A COMMUNITY CONNECT

REPORT ON SMALL MEDIUM

ENTERPRISE (SME)

YEAR-2019

ISHA LOHANI
2018016014
MBA (B&F)
 ABSTRACT

This study aims to provide an assessment of the Small and Medium

Enterprise sector (SME) FINANCE in India. The chapters in the study
highlight the key characteristics of the SME sector and assess the demand
for and the flow of finance into the sector. The study also evaluates the
consequent gap in the financing needs of SMEs. It explores potential
interventions to boost the flow of formal credit to the sector.

The SME sector is crucial to India’s economy. There are 55.8 million
enterprises in various industries employing close to 125 million people. Of
these nearly 14 percent are women led enterprises, and close to 59.5
percent are based in rural areas. In all the SME sector accounts for 31.5
percent GDP and 45 percent exports.

Lack of adequate and timely access to finance continues to remain the

biggest challenge for the sector and has constrained its growth.

The financing needs of the sector depend on the size of operation,

industry, customer segment, and the stage of development. Financial
institutions have limited their exposure to the sector because of small
ticket size of loan, higher cost of servicing the segment and limited ability
of SMEs to provide immovable collateral.
 INTRODUCTION

The small and medium enterprises (SMEs) are small sized entities, defined
in terms of their investment. They are contributing significantly to output,
employment export etc. They play in critical role in the economy by
providing employment to large number unskilled and semi skilled people,
contributing to exports, raising manufacturing sector production and
extending support to bigger industries by supplying raw material, basic
goods, finished parts and components.

AS per SME Report of the ministry of SMEs the sector consists of 36

million units and provides employment to over 80 million persons. The
sector produces more than 6000 products contributing to about 8% of
GDP besides 45% to the total manufacturing output and 40% to the
exports from the country. The SMEs are classified in terms of investment
made in plant and machineries if they are operating in the manufacturing
sector and investment in equipment for service sector companies.

If the investment is in between 25 lakhs to 5 crore then it is small. And if

the investment is in between 5 crore to 10 crore then it is medium.

For the service sector investment limits are Rs 10 lakh, 2crore, 5 crore in
terms of investment made in equipment.

SMEs are present in both urban and rural areas of county. While most of
manufacturing industries seem to be in rural areas. The total number of
enterprises in both areas i.e. Rural and urban is almost comparable:
324.88 lakh in Rural and 309 lakh in urban.

Although 94 percent of SMEs are unregistered, the contribution of the

sector to India’s GDP has been growing consistently at 11.5 percent a
year, which is higher than overall GDP growth at 8 percent. The lack of
adequate and timely access to finance has been biggest challenge. The
financing need of sector depends on the size of operation, industry,
consumer segment and stage of development.
 CURRENT STATE OF SME SECTOR IN INDIA

Small and Medium Enterprises (SME) sector is one of the still untapped
high growth segments in India and an essential partner for achieving
socio-economic growth. MSMEs, which are spread across both urban and
rural areas of the country, mostly form part of the unorganized sector.

India’s Small, and Medium Enterprises (SMEs) base is the largest in the
world after China. The sector provides a wide range of services and is
engaged in the manufacturing of over 6,000 products – ranging from
traditional to hi-tech items.

As per present estimates, the SME sector including Khadi, Village and Coir
industries, consist of 51 million units and provides employment to over
117 million persons. The sector contributes 7% to India’s GDP while
accounting for 45% of the total manufacturing output and 40% of the
exports from India.

India is the largest producer of coir in the world with a production of 5,

42,000 MT, which comes to around 55% of global production of coir.

In a first, Ministry of SME has been awarded the ISO 9001-2008

certification. Implementation of ISO standards has enabled the Ministry
to identify areas for improvement and also bring in transparency and
accountability in its functioning.

The state of Uttar Pradesh has the largest number of estimated SMEs
with a share of 14.20 percent of the total SMEs in the country. West
Bengal comes as close second with a share of 14 percent, followed by
Tamil Nadu and Maharashtra at eight percent.

According to the Act, there are two categories of SMEs in the country –
manufacturing and services.
For the manufacturing sector, the definition of an SME is based on a
company’s capital investment in plant and machinery. The threshold
limits are:

Small: when investment is more than Rs 2.5 million (US$34,040) but does
not exceed Rs 50 million (US$680,875); and

Medium: when investment is more than Rs 50 million (US$680,875) but

does not exceed Rs 100 million (US$1.3 million).

For the services sector, the definition of an SME is based on a company’s

investments in equipment. The threshold limits are:

Small: When investment is more than Rs 1 million (US$13,617) but limited

to Rs 20 million (US$272,350); and

Medium: When investment is more than Rs 20 million (US$272,350) but

less than Rs 50 million (US$680,875).

Earlier this year, the union cabinet of India approved the changes in the
classification of SMEs. According to the revisions, both the manufacturing
and services sectors will be classified based on the amount of annual
turnover instead of the investment limits, as given below.

The new classification of SMEs, however, is yet to be enforced by

amendment.

Small: a unit where the annual turnover is more than Rs 50 million

(US$680,875) but does not exceed Rs 750 million (US$10.1 million); and

Medium: a unit where the annual turnover is more than Rs 750 million
(US$10.1 million); rupees but does not exceed Rs 2.5 billion (US$33.8
million).
 OPPORTUNITY AREAS FOR SMEs IN INDIA

1. Telecommunications

 Domestic manufacturing of low-cost mobile phones, handsets, and

devices
 Manufacturing of telecom networking equipment, including routers
and switches
 Manufacture of base transceiver station equipment;
 Mobile customer data analytics – services oriented toward
analytical solutions
 Development of value-added services

2. Healthcare

 Manufacturing of low-cost medical devices, and medical accessories

such as surgical gloves, scrubs, and syringes;
 Low-cost surgical procedures to reduce the cost of healthcare;
 Medical tourism
 Diagnostic labs.

3. Electronics

 Domestic manufacturing of low-cost consumer electronics,

consumer durables
 Nano-electronics and microelectronics
 Electronic Systems Design and Manufacturing including
semiconductor design, electronic components design and hi-tech
manufacturing under India’s ‘National Electronics Mission
 Strategic electronics, as the government is keen on encouraging the
domestic manufacturing of products needed by the security forces.
 Other areas that offer opportunities for SMEs include information
technology, pharmaceutical, chemical, automotive, gems and
jewelry, textile, and food and agriculture.
 BENEFITS AVAILABLE

The federal government of India has initiated various schemes and

measures to allow SMEs easier access to funds, to modernize the sector,
and make it more competitive in the global market.

These include schemes ensuring the quality of products, especially those

meant for exports, technology up-gradation, incubation, credit-linked
capital subsidy, and UID linked schemes which facilitate ease of receiving
a subsidy.

Some of the other concessions available to the SMEs are listed below:

◆ Collateral free loans from banks;

◆ 50 percent subsidy on patent registration;

◆ 1 percent exemption on the interest rate on overdraft;

◆ Concession on power utility bills;

◆ Eligible for industrial promotion subsidy;

◆ Protection against delayed payments; and

◆ Reimbursement of ISO certification charges.

 RECENT INITIATIVES BY GOVT. OF INDIA FOR SME

1. 59 minutes loan portal to enable easy access to credit for SMEs-

Government has launched a portal to enable easy access to credit for
SMEs. The portal has been set up by Sidbi along with SBI, PNB, Bank of
Baroda, Indian Bank and Vijaya Banka with other banks joining in with
the passing of time. Any MSME can avail business loan from Rs. 1 Lakh
to Rs. 1 Crore through this portal, in just 59 minutes.
Once an SME fills up the application form online and submits the
required details, a single gateway will integrate platforms that will help
perform back-end checks with the ministry of corporate affairs and
credit information bureau for fraud before the loan is sanctioned.

2. Mandatory registration on TReDS-

All companies registered under the Companies Act, 2013, having a
turnover of more than Rs. 500 crore and all Central Public Sector
Enterprises (CPSE) shall now compulsorily be required to onboard on
the Trade Receivables e-Discounting System (TReDS) platform. TReDS is
a platform which paves ways for faster payments to the MSMEs. The
MSME sector was facing problems of cash cycle which is solved by this
platform. Joining this portal will enable MSMEs to access credit from
banks, based on their upcoming receivables from the empanelled
companies and CPSEs. The Ministry of Micro, Small and Medium
Enterprises has also issued a notification in this regard on November 2,
2018.

3. Mandatory 25 percent procurement from MSMEs by CPSEs-

Government had notified a new Public Procurement Policy for Small &
Medium Enterprises (SMEs) on April 25, 2012. The policy mandated
that 20% of procurement of annual requirement of goods and services
by all public sector companies (PSC) shall be from the SMEs.
The PSCs have now been asked to compulsorily procure 25%, instead of
20%, of their total purchases from SME. The notification in this regard
is still awaited. This policy of the government is expected to promote
the SME sector by improving their market access and competitiveness
through increased participation by SMEs.
4. Increase in Interest Equalization from 3% to 5%-
The Interest Equalization Scheme on pre & post shipment rupee export
credit was introduced in April 1, 2015. The scheme provided the rate of
interest equalization to be 3%. This meant that any exporter, who
receives loans in the pre-shipment & post-shipment period, will get an
interest rebate of 3%.
The Federation of Indian Export Organizations (FIEO) in its press release
dated November 2, 2018 increased the Interest Equalization from 3%
to 5% to provide competitiveness and level playing field to MSME
exporters. This move of the government is expected to help the
exporters to get credit at competitive rates close to international
benchmark. This move shows that government is very keen to lend a
helping hand to MSME to boost exports and create employment
opportunities in the country.
It was also announced that 2 percent interest subvention will be given
to all GST registered SMEs, on fresh or incremental loans. However, the
notification in this regard, is still awaited.

5. Ordinance for simplifying procedures for minor offences-

Government has notified the Companies (Amendment) Ordinance Act,
2018 (Ordinance), under which, for minor violations under the
Companies Act, the entrepreneur will no longer have to approach the
Courts, but can correct them through simple procedures. This
ordinance has been promulgated with an objective to promote ease of
doing business. In the Ordinance, the penal provisions have been
inserted in certain sections instead of levying fine for failing to comply
with the provisions of those sections. This shall reduce the burden on
special courts.
Subsequent to the Ordinance, the SMEs are not required to run to
courts to rectify small mistakes. They can go to the concerned
departments and follow easy process to rectify the mistakes. This move
of the Government will achieve corporate convenience.
6. Mandatory registration of vendors on GeM-
The Finance Minister in his Budget speech for FY 2016-17, announced
setting up of a technology driven platform to facilitate procurement of
goods and services by various Ministries and agencies of the
government. Government e-Marketplace (GeM) platform is an
initiative by the government for increasing transparency and combating
corruption. It is hosted by DGS&D. It is a portal to facilitate online
procurement of goods and services required by various government
departments, organizations and public sector undertakings in India.
GeM is dynamic, self-sustaining and user friendly portal for
procurement by Government officers.

FINANCING CONSTRAINTS FOR SMEs SECTOR

There is a total finance requirement of INR 32.5 trillion in SME sector,

which comprises of INR 26 trillion of debt demand and INR 6.5 trillion of
equity demand. Thus after excluding (a) sick enterprises, (b) new
enterprises ( those with less than a year in operation), (c) Enterprises
rejected by financial institutions, the viable and addressable debt
demand is estimated to be INR 9.9 trillion, which is 38 percent of the total
debt demand.

FLOW OF FINANCE TO THE SME SECTOR

Overall finance demand of INR 32.5 trillion, 78 percent, or INR 25.5 trillion
is either self- financed or from informal sources. Formal sources cater to
only 22 percent or INR 7 trillion of the total SME debt financing. Within
the formal financial sector, banks account for nearly 85 percent of debt
supply to the SME sector, with scheduled commercial banks comprising
INR 5.9 trillion. Non Banking finance Companies and smaller banks such
as Regional Rural Banks (RRBs) Urban cooperative banks and government
financial institutions (including state Financial Corporation).
 PROBLEMS FACED BY SMEs

1. Continuous default in meeting for consecutive half yearly installments

of interest of principal of institutional loans.

2. Continuous cash loss for a period or two years of continued erosion in

the net worth by 50 percent or more.

3. Mounting arrears on account of statutory or other liabilities for period

of one or two years.

4. Despite of the importance of the SMEs in Indian economic growth, the

sector is facing challenges and does not get the required support from
the concerned Government Departments, Banks, Financial Institutions
and corporate which are proving to be hurdle in the growth path of the
SMEs.

OTHERS PROBLEMS

1. Absence of adequate and timely banking finance.

2. Limited capital and knowledge.

3. Non availability of suitable technology

4. Low production capacity.

5. Ineffective marketing strategy

6. Constraints on modernization and expansion.

 SOME OF THE MAJOR CHALLENGES FACED BY SMALL AND
MEDIUM ENTERPRISES ARE AS FOLLOWS:

1. Problem of Raw Material:

A major problem that the Small and Medium enterprises have to

contend with is the procurement of raw material. The problem of raw
material has assumed the shape of:
(i) An absolute scarcity,
(ii) A poor quality of raw materials, and
(iii) A high cost.
The majority of Small and Medium enterprises mostly produced items
dependent on local raw material. Then, there was no severe problem in
obtaining the required raw materials. But, ever since the emergence of
modem small-scale industries manufacturing a lot of sophisticated
items, the problem of raw material has emerged as a serious problem
on their production efforts.
The small units that use imported raw material face raw material
problem with more severity mainly due to difficulty in obtaining this
raw material either on account of the foreign exchange crisis or some
of other reasons.
Keeping in view the raw material problem of micro and small
enterprises, the Government makes provisions for making raw material
available to these units. Nonetheless, micro and small enterprises with
no special staff to liaise with the official agencies, these units are left
with inadequate supplies of raw material. As a result, they have to
resort to open market purchases at very high prices. This, in turn,
increases their cost of production, and, thus, puts them in an adverse
position.

2. Problem of Finance:

An important problem faced by small enterprises is that of finance. The

problem of finance in micro and small sector is mainly due to two
reasons. Firstly, it is partly due to scarcity of capital in the country as a
whole.
 Secondly, it is partly due to weak credit worthiness of small enterprises
in the country. Due to their weak economic base, they find it difficult to
take financial assistance from the commercial banks and financial
institutions.

3. Problem of Marketing:

One of the main problems faced by the small enterprises is in the field
of marketing. These units often do not possess any marketing
organization. In consequence, their products compare unfavorably with
the quality of the products of the large-scale industries. Therefore, they
suffer from competitive disadvantages vis-a-vis large-scale units.
In order to protect small enterprises from this competitive
disadvantage, the Government of India has reserved certain items for
the small- scale sector. The list of reserved items has continuously
expanded over the period and at present stands at 824 items.
Besides, the Trade Fair Authority of India and the State Trading
Corporation (STC) help the small-scale industries in organizing their
sales.
Ancillary units face the problems of their own types like delayed
payment by parent units, inadequacy of technological support
extended by parent units, non- adherence to quality and delivery
schedules, thus, disturbing the programmes of the parent units and
absence of a well-defined pricing system and regulatory laws.

4. Problem of Under-Utilization of Capacity:

There are studies that clearly bring out the gross under-utilization of
installed capacities in micro and small enterprises. According to Arun
Ghosh, on the basis of All India Census of Small-Scale Industries, 1972,
the percentage utilization of capacity was only 47 in mechanical
engineering industries, 50 in electrical equipment, 58 in automobile
ancillary industries, 55 in leather products and only 29 in plastic
products. On an average, we can safely say that 50 to 40 per cent of
capacity were not utilized in micro and small enterprises.
The very integral to the problems of under-utilization of capacity is
power problem faced by micro and small enterprises. In short, there
are two aspects to the problem: One, power supply is not always
 available to the small units on the mere asking, and whenever it is
available, it rationed out, limited to a few hours in a day.
Second, unlike large-scale industries, the micro and small enterprises
cannot afford to go in for alternatives; like installing own thermal units,
because these involve heavy costs. Since micro and small units are
weak in economic front, they have to manage as best as it can within
their available meager means.

5. Other Problems:

In addition to the problems enumerated above, the micro and small

enterprises have been constrained by a number of other problems also.
According to the Seventh Five Year Plan (GOI 1985: 98), these include
technological obsolescence, inadequate and irregular supply of raw
materials, lack of organized market channels, imperfect knowledge of
market conditions, unorganized nature of operations, inadequate
availability of credit facility, constraint of infrastructure facilities
including power, and deficient managerial and technical skills.
There has been lack of effective co-ordination among the various
support organizations set up over the period for the promotion and
development of these industries. Quality consciousness has not been
generated to the desired level despite various measures taken in this
regard.
Some of the fiscal policies pursued have resulted in unintended
splitting up of these capacities into uneconomic operations and have
inhibited their smooth transfer to the medium sector. All these
constraints have resulted in a skewed cost structure placing this sector
at a disadvantage vis-a-vis the large industries, both in the domestic
and export markets.
 HOW TO MAKE SMEs MORE EFFECTIVE AND IMPACT ORIENTED

IMPACT ON SMEs-

The SME sector is exceedingly an imperative segment of the economy

because of its contribution to GDP, exports, Job creation, and overall
social and economic development. Government designs policies,
programmes, and schemes and ensures its effectual execution for the
augmentation and expansion of the SMEs. This study will examine the
relationship between employment generation growth and SME growth
and as well the impact of SMEs on employment generation in India. This
will be achieved by utilizing the primary source of data collection as a
survey will be conducted with the use of questionnaires, and statistical
tools will be used to analyze the data obtained to test the hypothesis and
level of significance. SMEs play a very significant role in economic growth
and development and due to that fact, findings in the study identified
some recent policy initiatives adopted by the Indian government to
stimulate the SMEs sub sector.

Effect on SMEs-

The vision of the Ministry of Small and Medium Enterprises is to have a

vibrant Small and Medium Enterprises (SME) sector in India.
It is envisioned that the sector will have a healthy growth with a large
number of enterprises being set up and their graduation by up scaling
into small and medium enterprises. This would be accompanied by
enhancement of their contribution to the GDP, manufacturing output,
employment and exports. For those already established, their upward
graduation to next higher levels of investments and market shares would
be welcomed. On an organizational level, transition of the sector from a
predominantly unorganized to the organized sector, would be welcomed.
Presently, the SME sector is associated, in public perception, with low
quality standards. It is envisioned that the SME sector will be upgraded
through modern and new technologies to achieve global quality
standards. Niche markets will be identified and developed for SME
products, including khadi and coir products.
 DATA ANALYSIS AND INTERPRETATION

1) Ranking is done in order to specify which of the following department

faces issues and problems-

Skilled
Ran Productio Human Marketin Financ Technolog Regulator
k n Resource g e y y Issues
1 36 37 13 15 26 40
2 16 14 28 21 22 11
3 8 12 19 23 12 12
4 15 12 15 19 19 12
Table 1

Rank
1%

Production
21%
Regulatory Issues
24%

Technology
15%

Skilled Human Resource

22%

Finance
9% Marketing
8%

The data shown in the table 1 indicates that the Department which faced
highest number of problems is Regulatory Issues as 40 out of 75
respondents ranked it 1st. 37 respondents marked Skilled Human
Resource as their department of causing issue followed by Production (36
out of 75), Technology (26 out of 75), Finance (15 out of 75) and
Marketing (13 out 75).
2) How your finished products are sold?

Wholesale Retail
28 47
Table 2

Wholesale
37%

Retail
63%

Out of 75, 47 respondents had the Retail method of selling their goods &
services which are 63% and 28 had Wholesale method to sell i.e. only
37%. This indicates that the SMEs in Greater Noida, Noida and Delhi have
more of a Retail consumers rather than wholesalers.
3) Following are the buyers which SMEs had-

Governmen Large or medium scale Individual

t industries customers Others
6 29 49 1
Table 3

Others Government
1% 7%

Large or medium scale industries

34%
Individual customers
58%

58% of the SMEs had ‘Individual customers’ as their buyers while only 1%
had ‘other’ than Government, Large or Medium scale industries or
Individual customers as shown in the Pie chart above.
4) Different modes of Business Promotion used by the evaluated SMEs-

Electronic Social
media Online media others
18 20 16 21
Table 4

othres
28% Electronic media
24%

Social media
21% Online
27%

21 out of 75 respondents marked ‘others’ as the mode of Business

promotion which is 28%, 20 out of 75 said they used online method for
Business promotion which is 27% and followed by Electronic media (18
out of 75=24%) and Social media (16 out of 75=21%).
5) Sources of recruitment of employees in the selected SMEs.

Employee Campus Placement Online job

referrals recruitment agencies portals
42 10 5 18
Table 5

Online job portals

24%

Placement agencies Employee referrals

7% 56%

Campus recruitment
13%

42 out of 75 respondents opted for Employee referrals as the way of

recruitment which is 42% and the least was given to Placement Agencies
which had 5 out of 75 respondents i.e. 7%. Followed by Online Job Portals
(18 out of 75=24%) and Campus Recruitment (10 out of 75=13%).

6) Ways by which these SMEs train their employees-

 On-the-job Off-the-job
training training Using e-learning Others Table 6

57 10 6 2

Others
Using e-learning 3%
8%

Off-the-job training
13%

On-the-job training
76%

57 out of 75 respondents i.e. the SMEs opts ‘On-the-job training’ to train

their employees whereas on the other hand, only 2 out of 75 opts for
some other types of method than On-the-job training, Off-the-job
training and e-learning. As the chart is shown above, 76% is for on-the-job
training, 13% is for off-the-training, 8% for e-learning and 3% for ‘other’.

7) Ways used by SMEs to appraise and reward employees-

As SMEs are small and medium scale enterprises, they don’t have much
to offer their employees in monetary terms so they have less emphasis
 on Bonuses and Profit Sharing rather appraise employees by
recognition programs and Flexible schedules.

8) SMEs getting affected by technology or not-

Yes No
55 20
Table 8

No
27%

Yes
73%

55 out of 75 SMEs said that they did get affected by the Technology factor
because of the new technology, the old employees aren’t able to cope up
with it and moreover, it is quite difficult for them to spend money on such
machineries. 20 out of 75 opted for NO as an answer to this question. So,
73% of SMEs got affected by technology and 27% dint.

9) If yes, than the ways in which technology has affected SMEs business-

By facilitating By easing the By easing By offering Others

 communication transportation the new
with supplier of goods marketing of distribution
and customer your product channel
30 8 18 15 4
Table 9

Others
5%

By offering new distribution channel

20%
By facilitating communication with supplier and customer
40%

By easing the marketing of your product

24%
By easing the
transportation of
gioods
11%

The respondents who opted for YES as an answer in question 8 had

different ways in which their business got affected by technology asked in
question 9. So, 30 out of 75 employees opted for ‘Facilitating
communication with supplier and customers’, 18 opted for ‘Easing the
marketing of their product’, 15 opted for ‘Offering new distribution
channel’, 8 for ‘Easing the transportation of goods’ and only 5 for
‘Others’.

10) Problems faced by SMEs in terms of regulatory compliances-

 SMEs constantly struggle for the ease of business and are
inadvertently met with roadblocks like Ambiguous and limited legal
know how, Thin budgets, Technology obsolescence etc. It is known
that regulation is necessary to provide stable trading conditions and
develop levels of business trust which can benefit SMEs development.
According to the survey, mostly every respondent stated one or the
other issue faced by them in regulatory aspect.

11) Areas in which the need of training or consultancy is required-

Employee Production/Engineering Market

training IT skills skills survey Others
24 20 8 18 5
Table 11

Others
7%

Employee training
32%
Market survey
24%

Production/Engineering skills
11% IT skills
27%

24 out of 75 SMEs said that the area in which the need of training is
required is in Employee training i.e. 32% of them, followed by IT skills
which has the numeric value of 20 out of 75 i.e. 27%, than Market survey
sector with 24%, Production/Engineering skills with 10% and other sector
with only 7%.

13) Nature of the Organization-

 Private Family
Limited Public Limited Partnershi Sole Owned
Company Company p Proprietor Business
33 0 10 27 5
Table 13

Family Owned Business

7%

Private Limited Company

Sole Proprietor 44%
36%

Partnership
13%

33 out of 75 SMEs were Privately Owned i.e. 44%, 27 were Sole

Proprietor i.e. 36%, 10 were in Partnership i.e. 13%, 5 were Family Owned
Businesses i.e. 7% and none were from Public Limited as shown in the
chart above.

14) If family owned, than-

 LLP OPC
25 50
Table 14

LLP
33%

OPC
67%

Out of 75, 50 were OPC i.e. One Person Company which means that 67%
of SMEs were operated by one person of the family. 25 out of 75 SMEs
were LLP i.e. Limited Liability Partnership which means that 33% of SMEs
were operating on the basis of LLP.

15) Nature/Kind of Organization-

 Retail Real
Trading Export Manufacturing Services Estate Farming
12 4 16 40 0 3
Table 15

Farming
4%

Retail Traiding
16%

Export
5%

Services Manufacturing
53% 21%

40 SMEs out of 75 had Nature of Organization as service provider which

means 54% of all. 16 out of 75 had manufacturing business i.e. 21%, 12
had Retail Trading nature of organization i.e. 16%, 4 were Exporters, 3
were of Framing and 0 were from Real Estate as shown in the above
chart.

16) Time period of the company to be in operation-

 Less Between Betwee Between Betwee
tha 1 to 3 n 3 to 5 5 to 7 n 7 to 10
n1 years years years years
year
2 19 17 10 11
Table 16

Less than 1year

3%

More than 10 years

21%
Between 1 to 3 years
25%

Between 7 to 10 years
15%

Between 3 to 5 years
23%

Between 5 to 7 years
13%

19 out of 75 SMEs were of 1 to 3 years of age i.e. they had an establishing

period of 1 to 3 years. Than 17 out of 75 were Between3 to 5 years. 16
out of 75 were for more than 10 years in that location. 11 were Between
7 to 10 years, 10 were between 5to 7 years and lastly, two were from less
than 1 year.

17) Location of the Firm-

 Industrial Industrial
Estate Area Others
7 29 39
Table 17

Industrial Estate
9%

Others
52% Industrial Area
39%

39 out of 75 were neither established in Industrial Estate nor Industrial

Area. But, 29 out of 75 were in Industrial Area and only 7 were in
Industrial Estate. So, according to the chart shown above, 52% had
different location of their respective firms than Industrial estate and
Industrial area; 39% had Industrial Area as their location and 9 % had
Industrial Estate.

18) Professionals with required qualifications-

 Yes No
22 53
Table 18

Yes
29%

No
71%

As per the chart, 71% of the SMEs had no professionals with required
qualification. SMEs have low profit margin due to which they are unable
to provide professionals for their business, whereas, on the other hand
29% had professionals for their work.

19) Number of employees-

 As per the survey, SMEs are pictured as small and medium enterprises
which mean that they operate on a low level. Operating at low level
does not require much of human asset therefore these SMEs had
fewer humans to work. Therefore, when the survey was done, the
maximum number which came out of sight was 22 i.e. few of the
SMEs had 22 employees overall and some had less than 10 also.

20) Nature of Production-

Continuous Seasonal
68 7 Table 20

Seasonal
9%

Continious
91%

68 out of 75 SMEs had Continuous nature of production which means

91% and only 7 had seasonal nature of production i.e. 9%.

21) Area of selling the product-

Locall Regionally Internationally

 y
36 30 9
Table 21

Internationally
12%

Locally
48%

Regionally
40%

36 out of 75 SMEs sell their product Locally which is 48% overall, 30 out
of 75 sell Regionally i.e. 40% and least is sold internationally.

REVIEW OF LITERATURE
Small and medium scale enterprises are the back born of the economy in
developed and undeveloped countries. The economic contribution of
SMEs to the GDP and employment of the countries are more than 50%,
some of the developed countries the share in GDP is more than 95%.
Thus all the countries are keen on developing SME sector as major part of
their economy. However, it was significant that past researchers citation
on slow growth of the SMEs due to various constraints evolves socially
economically, technologically etc. The literature extracts worldwide
publications by many social organizations and rank journal articles on
SMEs and SME development sector for sustainable performance. The
paper examined and categorized all recent facts of SMEs under five
hegemonies such as definitions, global opportunities, Innovation and
R&D, Internationalization, Failures & Constraints of the SMEs. The review
analyzed reports and research articles published from 2000 to 2017 on
SMEs and SME development. SMEs consist of manufacturing, services,
agriculture, mining etc. as main segments. The review focused on social,
technological and economic developments of small and medium-size
manufacturing industries in the world highlighting the similarities and
differences. The review finding contributes to updating the current stock
of knowledge on SMEs development and prevailing constraints to
improve their sustainable development. The study explored on current
trends in cross-border marketing through internationalization and
competitive advantages to be in the competitive market.

RESARCH METHODOLOGY
Meaning of Research-
Research includes any gathering of data information and facts for the
advancement of knowledge. Research must be systematic and follow a
series of steps and a rigid standard protocol. These rules are broadly
similar but may vary slightly between the different fields of science.

Meaning of research methodology-

The word research methodology comes from the word advance learners
dictionary meaning of research as a careful investigation or inquiry
especially through search for new facts in any branch of knowledge for
example some authors have defined research methodology as
systematized effort to gain new knowledge.
Research methodology can consider research as movement a movement
firm the known to unknown. The term research methodology is an
academic activity and as such the term should be used in technical sense.
According to Clifford woody research comprises defining and redefining
problems formulating hypothesis or suggested solutions collecting
organizing and evaluating data making education and reaching
conclusions and then testing of the conclusions to determine whether
they fit in the formulating hypothesis.
Analysis of past data helps the management of the company to plan its
future policies according to the external environment. Based on this
study has been taken up financial analysis of the company. Any sound
research must have a proper design to achieve the required result; this
study is constructed on the basis of descriptive design.

TYPES OF RESEARCH

Descriptive-
Descriptive research includes survey and fact finding enquires of different
kinds.
The study conducted is a conclusive descriptive statistical study.
Conclusive because after conducting the study the researchers came to a
decision which is precise and rational.

Research design-
A research design is the arrangement of conditions for collection and
analysis of data in a manner that aims to combine relevance to the
research paper with economy in procedure. In fact the research design is
conceptual structure within which the research is conducted it constitute
the blue print for the collection, measurement and analysis of data.
Decision regarding what when where how much, by what means
concerning an inquiry or research study constitute a research design.
Research design is needed because it facilitates the smooth sailing on the
various research operations thereby making research as efficient as
possible yielding maximal information with minimal expenditure of effort
time and money.

Sample Size
75 respondents

Sampling units
No. of respondents

TYPES OF SAMPLING

This project is special in nature and therefore method used for sample
technique is convenient sampling method. The method used for sample
technique was convenience sampling method. This method was used
because it was not known to previously as to whether a particular person
will be asked to fill the questionnaire that were easily accessible and
available to the researcher.

SOURCES OF DATA

Primary data sources-

Through interaction with respondents.

Limitations
1) The respondents were limited and cannot be treated as a whole
population

2) The respondents maybe biased

3) The accuracy of the indications given by the respondents may not be

considered adequate

4) Lack of sufficient time to exhaust the detailed study of the above topic
become a hindering factor in my research.

5) Resources were limited

6) Respondents are not willing to respond properly.

REFERENCES

 Yokota, Kazuhiko (2008b). “Productivity Growth, Innovation, and

Catching-Up of Medium-Size Enterprises in Indonesia: A
Nonparametric Approach,” in Lim (2008a).
  Vo, Tri Thanh (2008a). “Challenges, Prospects and Strategies for
CLMV: The Case of Vietnam,” in Chap (2008a).
 Uchikawa, Shuji (2008). “SMEs under Recession in Japan,” in Lim
(2008a).
 Tulus Tahi Hamonangan (2008). “SME Development in Indonesia
with Reference to Networking, Innovativeness, Market Expansion
and Government Policy,” in Lim (2008a).
 Tran, Tien Cuong; Le Xuan Sang; and Nguyen Kim Anh (2008).
“Vietnam's Small and Medium Sized Enterprises Development:
Characteristics, Constraints and Policy Recommendations,” in Lim
(2008a).
 Anis Ali (2014), MSME’s in India: Problems, Solutions and Prospects
in Present Scenario, International Journal of Engineering and
Management Sciences, Vol. 5 (2)
 BalaSubrahmanya, M. H. (2004), Small Industry and Globalization:
Implications, Performance and Prospects’, Economic and Political
Weekly.
 Das, K. (2008), SMEs in India: issues and possibilities in times of
globalization, in Lim, H. (ed) SME in Asia and globalization, ERIA
Research Project Report 2007.
 Dixit, A. and Pandey, A.K. (2011), ‘SMEs and Economic Growth in
India: Cointegration Analysis’, The IUP Journal of Financial
Economics, Vol. IX, No. 2.

ANNEXURE

1. Rank the following in order of importance from 1-4 specifying in which

department you face issues and problems

(a) Production
 (b) Skilled human resource

(c) Marketing

(d) Finance

(e) Technology

(f) Regulatory issues

2. How your finished products are sold?

(a) Wholesale

(b) Retail

(c) Others

3. Who are your buyers?

(a) Government

(b) Large or medium scale industries

(c) Individual consumers

(d) Others

4. Modes of Business Promotion (tick more than 1)

(a) Electronic Media

(b) Online (web)

(c) Social media

(d) Others

5. What are the sources of recruitment of employees in your

organization?

(a) Employee referrals

 (b) Campus recruitment

(c) Placement agencies

(d) Online job portals

6. How do you train your employees?

(a) On-the-job training

(b) Off-the-job training

(c) Using e-learning programs

(d) Others

7. How do you appraise and reward employees?

8. Had technology changes affected your business?

(a) Yes

(b) No

9. If yes, than how has it affected your business?

a) By facilitating communication with both supplier and the customer

b) By easing the transportation of goods

c) By easing the marketing of your products

d) By offering the new distribution channel

e) Others

10. What problems you face in terms of regulatory compliances?

11. In which area you feel the need of training or consultancy?

(a) Employee training

(b) IT skills
 (c) Production/Engineering skills

(d) Market survey

(e) Others

12. Nature/Kind of Organization?

(a) Retail Trading

(b) Export

(c) Manufacturing

(d) Services

(e) Real Estate

(f) Farming

13. Nature of Organization?

(a) Private Limited Company

(b) Public Limited Company

(c) Partnership

(d) Sole Proprietor

(e) Family Owned Business

CONCLUSION

There is an unprecedented importance of Micro and Small Enterprises in

the country. This is because the number of units is maximum in the
country. This sector, contributes a major amount in the development and
employment. This sector does the work of providing employment to
minorities, backward class people and also to women.
This sector is rife with problems like shortage of electricity and
development of basic infrastructure along with the problems related to
market. In order to solve these problems and develop the MSME sector,
major efforts have been done in the eleventh plan. However these efforts
are not enough. The concept of PPP should be implemented.
Development of KVIC along with broad spectrum growth should be
achieved. For the development of rural and farm group, different
departments should be formed. Similarly, in the development of
industrial ministry for urban Micro and Small and Medium Industries
specific efforts should be done.
Small and Medium Enterprises (SMEs) contribute to economic
development in various ways such as creating employment opportunities
for rural and urban population, providing goods & services at affordable
costs by offering innovative solutions and sustainable development to the
economy as a whole. SMEs in India face a number of problems - absence
of adequate and timely banking finance, non-availability of suitable
technology, ineffective marketing due to limited resources and non
availability of skilled manpower.
The Small and Medium Enterprises (SME) sector contributes significantly
to manufacturing output, employment and exports of the country. It is
estimated that in terms of value, the sector accounts for about 45 % of
the manufacturing output and 40% of total exports of the country.
To make this sector to become more vibrant and significant player in
development of the Indian economy the Government of India has taken
various initiatives.