MGN-101

Unit-I

Foundation of Indian
Business
Micro, Small and Medium Enterprises
MSME

Expected Outcome-
Be able to understand Small and Medium
Enterprises as well as the problems of these
enterprises
 Introduction
• Small and medium enterprises are the backbone of
industrial development.

• It is very important for both developed and developing country

• Small and medium enterprises always represented the model of

economic development, which emphasized high contribution
to domestic production, significant export earnings, low
investment requirements, employment generation, effective
contribution to foreign exchange earning of the nation with
 Continue….

• The development of this sector came about primarily due to the

vision of our late Prime Minister Jawaharlal Nehru who sought
to develop core industry and have a supporting sector in the
form of small scale enterprises.
• SMEs sector has emerged as a dynamic and vibrant sector of
the economy. The Indian economy is expected to grow by over
8 per cent per annum until 2025 and can become the second
largest in the world, ahead of the United States, by 2050, and
the third largest after China and the United States by 2032.
 MSME

• MSME Stands for Micro, Small and Medium Enterprise. It

was introduced by the government of India in agreement with
the MSMED Act of 2006.
• As per this act, MSMEs are the enterprises involved in the
processing, production and preservation of goods and
commodities.
 Enterprise, as defined by MSME Dev. Act,
2006
• “Enterprise” means an industrial undertaking
or a business concern or any other
establishment, by whatever name called,
engaged in the manufacture or production of
goods, in any manner, pertaining to any
industry or engaged in providing or rendering
of any service or services.
 Enterprise, as defined by MSME Dev. Act,
2006
• MSMED Act in 2006, the enterprises are
classified into two divisions.
1. Manufacturing Enterprises : Engaged in the
Manufacturing or production of goods in any
industry
2. Service Enterprises: Engaged in providing or
rendering services.
 Since 1 July, 2020
st

Classification Micro Small Medium

Investment in Plant Investment in Plant Investment in Plant

and Machinery or and Machinery or and Machinery or
Equipment: Equipment: Equipment:

Manufacturing Not more than Rs.1 Not more than Rs.10

Enterprises and crore crore Not more than Rs.50
Enterprises crore
rendering Services and and
And
Annual Turnover ;
not more than Rs. 5 Annual Turnover ; Annual Turnover ;
crore not more than Rs. 50 not more than Rs.
crore 250 crore
 Micro enterprise
• Micro enterprise generally refers to a small
business employing 10 people or less with a
small amount of capital.
• These enterprises works and operates not by
choice but out of necessity.
 Micro enterprise
• Freelance writers
• Etsy Shop Owners (Global online marketplace)
• Consultants
• Many others self employed workers.
 SMALL ENTERPRISE
• Small enterprise generally refers to a
business employing 50 persons or less
• These enterprise works and operates to
earn a small amount of profit.
 SMALL ENTERPRISE
Small businesses are independently owned
organizations that requires less capital and
less workforce and less or no machinery.
Examples
• Grocery Stores
• Medical Stores
• Bakeries
• Small Manufacturing Units
 Medium enterprise
• Medium enterprise refers to a business
employing maximum to 250 employees
• These enterprises works and operates to earn a fair
amount of profits to increase their standard of living.
 Medium Scale Business Ideas
• Food Delivery Service
• Consulting Firm
• Home Repair Services
• Event Planning Company
• Printing Services
• Real Estate Agency
• Digital Marketing Agency
• Cleaning Service
• MSME is defined under which act?
A) MSME Act, 2004
B) MSMED Act, 2006
C) MSMED Act, 1999
D) MSME Act, 2001

• In production sector, a micro enterprise is an enterprise where

investment in plant and machinery does not exceed ______ till
30th june 2020.
A) Rs 10 lakh
B) Rs 15 lakh
C) Rs 20 lakh
D) Rs 25 lakh
List
Listof
ofBusinesses
Businessescomes
comesunder
underMSME
MSMEs
• Leather products.
• Moulding of products like combs, umbrella frames,
plastic toys, etc.
• Natural fragrance and flavours.
• Placement and management consultancy services.
• Training and educational institute.
• Energy efficient pumps.
• Xeroxing.
• Beauty parlour and crèches.
 ListList of Businesses
of Businesses not covered
comes under under
MSME
MSMEs
• Gambling and betting activities
• Forestry and logging
• Fishing and aquaculture
• Repair of motorcycles
• Activities of households
• Goods or services produced via households for
personal use
• Activities of extraterritorial organizations and
bodies (IMF, World Bank, WCO)
 List
Mostof Popular
Businesses comesamongst
Industries under MSME
MSMEs

• Food Products
• Textile
• Apparel
• Fabricated metal Products
• Machinery and Equipment
 Characteristics of MSME
• Low cost
• Supports product development, innovation
• Provides employment generation and Loans
• Reduction of regional imbalance
 ROLE OF MSME’S IN INDIA
• MSME s provide employment opportunities and
loans
• MSMEs provide credit limit or funding support to
various banks in the country.
• MSMEs support the upgrading of technology,
infrastructure and the modernization of sector
• MSMEs provide assistance for improved access to
the domestic as well as export markets
• MSMEs support product development, design
innovation, intervention.
 Challenges Faced by MSME’s
• Financial and Regulatory Issues: Access to finance is hurdle for
MSMEs with only 16% receiving timely finance. This forces
them to rely on their own sources, hindering their growth
prospects.
• Infrastructure: inadequate infrastructure affects their
efficiency and ability to compete globally.
• Low Productivity and Lack of Innovation: Small scale
industries providing goods at lower price and that put them at
a disadvantageous position.
• Technical Changes: changes in land ownership rights have led
to mismanagement and reduced productivity, highlighting the
need for adaptability.
 Challenges Faced by MSME’s
• Competition and Skills: MSMEs struggle to withstand
the pressure in areas such as agriculture, garments and
tourism.
• Lack of Professionalism : Many MSMEs lack
professionalism, making them vulnerable to corruption
and abuse of power.
• Lack of Standardized Policies :India lacks consistent
MSME policies, resulting in inconsistent development
and entrepreneurship promotion programs.
SUGGESTIONS FOR IMPROVEMENT
• Supply of technology
• Awareness creation
• Involvement of stakeholders
• Interaction with research and development
sector
• Increase in marketing and promotional activities
 Supporting Agencies of SMEs
• Small Industries Development Organization (SIDO),
• National Small Industries Corporation Ltd. (NSIC),
• Small Industries Development Bank of India (SIDBI),
• Confederation of Indian Industry (CII),
• Laghu Udyog Bharti (LUB),
• Federation of Indian Chamber of Commerce and Industry (FICCI),
• Associated Chamber of Commerce and Industry of India
(ASSOCHAM),
• National Institute of Small- Industry Extension Training (NISIET),
• World Association for Small and Medium Enterprises (WASME),
• Small Scale Industries Board (SSIB),
• PHD Chamber of Commerce and Industry (PHDCCI),
• Federation of Indian Exporters Organization (FIEO),
• Federation of Associations of Small Industries of India (FASII)
 Economic and non-economic activity
BASIS FOR COMPARISON ECONOMIC ACTIVITY NON-ECONOMIC ACTIVITY

Meaning Economic activity refers to a Non-economic activity is an

human activity related to activity performed gladly, with
production and consumption of the aim of providing services to
goods and services for others without any regard to
economic gain. monetary gain.
Motive Economic, i.e. to earn money. Social or psychological, i.e. out
of love, affection, etc.

Money measurement Measured in monetary terms. Lacks money measurement.

Approach Pragmatic Idealistic

Results in Creation of wealth and assets. Satisfaction and happiness.

National Income Adds value to national income. Does not affects national
income.