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7/30/2019 Final Smi's Amaresh
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Amaresh
Naveen B R
Monika
Musaffar
Satya Narayan
Naga Balaji
Aasiya
Sharan Basava
Nagaraj uppin
1
Module-3.SMALL AND MEDIUM
ENTERPRISE(SME)
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When small and medium scale industries are
developed, then only Indias economy will
develop
2
Module-3.SMALL AND MEDIUM ENTERPRISE(SME)
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INTRODUCTION
Small- and medium-scale enterprises (SMEs) occupy
an important and strategic place in economic growth andequitable development in all countries.
SMEs IN INDIA
With the advent of planned economy from 1951and the
subsequent industrial policy followed by Government of India,
both planners and Government have a special role for small-
scale industries and medium scale industries in the Indian
economy.
Since the time of independence, the small-scale sector in
India has been a major contributor to countrys Gross Domestic
Product (GDP).
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CLASSIFICATION OF INDUSTRIES
(ENTERPRISES)
Enterprises have been classified broadly into two categories,
namely
1. The enterprises in the manufacture/ production of goods
pertain to any Industry.2. The enterprises engaged in providing/rendering of services.
Enterprises have been defined in terms of investment in plant &
machinery/equipment (excluding Land & building) are asbelow:
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DEFINITION OF MICRO,SMALL & MEDIUM
ENTERPRISES
Types Manufacturing Services Enterprises
Micro----- up to Rs 25 lakh. up to Rs 10 lakh.
Macro---- More than Rs25 lakh More than Rs10 lakh
and up to Rs 5 Crore. and up to Rs 2 Crore.
Medium--- More than Rs 5 Crore More than Rs 2 Crore
and up to Rs 10 Crore. and up to Rs 5 Crore.
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ROLE OF SMALL SCALE SECTOR
SSI constitutes an important segment of Indianeconomy & contributes 39% of output.
Have been contributing 5 to 6 percent of the
country.
It provides employment to around 31.3 millionpeople.
It contributes 34% of Exports.
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SSI makes better use of indigenous
management capabilities and provide outletsfor enterprising independent people.
It provides opportunities for development of
technology.
SSIs have been producing a wide variety of
goods like food products, beverages, cotton
textiles, leather products etc.,
7
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PROBLEMS OF SMALL SCALE INDUSTRIES
Finance (scarcity of capital, non availability ofcredit facility)
Raw Material (Poor quality, uneven supply of rawmaterial, inadequate qty)
Technology ( not exposed to latest technology)
Idle Capacity( due to underutilization)
Infrastructure (Transport,power,communication)
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Marketing (not in a position to get first handinformation about the market)
Underutilization of Capacity (due to nonavailability of raw material, power, finance)
Skilled Manpower (Being in backward areas)
Project Planning (Lack Tech& Economical)
Managerial inadequacies like overdependence
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PERFORMANCE OF SSI
Over the last five decades, the small scale industries
sector has acquired a place of prominence in the
economy of the country. It has contributed
significantly to the growth of the GDP, employment
generation and exports.
During 2000-01 to 2004-05, the average annual
growth in the number of units was around 4.1 per cent
while employment grew by 4.4 per cent annually.
Further, the average annual growth in production, at
current and constant prices, was 10.6 per cent and 7.6
per cent respectively.
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Some of the problems faced by SSI are timelyand adequate credit technological obsolescence,
infrastructural bottlenecks, marketing
constraints.
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GROWTH OF SSI
The number of industries registered has increased from 79
lakhs in 1994-95 to 118 lakhs in 2004-05.
Employment generation by this sector has recorded a 59 per
cent increase from 84.2 lakhs in 1983-84 to 134.0 lakhs in
1992-93 and it generated employment of 229 lakhs in 1990-
2000 and 274 lakhs at end of March 2004. 1 reveals that the number of small industrial units increased
from 4.16 lakhs in 1973-74 to 19.48 lakhs in1990-91; 40.09
lalkh in 2005-06 and are estimated to increase 43.78 lakhs in
2007-08 at an average annual growth rate of 5.51 percent.
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Small scale sector accounts
92 per cent of marine products, 95 per cent of ready-made garments,
84 per cent of woolen goods,
65 per cent leather goods, 40 per cent of engineering goods,
45 per cent of cashew kernels and
60 percent of chemical items.
13
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SICKNESS IN SME
In common parlance , a sick industry is one which isnot healthy. A healthy unit is one which earns a
reasonable return on capital employed and which
builds up reserves after providing reasonable
depreciation. According to RBI a sick unit is one which incurs
cash losses for one year and is likely to incur cash
losses for the current year as well as for the following
year.
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The Sick Industrial Companies Act 1985,
defines a sick industry as an industrial
company which has at the end of any financialyear accumulated losses equal to or exceeding
its entire net worth and has also suffered from
cash losses in such financial year immediately
preceding such financial year.
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CRITERIA TO IDENTIFY SICKNESS
Continuous decline in gross output compared to theprevious two financial years.
Delays in repayment of institutional loan, for more
than 12 months.
Erosion in the net worth to the extent of 50 per cent ofthe net worth during the previous accounting year.
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SIGNALS OF INDUSTRIAL SICKNESS
Decline in capacity utilization
Shortage of liquid funds
Inventories in excessive quantities
Irregularity in maintaining the bank accounts Frequent break downs in plant & equipments
Decline in the quality of products
Frequent turnover of personnel
Technical deficiency
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SYMPTOMS OF INDUSTRIAL SICKNESS
Shortage of cash
Deteriorating financial ratios
Widespread use of creative accounting
Continuous decline in prices of the shares
Delay & default in the payment of statutory dues
Morale degradation of employees
Frequent request to banks & financial institutions for
loans
Delay in the audit of annul accounts
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CAUSES OF INDUSTRIAL SICKNESS
External or Exogenous causes
Internal or Endogenous causes
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EXTERNAL CAUSES:
Changes in the industrial policy of governmentInadequate & untimely availability of necessary
inputs
Lack & shrinkage of demand for the product
Frequent industrial strikes & labour unrest
Shortage of financial resources especiallyworking capital
Natural calamities like drought, floods etc.,
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INTERNAL CAUSES
Lack of good management Poor implementation
Marketing problems
Non-availability of raw materials
Shortfall of working capital
Labour trouble
Technical/ operational problems
Uneconomic location, inefficient method ofproduction etc.,
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CONSEQUENCES
Huge financial losses to the banks & financialinstitutions
Loss to employment opportunities
Emergence of Industrial unrest
Adverse effect on perspective investors andentrepreneurs
Wastages of Scarce resources
Loss of revenue to government
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REMEDIAL MEASURES
Monitoring and nursing the sick units during infancy
Diagnostic studies (Role of BIFR)
Incentives should be provided to professional
managers helping in reviving sick units
Issuing guidelines on major aspects that affect the
image of the company
Brain storm with a select group to get creative ideas for
improvement
Adopt better practices, right technology, better workculture and professional management SSI can improve
their health as well as the economy.
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Continue
RBI guide lines RBI has constituted a standing coordination committee to
consider issues relating to coordination between commercialbanks and lending institutions.
A special cell has been set up within the rehabilitation financedivision of IDBI to attend the case of sickness.
RBI has issued suitable guidelines to the banks to ensure thepotentially viable sick units receive attention and timelysupport from banks.
RBI has clarified that units becoming sick on account ofwillful management, willful default should not be consideredfor rehabilitation.
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SETTING UP A SMALL AND MEDIUM ENTERPRISE
The main steps involve in setting up a Small & Medium
Enterprise are as below :- Project selection
Technology and Machinery
Arranging finance
Unit Development Filing of Entrepreneurs Memorandum
Approvals
Clearances
Quality Certification" Setting up a new unit is a big chal lenge."
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CONCLUSION
Small industry sector has performed
exceedingly well and enabled our country to achieve awide measure. By its less capital intensive and high
labour absorption nature, SSI sector has made
significant contributions to:
Industrial growthDiversification.
Employment generation and
Rural industrialization.
Also small Scale Industries in India is facing
competitive environment since 1991.
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Thank You.
Any Questions and
Comments