrial enterprises. Government of India has and is taking different measures so as to increase their competitiveness in the international market. lack of access to technology.

2006. HIGHLIGHTS OF MSMED ACT 2006: The MSMEs Act. to facilitate greater and easier flow of credit from banking sector to SMEs. • Facilitation of technology transfer through Technology Bureau for Small Enterprises (TSBE). 2006 which came into effect from October. 2006 inter-alia seeks to facilitate the promotion. • Revised strategy of lending including establishment of Small Enterprises Financial Centres for strategic alliance between branches of banks and SIDBI located in 388 clusters. development and enhance the competitiveness of the MSMEs. • The National Commission for Enterprises in the Unorganised Sector (NCEUS) has been set up as an advisory body and a watchdog for the informal sector to bring about improvement in the productivity of these enterprises. New promotional packages for SMEs and focus on development of clusters. produced and provided by these enterprises by the Government and its aided institutions. SOME OTHER STEPS TAKEN BY GOVERNMENT: . • Accelerating initiatives to address various developmental needs for the SMEs in the11th Five Year Plan. (c) Preference Policies in respect of procurement of goods and services. development and enhancement of the competitiveness of the SME sector. marketing assistance or infrastructure facilities and cluster development of such enterprises with a view of strengthening of backward and forward linkages. • National Manufacturing Competitiveness Council (NMCC) is set up to energise and sustain the growth of the manufacturing industry. (d) The buyer shall make payment to the supplying MSMEs before the appointed day and in no case the period of payment shall exceed 45 days and that any delay thereafter shall give rise to liability to pay compound interest as notified with monthly rests. • Promotion and financial support for credit-cum-performance rating in the MSME sector in India. (b) Progressive practices and policies in respect of credit to these enterprises.Micro Small & Medium Enterprises Development (MSMED) Act.• A single comprehensive legislation for the promotion. The measures as envisaged by the Act. includes the following: (a) Provisioning for technical upgradation.

• The Ministry of Agro & Rural Industries and the Ministry of Small Scale Industries have been merged into a single Ministry. skills development and finance. trade associations. However. ensure varied supply of goods and services. to enable them to have level playing. . a coherent policy and concerted actions on suggested measures by the policy makers. give customers wider and customised choice. the SMEs increase competition. It must be remembered that all policy initiatives and measures are aimed to strengthen the disadvantaged enterprises. technology and market access are being addressed by focusing on clusters as they provide collective guarantee. contribute comprehensively in the GDP. put new ideas to the test and speed up the dissemination of new economic knowledge. SMEs. It has since launched the National Manufacturing Competitiveness Programme (NMCP).The problems of credit. • CONCLUSION: Protecting fragmented and disorganized SMEs interest in the context of highly concentrated market structures is a formidable challenge. Nonetheless. the CCI and fans of free and fair competition in markets in India can make significant contribution in strengthening the SMEs. Small & Medium Enterprises so as to provide unitary command and cohesiveness in implementing the law.21 All these lead credence to say that “SMEs are beautiful as well as precious too”. the Ministry of Micro. The Government has identified three thrust areas for increasing competitiveness namely technology (including quality). namely. to afford them equal opportunity to participate in the economy and thereby promote a greater spread of ownership.

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