Yojana November 2017
Yojana November 2017
Yojana November 2017
November 2017
Micro, Small and Medium Enterprises
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Insights into Yojana: November 2017
Table of Contents
1. Empowering India’s MSME Sector...............................................................................3
2. Promotional Avenues for MSMEs................................................................................5
3. Enhancing Competitiveness through Technology Upgradation....................................6
4. Accessing Finance: Challenges to the MSMEs..............................................................7
5. Quality Certification: Trigger Force for Competitiveness..............................................9
6. Encouraging Environment for Small Enterprises........................................................10
7. Role of MSMEs in New India.....................................................................................12
8. Facts for Prelims
a) Udyog Aadhaar Memorandum (UAM).............................................................13
b) Intensified Mission Indradhanush (IMI) ..........................................................13
c) Electronic Negotiable Warehouse Receipt (e-NWR) System..............................13
Indian Perspective
Nearly, 90% of the industrial units belong to this sector, employing 40% of India’s workforce. With
Indian economy likely to become a $5 trillion economy by 2025, the development of the sector has
become critical.
Strengthening MSMEs
There are many challenges like timely access to credit, infrastructural gaps, technological
obsolescence, and access to market and skilled man power.
With increasing competition from neighbouring countries like China, Indonesia, Philippines, and
Thailand, it has become imperative for the sector to adopt robust strategies to become globally
competitive.
Measures are also underway to enhance the overall contribution of the manufacturing sector in
India’s GDP to 25% by 2022.
Financing SMEs
Timely access to adequate finance is a priority for MSME and remains a challenge. In order to
address this concern, coverage under Credit Guarantee Fund Scheme has been augmented by the
government.
Focus on Technology
Today enterprises need to adopt best practises and follow international standards to go forward
for offering innovative solutions.
A Credit Linked Capital Subsidy Scheme (CLCSS) is operational for upgradation of technology for
MSMEs.
The scheme for Financial Support to MSMEs in Zero Defect Zero Effect (ZED) certification is an
extensive drive to create awareness amongst MSMEs about ZED manufacturing and motivate them
for assessment of their enterprise for ZED and support them.
Strengthening Infrastructure
Availability of infrastructure such as access to utilities, market, skilled manpower and technology
etc is a must for any enterprise to run its operations successfully in the market.
In this context, the government has adopted a cluster-based approach for the development of
MSMEs.
Human Capital
Attracting and retaining new talent has become an important factor for the growth of MSMEs.
MSME sector holds the key for skilling our workforce, especially at a time when 65% of our
population is below the age of 35.
Questions
1. It is said that the new engines for the India growth and equity story are MSME (micro, small and
medium enterprises) and not large corporations. Examine why.
2. MSME sector has been recognised globally as a major contributor to GDP and stimulator for economic
growth. Suggest the ways to strengthen the MSME sector.
Solution (a)
Questions
1. Critically discuss major problems plaguing the micro, small and medium enterprises (MSMEs) sector in
India. Do you think government’s policies to boost this sector adequately address these problems?
Examine.
2. Examine the role played by the Ministry of MSME to encourage entrepreneurship, employment and
livelihood opportunities for MSMEs.
Technology Transfer
Technology can be defined as the knowledge whereby economic efficiency can be improved.
Technology development is of paramount importance for Indian MSMEs, if they have to remain
competitive in the domestic market and penetrate the international market.
Technology transfer assumes significance because technological obsolescence has been one of the
most severe problems identified with the Indian MSME sector time and again.
MSMEs would prefer technology transfer to save on time and money and to achieve technology
upgradation.
What is more important is the transfer of information and skills because if the acquiring firm has to
effectively use the transferred technology, necessary information and skills related to the use of the
new technology is essential and critical.
Achievements of technology transfer:
o Increase in number of new products
o Shortened product development cycle
o Increase in productivity due to cost reduction
o Sales increase
Conclusion
Technology upgradation is desired by MSMEs to achieve multiple objectives such as overcoming
technological obsolescence, scale/scope expansion, and entering international market.
Technology transfer would enable MSMEs to realise their objectives leading to an overall
enhancement of economic performance and competitiveness.
Questions
1. Technology development is of paramount importance for Indian MSMEs, if they have to remain
competitive in the domestic market and penetrate the international market. Examine.
2. What are the constraints involved in transfer of technology to MSMEs. Suggest suitable measures to
overcome these constraints.
Policy Response
There are financial inclusion programmes like Pradhan Mantri Jan Dhan Yojana (PMJDY) where
banks reached out to the informal sector like never before.
Credit Guarantee Trust for MSMEs has been created to access loans without collateral securities.
To enable MSMEs to have access to equity for green field or brown field, both BSE and NSE have
been allowed to create dedicated SME exchanges.
The most critical reform is enactment of Indian Bankruptcy and Insolvency Code, 2016.
Way Ahead
The creation of these institutions fills important needs of a modern financial system, but lot needs
to be done.
There is a need to create a revolution similar to telecom in the banking sector where the service
providers chase the clients.
The government will have to exit from banking and cede space to private sector to create massive
competition.
Questions
1. MSMEs face enormous hurdles in accessing finance. Do you agree? What are the steps taken by the
government to address the issue and suggest ways to improve access to finance for MSMEs.
2. There is no specific sub-target for MSMEs within the priority sector lending. Do you think lending
MSMEs under priority sector lending solve the financial constraints faced by MSMEs.
Solution (c)
Solution (b) ASPIRE Scheme is under the Ministry of Micro, Small & Medium Enterprises.
Solution (a)
Way Forward
If India has to achieve growth rate of 8-10% for the next decade, it requires a strong and vibrant
MSME sector who can withstand global challenges.
Entrepreneurs need to develop quality conscious mindsets embedded in the organisational culture.
Sensitisation and handholding of MSMEs at different and upgraded level of certification is the need
of the hour.
Indian MSMEs have the potential to become global enterprises. To manifest this, MSMEs need to
invest in quality certifications and R&D.
Questions
1. Examine the significance of Quality Certification for gaining strong foothold in exports for MSMEs.
2. If India has to achieve growth rate of 8-10% for the next decade, it requires a strong and vibrant
MSME sector. Comment.
Finance
Banks and other Financial Institutions feel that it's risky and cumbersome to lend to small
enterprises.
There is hardly any truth in this thinking, given the NPA crisis being faced by banks due to big loans
turning bad. Banks even circumvent their legal binding of priority lending to Small Enterprises.
Small Enterprises get loans at higher interest rates, whereas big borrowers get loan at much
cheaper rates and on more easy terms, without hassles.
The government has tried to facilitate Small and Micro Enterprises through Micro Units
Development and Refinance Agency (MUDRA), Startup schemes etc.
Building Infrastructure
It’s almost impossible to start and run Small Enterprises in a remote area. They are neither
connected with rail or road; nor do they have assured source of power.
Even in big and developed places, assured power supply is a big issue. Generators are under
rampant usage which is a source of pollution and units equipped with generators are subject to
exploitation by concerned departments' inspectors.
There is need to develop infrastructure of various kinds including rail, road, power, skill
development, markets (including e-portals) etc.
Universal electrification of villages, solar energy, and fast tract building of roads is expected to help
promotion to small scale and tiny industries, especially in rural areas.
Conclusion
Indian people need conducive environment for entrepreneurship development. This is majorly a
work of the government. The government has to make good laws and make atmosphere conducive.
Questions
1. Examine the Impact of Liberalisation and Globalisation on the Small Industries sector in India.
Future Prospects
The growth of new wave MSME must be led by entrepreneurship focused on innovation and
technologies. Creating opportunities for women entrepreneurs and developing skilled resources
across the following areas:
Come Make in India
o Promote foreign companies to invest in manufacturing, service and agricultural related
segments.
Digital India
o Promote MSMEs’ manufacturing and service capabilities in the ICT sector.
Export Contribution
o Promote export contribution by developing MSME segment to be globally competitive and
adopt research and development, innovation and global technologies.
Public Procurement Policy
o Promote at least 25% portion of total procurement by defence and public sector
enterprises from MSME.
Indigenisation
o Incentivise MSME vendors to indigenise and enable import substitution by adapting to
research and development, innovation and global technologies.
Traditional and Heritage Industries
o Incentive any stakeholder that invests in India’s traditional and heritage industries for
goods, services and agricultural and natural medicines.
Funding
o Providing incentives for investments by High Net Worth individual into MSME as well as
incentivise debt funding in MSME segment.
Questions
1. MSMEs have been accepted as the engine of economic growth. Critically examine the future prospects
for the growth of MSME sector.
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Insights into Yojana: November 2017