final smi's amaresh

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

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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

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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.
http://www.picturesindia.com/industry/17_001010.html


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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.,

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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)
http://dna-cdm.menlh.go.id/images/tofu_clip_image002.jpg


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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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http://www.photographersdirect.com/buyers/stockphoto.asp?imageid=1869844http://www.photographersdirect.com/buyers/stockphoto.asp?imageid=1061701


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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.

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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.

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final smi's amaresh

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