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Policy recommendations on the Small and Medium Enterprises of India
A few facts about India
Labor Force Composition: Agriculture: 53% Industry: 19% Services: 28%
GDP Composition Agriculture: 17% Industry: 18% services: 65%
Total GDP: $4.784 trillion
GDP per capita: $3900
40.4% of the population in the age group of 25 – 54 years
Second Largest Population of the World : 1.2 billion
Manufacturing Enterprises – Investment in Plant & Machinery
Description INR USD($)
Micro Enterprises upto Rs. 25Lakhs upto $ 62,500
Small Enterprisesabove Rs. 25 Lakhs & upto Rs. 5Crores
above $ 62,500 & upto $ 1.25million
above Rs. 5 Crores & upto Rs. 10Crores
above $ 1.25 million & upto $2.5 million
Definition of Micro Small & Medium Enterprises in India
Service Enterprises – Investment in Equipment
Description INR USD($)
Micro Enterprises upto Rs. 10Lakhs upto $ 25,000
Small Enterprisesabove Rs. 10 Lakhs & upto Rs. 2Crores
above $ 25,000 & upto $ 0.5million
Medium Enterprisesabove Rs. 2 Crores & upto Rs. 5Crores
above $ 0.5 million & upto $1.5 million
According to the Indian Ministry of Micro Small & Medium Enterprises
Micro Small and Medium Enterprises Growth Rate
1.2 Billion people
Nearly half under 25 years of age
Only 16% report owning their businesses
The Reality – Gallup Report
Where does India stand?
Economy Name RankProcedures
(number)
Time
(days)
Cost (% of income per
capita)
Paid-in Min. Capital (% of income
per capita)
New Zealand 1 1 1 0.4 0
Indonesia 166 9 47 22.7 42
Niger 167 9 17 112.8 572.8
Comoros 168 9 20 150 261.9
Ecuador 169 13 56 29.9 4.5
Central African Republic 170 8 22 172.6 444.1
Angola 171 8 68 105.4 24.6
Guatemala 172 12 40 48.1 20.9
India 173 12 27 49.8 140.1
Bolivia 174 15 50 74.1 1.9
Cambodia 175 9 85 100.5 28.5
Côte d'Ivoire 176 10 32 130 184.6
Iraq 177 10 74 81.1 25.2
Suriname 178 13 694 110.9 0.4
West Bank and Gaza 179 11 48 91 206.7
Congo, Rep. 180 11 161 55.3 80.5
Chad 181 9 62 202 289.4
Equatorial Guinea 182 18 135 98.2 11.7
Eritrea 183 13 84 52.3 203.1
Haiti 183 12 105 286.6 21
Djibouti 185 11 37 150.7 383.6
“Doing Business Project” Ranking data June 2012
http://www.doingbusiness.org/data/exploretopics/starting-a-business
Let’s come to the basics
68.7% of the Indian population lives under $2 a day.
Lack of reliable and efficient government
support structure
Lack of access to mentorship and
training opportunities
Lack of easy access to funds
Failure considered to be
a taboo
Issues hampering the growth of SME’S
Bottlenecks in the existing system
Slow growth in the SME sector
Fragmented distribution
network
Low penetration of
financial services
Lack of power/energy
(electricity)
Lack of water supply in the
farm areas
Top constraints reported by South Asian benchmark firm in the urban formal
sector – Electricity wins!
Electricity has been reported as the top constraint hampering the growth of businesses
Current Water Situation in India
Demand is more
India’s current water
supply: 740 billion m3
Future Projections for Water
Low Penetration of Financial Services
Only 40% of the total population have bank accounts
The lighter the color the lower the bank branches
Percentage of firms with credit line or loan from a financial institution
Low penetration of financial services is visible in the percentages
Fragmented Distribution Network
Key Issues in India Distribution Network
Focused policy in the form of a National Support Program for the next ten years to support SME’s in creating nationwide distribution networks
The National Support program to be headed by Industry leaders and practioners having the know how and expertise
This should be done in mind with an aim to create sustainable infrastructure for future generations to use
Recommendations
Expand the reach of banking sector and the flow of money to the rural area and Tier II – III city entrepreneurs by opening up the banking sector for public private partnership
Mobile technology should be leveraged to reach the remote areas for financial inclusion
Recommendations
Leverage the abundant natural resources India has in its different states, like wind in the coastal regions, solar in Rajasthan, to supplement its power generation.
Reduce T&D losses by laying underground wiring
Reliable and continuous supply of power to businesses in the Tier II – III using renewable sources will help in the growth of SME’s
Recommendations
The use of established water management techniques such as watershed management, rainwater harvesting, river interlinking and desalination should be expedited
An independent regulator should be appointed to control and coordinate implementation efforts
Strict legislation should be instituted for the exploitation of groundwater
Recommendations
Focused policy for a complete paradigm shift of the government departments to work as enablers and facilitators to help the public
The red-tapism and the shylock image of the government has to be shunned at the earliest.
Primary Recommendation
THANK YOU