India’s Micro, Small, and Medium Enterprises (MSMEs) base is the largest in the world after China.

The sector provides a wide range of services and is engaged in the manufacturing of over 6,000 products
– ranging from traditional to hi-tech items.

Given the government of India’s latest ‘Make in India’ push, along with a significant jump in the FDI
flows, the Indian MSMEs sector is poised for rapid growth and integration with major global value
chains.

As per the official estimates, there are about 63.05 million micro industries, 0.33 million small, and
about 5,000 medium enterprises in the country.

The state of Uttar Pradesh has the largest number of estimated MSMEs with a share of 14.20 percent of
the total MSMEs in the country. West Bengal comes as close second with a share of 14 percent, followed
by Tamil Nadu and Maharashtra at eight percent.

 Micro: when investment does not exceed Rs 2.5 million (US$34,040);

 Small: when investment is more than Rs 2.5 million (US$34,040) but does not exceed Rs 50
million (US$680,875); and

 Medium: when investment is more than Rs 50 million (US$680,875) but does not exceed Rs 100
million (US$1.3 million).

For the services sector, the definition of an MSME is based on a company’s investments in equipment.
The threshold limits are:

 Micro: When investment does not exceed Rs 1 million (US$13,617);

 Small: When investment is more than Rs 1 million (US$13,617) but limited to Rs 20 million
(US$272,350); and

 Medium: When investment is more than Rs 20 million (US$272,350) but less than Rs 50 million
(US$680,875).

Earlier this year, the union cabinet of India approved the changes in the classification of MSMEs.
According to the revisions, both the manufacturing and services sectors will be classified based on the
amount of annual turnover instead of the investment limits, as given below.

The new classification of MSMEs, however, is yet to be enforced by amendment.

 Micro: a unit where the annual turnover does not exceed Rs 50 million (US$680,875);

 Small: a unit where the annual turnover is more than Rs 50 million (US$680,875) but does not
exceed Rs 750 million (US$10.1 million); and

 Medium: a unit where the annual turnover is more than Rs 750 million (US$10.1 million); rupees
but does not exceed Rs 2.5 billion (US$33.8 million).

 How to register as an MSME in India?

 To encourage MSME registration in India, the ministry of MSME has notified a
simple one-page registration form called ‘Udyog Aadhaar Memorandum’.
 The entrepreneurs in the MSME sector can file the form online, and instantly get
a unique Udyog Aadhaar Number (UAN). The information sought includes
personal Aadhar number, industry name, address of the business, bank account
details, and other general information. Applicants can provide this information on
a self-certification basis and do not need any supporting documents.

 How Startups Differ From MSMEs

 To begin with there is a basic difference in how the government defines
startups and MSMEs. What is a startup, and how is it different from
MSMEs?
 The legal definition of a startup is an entity that has been in registered
not more than seven years ago, and has an annual turnover not
exceeding INR 25 Cr in any preceding financial year. The startup must
also have been working towards innovation, development or
improvement of products or processes or services, or it is a scalable
business model with a high potential of employment generation or
wealth creation.
 Meanwhile, small and medium-sized enterprises (SMEs) are defined as
small-scale units with an investment up to INR 1 Cr in plant and
machinery, provided it is not owned by or controlled by a subsidiary of
any other industrial undertaking. This latter condition ensures that larger
corporate entities do not set up subsidiaries to get the same benefits
afforded to SMEs.
 For MSMEs, the government has set up different slabs as part of the
Micro, Small and Medium Enterprises Development (MSMED) Act, 2006
to differentiate between manufacturing and services sectors.
  Large Scale Industries

 A business can range from a single proprietor enterprise to a large

corporation which employs thousands of workers across multiple
countries. Based on the scale of business, organizations are
classified as micro-enterprises, small-scale enterprises, large
scale industries, public enterprises, and multinational corporations.
In this article, we will take a quick peek at large scale industries.

What are Large Scale Industries?

Industries which requires huge infrastructure and manpower with an
influx of capital assets are Large Scale Industries. In India, large-scale
industries are the ones with a fixed asset of more than one hundred
million rupees or Rs. 10 crores.

The Indian economy relies heavily on such industries for economic

growth, generation of foreign currency, and the creation of job
opportunities for millions of Indians.

Here are some advantages of large scale industries:

 They provide an impetus to the industrialization of the country.

 Large scale industries, usually, produce capital and basic goods
(instruments, machines, chemicals, etc.)
 They are capable of generating funds for the research and
development of new technologies.
 Due to the large scale of operations, they have the potential to lower
the cost of goods.
 Further, they create opportunities for small-scale and cottage
industries to evolve and flourish.
 Also, the employment opportunities created by large scale industries
are huge.

Large Scale Industries in India

The term ‘large-scale’ is generic in nature and includes different types
of industries. In India, the following heavy industries fall under the
purview of large scale industries:

 Iron and Steel Industry

 Textile Industry
 Automobile Manufacturing Industry
 Over the last two decades, Information and Technology (IT) industry
has evolved and has contributed huge revenues while creating
thousands of jobs for Indians. Hence, many economists include it in
the large-scale industry sector.
 Telecom Industry
It is important to note that these industries are either manufacturing
units or those which use both indigenous and imported technologies.

The Export Oriented Units (EOUs) scheme, introduced in early 1981, is complementary to the
SEZ scheme. It adopts the same production regime but offers a wide option in locations with
reference to factors like source of raw materials, ports of export, hinterland facilities,
availability of technological skills, existence of an industrial base and the need for a larger
area of land for the project. As on 31st December 2005, 1924 units are in operation under the
EOU scheme.

Objectives of the Export oriented unit:

The main objectives of the EOU scheme is to increase exports, earn foreign exchange to the
country, transfer of latest technologies stimulate direct foreign investment and to generate
additional employment.
Major Sectors in EOUs:
 GRANITE
 TEXTILES / GARMENTS
 FOOD PROCESSING
 CHEMICALS
 COMPUTER SOFTWARE
 COFFEE
 PHARMACEUTICALS
 GEM & JEWELLERY
 ENGINEERING GOODS
 ELECTRICAL & ELECTRONICS
 AQUA & PEARL CULTURE

Export from EOU

Exports from EOUs during 2004-2005 were of the order of Rs.36806.17 crores as compared
to the export of Rs.28827.58 crores achieved during 2003-2004, registering a growth of
27.68%.

Multinational Companies or Corporations – MNC

Multinational Corporation – MNC, the name in itself is pretty self-
explanatory. It is a company or a corporation that operates in many
countries. So it has business activity in more than one country at any
given time.

So let us look at a more technical definition of an MNC. A

multinational corporation is a company incorporated in its home
country (country of origin) but it carries out business operations beyond
that country in many other foreign countries, we call the host countries.
Its head office will be in the home country.

Features of a Multinational Company – MNC

1. High Turnover and Many Assets
MNCs operate on a global scale. Which means they have huge assets in
almost all countries in which they operate. Their turnovers can also be
incomprehensibly large. For example, Apple has a market
capitalization of 1 trillion dollars. This is bigger than the entire economy
of Saudi Arabia!

2. Control

MNCs have unity of control. So while they have many branches in

many countries, the main control will remain with the head office in its
country of origin. The business operations in the host country have their
own management and offices, but the ultimate control will still remain
at the head office.

3. Technological Advantages

As we saw earlier, an MNC has at its disposal huge amounts of wealth

and investments. This allows them to use the best technology available
to boost their products and their company. Most companies also invest
huge money in their Research & Development Department to invent
and discover new technological marvels.

4. Management by Professionals

An MNC is run by very competent and capable individuals. They have

suitable managers to take care of their business operations, technology,
finances, expansion etc. And they are also able to attract the top talent to
their corporations due to their resources and their reputations.

5. Aggressive Marketing

MNCs can spend a lot of their money on marketing, advertising, and

promotional activities. They target an international audience, so
effective marketing becomes necessary. Aggressive marketing allows
them to capture the market and sell their products globally.

List of Multinational Companies in India

 Microsoft
 Apple
 LTI
 Deloitte
 Coca Cola
 TCS
 Accenture
 IBM
 Capgemini
 Adidas
Merits of a Multinational Companies in a Host Country

 One of the main advantages to the host country is that MNCs boost
their economic growth. They bring with them huge investments and
capital. And then through subsidiaries, joint ventures, branches,
factories they promote rapid industrial growth. In fact, MNCs are
known as the messengers of progress.
 A multinational corporation helps the technological growth of the
country as well. They bring new innovations and technological
advancements to the host country. They help modernize the industry
in developing countries.
 MNCs also reduce the host countries dependence on imports. Imports
reduce while exports from the country see a rise.
 All MNCs have enormous capital and resources at their disposal. A
good portion of such resources is invested in R&D. This can be very
beneficial to the host countries where they set up their R&D facilities.
 Multinational corporations also promote maximum utilization of the
country’s resources. This, in turn, leads to economic development.
Merits of Multinational Companies in the Home Country

 MNCs make their home countries (country of origin) very rich by

their revenues. The corporation will collect fees, royalties, profits,
charges from all their host countries and bring them back to the home
country. This huge inflow of foreign exchange is very beneficial to
the home country.
 MNCs provide a means of co-operation between developed countries
and developing or underdeveloped countries. This allows both to
benefit from the partnership.
 And these multinational corporations also help promote bilateral trade
relations between countries. This is beneficial to both the countries
and the global market and economy.

Solved Question on Multinational Companies

Q: Are there any demerits of a Multinational Corporation?

Ans: Yes, an MNC also has a few disadvantages to deal with. Here are a
few examples,

 A multinational corporation only has a profit motive. Their interests

may not align with the national interests of the host country and be
harmful to their economy and development
 In some host countries, the presence of MNCs can restrict
competition and may even cause a monopoly or monopolistic
competition.
 They also charge heavy fees and charges in their host countries. And
move all the profits to their home country. This outflow of foreign
exchange can be detrimental to the host country.
 They also use tactics like transfer pricing to avoid heavy tax liabilities

A family-owned business may be defined as any business in which two or

more family members are involved and the majority of ownership or control lies within
a family. Family-owned businesses may be the oldest form of business organization.

How large is the family business sector in India?

In India the majority of businesses are in the dominant control of the families. It is
estimated that 90% of the business in India is controlled by families. From 'Mom
and Pop' Kirana stores to large conglomerates and SME's one finds family run
businesses. Most of the big corporate business houses like Tatas, Ambanis, Birlas,
Godrej, Wadias, Munjals, Mahindra, Thapars, Mittals, Shaparji Paollonji, Jindals,
Adanis, Anil Aggarwal – Vedanta, Bajaj, Ruias, Ranbaxy, Times of India and
many more are all controlled by families. The role of family and the family
patriarch is quite important in India.

There are many families who have separated and partitioned. Some such families
have succeeded and the separated branches have also grown big, while in some
cases the branches which have separated or the business as a whole have failed or
collapsed. There are mixed reports as and when the family separate.

What helps family firms in India survive for generations?

Most of the family businesses are still not very old businesses. A number of
business activities led by families started post-independence and gained
momentum thereafter. Since families are concerned about their personal wealth
creation and preservation, the brand of their family names, family reputation and
goodwill, the elements of self-discipline and self-governance are high.

It is noticed that where the inheritance is amongst the immediate family members,
for example from father to sons and daughters, the first level inheritance which
implies two generations running the family business, the chances of disputes and
succession related issues are manageable. However, the problems arise when at the
first stage it is the father and his brothers who are running the family business and
the next generation of each of the brothers also start joining the business. There are
several families who have undergone partition or disputes at this stage.

Indian families have been exposed to these challenges and in the interest of family
business, family wealth, goodwill and family reputation the family arrangements
have been made or the family constitutions have been written to protect the interest
of each branch of the family. Wherever these sensitive issues have been dealt with
professionally the family business has survived.

Are family businesses becoming the norm and more accepted as a successful
business model?

In India traditionally the family business is the norm. The trend continues.
However, there are certain business houses where the professional teams are taking
over to run the empires. These cases are also multiplying as the wealth is growing
at different levels.

The recent cases are of Tata Group where a serious head hunting programme was
done to find a successor to Mr. Ratan Tata. Mr. Mistry was appointed to head the
Tata Group. The famous IT company Infosys has seen the change at the top level
when Mr. Narayan Murthy has been successful in appointing the well-known
professional personality Mr. Vishal Sikka to head the business founded by him.
Family business remains the norm for a large section of society in India and is not
going to fade away. There are obvioulsy going to be exceptions depending upon
the size and nature of business.