2.

0 INTRODUCTION
The micro, small and medium enterprises have contributed much to the industrial
development in the country, particularly in the rural sphere. They have added significantly
to the output and also employment. The spirit of entrepreneurship has been hastening the
process of economic development. The government and other organizations, institutions
have also contributed to the nourishing and encouragement of entrepreneurship in India.
The Five Year Plans also gave emphasis to this sector and incorporated different schemes
in the Plans With the results, the MSMEs have registered significant growth contributing
to the total industrial production and exports. The present Chapter deals with the growth of
MSME’s in India and Andhra Pradesh in the past decades. It also deals with the
promotional support given to the entrepreneurship particularly in MSME’s.
2.1 ROLE OF MSMEs
The Micro, Small and Medium Enterprises (MSMEs) sector constitutes an
important segment of the Indian economy in terms of its contribution to the country’s
industrial production, exports, employment and creation of an entrepreneurial base.
MSMEs have the advantages of generating gainful employment with low investment,
diversifying the industrial base, reducing regional disparities through dispersal of
industries into rural, semi – urban and backward areas. The output of the small-scale
industry sector contributes almost 40 per cent to the gross industrial value-added and 45
per cent of the total exports from India and is the second largest employer of human
resources after agriculture. The development of small scale sector has therefore been

33
assigned an important place in India’s national Plans. In order to facilitate the promotion
and development and enhancing competitiveness, it was felt to have a separate legislation
for this sector. The need for a single legislation was pointed out by different committees
and also by several associations. The government established the Ministry of Small Scale
Industries and Agro and Rural Industries (SSI & ART) in October, 1999 as the nodal
Ministry for formulation of policies and programmes/schemes, their implementation and
related coordination, to supplement the efforts of the States for promotion and
development of this category of industries in India. The Ministry of SSI and ART was
bifurcated into two separate Ministries, namely, Ministry of Small Scale Industries and
Ministry of Agro and Rural Industries, in September 2001. The role of the Ministry of
Small Scale Industries is mainly to assist the States in their efforts to promote growth and
development of the SSIs to enhance their competitiveness and to generate additional
employment opportunities. In addition, the Ministry attempts to address issues of country-
wide common concerns and also undertakes advocacy on behalf of the SSI. The
Government also felt that there was a need for defining the micro, small and medium
enterprises concept, to promote service sector, to strengthen existing law on delayed
payments and to facilitate closure of sick enterprises. Keeping this in view, the
Government of India brought out Micro, Small and Medium Enterprises Development Act
2006, which became operational from 2nd October, 2006. It is a known fact that the
service sector has fast emerged as a sector with a lot of employment potential and is
becoming a good contributor to the economy. Therefore, manufacturing and service
sectors have been defined separately.
2.2 THE CONCEPT AND DEFINITION OF MSMES
The concept and definition of small industries changed over years with the
changing circumstances and pressing problems of the Indian economy. Various
institutions, government agencies and individuals had defined small industrial units in
different ways.
(i) Small Industrial Units (1948): The factory sector units, registered under the Factories

Act of 1948, form organized sector. All traditional units and the remaining units of small
industries segment not covered under the Factories Act of 1948 constitute the unorganized
sector. Such units generally employ less than 10 workers, if power is used and less than 20
workers, if power is not used.

34
(ii) Small Industrial Units (1966): The small enterprises definition has changed to mean

an enterprise with a fixed capital investment of less than Rs. 5 lakhs and ancillary units
with a fixed capital investment of Rs.10 lakhs.
(ii) Small Industrial Units (1972) :A small industrial unit was defined as a unit with

investment in fixed assets like plant and machinery whether held on ownership basis or by
lease or by hire purchase not exceeding Rs. 35 lakhs. In the same year ancillary and tiny
industries were defined as unit with investment in plant and machinery not exceeding
Rs.45 lakhs and Rs.2 lakhs respectively.
(iii) Small Industrial Units (1990): According to Industrial Policy Statement 1990, the
investment ceiling in plant and machinery for small industrial units (fixed in 1985) has
been raised from Rs.35 lakhs to Rs.60 lakhs and correspondingly for ancillary units from
Rs.45 lakhs to Rs.75 lakhs. The investment for tiny units has been increased from Rs. 2
lakhs to Rs 5 lakhs According to the modified definition, an ancillary unit is one, which
sells not less than 50 per cent of its manufactures to more industrial units.
(iv) The Union Budget 2002-03:The Union Finance Minister announced the change in the

small industries definition i.e., enhancement of small industries investment ceiling for
specified Hosiery / Hand tool items .The investment limit in plant and machinery with regard
to industrial undertakings manufacturing specified items in the Hisiery and hand tool was
enhanced from Rs.1 crore to Rs. 5 crores.
(v) MSMEs Act 2006: According to Micro, Small and Medium Enterprises Act the

enterprises are broadly classified in terms of activity such as enterprises engaged in the
manufacturing/production and enterprises engaged in services. While the manufacturing
enterprises were defined in terms of investments in plant and machinery, the service
enterprises are defined in terms of investment in equipments. The Act has also defined
medium scale enterprises for the first time. The enterprises are further classified into
Micro, Small and Medium categories. The investment limits of these enterprises are as
follows:
Manufacturing Enterprises
Micro Enterprises – investment uptoRs. 25 lakh
Small Enterprises – investment above Rs. 25 lakh and up to Rs. 5 crore
Medium Enterprises – investment above Rs. 5 crore and up to Rs. 10 crore
Service Enterprises
Micro Enterprises – investment uptoRs. 10 lakh
Small Enterprises – investment above Rs. 10 lakh and up to Rs. 2 crore

35
 Medium Enterprises – investment above Rs. 2 crore and up to Rs. 5 crore
2.3 INDUSTRIAL POLICY RESOLUTIONS AND MSMES
India has a long history of conceiving policies of protecting the small industrial
units and their origin can be traced back to the days of national movement and to Mahatma
Gandhi’s stress on the village industries. Gandhian thought stressed the need to promote
village and small industrial units because of their desirable social and employment
consequences. The Swadeshi movement and the decision to boycott British goods before
the II World War led to the growth of large cotton mill industry in India, but did not lead
to the growth of small or the cottage industry. In fact, the handloom industry declined due
to the stiff competition faced from the large mill industry.
Since Independence, several Industrial Policy Resolutions have been formulated to
promote industrial growth in the country. These industrial Policy Resolutions have helped
the small industrial units through various incentives in order to fulfill the socio-economic
objectives. These incentives were related to the financial, fiscal and infrastructural
measures and were targeted at achieving the growth of the small sector during the Plan
periods. The main objectives of Industrial Policy Resolutions were to promote industrial
growth and also to determine the pattern of State assistance to small industrial units for
fulfilling socio-economic objectives.
Industrial Policy Resolution - 1948
The Industrial Policy Resolution of 1948 spelt out the details of some basic and
strategic industries to be established by the State in addition to those, in which the private
sector could be permitted to play a role. The policy aimed at a balanced growth of
different manufacturing sectors and focused on the co-existence of large, small and cottage
industries. An emphasis was laid on the promotion of cottage and small industrial sector
as these could play a crucial role in the rehabilitation of displaced persons through
establishment of individual corporate units.
In 1948, an all India Cottage Industries Board (ICIB) was set up and by the end of
First Five year Plan, a series of Boards were established to deal with traditional industries.
These were the:
1. All India Handloom Board.
2. All India Handicrafts Board.
3. Central Silk Board.
4. Coir Board.
5. All India Khadi and Village Industries Board.

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 6. Small Scale Industries Board.
The first five industries came under the category of traditional industry, while the Small
Scale Industries Board (SSID) was concerned with the modern small industry.
The Industrial Development and Regulation Act (IDRA), which was passed in
1951, served as the main instrument of Government policy for regulating industrial
growth. The IDRA exempted from registration, the units using power and employing less
than fifty workers or employing less than hundred workers when not using power. For
certain specified industries like cotton, weaving and matches, no new units could be
allowed to be set up without prior approval, even when the units propose to employ less
than fifty workers.
In 1955, the Village and Small Scale Industries Board (VSSIB) was set up to
encourage and protect the village and small industries. The main objectives of the
Committee were:
1. To avoid technical unemployment;
2. To increase employment through village and small industries; and
3. To provide the basis for a structure of an essentially decentralized society.
Industrial Policy Resolution - 1956
The Industrial Policy Resolution of 1956 supported the initiation of measures to
improve the competitive strength of enterprises while recognizing the role of small
industrial sector in providing employment opportunities and in mobilizing local skills and
capital resources. Industries have been classified into three categories, namely, those
exclusively reserved for public sector, those in which the public sector would take
initiative with the private sector and the third category representing the remaining
industries that would be left to the initiative of the private sector. The starting of industrial
estates to set up and expand the small industrial units was a very important measure for the
growth of different types of small industrial units all over the country during Second Five
Year Plan period. The industrial estates providing the necessary infrastructure such as
power, water, transport etc. were encouraged in the Second Plan. Thus, the Second Five
Year Plan gave boost to the small industrial sector to develop extensively. The Third and
Fourth Five Year Plans concentrated more on providing financial facilities, marketing
facilitates etc. to the small industrial sector. The financial assistance to these units is provided
by the State Financial Corporation (SFC), the Small Scale Industrial Development
Corporations (SSIDC) and Commercial Banks. The timing also coincided with the
nationalization of banks in 1969 in order to promote more financial aid to the priority sectors

37
of which small industrial sector is an important one. Later, a number of steps have been taken
both at Center and State levels to develop small industrial units.
Industrial Policy Resolution – 1977
The Industrial Policy Statement of, 1977 stressed the need for a wider dispersal of
cottage and small industries into rural areas and small towns. It emphasized the
importance of effective promotion of cottage and small industries. The Government
committed itself to the concept that any product which could be produced by cottage and
small industry be exclusively within the Small Enterprise Sector. This led to the expansion
of the list of reserved items for exclusive production by small industrial units. The number
of items reserved expanded from 180 in 1976-77 to 500 in 1978 and more than 800 in
1979. It provided for an annual review of their list in view of new products and new
processes of manufacture that emerge.
Within the small industrial sector, tiny sector was also defined with investment in
machinery and equipment up to Rs. 1.00 lakh and situated in towns with a population of
less than 50,000 according to 1971 census. Special legislation was introduced to protect
cottage and household industries. The setting up of District Industries Centers in 1977
heralded a new era in the growth and development of Small Industrial Units. The District
Industries Centers under single window concept provided much needed technical
assistance, credit and other support for small industrial units.
Industrial Policy Resolution - 1980
The Industrial Policy Statement of 1980 focused on integrated industrial
development and suggested the setting up of nuclear plants in those districts which were
identified as industrially backward with the expectation that these would help the spatial
dispersal of small, ancillary units and that the existing network of small industrial units
would grow faster. This Industrial Policy Statement spelt out the following socio-
economic objectives:
1. Optimum Utilization of installed capacity.
2. Maximum production and achieving higher productivity.
3. Higher employment generation.
4. Correction of regional imbalances.
5. Strengthening of the agro-based industries.
6. Promotion of export oriented industries.
Small industrial units were redefined by raising the ceiling limit of investment in
plant and machinery. The investment limit in the case of tiny units was enhanced to Rs.

38
2.00 lakh, small industrial units to Rs. 20.00 lakhs and ancillaries to Rs. 25.00 lakhs. A
scheme for building buffer stocks of essential raw materials for the small industrial units
was introduced for operation through the Small Industries Development Corporations in
the States and the National Small Industries Corporation in the Centre. The Government
of India has formulated a scheme to train small entrepreneurs and the managerial assistants
to improve the supply of managerial cadre to this sector. The Small Industries
Development Fund (SIDF) was set up in 1986, for providing refinance facilities for the
development and also for rehabilitation of small, cottage and village industries in rural
areas. Later, the National Equity Fund was set up in 1987 to provide equity type support
to small entrepreneurs for setting up of new projects in the small industrial sector. The
Small Industrial Development Bank of India (SIDBI) was set up in 1989 with an
authorized capital of Rs. 250 crores, as a subsidiary of Industrial Development Bank of
India (IDBI), to provide credit to small industrial units and also refinance facilities to
commercial banks.
Industrial Policy Resolution - 1990
This policy resolution is related mainly to three important issues viz., (a) industrial
licensing, (b) foreign investment and foreign collaboration, and (c) agreement on
investment ceilings for small industrial units. Investment limit for small industrial units
was revised to Rs. 6.00 million, to Rs. 7.50 million for ancillary units and to Rs. 0.50
million for tiny sector respectively. During this period Central Investment Subsidy
Scheme, was introduced for small industrial units. A special cell was established in Small
Industrial Development Organization (SIDO) and State Directorate of Industries to impart
training and conduct entrepreneurial level training programmes.
This Industrial Policy was announced separately for the small industrial sector with
the basic objective of making this sector more competitive. The important measures
initiated were:
(a) to shift emphasis from cheap credit to adequate flow of credit on normative
basis;
(b) to provide access to the capital market by allowing 24.00 per cent equity
participation by other industrial undertakings;
(c) to establish Technology Development Cell to improve the productivity and
competitiveness of small industrial units;
(d) to promote marketing of small industrial units products through institutions;
and

39
 (e) to create Export Development Centre in SIDO.
Industrial Policy Resolution - 1991
In 1991, the Indian Government had announced a separate policy for the small and
tiny sectors. This policy statement widened the investment limit for the tiny sector,
removed the vocational restrictions and recognized business and industry related services
as small industrial units on par with the tiny units. The manufacture of items earlier
banned in the small industrial units was removed. The small industrial units which employ
less than 50 workers with power and 100 workers without power were exempted from
licensing. The small and ancillary industries were exempted from licensing for all articles
of manufacture, which were not covered by the public sector. The investment of 0.5
million and other locational conditions were withdrawn. All industry related services and
business enterprises with an investment limit as those of tiny enterprises, irrespective of
location, were recognized as small industrial units. A new scheme of integrated
infrastructural development for small industrial units was provided with the participation
of State Government and financial institutions.
The Industrial Policy - 1999
The main objective of the Industrial Policy, 1999 was to create congenial
environment for the small industrial units to cope with the emerging challenges of
globalization. To focus fully on the promotion and development of small industrial units, a
separate Ministry of Small Industrial Units and Agro and Rural Industries was created.
The policy initiatives were.
1. The annual turnover limit for calculation of working capital limit for small
industrial units was raised to Rs. 5 crores from Rs. 4 crores.
2. The maximum ceiling limit for Composite Loan Scheme was increased to
Rs. 5 lakhs.
3. To increase flow of credit to small industrial units, a new credit insurance
scheme was launched.
4. Small Industrial units producing goods in rural areas were allowed excise
exemption on third party branded goods.
5. The definition of small and ancillary industrial units was revised by
reducing investment limit in plant and machinery to Rs. 1 crore from Rs. 3
crores.
6. Special package for the development of small and village industries in
North Eastern regions were announced. The industrial units in the North

40
 Eastern Region were given exemption from excise duty for 10 years from
the date of commencement of production; and
7. Special emphasis was given for the units which have high export potential.
2.4 FIVE YEAR PLANS AND MSMES
Government of India has undertaken measures to develop the growth of small
industrial units through Five Year Plans, as this sector demands labour and capital in
proportion, corresponding more closely to their relative supplies than does a large scale
industry. Instead of stressing merely labour intensive techniques of production and their
contribution to economy in terms of production and employment generation and exports,
the planners laid greater emphasis on the development of small industries. Many
programmes were implemented by the governmental authorities to develop these
industries in the country during the Plan Periods.
First Five Year Plan (1951 - 1956)
During the First Plan period a major step was taken for the development of small
industrial units by establishing the All India Boards to advise and assist in the formulation
of developmental programmes of small industrial units. Store purchase and replacement of
imports were the two directions in which the demand for products of small industries
could be deliberately developed. New centers of small industrial production, establishment
of new townships as river valley projects, training, research and finance were the various
aspects which were stressed in the First Plan. A network of various All India Boards,
such as the Khadi and Village Industries Boards (KVIB), the Handloom Board and the
Sericulture Board were established. Four regional Small Industries Service Institutes were
setup to provide technical assistance to small industries. Twelve State Financial
Corporations have been established. Again the value of purchases made from Cottage and
Small Industrial Units by the Directorate General of Supplies and Disposal was increased
from Rs 66 1 lakhs in 1952-53 to Rs 105 lakhs in 1954-55.
The First Plan was not a comprehensive one and it was a rehabilitation plan to bring
up the Indian economy which was ravaged by the partition of the country and consequent
refugee influx and the shortages that existed in the economy and to make up a sound base
for the more rapid advance in future. Hence, the Plan tried to lay the foundation to improve
the small industrial units. The total outlay for the small industrial units was Rs. 5.2 crores
during the First Plan Period. The Karve committee was appointed by the Planning
Commission in June 1955 for this purpose

41
Second Five Year Plan (1956 - 1961)
The government wanted to implement the recommendations of Karve committee to
avoid technological unemployment and to provide employment in traditional industries.
The Second Five Year Plan proposed an outlay of Rs. 55.0 crores to SSI sector, but the
actual expenditure incurred was Rs. 44.4 crores. During the Second Plan period, nearly 60
industrial estates were setup with an expenditure of Rs. 10 crores. At the end of the
Second Plan, extension officers for industries were provided to 1650 development blocks
out of 3110 blocks in India. Between 1956 and 1960, the number of small industrial units
engaged in the production of bicycles, sewing machines, machine tools, electric motors,
and electric fans went up. The production of bicycles in the Small Industrial Sector
increased from about 25,500 in 1956 to 2, 28,000 in 1960 and of sewing machines from
23.600 to 52,000. The value of upgraded machine tools rose from Rs. 1.3 crores in 1956
to Rs. 4.0 crores in 1960. The small industrial units provided full-time employment to
Rs.3 lakh persons.
Third Five Year Plan (1961 - 1966)
In the Third Plan, the main objectives of the Small Industries Programmes were to
improve the productivity of the workers, to enlarge the availability of institutional finances
and the growth of small industrial units in rural areas and small towns. During the Third
Five Year Plan the outlay of Rs. 84.6 crores was proposed but the actual expenditure
incurred was Rs. 86.1 crores, an excess of Rs. 1.5 crores and the actual expenditure
incurred in Annual Plans was Rs. 39.4 crores. During the Third Plan and the Annual Plans
nearly 1,40,000 small industrial units were registered with the States Industries
Directorates and 346 Industrial Estates were completed by the end of March 1969. The
small industrial units set up in these estates provided employment to 82,700 persons. The
annual production of the small industrial units during 1968-69 was Rs. 1556 crores. The
progress of small industrial units in the Third and Annual Plans has been quite
satisfactory, and these unitedly achieved greater success in urban areas than in rural and
semi-urban areas.
Fourth Five Year Plan (1969 - 1974)
The main objectives of the Fourth Plan were to improve the production techniques
of small industries, to promote decentralization and dispersal of industries and to promote
agro-based industries. To achieve these objectives an outlay of Rs. 104.3 crores was
proposed, but the actual expenditure incurred was Rs. 70.3 crores with the gap of 34.0
crores. The number of units registered on voluntary basis with the industries Directorates

42
of the States and Union Territories increased from Rs. 2 lakhs in 1969 to Rs. 4.09 lakhs in
1973. The total employment by these units was Rs. 39.65 lakhs, output and exports were
Rs. 7200 crores and Rs. 538 crores respectively in 1973-74. The annual production of the
units in Estates increased by Rs.127 crores and employment by 23,305. However, the
pace of growth of most industries continued to be uneven in different states and union
territories. Besides this, progress in realizing certain other objectives envisaged in the
Fourth Plan including the progressive improvement of skills and production techniques,
promotion of industries in semi-urban and rural areas and rapid development of agro-
based and ancillary industries has not been upto the expectations.
Fifth Five Year Plan (1974 - 1979)
The principal objective of the Fifth Plan for the development of small industrial
sector was the removal of poverty, and the inequality in the living standards of those
depending on traditional industries through creation of large scale opportunities,
improvement of their skills and, thereby, offer them chance to increase their earnings.
With this objective, the Government reserved 124 items exclusively for small industrial
units and different programmes were introduced for the development of ancillary units as
feeder industries to large scale units. The Fifth Plan proposed an outlay of Rs.241.3 crores.
But the actual expenditure incurred was Rs. 221.7 crores with a gap of Rs. 19.6 crores.
The number of units registered on voluntary basis with the industries and Directorates of
the State and Union Territories increased from Rs. 4.09 lakhs in 1973-74 to Rs. 7.99 lakhs
in 1979-80. The total employment increased from 39.7 lakhs persons in 1973-74 to. 65
lakhs persons in 1979-80, an excess of Rs.25.3 lakhs. Output also increased from Rs.
7200 crores in 1974-75 to Rs. 19060 crores in 1979-80 an excess of Rs. 4475 crores, and
exports from Rs.538 crores in 1973-74 to Rs. 1050 crores in 1979-80, an excess of Rs. 512
crores.
Nevertheless, some of the important objectives set for the small industrial sector
were not fully achieved. The dispersal of small industrial units far away from the
metropolitan area and large cities has not taken place to an appreciable extent. Available
data indicate that the industrially developed states, along with Delhi, accounted for nearly
67 per cent of the registered small industrial units which had come in 1976, and 75 per
cent of the employment is generated by them.
Sixth Five Year Plan (1980 - 1985)
The main objectives of the Sixth Plan were:

43
  Improvement in the levels of production and earnings, through measures
like up-gradation of skills and technologies and producer-oriented
marketing, etc.
 Creation of additional employment opportunities on a dispersed and
decentralized basis;
 Fuller utilization of existing installed capacities;
 Establishment of a wider entrepreneurial base through appropriate training
and package of incentives;
 Creation of a viable structure of the small industrial sector so as to
progressively reduce the role of subsidies, and
 To expand the efforts in export promotion.
Along with these Plan policies and programmes, the Government of India has
nationalized the major commercial banks in the country. One of the main objectives of this
nationalization is to provide liberalized timely credit to the priority sectors, especially to
the small industrial units, and the “Lead Bank” scheme was introduced in December 1965.
The Sixth Plan allocated a sum of Rs. 616.1 crores for small industrial units, but the actual
expenditure was achieved fully. During the sixth plan period 1079-80 to 1984-85 the
value of production increased from Rs. 21635 crores to Rs. 50520 crores, employment
from 67,00 lakhs persons to 90.00 lakhs persons and exports during the period have
registered a significant increase from Rs, 1050.00 to Rs. 2350..00 crores.
Seventh Five Year Plan (1985 - 1990)
Within the overall objectives of food, work and productivity laid down in the
Seventh Plan, SME sector would contribute towards improving the economic and
occupational profile of rural, semi-urban and weaker sections of urban communities
through promotion of village and small industrial activities. This sector would:
 Assist in the growth and widespread dispersal of industries;
 Increase the levels of earnings of artisans;
 Sustain and create avenues of self-employment;
 Ensure regular supply of goods and services through use of local skills and
resources;
 Development of entrepreneurship in combination with improved methods
of production through appropriate training and package of incentives, and
 Preserve craftsmanship and art heritage of the country.

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 The Seventh Plan would focus attention on up-gradation of technology by
strengthening creation of tooling and workshop facilities for development of proto-type
design, new products and processes, promoting the dispersal of industries to the less
developed areas and impart higher levels of training. Simultaneously special emphasis
would be laid on human resource development, particularly training programmes, both at
the Central and State levels. The specialized agencies like Small Industries Service
Institutes (SISIs), National Institute for Entrepreneurship and Small Business
Development (NIESBUD), National Institute of Small Industry Extension Training
(NISIET) etc., would provide increased extension services and establish service outlets in
centers of industrial activity. The Development Commissioner of SSIs has been engaged in
promotion, development and regulatory activities for the small industrial sector. This office,
inter alia, takes care of technology, training, common services, tooling facilities, design and
development of proto-types, entrepreneurial development, data collection and monitoring of
production of items reserved for this sector. A number of regional testing centers were
established for providing quality marking services. A number of consultancy organizations
were established with the assistance and participation of Industrial Development Bank of India
(IDBI).
An outlay of Rs 1120.00 crores was proposed in Seventh Plan which was 0.6 per
cent of total outlay. In the Seventh Five Year Plan period, the value of production rose
from Rs. 801220 crores to Rs 920801 crores, employment from 119 to 119.60 lakh
persons and exports from Rs 2350 to Rs 4140 crores. In the Annual Plan 1990-91 to 1991-
92, the value of production rose from Rs 159062 to Rs 160000 crores, employment from
125 50 lakhs persons to 126, and exports from Rs 7100 crores to Rs 12658 crores.
Eighth Five Year Plan (1992 - 1997)
During the Eighth Five Year Plan Rs. 2,862.1 crores were allocated for the
development of village and small industrial units out of the total plan outlay of Rs.
4,34,100 crores. The Eighth Plan aimed at a growth rate of 5.6 per cent. The growth rates
for the manufacturing sector and exports kept at 7.3 per cent and 13.6 percent respectively.
During the Eighth Plan, people’s initiative and participation would be key element in the
process of development. One of the areas of priority of the Eighth Plan was generation of
adequate employment to achieve full employment. Several activities pertaining to this
sector like processing of agricultural produce in rural areas, sericulture and allied activities
have been identified as critical goals in priority sectors.
The Reserve Bank of India has appointed a Committee in December, 1991, to
review the arrangements for meeting the working capital requirements of small industrial
units and for the rehabilitation of sick small industrial units and to examine the other

45
issues relating to small industrial units. The growth centre approach was accepted as a
suitable measure for industrial dispersal and is under implementation in large and medium
industries sector. During the Eighth Plan, establishment of 70 growth centers has been
envisaged. It was proposed to earmark a certain percentage of developed industrial area
for small industries.
Ninth Five Year Plan (1997 – 2002)
During the Ninth Plan, various initiatives were taken to strengthen the small
industrial units through technology up gradation, modernization, enabling and encouraging
them to enhance quality through introduction of modern management practices, providing
marketing and other key inputs, increasing the availability of credit/loans from financial
institutions and banks against materials supplied etc., Fifty Integrated Infrastructure
Development Centers (1IDCs) were set up during the Eighth Plan for infrastructure
facilities for small industrial units developed in backward and rural areas, out of which 22
have been approved. This scheme continued during the Ninth Plan period to help the small
industrial sector. The government has given token financial assistance of Rs 75,000 per
small industrial unit, being provided to acquire ISO 9000 or an equivalent quality
certification. The credit provided to the small industrial sector by the public sector banks
stood at Rs. 31,542 crore by March, 1997. The cumulative disbursement by the State
Financial Corporations amounted to Rs. 12,704 crores upto March, 1996.
The proposed outlay for Ninth Plan was Rs. 3,330.00 crores, but the actual
expenditure was Rs. 2855.00 crores for the development of village and small industrial
units. By the end of March 2002, there were over 3.4 million small industrial units in the
country accounting for more than 40 per cent of the gross output in the manufacturing
sector and 35 per cent of the total exports of the country. They provided employment to
l9.2 million persons.
Tenth Five Year Plan (2002 - 2007)
A Study Group under the chairmanship ofDr.S.P. Gupta submitted a report on the
problems of small industrial sector in July 2000. After inter-ministerial consultations, the
Prime Minister announced a number of new policy initiatives on 30 August 2000.
 Enhancement of excise duty exemption limit for small industrial units from
Rs. 50 lakh to Rs. 100 lakhs.
 Increase in composite loan limit to Rs. 25 lakh.
 Coverage of loans up to Rs.25 lakh under the Credit Guarantee Fund
scheme.

46
  Increase in project cost limit under the National Equity Fund Scheme to Rs. 50
lakh.
 Credit linked capital subsidy at 12 per cent of the cost of technological up-
gradation of small industrial units for modernization of small industrial
units.
 The service and business related small industrial units with a maximum
investment limit of Rs.10 lakh would also be covered under priority lending
 Enhancement of investment limits to Rs. 500 lakh for hi-tech and export
oriented sectors.
 Technology Bank would be set up for small industrial sector by
strengthening the existing Technology Bureau for Small Enterprises
(TBSE) of SIDBI.
 One time capital grant of 50 per cent to Small Industry Associations for
setting up international level testing laboratories for small industrial units.
 Preference to be given to tiny units while organizing buyer seller meets,
vendor development programmes and exhibitions.
 Conduct of Third Census on Small Industries.
 Integrated Infrastructure Development Centers (IIDC) scheme extended to all
areas.
During the Tenth Five Year Plan 58 IIDCs have been approved and central grant of
Rs. 38.83 crore has been released up to February 2001. An additional 50 centers were
proposed to be taken up during the Tenth Plan Period.
The Tenth Plan has been expected to increase the production of these small
industrial units to Rs. 14,01,939 crores, help them provide employment to 23.7 million
persons, and export goods worth Rs. 1,26.000 crores by 2006 – 2007. Out of the total plan
outlay of Rs. 15,25,639.0 crores as on 2002-07, the proposed outlay for the development
of village and small industrial units was Rs. 3,499 crores. The sector is targeted to grow at
12 per cent per annum during the Tenth Plan.
Eleventh Five Year Plan (2007 – 2012)
The 11th Plan aimed at raising the rate of growth of the industrial sector to 10 per
cent and manufacturing growth to 12 per cent per annum. Continuing commitment to
priority lending for MSMEs remains an essential feature of development banking. The
11th Plan ensured that the policies are sufficiently flexible to support the development of
micro finance.

47
 In the 11th Plan, the strategy for manufacturing proposed by the National
Manufacturing Competitive Council (NMCC), which includes the following initiatives:
(i) Taxes and duties should be made non-distortionary and internationally
competitive. Internally, the tax system must promote and be consistent with
the unified national market, so that the Indian industry can reap the benefit
of economies of scale and scope.
(ii) While initiatives to provide infrastructure in general are important, they
should be supplemented by efforts to promote infrastructure development
in local areas such as Special Economic Zones (SEZ) and Special
Economic Regions.
(iii) Technological modernization will be the key to high industrial growth.
(iv) State Governments should take steps to create an investor friendly climate,
providing a Single Window Clearance of applications for establishment of
industrial units.
(v) Labour-intensive mass manufacturing based on relatively lower skill levels
provides an opportunity to expand employment in the industrial sector.
(vi) The policy of progressive de-reservation of industries for small scale
production has reduced the list of reserved industries from about 800 to
239. This policy should continue in the 11th Plan at an accelerated pace.
(vii) Industrial licensing should be progressively eliminated. Equally important
is the need to amend the Companies Act, 1956.
(viii) The existing incentive programmes such those available for the North-East,
Jammu and Kashmir , Himachal Pradesh and Uttaranchal need to reviewed
with a view to assessing their impact on industrialization in these areas.
(ix) The industrial growth strategy would be incomplete if it does not recognize
the critical role and the special needs of the micro, small and medium
enterprises (MSMEs).
The 11th Plan placed special emphasis on infrastructure and skill formation.
Competition is the best guarantee of consumer protection and should be strongly
encouraged. It needs to be ensured that the un-registered small enterprises and units
outside the co-operative fold are also able to benefit from government schemes. A cluster
approach can help increase viability by providing these units with infrastructure and
support services of better quality at lower costs. All entry barriers should be removed and
business risks for start-ups mitigated, the latter, inter alia, through a large number of well-

48
managed business incubators in the identified thrust areas of manufacturing. In order to
improve the competitiveness of MSMEs, schemes for establishment of mini tool rooms,
setting up of design clinics and providing marketing support should be innovated on public
private partnership (PPP) basis, and there should be special focus on the services sector, so
that its potential to create employment and growth is fully realized.
Under the 11th Plan, there were two kinds of schemes – one focusing on the lives
of small firm workers, artisans and craft people and other on their livelihood. One of the
important tasks of the 11th Plan was to review the position regarding the availability of
timely and adequate credit (both term loan and working capital) to small and medium
enterprises from commercial banks and other financial institutions and suggest measures
to eliminate the shortcomings that are noticed.
Twelfth Five Year Plan (2012-17)
As the manufacturing performance was weak growth of manufacturing in Eleventh
Plan was likely to be 8 percent. The Planning Commission was planning to raise this to
11-12 percent per year in the Twelfth Plan to create jobs for the growing labour force. For
accelerating manufacturing growth, therefore, the strategies are to achieve greater
domestic value addition and technological depth in Indian industry position, attract
investment including FDI, critical areas where manufacturing capacity should modernize
and develop, doing business. This is largely an agenda item for State governments. Land
and infrastructure constraints must be addressed effectively. Again this is largely in the
domain of the State, but the Centre can “incentivize”, promoting clusters. It is a very
effective way of helping the manufacturing sector State governments should be
incentivized to support the industrial clusters.
Table 2.1
Outlay for the Development of MSMEs in Successive Five Year Plans
Five Year Plan Total Share of MSMEs Percentage
First Plan 1960 5.20 0.27
Second Plan 4672 56.00 1.20
Third Plan 5877 113.06 1.32
Fourth Plan 6625 53.48 0.81
Fifth Plan 15779 96.19 0.61
Sixth Plan 39426 221.74 0.56
Seventh Plan 12177 104.81 0.86

49
 Eight Plan 109292 616.10 0.56
Ninth Plan 180000 1120.51 0.62
Tenth Plan 434100 1629.55 0.66
Eleventh Plan 859200 4303.85 0.50
Twelfth Plan 1865700 5534.00 0.93
Total 8921600 13854.49 8.90
Mean 12745.14 1154.54 0.74
S.D 12634.08 1847.15 0.30
CAGR 77.10 78.75 10.86
C.V 99.13 159.99 40.33
Source: Five Year Plan, Documents.
2.5 (A) SCHEMES AND INCENTIVES FOR ASSISTANCE TO SMALL
SCALEINDUSTRIES BY NATIONAL SMALL INDUSTRIAL CORPORATION
(NSIC)
National Small Industrial Corporation, a public sector undertaking under the
Ministry of MSME is implementing different schemes and is providing incentives for the
promotion of and growth of MSMEs in India.
(a) Consortia Marketing and Brand Building
Formation of consortia of small scale enterprises in specific product groups is
encouraged to enable small enterprises to be competitive and to integrate their capacities.
The Corporation explores markets and secures bulk orders, which are formed out to small
units in accordance with their production capacity. Testing facilities are also being
provided to enable the units to improve and maintain the quality of their products.
(b) Government Purchase Programme
The Government laid emphasis on the purchase of various items from small- scale
industries. Preferential purchase policy has been introduced and the corporation has been
designated as the ‘Nodal Agency’ to promote the marketing of small industry products to
the Government.
(c) Raw Material Assistance
The right type of raw material at an appropriate price and time not only enhances
the competitive capacity of small units but also avoids their sickness. Keeping this in
view, the Corporation through its distribution system has been supplementing the
availability of raw materials to a large number of small industries all over the country.

50
(d) Special Arrangement with National Aluminium Company Limited National
Small Industrial Corporation (NALCO)
In order to facilitate the small scale units in the procurement of aluminium at a
competitive price, the Corporation has entered into a Memorandum of Understanding with
National Aluminium Company (NALCO). Under this arrangement, the corporation is
getting volume based quantity and other discounts on all India basis and a part of the same
is passed on to the small scale units to reduce their cost of raw materials and make the
finished products more competitively priced.
(e) Exports
The Corporation continues its efforts for facilitating exports from small industries
by undertaking the following measures:
 Identifying international market opportunities for the products
manufactured in the small scale units,
 To show the SSI products effectively at different international fora and
exhibitions,
 Counseling on market intelligence and providing technology up-gradation support
(f) Trade Fairs and Exhibitions
To show the competence of Indian SSIs and to capture market opportunities, the
NSIC facilitates the participation of small scale units in fairs and exhibitions.
(g) Buyer - Seller Meets
The buyer-seller meets are organized to bring bulk buyers and the SSI suppliers on
a common platform and facilitate vendor development. These meets also sensitize the
small entrepreneurs to the requirements of the bulk buyers in respect of quality,
manufacturing practices, product specifications, delivery schedules and pricing.
(h) Display Centre for SSI Products
To assist the small-scale units in marketing their products, the NSIC has
established Display Centre at Okhla, New Delhi. This Display Centre will exhibit products
manufactured by different SSIs. The Display Centre has a special enclave for the SSI
products from the North Eastern Region.
(i) Technology Up-gradation
Technical Services Centres / Extension Centres provide valuable technology and common
facility support to the SSIs. This support is in the form of conventional and hi-tech machining
facilities, specialized testing facilities and other quality up-gradation services. Services in the

51
area of energy / environment audit, consultancy for ISO 9000 and preparation of project
exports for the SSIs are also provided.
(j) Software Technology Parks (STP)
The NSIC established two Software Technology Parks one at New Delhi in 1995
and the other at Chennai in 2001. These two parks are established under the Software
Technology Parks of India (STPI) Scheme of the Ministry of Information Technology.
(k) Credit for SSIs
The NSIC facilitates credit support for technology up-gradation programmes for
small scale industries through its equipment financing schemes. In addition to equipment
financing, it also provides limited financial support for their marketing activities, i.e., raw
material procurement, exports, internal marketing and bill discounting.
(l) International Cooperation Programme
Under the International Cooperation Programme, the NSIC facilitates enterprises-
to-enterprises cooperation and the sharing of best practices and experiences with other
developing countries.
There are several bodies and agencies helping the industries sector, both large and
small. The Industrial Development Bank of India (IDBI), was established 1St July, 1964
as a wholly-owned subsidiary of the Reserve Bank of India. The State Trading
Corporation of India (STC), the National Industrial Development Corporation (NIDC) and
the recognized Export Houses also assist small, medium and large industries in production
and exports. The National Institute for Entrepreneurship and Small Business Development
(NIESBD), New Delhi, established in 1983 is an apex body for coordinating
entrepreneurial development programmes organized by various institutions in the country.
Besides these, the international agencies like International Bank for Reconstruction and
Development (World Bank) and its affiliates, the International Development Agency
(IDA) and the national or regional Development Finance Companies (DFCs) have been
providing assistance to small industry.
The Small Industries Development Bank of India (SIDBI), was set up as a wholly
owned subsidiary of the Industrial Development Bank of India in April 1990 under an Act
of Parliament, viz., the Small Industries Development Bank of India Act, 1989. The SIDBI
is the principal financial institution for promotion, financing and development of industry in
the small scale sector, and it co-ordinates the functions of institutions engaged in a similar
spectrum of the SSI sector, including the tiny, village and cottage industries through suitable
schemes tailored to meet the requirements of setting up of new projects, expansion,

52
diversification, modernization and rehabilitation of the existing units. The SIDBI operates its
different programmes and schemes through its 5 regional offices and 33 branch offices. The
SIDBI has taken up major initiatives for the launching of State / Regional Level Venture
Capital Funds dedicated to the Small Scale Units in the Software / IT industry with
participation from the Central / State Government 22.
Initiatives from Central Government
The Union Government has initiated the following steps to support and strengthen
small industries in the country. like:
 The limit of composite loan has been increased from Rs. 1 crore
 The exemption limit for collateral security has been increased from Rs. one
lakh to Rs. 5 lakhs
 The project cost limit under the national equity fund has also been
enhanced from Rs, 25 lakhs to Rs. 50 lakhs
 The extension of credit to small industrial units has been facilitated through
the Credit Guarantee Scheme. Revision in eligible limit for coverage under
Credit Guarantee Scheme from Rs. 10 lakh to Rs. 25 lakh has been made
 Ceiling for loans under Credit Linked Capital Subsidy Scheme (CCLCSS)
for technology up-gradation has been increased from Rs. 40 lakhs to Rs. one
crore. The rate of subsidy has been raised from 12 percent to 15 per cent in
2004-2005 budget
 Small Industries exemption limit for excise duty rose from Rs. 50 lakhs to Rs.
one crore.
 A small and Medium Enterprise (SME) fund of Rs. 10,000 crores has been
set up under SIDBI for the problems of inadequacy of financial resources at
competitive rates for the small industrial sector. The fund has been made
operational with effect from April, 2004.
 A Credit Rating Scheme has been 75 per cent of the cost with a maximum
limit of Rs. 40,000 per small industrial unit, is being implemented by
National Small Industries Corporation (NSIC).
 Small Industries Development Bank of India (SIDBI) has taken “SIDBI
Growth Fund” with a corpus of Rs. 100 crores which would focus on small
units of various industries including software and IT industries. The corpus of
SIDBI Growth Fund is proposed to be raised to Rs. 500 crore in due course.

53
2.5 (B) SCHEMES FOR SMALL INDUSTRIAL UNITS
In the post-World Trade Organization (WTO) environment, it has become very
clear that small industrial units have to be cost competitive and produce quality goods to
remain in business. The Ministry of SSI proposed to help small industrial units by giving
incentives for taking ISO-9000 certification, introduce a Credit Linked Capital Subsidy
Scheme (CLCSS), Technology up-gradation Scheme and Credit Guarantee Fund Trust
(TGSCGPT) for Small Industries.
(a) Reimbursement for ISO-9000 Certification Scheme
The scheme was started in March 1994 and it provides uptoRs. 75,000 per small
industrial unit which acquire ISO-9000 Certification. Since the inception of the scheme of
ISO-9000 reimbursement, 4101 small industrial units to the tune of Rs. 1944 crore have
been benefited upto Nov -2006.
(b) Laghu Udyami Credit Card Scheme
Laghu Udyami Credit Card Scheme (LUCCS), introduced in November 2001, has
been implemented by the banks for providing borrower friendly credit facilities to small
business, retail traders, artisans, small entrepreneurs, professionals and other self-employed
persons including those in the tiny sector. Credit limit per enterprise under the scheme has
been increased from Rs. 2 lack to Rs. 10 lack for borrowers with satisfactory record.
(c) Swarojgar Credit Card scheme
Swarojgar Credit Card Scheme (SCCS) has been launched since 15th August 2003
and banks are providing working capital to self-employment persons to the extent of Rs.
25000 lakhs per card. Credit flow from the formal system to small borrowers, especially
persons of small means, has not been satisfactory which has been ‘confirmed by various
studies. Various credit delivery innovations in the firm of SHG - Bank Linkage
Programme for making financial services available to the poor, Kisan Credit Card Scheme
(KCCS) for meeting the production credit needs of the farmers for small industrial sector
have been introduced. However, tiny and cottage village industries sectors and self-
employed persons were left out from credit card schemes.
(d) Credit Guarantee Fund Trust Scheme for Micro and Small Industries (CGFTSI)
The scheme covers collateral free credit facility extended by eligible lending
institutions to new and existing Micro and Small Enterprises up to Rs. 50 lakhs per
borrowing unit. Under the Scheme, 73431 proposals amounting to Rs. 197133 crores have
been approved. Credit Guarantee Fund Trust for Micro and Small Industries helps small
entrepreneurs to realize their dreams of making it big and successful.

54
(e) Credit Linked Capital Subsidy Scheme (CLCSS)
The Scheme was started in October, 2000 for a period 5 years for encouraging the
small industrial units for technology up-gradation by installing new machinery and
equipment for increasing productivity, quality up-gradation, machinery for packaging or for
environment protection. Initially 13 items were shortlisted under this scheme, providing 15
per cent upfront capital subsidy with effect from the 29.09.2005 to Micro, Small and
Medium Enterprises. A provision for giving subsidy of Rs. 600 crores was made under this
scheme. Recently the list of items has been enhanced to 30, so that more number of units
can become technically advanced.
(f) National Equity Fund Scheme (NEF)
The objective of NEF Scheme is to provide equity type support to entrepreneurs for
setting up new projects in tiny/small industrial sector for undertaking expansion,
modernization, technology up gradation and diversification of existing tiny, Small Industries
and Service Enterprises and for rehabilitation of viable sick units. In this scheme the cost
should not exceed Rs. 50 lakhs for new projects.
(g) Integrated Infrastructure Development Scheme (IIDS)
IIDS was launched in 1994 with the objective of providing basic infrastructural
facilities like power distribution network, Water, Roads, Telecommunication, Drainage
and Pollution control facility, Banks, Storage and Marketing outlets, Common service
facility and Technological back up service etc. The estimated cost to set up an IID centre
is Rs. 5.00 crores. Central Government provides upto 40 per cent or Rs. 2 crores in the
case of general states and 80 per cent or Rs. 4 crores – for North – East Region, Jammu
and Kashmir, Himachal Pradesh and Uttarakhand.
(h) Technology development and Modernization Fund scheme (TDMF)
The main objective of the scheme is to encourage existing industrial and small
industrial units to take up modernization of their production facilities and adoption of
improved technology. The scheme was initiated in 1995 and extended up to 2003.
(i) MSME Hub for SC/ ST
In pursuance of Budget Announcement 2016-17, the Ministry of Micro, Small and
Medium Enterprises (MSME) has launched the National Scheduled Caste and Scheduled
Tribe (SC/ST) Hub. This scheme is being implemented through the National Small
Industries Corporation Limited (NSIC), a public sector undertaking under the Ministry of
MSME.The SC/ST Hub would provide professional support to SC/ST entrepreneurs to
fulfill the obligations under the public procurement policy for micro and small enterprises,

55
adopt applicable business practices and leverage the stand-up India initiative. The function
of the Hub include collection, collation and dissemination of information regarding SC/ST
enterprises and entrepreneur, capacity building among existing and prospective SC/ST
entrepreneurs through skill training and Entrepreneurs Development Programmes (EDPs).
Promotional Support for MSMEs Entrepreneurs in India
Micro, Small and Medium enterprises are one of the fastest growing industrial
sectors in the world. The potentialities of small-scale industries for developing the
economy have been recognized by many countries and the promotion of small firms is
regarded as a way of enabling the local population to participate actively in the economic
and social development of any country. In many countries, the MSMEs sector has been
playing an active role in generating employment at lower cost by establishing an
entrepreneurial base even in rural and backward areas. In agriculture-based economies, the
small-scale sector plays a very important role in economic and social transformation of the
country by providing inputs to agriculture and related activities and to rural infrastructure
development, processing agricultural outputs for domestic consumption and export, and
producing goods and services for local consumption. That is why; the Central Government
has set up many institutions for the promotion of SSIs.
Andhra Pradesh embarked upon a mission, which was, to be at the forefront of
industrial development in the country by the year 2020. But fulfilling this Mission needs not
only ideas and dreams but also a lot of hard work and realistic planning guided by well
spelt out policy directions. In 1995, the State Government enunciated its Industrial
Policy Target 2000 which set the tone for adopting a new approach to industrial
development in the liberalized economy. One of the objectives of this New Industrial
Policy was to promote the growth of small-scale and cottage industries to help the small
entrepreneurs.
National Institute of Small Industry Extension Training (NISIET)
The NISIET is the mother of entrepreneurship development in India. It was the
first Indian institute to provide training to officers dealing with small industries as well as
entrepreneurs. The institute pioneered entrepreneurial research in the early 1960s through
experiments on achievement motivation, which led to the first entrepreneurship
development model. Later, other models and approaches were developed. It heralded the
concept of growth centers. Its industrial potential surveys culminated in policy formulation at
the central and state levels. At present NISIET is involved in the promotion and development
of SSIs through a cluster approach. In 1962, when NISIET was registered in Hyderabad, it

56
was called Small Industry Extension Training (SIET) Institute. It. was changed to NISIET
in 1984 (APO, 2007).
Entrepreneurship Development Institute of India (EDI)
The success story of Centre for Entrepreneurship Development (CED),
Gujarat led to the establishment of an entrepreneurship development institute
Ahmedabad in 1983 with the support of the Industrial Development Bank of India (IDBI),
the Industrial Credit and Investment Corporation of India (ICICI), the Industrial Financial
Corporation of India (IFCI), and the State Bank of India (SBI). The establishment of EDI has
further facilitated the growth of entrepreneurship in the country through its activities of
entrepreneurship education, training, and research. EDI programs address entrepreneurs,
students, executives, etc., as well as agencies concerned with entrepreneurship development.
National Institute of Entrepreneurship and Small Business Development
(NIESBUD)
The NIESBUD is another national institute which was established in 1983 in Delhi
by the Ministry of SSI, Government of India, to coordinate and organize entrepreneurship
development programs. It is registered as a society under the Government of India Societies
Act. Its main goal is to promote, support, and sustain entrepreneurship and small business
through training, education, research, consultancy, and other interventions in India and
other developing countries. Its main activities include evolving effective training strategies
and methodology, standardizing model syllabi for entrepreneurship training, organizing
trainers' training programs, and undertaking research in entrepreneurship development.
Indian Institute of Entrepreneurship (IIE), Guwahati
The IIE began as a branch institute of NISIET, located in Guwahati, to promote
entrepreneurship in the north eastern states of India. It became an independent institute
in 1994 under the Ministry of SSI and started its operations with the North-East Council
(NEC), the Governments of Assam, Arunachal Pradesh, and Nagaland, and SIDBI as the
stakeholders. Its main activities include identification of training needs, designing and
organizing training programs for entrepreneurs and concerned agencies, evolving effective
strategies and methodologies, organizing seminars/workshops, undertaking research in
entrepreneurship, and documentation and dissemination of information on self-employment
and entrepreneurship. The institution has been undertaking efforts to create an
entrepreneurial climate in the north eastern states through its activities.

57
State-Level CEDs/IEDs
In addition to the above four national institutes, at present, there are 14 state-level
Centers of Entrepreneurship Development (CEDs)/Institutes of Entrepreneurship
Development (lEDs).

a. Institute of Entrepreneurship Development (IED), Lucknow (Uttar Pradesh).

b. Centre for Entrepreneurship Development of Karnataka (CEDAK),
Dharwad, (Karnataka).
c. Maharashtra Centre for Entrepreneurship Development (MCED),
Aurangabad, (Maharashtra).
d. Centre for Entrepreneurship Development (CEDMAP), Bhopal (Madhya
Pradesh).
e. Centre for Entrepreneurship Development (CEDMAP), Raipur (Chattisgarh).
f. Institute of Entrepreneurship Development (IED), Bhubaneswar (Orissa).
g. The Institute for Enterprise Culture and Entrepreneurship Development
(IECED), Cochin (Kerala).
h. Himachal Pradesh Centre for Entrepreneurship Development (HPCED),
Simla (Himachal Pradesh).
i. Centre for Entrepreneurship Development (CED), Madurai (Tamil Nadu).
j. Haryana Institute of Public Administration, Gurgaon (Haryana).
k. Entrepreneurship and Management Institute (EMI), Jaipur (Rajasthan).
l. Centre for Entrepreneurship Development (CED-AP), Hyderabad
(Andhra Pradesh).
m. Jammu & Kashmir Entrepreneurship Development Institute (J&K EDI),
Jammu (Jammu & Kashmir).
n. Institute of Entrepreneurship Development (IED), Patna (Bihar).
These institutes were established under the scheme for strengthening the training
infrastructure of existing and new entrepreneurship development institutions (EDIs) as
envisaged in the policy measures of Ministry of SSI adopted in 1991.
Association of Women Entrepreneurs of Karnataka (AWAKE)
AWAKE was established in 1993 in Bangalore, Karnataka, with the mission of
empowering women through entrepreneurship development. It is an ISO 9001-2008
accredited organization, totally devoted to entrepreneurship development among women
both in rural and urban areas of India. It develops, guides, and extends assistance to

58
potential women entrepreneurs in Karnataka through counseling, training, handholding,
and peer group support (http://awakeindia.org.in/).
Association of Lady Entrepreneurs of Andhra Pradesh (ALEAP)
ALEAP was established in 1993 at Hyderabad, Andhra Pradesh, by several women
entrepreneurs with the aim of empowering women to establish small and medium
enterprises. Its major activities are identification of projects, guidance for finance, training,
organizing exhibitions, and creating industrial infrastructure for developing women
entrepreneurs. In 1997, ALEAP set up a centre for entrepreneurship development, with
financial support from central and state governments, to promote women entrepreneurs in
the state of Andhra Pradesh (http://www.aleap.org/).
Consortium of Women Entrepreneurs of India (CWEI)
CWEI is a registered society that works for the economic empowerment of women
through entrepreneurship strategy. Its main activities are participating in trade exhibitions,
organizing training programs, providing escort services and handholding and export
marketing for the benefit of first-generation women entrepreneurs. In their activities,
CWEI widely uses e-governance, e-commerce, and other services. Rural and tribal women
with traditional skills have been greatly motivated towards entrepreneurship by CWEI. It
has started networking with women entrepreneurs of other countries to market the
products manufactured by women entrepreneurs in India.
Ministry of Small Scale Industries and Agro and Rural Industries (MoSSI andARI)
The process of liberalization and market reforms has created wide-ranging
opportunities for the development of small-scale industries. At the same time, the
changing world scenario has thrown up new challenges to the very existence of the sector.
The need of the hour is to suitably strengthen the sector so that it can adapt itself to the
changed environment and face the challenges boldly and effectively. In order to focus on
the issues facing the sector, the government created the Ministry of Small Scale Industries
and Agro and Rural Industries (MoSSI & ARI) in October 1999 as the nodal ministry for
formulation of policy and coordination of central government assistance relating to
promotion and development of small-scale industries in India. In September 2001 it was
bifurcated into two separate Ministries, the Ministry of Small Scale Industries and
Ministry of Agro and Rural Industries. The MoSSI designs policies, programs, projects,
and schemes in consultation with its organizations and various stakeholders and monitors
their implementation with a view to assisting the promotion and growth of small-scale
industries. The Ministry also performs the function of policy advocacy on behalf of the

59
SSI sector with other Ministries/Departments of the Central Government and the State and
Union territories. The implementation of policies and various programs/schemes for
providing infrastructure and support services to small enterprises is undertaken through its
attached office, the SIDO; statutory bodies/other organizations like Khadi and Escort
services provide assistance from the stage of identification of a product until the start-up
of the unit, including project reports, loans, technical information, etc. The assistance
provided after starting-up is called handholding. This includes marketing and counselling
on other issues. Village Industries Commission (KVIC), Coir Board, National Small
Industries Corporation (NSIC); and three training institutes: National Institute of Small
Industry Extension Training (NISIET), Hyderabad; Indian Institute for Entrepreneurship
(HE), Guwahati; and National Institute of Entrepreneurship and Small Business
Development (NIESBUD), New Delhi.
Small Industries Development Organization (SIDO)
Many countries have established have an SME Development Agency (SMEDA) as
the nodal agency to coordinate and oversee all government interventions in respect to the
development of this sector. In India, though a separate medium sector has been defined
only recently, the Office of the Development Commissioner Small Scale Industries DC
SSI), also known as SIDO, established in 1954, has been functioning as the nodal
development agency for small industries. It provides a comprehensive range of common
facilities, technology support services, marketing assistance, and so on, through its network
of 30 Small Industries Service Institutes (SISIs), 28 Branch SISIs and Field Testing Stations,
four Regional Testing Centers, two Small Entrepreneur Promotion and Training Institutes,
and one Hand Tool Design Development and Training Centre. SIDO also has a network of
Tool Rooms, Processing-cum-Product Development Centers, and technology and training
support institutes which are run as autonomous bodies registered as.
Societies under the Societies Registration Act,1860, SIDO operates a number of
schemes for the SSI sector: the Credit Linked Capital Subsidy Scheme (CLCSS) for
technology upgrading; the Credit Guarantee Fund Scheme; Quality Up-gradation/
Environment Management through incentive for ISO 9000ISO14001Certifications;
participation in international fairs; purchase and price preference policy; Prime Minister's
Rojgar Yogna (PMRY) scheme; the Cluster Development Programme; the Integrated
Infrastructure Development scheme; Mini Tool Rooms; Testing Centers; Sub-Contracting
Exchanges; the SSI-MDA scheme; assistance to Entrepreneurship Development
Institutes; and the scheme of microfinance(APO,2007).

60
The National Small Industries Corporation Ltd (NSICL)
NSICL was set up in 1955 with a view to promoting, aiding, and fostering
the growth of small-scale industries in the country, focusing on commercial aspects
of these functions. NSIC continues to implement its various programs and projects
throughout the country to assist SSI units. The Corporation has been assisting the
sector through schemes and activities such as supply of both indigenous and
imported machines on easy hire-purchase terms; composite term loans and credit
rating for small-scale industries; procurement, supply, and distribution of indigenous and
imported raw materials; marketing of small industries' products; export of small industries'
products and developing their export worthiness; enlisting competent units and
facilitating their participation in the Government Stores Purchase Programme; training in
several technical trades; sensitizing SSI units on technological upgrading through software
technology parks and Technology Transfer Centers, mentoring, and advisory service;
technology business incubators; setting up small scale industries in other developing
countries on a turnkey basis; and other areas of international cooperation.
National Commission for Enterprises in the Unorganized Sector (NCEUS)
The National Commission for Enterprises in the Unorganized Sector was
established in September 2004. The Commission recommends measures considered
necessary to bring about improvement in the productivity of informal sector enterprises; to
generate large-scale employment opportunities on a sustainable basis, particularly in rural
areas; to enhance the competitiveness of the sector in the prevailing global environment; to
link the sector with institutional support in areas such as credit, raw material,
infrastructure, technology up-grading, marketing, and formulation of suitable
arrangements for skill development.
Khadi and Village Industries Commission (KVIC)
KVIC was set up in 1957, to assist the development, promotion, and dispersal of
traditional industries in rural and urban areas. Some of its major functions are the
planning, promotion, organization, and implementation of programs for the development
of khadi and other village industries in rural areas in coordination with other agencies
engaged in rural development wherever necessary; building up reserves of raw materials
and implements for supply to producers, creation of common service facilities for
processing of raw materials as semi-finished goods, and facilities for marketing of KVI
products, apart from organizing training for artisans engaged in these industries and
encouraging cooperative efforts among them; encouraging and promoting research in

61
production techniques and equipment employed in the khadi and village industries sector
and providing facilities for the study of problems relating to it, including the use of non-
conventional energy and electric power with a view to increasing productivity, eliminating
drudgery, and otherwise enhancing their competitive capacity, and arranging for
dissemination of salient results obtained from such research; and providing financial
assistance to institutions as well as individuals for development and operation of khadi and
village industries and guiding them through supply of designs, developing prototypes, and
providing other technical information.
KVIC launched the Rural Employment Generation Programme (REGP) scheme in
1995 to generate employment in rural areas under the KVI sector. The scheme is
implemented through KVIC with fond assistance from public-sector banks, rural banks,
KVI Boards, and other institutions as approved by KVIC. This scheme promotes
entrepreneurial culture particularly in rural areas, and entrepreneurial development training is
important for the selected entrepreneurs. During 2004-05, 0.53 million entrepreneurs were
developed through the scheme. In addition, KVIC also extends fond assistance to public and
private institutions for organizing EDPs in the KVI sector. The Coir Board under the
MoARI also facilitates EDPs through public and private institutions to develop
entrepreneurs in the coir sector. Their programs focus primarily on skill development
with entrepreneurship input. Coir units are concentrated in southern and eastern India.
Ministry of Food Processing Industries (MoFPI)
MoFPI was set up in July 1988. The MoFPI is the nodal agency of the Government
of India for processed foods and is responsible for developing a strong and vibrant food
processing sector with emphasis on:
(a) Stimulating demand for appropriate processed foods.
(b) Achieving maximum value addition and by-product utilization.
(c) Creating increased job opportunities, particularly in rural areas.
(d) Enabling farmers to reap the benefits of modern technologies.
(e) Creating surpluses for exports.
The Ministry concerns itself with fruits and vegetable processing, food-grain milling,
dairy products, processing of poultry and eggs, meat and meat products, fish processing,
bread, oil seeds and meals (edible), breakfast foods, biscuits, confectionery (including
cocoa processing and chocolate), malt extract, protein isolate, high-protein foods, weaning
foods and ready-to-eat food products, beer (including non-alcoholic beer), alcoholic drinks
from non-molasses base, aerated waters/soft drinks and other processed foods, specialized

62
packaging for food processing industries, and technical assistance and advice to the food
processing industry. The Ministry also interacts with the Agricultural and Processed Food
Products Export Development Authority (APEDA), the Marine Product Export
Development Authority (MPEDA), the National Dairy Development Board etc.
National Manufacturing Competitiveness Council (NMCC)
The National Common Minimum Programme, launched in 2004, identified the
need to have a continuing forum consisting of representatives from the government,
industry, and academia for policy dialogue to energize and sustain the growth of the
manufacturing industry. This is an interdisciplinary and autonomous body at the highest
level that serves as a policy forum for credible and coherent policy initiatives. Food
processing, textiles and garments, engineering, consumer goods, pharmaceuticals, capital
goods, leather, and IT hardware are among the priority items specifically mentioned in the
Common Minimum Programme. The Council will also help in immediate implementation.
Broadly, the role of the Council includes identification of manufacturing sectors having
the potential for global competitiveness, dealing with problems and constraints in such
sectors with respect to structure and size of industry, technology gaps, modernization
needs, etc., and evolving sector-specific strategies for enhancing the competitiveness of
manufacturing sectors. Its functions would, inter alia, include sectoral and enterprise-level
initiatives, innovation and technology development (R&D), entrepreneurship promotion,
infrastructure and enabling facilities, trade and fiscal policies, and generation of
employment.
State Level Institutional Support
The State governments execute different promotional and developmental
projects/schemes and provide a number of supporting incentives for development and
promotion of the small-scale sector in their respective states. These are executed through
state Directorates of Industries, which have District Industries Centers (DICs) under them
to implement central/state-level schemes. The State Industrial Development Corporation
and State Financial Corporations look after the needs of the small-scale sector.
Public-Private Partnerships (PPP)
The government is initiative for the growth of micro, small, and medium
enterprises (MSMEs) have been oriented towards PPP. Several private organizations like
TANSTIA FNF Service Centre, FISME (Federation of Indian Micro, Small and Medium
Enterprises), ASSOCHAM, FICII, and CII have been involved in promoting these sectors.

63
Financial Institutions
Reserve Bank of India (RBI)
RBI is the central bank for the country, and it gives guidelines and direction to all
sectors of the economy. The RBI has resorted to "moral persuasion" from time to time to
improve credit delivery from banks to the small-scale sector.
(a) Public-sector banks have been advised to operationalise more specialized
SSI branches at centers where there is a potential for financing many SSI
borrowers.
(b) Banks have also been advised to accord benefits of lower spread over the
PLR to SSI units with a good track record.
(c) Banks have been advised to delegate enhanced powers to branch
managers of specialized SSI branches so that most of the credit proposals
are decided at the branch level.
(d) A single window scheme is being extended to all districts to meet the
financial requirements of SSI units.
The feedback received from the SSI units shows that a great deal remains to be done
and that the responsible banks have not fully implemented the policy initiatives at the
ground level. To cater to the needs of the SSI sector in the country and to address the issues
related to credit flow and other important matters, banks have formulated various special
committees in close collaboration with the Planning Commission. Important among them are
the Nayak Committee (1991-92), the S.L Kapur Committee (1997-98), and the S.P. Gupta
Study Group (July 2000). Based on their recommendations, a comprehensive policy package
was announced in August 2000 that included:
a) Launch of a Credit Guarantee Scheme to cover loans up to INR2.5
million.
b) Launch of a Credit Linked Capital Subsidy Scheme to provide subsidies
against loans taken for technological upgrading.
c) Raising the composite loan limit ceiling to INR2.5 million.
This is a credit rating scheme encouraging the policy of ranking the SSIs on the
basis of their repayment behavior under which bankers can, at their discretion, issue
concessions or penalties to entrepreneurs based on their repayment pattern.
Small Industries Development Bank of India (SIDBI)
The Small Industries Development Bank of India is an apex bank that since 2nd April
1990 has provided direct/indirect financial assistance under different schemes to meet the

64
credit needs of the small-scale sector and to coordinate the functions of other institutions in
similar activities. SIDBI offers the Direct Discounting of Bills (Components) Scheme, the
Technology Development and Modernization Fund (TDMF) Scheme (both direct and
indirect assistance), the Single Window Scheme through Primary Composite Loan Scheme
of Lending Institutions, the Scheme for Financing Activities Relating to marketing of SSI
Products, the Scheme of Direct Assistance for Development of Industrial Infrastructure
for SSI Sector, the Export Credit Scheme, the Venture Capital Scheme, etc. New
initiatives taken by SIDBI to boost the growth of SSIs are two subsidiaries-SIDBI Venture
Capital Limited and SIDBI Trustee Company Limited-formed to oversee venture capital, the
Technology Bureau tor Small Enterprise formed to oversee technology transfer, Match-
making Services, Finance Syndication and Facilitation of Joint Ventures, a Marketing
Finance and Development Department to set up a Marketing operation Division, and a
Foundation for Micro Credit.
State Finance Corporations (SFCs)
The State Finance Corporations (SFCs) are the integral part of institutional finance
structure in the country. SFCs promote small and medium industries in the state. Besides,
SFCs are helpful in ensuring balanced regional development, higher investment, more
employment generation and broad ownership of industries. At present there are 18 SFCs
out of which 17 SFCs were established under SFC Act 1951. In Industrial Investment
Corporation Ltd established under company Act, 1949 in also working as SFC.
The SFCs, the state level financial institutions, have played an important role in the
development of SSIs in their respective states with the main objectives of financing and
promoting these enterprises for achieving balanced regional growth, catalyze investment
and general employment. In order to meet the financial needs of small and medium scale
industrial units which are not governed by Industrial Finance Corporation (IFC), the
Government of India passed SFC Act in 1951, empowering the State Governments to State
Financial Corporations. The main function of SFCs is to provide long - term finance to
small and medium scale industrial concerns formed as public or private limited companies,
corporations, firms or proprietary concerns. Other functions are guaranteeing loans,
subscription and under writing, guarantee for deferred payments and acting as agent of
Central and State Governments for sanctioning loans to small industries.
The APSFC also supports the State Government's Industrial Investment Promotion
Policies by introducing specific schemes for the educated unemployed under 'Crash
Programme and 'Self Employment Scheme for young entrepreneurs'. It is operating many

65
other schemes for modernization and up-gradation of technology, besides being the
government agency for disbursement of subsidies. It has also formulated a scheme for the
benefit of the 'Export Oriented Units' in line with the commitment of the government to
increase earning through exports. The Corporation intends to provide all facilities under
one roof by becoming a 'One Stop Shop". Its official reports say that it is also gearing to
meet the needs, expectations, aspirations and ambitions of entrepreneurs and to keep pace
with and be ahead of the Industrial Investment Promotion Policy (2005-2010) of the State
Government.There are decisions taken at the Annual Officers' Conference (AOC) on
simplification of sanctions and disbursements procedures, further delegation of powers
on relaxation of certain terms and conditions of sanction, reduction of interest rates,
service charges and upfront fee and increase of loan period, reduction of the time lag
involved ^"in sanctions and disbursements resulted in improved customer service and
ultimately, in increased volume of the business of the APSFC. Delegation of powers on sale
of sick units to various committees, modification of the existing guidelines on One Time
Settlements (OTS) of loan accounts of Doubtful and Loss category assets were a few other
important decisions taken at the AOC which contributed to the improved recovery
performance. The Corporation will continue to enhance the level of funding to this sector
and increase its contribution to the growth of MSME Sector in the State (APSFC Annual
Report, 2010-11, p.6).
From 1998-99 onwards the APSFC has been organizing 1 - Day Entrepreneurs'
Awareness Seminar (IDEAS) in Hyderabad and at various growth centers in every district
of the State. At the IDEAS, the APSFC made on the spot scrutiny of loan proposals and
accorded in-principle sanction approvals in respect of loan applications received,
interacting with and inviting suggestions from them on simplification of its systems and
procedures. In addition, quick sanction and disbursements of loans by the APSFC
helped in building up a favorable image among the entrepreneurs and in attracting a good
number of loan proposals which ultimately enabled the APSFC to achieve the record
sanction.
Specific Policy Initiatives for Entrepreneurship Development Ministry ofSmall-Scale
Industry
E D I Schemes
The Central assistance provided under the scheme would only be catalytic and
supplementary to the efforts of respective states/ agencies involved in entrepreneurship
development. Financial assistance will be provided for creating infrastructure such as

66
buildings, training equipment, and support services on a matching basis from the state
governments, restricted to INR 1 million in each case. These institutes are making efforts
to organize various kinds of activities to promote entrepreneurial culture in the respective
states.
National Entrepreneurship Development Board (NEDB)
NEDB is the apex body for entrepreneurship development. It devises and
recommends Government schemes for the promotion of entrepreneurship through self-
employment or setting up small-scale industries and small businesses. Grants are provided
to reputable organizations engaged in entrepreneurship development for organizing
workshops and seminars, conducting research in entrepreneurship development, etc.
Under this program the MoSSI provides funds for organizing surveys and research
studies on topical issues in the SSI sector. Training institutes, universities/colleges, NGOs,
and other industry associations conduct surveys and studies on various issues of
entrepreneurship development and problems of first-generation entrepreneurs that are
published for wider dissemination.
Scheme of International Cooperation
Technology infusion and/or upgrading of MSMEs, their modernization, and
promotion of exports are the principal objectives of assistance under this scheme. It covers
activities like participation of entrepreneurs in international exhibitions; buyer-seller
meets, deputation of business delegations to other countries for technology upgrading,
facilitating joint ventures, improving markets, etc. It also holds international conferences
and seminars of topical interest.
2.6 Growth of MSME in India and Andhra Pradesh
Micro Small and Medium Enterprises (MSMEs), including khadi and village/rural
enterprises play a key role in the development of Economides with their effective,
efficient, flexible and innovative entrepreneurial spirit. The socio-economic policies
adopted by India since the Industries (Development and Regulation) Act, 1951 have laid
stress on MSMEs as a means to improve the country’s economic conditions. The Micro
Small and Medium Enterprise (MSME) have been accepted as the engine of economic
growth and for promoting equitable development. The major advantage of the sector is its
employment potential at low capital cost, and the labour intensity of the MSME sector is
much higher than that of the large enterprises. The MSMEs constitute over 90 per cent of
total enterprises in most of the economic and are credited with generating the highest rates
of employment growth and account for a major share of industrial production and exports.

67
 In India too MSMEs play a pivotal role 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. As per available statistics (4th Census of MSME sector), this sector employs
an estimated 59.7million persons spread over 26.1 million enterprises. It is estimated that
in terms of value, MSME sector accounts for about 45 per cent of the manufacturing
output and around 40 per cent of the total exports of the country (Fourth All India Census
of MSMEs, 2006-2007, Government of India, New Delhi)
The Micro Small and Medium Enterprises (MSMEs) sector contributes
significantly to the manufacturing output, employment and exports of the country. It is
estimated that in terms of value, the sector accounts for about 45 percent of the
manufacturing output and 40 per cent of the total exports of the country. The sector is
estimated to employ about 59 million persons in over 26 million units throughout the
country. Further, this sector has consistently registered a higher growth rate than the rest
of the industrial sector. There are over 6000 products ranging from traditional to high-tech
items, which are being manufactured by the MSMEs in India. It is well known that the
MSME sector provide the maximum opportunities for both self-employment and jobs after
agriculture sector.
2.6.1 Growth Pattern of MSMEs in INDIA
MSMEs are often said to grow faster than large firms. However, empirically it is
observed that through they have high growth rates, they as a group has high death rates,
that is, many firms do not last very long. This means that the total effect on the economy
may not be much greater than that of relatively larger firms. This section attempts to study
the direction of growth in various aspects of MSMEs.
Growth Rate of MSME Sector in Comparison with the Overall Industrial Sector
The table 2.2 gives the details of the growth rate of MSME sector when compared
with the overall industrial sector. The MSME sector has consistently registered a higher
growth rate overall growth of industrial sector.

68
 Table 2.2
Comparative Growth Rate of MSMEs Sector to Overall Industrial Sector During
2000-15
Growth rate of over all
Year Growth rate of MSMEs Sector (% )
industrial sector (% )
2000-2001 8.0 5.0
2001-2002 6.1 2.7
2002-2003 8.68 5.70
2003-2004 9.64 7.00
2004-2005 10.8 8.40
2005-2006 12.32 8.20
2006-2007 12.60 11.60
2007-2008 13.0 8.50
2008-2009 10.30 1 2.80
2009-2010 6.70 10.40
2010-2011 4.4 07.40
2011-2012 4.4 07.80
2012-2013 5.6 06.85
2013-2014 9.1 06.76
2014-2015 8.56 06.54
LGR -6.790 3.125
CV 2.393 1.205
t-value 1.640@ 1.474@
CGR -09.596 4.371
CV -19.101 0.696
t-value 1.610@ 1.822@
Source: Annual Reports of Ministry of MSMEs
The table 2.2 shows the comparative growth of industrial sector as a whole and the
growth of MSMEs during fifteen year period of 2000-15. The two sectors have shown
moderate to high growth rates during earlier phase of this period i.e., upto 2000-10. But
during the recent five years period the growth rate of MSMEs was greater than that of the
overall industry during early period and lower during the later period.
The growth rate of MSMEs was 8.00 in 2000-01,it declined to 6.10 next year,
increased the 8.68 in 2002-03 and then showed increasing period upto 2007-08 when it
reached to 13.00 percent. Later, it declined and fell to a low of 4.4 per cent in 2010-11
and then increased to reach 9.1t per cent in 2014-15. However, the liner and compound
growth rates are negative because of steep decline in few years, the rates are -6.790 and -
9.596 respectively and they are not significant. The growth rate of industrial sector
declined in the second year from 5.00 to 2.70 per cent and then increased gradually to
reach 11.60 per cent in 2006-07 and then to 12.80 per cent in 2008-09. Afterwards the
growth rate showed declining trend and reached 6.76 per cent in 2014-15. But, as the end

69
year growth rate was greater and as there are no steep falls, the linear and compound
growth rates are positive at 3.128 and 4.371 respectively which, however, are not
significant.
Comparatively, the growth of industrial sector has been more significant than the
growth of MSMEs during the entire period of 2000-15. The fluctuations are also less in
the growth of industrial sector than in MSMEs. However, the growth rate of MSMEs was
less during in the initial period of upto 2007-08, highest difference in the year 2001-02
when the growth rate of overall industrial sector was very low at 2.70 per cent. In the later
period i.e from 2008-09 the overall industry registered during growth than the MSMEs,
the largest difference in the year 2009-10.
The performance of small scale sector is analyzed in terms of total number of units,
fixed investment, production, employment and exports. Table 2.3 shows the performance
of the small scale sector.
Table 2.3
Performance of MSMEs in India: Units, Investment, Production, Employment &
Exports,-2000-2015
Total Fixed
Employment Exports
Year MSMEs Investment Production
lakhs in person Rs. crore
(in lakhs) Rs. in crore
101.1 146845 261297 238.73 69797
2000-01
(4.07) (4.90) (11.78) (4.21) (28.78)
105.21 154349 282270 289.33 71244
2001-02
(4.07) (5.11) (8.03) (4.44) (2.07)
109.49 162317 314850 260.21 86013
2002-03
(4.07) (5.16) (11.54) (4.36) (20.73)
113.95 170219 364547 271.42 97644
2003-04
(4.07) (4.87) (15.78) (4.31) (13`52)
118.59 178699 429796 282`57 124417
2004-05
(4.07) (4.98) (17.90) (4.11) (27.42)
123.42 188113 497842 294.91 150242
2005-06
(4.07) (5.27) (15.83) (4.37) (20.76)
261.01 500758 709398 594.61 182538
2006-07
(111.48) (166.20) (42.49) (101.62) (21.50)
272.79 558190 790759 626.34 202017
2007-08
(4.51) (11.47) (11.47) (5.34) (10.67)
285.16 621753 880805 659.35
2008-09 N.A
(4.53) (11.39) (11.39) (5.35)
298.08 693835 982919 695.38
2009-10 N.A
(4.53) (11.59) (11.590 (5.47)
311.52 773487 1095758 732.17
2010-11 111403
(4.51) (11.48) (11.48) (5.29)

70
 2011-12 447.64 182757.64 1834332.05 1011.69 131483
2012-13 447.54 1268763.67 1883394.25 1061.40 128162
2013-14 488.46 1363700.54 2049852.32 1114.29 N.A
2014-15 510.57 1,471,912.94 1,171.32
LGR 12.262 15.896 14.847 11.896 2.806
CV 2.129 3.142 2.614 0.066 1.086
t-value 13.003** 5.735** 11.015** 12.964** 1.728@
CGR 14.458 18.275 17.900 13.798 3.687
CV 0.433 0.256 0.206 0.358 0.096
t-value 13.163** 5.822** 26.148** 12.892** 2.310*
Source: Annual Reports of Ministry of MSMEs
The table gives a picture of trends of the number of units, production, employment,
and exports in the MSMEs sector from 2000-01 to 2014-15. The year 2006-07 witnessed a
significant jump in the magnitude of the above aspects because of inclusion of the micro
unit in the category of MSME sector. However growth rates are calculated for the entire
period. The number of units increased from about 100 lakh unit to 123.42 lakh units in
2005-06 ,this number more than doubled next year to 261.01 lakhs which gradually
increased and reached 510.57 lakhs in 2014-15. The growth achieved linear and
compound rates 12.262 and 14.458, both of which are significant at 1 per cent level. The
same trend can be observed in not only in fixed investments but also in production and
employment. The fixed investment registered linear and compound growth rates of 15.896
and 18.275 which are significant at 1 per cent level. The production also registered high
growth rates of 14.847 and 17.900, both the linear and compound rates are significant at
1% level. But the employment registered slightly lower rates; the linear and growth rates
are 11.896 and 13.798, both of which are however, significant at 1per cent level. The
exports reached very low levels of growth during the period. The linear and compound
rates are only 2.806 and 3.687, the former is not significant at all, which the latter
significant at 5 per cent level.
Thus, the data analysis reveals that during the last 15 year period of 2000-15, the
MSME sector has shown good performance in growth, production and employment, but
not in exports. The number of total units, the amount of fixed investment and production
has shown high growth while employment has registered low level of growth and exports
a very low rate of growth.

71
Contribution of MSME Sector to GDP and Exports
The MSMEs sector in India has been contributing much to the industrial sector and
thereby to the gross domestic product. But as the growth of this sector slackened in the
recent past, the contribution has, slightly come down in terms of percentage. The
contribution of MSME sector the economy in shown in table 2.4
Table 2.4
Contribution of MSMEs to the
Total Gross Domestic Product (GDP) 2015

Gross Domestic
Year Total Industrial Production
Product (GDP)
2000-2001 39.71 6.04
2001-2002 39.12 5.77
2002-2003 38.89 5.91
2003-2004 38.74 5.79
2004-2005 38.62 5.84
200-5-2006 38.56 5.83
200602007 45.62 7.20
2007-2008 45.24 8.00
2008-2009 44.86 8.72
2009-2010 39.63 7.45
2010-2011 38.50 7.39
2011-2012 37.47 7.27
2012-2013 37.33 7.04
2013-2014 37.24 6.95
2014-15 36.95 6.68
LGR -0.031 2.617
CV 0.256 0.503
t-value 0.054@ 3.271**
CGR -0.054 2.697
CV 0.067 0.259
t-value 0.099@ 3.505**
Source: Annual Reports of Ministry of MSMEs
During 2000-2015, it is observed from the table that, the percentage contribution of
MSME sector to the total industrial production and to the gross domestic product has
shown decline trend, though there are fluctuations. The contribution to the total industrial

72
production has come down from about forty percent in 2000-01 to about thirty seven
percent in 2014-15.In fact, the percentage declined from 39.71 in 2000-01 to 38.56 in
2005-06,up to 45.62 next year (2005-06). Afterwards, it showed declining trend and
reached 36.95 percent in 2014-15. The contribution to gross domestic product showed
declining trend in the beginning and increased afterwards before it declined. However, the
percentage increased between 2000-01 and 2014-15. That is why, the growth rates are
positive and significant at 1 per cent level. The percentage contribution of MSMEs gross
domestic product was 6.04 in 2000-01, gradually declined to 5.83 in 2005-06 and showed
increasing trend afterwards and reached 6.68 per cent in 2014-15. The linear and
compound growth rates were 2.617 and 2.697 both of which are significant at 1 per cent
level.
The MSME sector has contributed to the exports also. Table 2.5 presents the
contribution of MSMEs to the exports.
Table 2.5
India’s Merchandise Export- Share of MSME
Sector and Total Exports During 2000-2015
Exports from Share of MSME
Year Total Exports
MSME Sector Sector (%)
2000-01 203571 69797 34.3
2001-02 209018 71244 34.1
2002-03 255137 86013 37.1
2003-04 293367 97644 33.3
2004-05 375340 124417 31.7
2005-06 425650 150242 38.56
2006-07 465698 182538 44.12
2007-08 495845 202017 45.00
2008-09 840755 219227 26.1
2009-10 945534 229227 27.2
2010-11 1142644 340507 29.8
2011-12 1260735 408478 32.4
2012-13 1403875 485740 34.6
2013-14 1803164 551319 36.68
2014-15 2140627 613678 28.67
CGR 19.204 17.930 -0.631
CV 0.202 0.206 0.160
t-value 27.360** 31.425** 0.593**
LGR 16.132 15.461 -0.567
CV 2.560 2.470 0.570
t-value 10.611** 9.913** 0.525@
Source: Annual Reports of Ministry of MSMEs
The growth in exports from MSME sector has contributed to the growth of total
exports. But, the export from MSME sector has been lower than to the growth of total

73
exports. That is why the share of MSME sector to total exports in terms of percentages has
showed negative trend and also wide fluctuations. The total exports increased significantly
upto 2007-08 from 2,03,571 crores to 4,95,845 crores, and jumped to an 8,40,755 crores
next year and showed significant increasing trend afterwards to reach 21,40,627 crores in
2014-15. That is why, the linear and compound growth rates are very high at 19.204 and
16.132 respectively and they are significant at 1 per cent level. But, the exports from
MSME sector has shown same increasing trend throughout recording a linear growth rate
of 17.930 and compound growth rate of 15.461 both of which are significant at 1 per cent
level. Thus, the growth rates of exports from MSME sector are lower than that of total
exports. With the result, the share of exports from MSME sector in total exports showed
declining trend except in a few years. The share which was 34.3 in 20 per cent00-01
declined to 31.70 per cent in 2004-05. Later it shot up to38.56 per cent in 2005-06 further
up to 44.12 per cent in 2006-07 and 45.00 in 2007-08. The share suddenly fell to 26.10 per
cent next year and increased slowly up to 36.68 percent in 2013-14 only to fall on to 28.67
per cent, in 2014-15. The growth rates have been negative and not significant. The linear
growth rates were -0.631 and -0.567 respectively both of which are, however, not
significant.
2.6.2 Growth of MSMEs in Andhra Pradesh
This section deals with the growth of MSMEs in A.P. In fact, the growth of
MSMEs in A.P has to be discussed in two contexts- in the erstwhile A.P and in the
residual A.P. This issue arises because of change in the territorial limits of A.P due to the
division of the state into two and the separation of Telangana region from the state of A.P
in May,2014. The erstwhile A.P consisted of 23 districts and the residual A.P consists of
only thirteen districts, the other ten districts forming into Telangana State. The growth of
MSMEs is discussed into two contexts one the growth unto 2012-13 in the combined state
of A.P, and two the growth afterwards until 2015-16.
Growth of MSMEs in Erstwhile Andhra Pradesh
Andhra Pradesh was the fifth largest state in the country with an area of 2,76,754
sq. km. accounting for 8.4 per cent of India’s territory with 76.7 million population.
Andhra Pradesh is strategically located in the Indian sub-continent and the state had the
longest coastline (972 km) among all the state in India. Its capital Hyderabad occupied a
central location and is well connected with the rest of the world through its seaport on the
eastern coast and its international airport. Well established air, road and railway networks
link the State to the rest of India. Andhra Pradesh’s strength lies in its fully diversified

74
industrial base, with the thrust on high-tech sectors including information technology,
pharmaceuticals, biotechnology and Nano Technology. Traditional sectors such as textiles,
leather, minerals, and food processing are also being further developed for high value
addition. The state has an exclusive financial institution, APSFC for providing finance to
small industry. Apart from this 5288 commercial banks are functioning in the state in rural
and urban areas. The State has a good network of specialized SSI braches for extending
assistance to small and tiny industries.
Andhra Pradesh Government has given the highest priority to the industrial sector
to register sustainable economic growth. It plays a crucial role in the process of economic
development by value addition, employment generation, equitable distribution of national
income, regional dispersal of industries, and mobilization of capital, entrepreneur kills and
contribution to export. In the industrial infrastructure front, the State has taken lot of
initiatives for development of industrial infrastructure for consistent growth. government,
in association with APIIC, has initiated a set of prestigious projects that include industrial
infrastructure, social infrastructure and infrastructure for the specific sectors. The state
owned corporation, APIIC, has already set up 272 industrial estates and specialized Parks
like ICICI Knowledge Park, SP Bio-tech park, marine Bio-tech Park, Agri Bio-tech Park,
Special Economic Zone, pharma city, hardware park, HITEC city, Leather Park, Food
Park, Agri Export Zones etc. The state has one major port at Vishakapatnam which
handles the largest tonnage among all Indian ports and minor ports at Kakinada,
Krishnapatnam,Vodarevu and Gangavaram.
To provide suitable atmosphere for setting up asset management, venture capital
companies, insurance companies, commercial banks, financial District is being set-up in
Hyderabad. With the establishment of Insurance Regulatory and Development Authority
headquarters in Hyderabad, the state has been recognized as insurance capital. It is the
endeavor of the Government of Andhra Pradesh to create a conducive environment for
industrial growth by providing necessary support and service. In order to protect support
and promote entrepreneurship as also help them become self-supporting a number of
protective and promotional measures have been undertaken by the Central and State
Government.
Table 2.6 presents the growth of MSMEs in terms of number of units, investment
amount and employment in the erstwhile A.P during two decade period from 1991-92 to
2011-12.

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 Table 2.6
Performance of SSI/MSMEs in Andhra Pradesh, 1992-2012

Investments Employment
Year Units
(Rs.crores) (No)
1991-92 7706 111 67450
1992-93 6201 155 41454
1993-94 5612 157 46362
1994-95 4435 185 40899
1995-96 4123 191 33836
1996-97 4970 211 37900
1997-98 4935 297 49999
1998-99 4997 552 58253
1999-00 4195 539 39664
2000-01 2124 327 25433
2001-02 1612 261 19211
2002-03 1641 235 24293
2003-04 1573 204 21949
2004-05 1632 266 24076
2005-06 1267 245 15832
2006-07 2440 886 36019
2007-08 4209 2161 79258
2008-09 4599 2628 85211
2009-10 5101 4423 64844
2010-11 8507 4905 104620
2011-12 8464 4881 120435
LCR -0.520 17.752 4.060
CV 2.329 6.482 2.589
t value 0.271@ 5.097* 2.107@
CGR -1.441 18.501 2.408
CV 0.327 0.903 0.236
t value 0.6600 6.850 1.185@
Source: Field Study
The number of units, which was 7706 in 1991-92 increased to 8464 in 2011-12,
though it showed declining trend and fluctuations in the intervening period. The number
declined in the following four years to 4123 in 1995-96 and then increased to 4997 in
1998-99 only to show declining trend afterwards. The number declined to a minimum of
1267 in 2005-06 and then increased each year in the next two years and then increased to
8507, in 2010-11 to decline again to 8464 in 2011-12. With the result of all these the linear
and compound growth rates were -0.520 and -1.441 respectively which are not significant.
But, there are positive trends in investment and employment. The investment increased
from 111 crores in 1991-92 to 552 crores in 1998-99, declined marginally next year but
significantly afterwards to reach 204 crores in 2003-04. Afterwards, investment showed

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increasing trend to reach 886 crores in 2006-07. The investment actually surged afterwards
by multiples and reached 4881 crores in 2011-12. The linear and compound growth rates
are 17.752 and 18.501 respectively both of which are significant at 5 per cent level. The
employment also increased from 67,450 in 199to 120435 in 2011-12, though it showed
fluctuations during the intervening period. However, the linear and compound growth
rates are 4.060 and 2.408 which are not significant.
Thus, the MSMEs have shown satisfactory growth in terms of investment and
employment though the number of units has not increased significantly. The number of
units has declined in the first decade after new economic policy of liberalization,
privatization and globalization. It, however, reached maximum from in the next decade
i.e., first decade of 21st century. The investment has, however, increased during the total
two decades period. Again, the employment growth has not recorded high growth rates, it
increased at a low rate.
Growth of MSMEs in Residual Andhra Pradesh
The present Andhra Pradesh is one of the 29 states of India, situated on the
southeastern coast of the country. The state is the eighth largest state in India covering an
area of 160,205 km (61,855 sq mi). As per 2011 census of India. The state is tenth largest
by population with 49,386,799 inhabitants. The state has a coastline of 974 km (605 mi),
the second longest among all the states of India after Gujarat. It is bordered by Telangana
in the north-west, Chhattisgarh in the north, Odisha in the north-east, Karnataka in the
west, Tamil Nadu in the south and the water body of Bay of Bengal in the east. A small
enclave of 30 km2 (12 sq. mi) of Yanam, a district of Puducherry, lies south of Kakinada
in the Godavari delta to the east of the state.
In February 2014, the Andhra Pradesh Reorganization Act, 2014 bill was passed
by the Parliament of India for the formation of Telangana state comprising ten districts.
Hyderabad will remain as a joint capital for 10 years for both Andhra Pradesh and
Telangana. There are two regions in the state namely Coastal Andhra and Rayalaseema.
These two regions comprise 13 districts, with 9 in Coastal Andhra and 4 in Rayalaseema.
The districts in the state are Anantapur, Chittoor, East Godavari, Guntur, Kadapa, Krishna,
Kurnool, Prakasam, Nellore, Srikakulam, Visakhapatnam, Vizianagaram and West
Godavari. There are a total of 31 cities which includes, 16 municipal corporations and 14
municipalities. There are two million plus cities namely, Visakhapatnam and Vijayawada.

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 The climate of Andhra Pradesh varies considerably, depending on the
geographical region. Monsoons play a major role in determining the climate of the state.
Summers last from March to June. In the coastal plain, the summer temperatures are
generally higher than the rest of the state, with temperature ranging between 20°C and
41°C. July to September is the season for tropical rains in Andhra Pradesh. The state
receives heavy rainfall from the southwest monsoon during these months. About one third
of the total rainfall in Andhra Pradesh is brought by the northeast monsoon. October and
November see low-pressure systems and tropical cyclones form in the Bay of Bengal
which, along with the northeast monsoon, bring rains to the southern and coastal regions
of the state. November, December, January, and February are the winter months in Andhra
Pradesh. Since the state has a long coastal belt the winters are not very cold. The range of
winter temperature is generally 12°C to 30°C. As of 2011 Census of India, the state had a
population of 49,386,799 with a population density of 308/km2 (800/sq mi). The total
population constitutes 70.4 per cent of rural population with 34,776,389 inhabitants and
29.6t per cent of urban population with 14,610,410 inhabitants. Children in the age group
of 0–6 years are 5,222,384, constituting 10.6 per cent of the total population. Among them
2,686,453 are boys and 2,535,931 are girls. Visakhapatnam district has the largest urban
population of 47.5 per cent and Srikakulam district with 83.8 per cent, has the largest rural
population, among others districts in the state. The overall population of the state
comprises 17.1 per cent of Scheduled Caste and 5.3 per cent of Scheduled Tribe
population. There are 24,738,068 male and 24,648,731 female citizens—a sex ratio of 996
females per 1000 males, higher than the national average of 926 per 1000. The literacy
rate of the state stands at 67.41 per cent. West Godavari district has the highest literacy
rate of 74.6 per cent and Vizianagaram district has the least with 58.
Table 2.7 depicts the growth of MSMEs in residual A.P i.e after 2014 in terms of
number of units, investment and employment. It is clear from the table that while there has
been increase in all the above aspects in total terms at State level, there is difference
among different districts.

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 Table 2.7
Growth of MSMEs in Andhra Pradesh 2013-14 to 2015-16

Units Investments (Rs in crores) Employment

District Upto During During During Upto During During During Upto During During During
2013 2013-14 2014-15 2015-16 Total 2013 2013-14 2014-15 2015-16 Total 2013 2013-2014 2014-2015 2015-2016 Total

Srikakulam 4813 51 15 21 4900 417.07 39.72 7.69 13.94 478.42 49666 898 209 5983 56756
Vizianagaram 3848 55 115 227 4245 433.89 28.24 89.98 198.32 750.43 39334 1384 2105 5380 48203
Visakhapatnam 7516 497 92 1018 9123 3485.67 470.96 488.8 2271.51 6717 129278 11815 11378 31138 183609
East Godavari 10756 164 121 807 11848 1853.00 128.83 68.27 483.34 2533.43 118832 1789 1592 11676 133889
West Godavari 7020 119 497 481 8117 700.79 110.09 116.36 253.33 1140.6 73017 1914 2203 5343 82477
Krishna 4933 322 492 738 6485 639.40 238.81 236.67 296.22 1411.17 49497 6868 5673 727 69317
Guntur 6127 295 243 619 7284 607.43 237.67 315.14 217.63 1377.87 67516 3854 6364 6555 84259
Prakasam 23111 274 83 444 23912 3769.71 258.04 195.38 333.40 4458.53 255471 4119 3645 6110 269345
SPS Nellore 5126 112 162 454 5854 405.28 98.30 93.99 358.68 956.25 50899 1697 1379 5241 59216
Kadapa 11961 113 119 632 12825 1152.43 77.62 99.27 317.49 1646.81 112385 1320 1994 7355 123054
Kurnool 4018 79 172 140 4409 368.46 56.40 77.49 57.41 559.76 38507 861 1112 1436 41916
Anantapuramu 6817 150 219 235 7421 346.64 124.79 76.9 145.50 693.83 55610 2073 1476 5158 64317
Chittoor 8055 172 2847 40 11114 771.14 92.47 153.33 79.67 1096.61 84312 2186 3266 1897 91661
Total 104096 2403 5177 5856 117537 14950.91 1961.94 2019.27 5027.14 23820.68 1124324 40778 42396 100555 1308019
Source: A.P. Socio – Economic Survey

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In the case of number of units at the state level MSMEs increased from 1,04,096 in 2013
to 1,17,537 by 2015-16. The district wise analysis shows that the district of
Vizayanagaram, East Godavari, West Godavari, Krishna, Nellore, Kadapa, Ananthapuram
have witnessed already growth, other states like Srikakulam, Vishakapatnam, Guntur,
Prakasam, Kurnool, and Chittoor have witnessed rise and fall in the number. The same
trend can be observed in investment and employment. The investment in the state
increased from 14,950.91 crores in 2013 to 23,820.68 crores in 2015-16. The employment
in MSMEs increased from 11,24,324 to 13,08,019 during the four year period of 2013-
2016. Thus, it can be concluded that the growth in MSMEs has been satisfactory at state
level in respect to number of units, investment and employment. The districts have shown
variance. Out of thirteen districts seven districts have witnessed steady growth other by
state have referenced fluctuations. If these districts had achieved steady growth, the state
level growth which have been more satisfactory in terms of investment and employment
and fulfilled the employment objective of small scale enterprises.

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