ENTREPRENEURIALSHIP DEVELOPMENT

Prof. J M Ovasdi

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Evolution of the concept• Entrepreneur – a French word for an organizer

of musical or other entertainments• It was also used for military expeditions and

civil engineering aspects• In the 18th century the term was used in

economic aspects also• Richard Cantillon, an Irishman, living in

France, introduced the term ‘entrepreneur’ as his unique risk-bearing function in economics.

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Entrepreneur as a Risk-Bearer• Richard Cantillon defined entrepreneur as a agent

who buys factorof productions at certain prices in order to combine them into a product with a view to selling it at uncertain prices in future.

• Uncertainty – a risk which cannot be insured against and is incalculable

• A risk can be reduced through the insurance principle, where the distribution of outcome in a group of instances is known

• Uncertainty is the risk which cannot be calculated

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Entrepreneur as an Innovator• Organizer – coordination of the factors of

production, organization & supervision• Innovator -- new product, new technology

new market, new source of raw material, new process

• Inventor & innovator – inventor is one who discovers new methods and new materials. Innovator utilizes inventions and discoveries in order to make new combination of products, services

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Characteristics of an entrepreneur• Risk-bearer• Hard work• Desire for high achievement• Highly optimistic• Independence• Foresight• Good organizer• Good judge of persons• Innovative • Leadership

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Difference between an entrepreneur and a manager

Points Entrepreneur ManagerMotive To start a venture for personal

gratificationProvide her services to an entrepreneur

Status Owner of the enterprise A servant of entrepreneur

Risk-bearing

Assumes all risks & uncertainty of the business

No risk except punishment for non-performance

Rewards Though uncertain gets all the profit Fixed salary and bonus for exceptional services

Innovation Change-agent, strategist Executes the plans of the entrepreneur

Qualifications Professional qualifications and experience not necessary.

Professional qualifications necessary. Experience preferred

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Functions of an entrepreneur• Idea scanning and ideation• Determination of the business objectives• Product analysis and market research• Determination of form of ownership/organization• Promotional formalities for business set up• Raising necessary funds• Procuring machines and material• Recruitment of workers• Undertaking the business operations….

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Types of entrepreneurs• Innovating- new products/services, new markets• Imitative -- duplicating• Fabian – least risk taker, follower of successful people• Drone – lack of adaptation to environmental changes• Solo operators – self with a few employees• Active partners – joint venture with active

participation• Inventors – research & innovation• Challengers – Karsan Bhai, Gulshan Kumar• Buyers – who take over companies• Life-timers – family business extensions• Intrapreneurs (from within)– managers starting

independent business ventures

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Difference between entrepreneur and intrapreneur

Difference Entrepreneur Intrapreneur Dependency Independent in his

operationsDependent on the entrepreneur – the owner

Raising of funds Raises funds himself Funds are not raised by her

Risk Bears the complete risk Bears partial riskOperation Operates from outside

– not an employeeShe operates from within the organization

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Entrepreneurship • What an entrepreneur does is entrepreneurship• It is an attempt to create value through

recognition of business opportunity, the management of risk-taking appropriate to the opportunity, and through the communicative and management skills to mobilize human, financial and material resources necessary to bring a project to fruition

• It is the purposeful activity of an individual or a group of associated individuals, undertaken to initiate, maintain or increase profit by production or distribution

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Entrepreneur & Entrepreneurship

Entrepreneur Entrepreneur ship •Person•Organizer•Innovator•Risk-bearer•Motivator•Creator•Visualizer•Leader•imitator

•Process•Organization•Innovation•Risk-bearing•Motivation•Creation•Vision•Leadership•imitation

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GROWTH OF ENTREPRENEURSHIP IN INDIA

Prof. J M Ovasdi

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Pre-independence• Till about 1750, that is, prior to the Industrial

Revolution India & China had over 40 % share of the world trade. Industrial revolution of Europe and North America killed the entrepreneurship of the rest of the world

• Indian textile, carpets, gems, spices were traded world-over

• Indian entrepreneurs catered to all the needs of the common man and the nobility

• The surplus was exported by traders

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British Rule & IR• Indian entrepreneurship suffered because of the

decline of the Royal patronage• East-India company rule – they purchased raw

material from India and after making cloth in England imported to India and other colonies

• The British rulers did not allow industries to be set up in India for fear of competition with British industries

• Daily need goods for the common man continued to be manufactured by the local artisans

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Other Factors• Imposition of heavy duties on the import of

the Indian goods in England• Mass-manufactured low priced goods killed

Indian craftsmanship• Indian Railways were built to help British

trade• The Indian nobility who were the patrons of

Indian crafts became crazy about foreign goods

• Indian craftsmen failed to adapt to the changing tastes and needs of the people.

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Attempts at Revival of Entrepreneurship

• Parsi community became the pioneers of entrepreneurship in India

• They set up a number of factories in and around Bombay to meet the needs of the British companies – ship building, steel making, gunpowder in the second half of 19th century.

• Ranchodlal Chotalal set up a modern textile factory in Ahmedabad in 1861. Parsis set up a number of textile mills in Bombay

• In 1915 there were 96 textile mills – 41 of Parsis, 23 by Hindus and 10 by Muslim entrepreneurs

• First major steel mill by set up by Jamshedji Tata in 1911.• The dominant trading communities of Jains and Marwaries

entered the scene after first World War.

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After the first World War• Managing Agencies --In 1936 Dwarkanath Tagore

set up the first joint-stock company – Carr, Tagore & Co. for managing the steam tugs/boats

• After the First WW and more so during the II WW the British government encouraged the Indian entrepreneurs to set up factories to fill up the gap in production by British companies

• At this stage the traditional trading communities of India emerged as the big entrepreneurs – Birlas, Modi, Bajaj, Mafatlal, Kirloskar, Chettiars…

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After Independence• After getting political independence, the

Government of India focused on economic growth

• Government took a number of initiatives to put economy on the fast track

• Five Year Plans were designed and implemented for all round development in urban & rural sectors, big and small business

• Infrastructure like electric power, roads, railways, telephones etc needed immediate attention

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Development of SME• From third Five Year Plan (1962-67) special

emphasis was accorded to develop small-scale industries

• Various incentives & concessions were given in the form of capital, technical know-how, markets, and land to potential entrepreneurs

• Special concessions were granted for setting up small industrial units in ‘backward’ areas to remove the regional imbalances in development

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Institutional Support to SMEs• To facilitate the new entrepreneurs several

institutions were set up like• Directorate of Industries• Financial Corporations• Small-scale Industries Corporations• Small Industries Service Institutes

As a result of these initiatives the number of small-scale industries increased from 121,619 in 1966 to 190,727 in 1970 – an increase of 17,000 units in four years

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Comments on the Trade and Industrial Policies from 1947 - 1991

• Since exports were much lower than the demand of imports emphasis was laid on encouraging import-substitution to save foreign exchange to develop entrepreneurship and technical skills of the workers

• Heavy industries were set up as Public Sector Undertakings (PSU)

• Technology was imported for setting up big and small industries

• Automatically SMEs emerged to feed the heavy industries

• However the quota-permit industrial policy was a mistake.

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Role of Entrepreneurs in Economic Development

• Economic development means a process of upward change whereby the real per capita income of a country increases over a long period of time.

• What causes economic development• The classical economists like Adam Smith, and David

Ricardo the rate of capital formation was the most important factor of economic development – save more and invest in production of goods & services

• It depends on the personal interest & initiative of an individual where to invest & earn profit & create wealth

• Ricardo identified 3 factors of production – machinery, capital & labour. They had no though for entrepreneurship.

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Role of Entrepreneurship…• The emergence of USA, Japan, and Russia as

great economic powers in the 20th century was due to the spirit of entrepreneurship of small innovator investors who were the drivers of great economic development

• Most of the big businesses, world over had started as small enterprises

• In India, Gulshan Kumar revolutionized the audio-cassette business with T-series, and Karsanbhai defeated the multinational HUL in detergent business by introducing Nirma

• Infosys was launched by six co-workers who sold the ornaments of their wives to raise Rs. 1 Lakh.

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Role of Entrepreneurship…• There are certain barriers for entrepreneurs in

underdeveloped regions• Paucity of funds• Lack of skilled labor• Non-existence of minimum social and economic

overheads• Lack of infrastructural amenities – electricity,

roads and other means of communication• In India, largest number of entrepreneurs have

been imitators rather than innovators – great scope for duplicate/unbranded goods produced by jugad methodology.

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Role of Entrepreneurship…• Entrepreneurship promotes capital formation by

mobilizing the idle saving of the public• Provides immediate large-scale employment• Promotes balanced regional development• Helps reduce the concentration of economic power• Stimulates the equitable distribution of wealth, income

and even political power in the interest of the country• Encourages effective resource mobilization of capital &

skill which might otherwise remain unutilized and idle• It includes backward & forward linkages which

stimulate the process of economic development• It promotes country’s export trade (40% in India)

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Reasons for Growth of Entrepreneurship• The Global Entrepreneurship Monitor report in 2007

observed high incidence of entrepreneurship throughout the world, particularly in China, India, Thailand.

• Industry structure – post-capitalist society. Shift from capital intensive to knowledge intensive industry inspired by IT revolution. Ideas and not infrastructure are important

• Deregulation and Privatization – China in 1980s, Russia, Eastern Europe and India in 1990s

• Growth of Services Sector- largest number of opportunities in this sector for entrepreneurs and jobs

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Reasons for Growth of Entrepreneurship• Government Incentives & Subsidies• Entrepreneurial Education (EDP) – universities

and technical institutes • Rajiv Gandhi Udyami Mitra Yojana (RGUMY)• Increasing flow of Information• Easier Access to Resources• Return on Innovation – IPR is a major boost to

entrepreneurs willing to take risk• High regards for Self-employment – formerly

government jobs were the first priority• Acceptance of Ex- Entrepreneurs in jobs even

after their failed ventures.

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Doing Business in India -- Some Issues• John Galbraith, a noted economist who served

as the Ambassador of the US in India, had called India ‘the chaos that works’.

• Starting a business in India is not an easy task. Funds may be available but there are lot of hurdles to be crossed before the business starts functioning.

• India is not considered to be business-friendly• Major issues involved are the following…

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Doing Business in India -- Some Issues• Bureaucracy – bureau is a French word meaning

‘office’ and the Greek suffix kratos, means ‘power’ or ‘rule. So, bureaucracy refers to the ‘rule of the office’.

• Bureaucracy in India is very ‘rule-minded’. There are too many rules to be complied with for starting a business. Too many clearances to be obtained. Businessmen frequently use bribe and other methods to get the government clearances

• Corruption is a way of life, not only in bureaucracy and politics but in many other fields.

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Doing Business in India -- Some Issues• Tribe of Middle-men – acting as consultants they help

and also cheat the businessmen for getting licenses and loans.

• Grey market and Counterfeit Goods – grey market is the flow of goods through unauthorized channels (smuggling) to evade taxes. It creates problems for the manufacturers and the customers. Counterfeit goods are a substandard copy of the original. Also known as piracy. Pirated/counterfeit music and film CDs/DVDs are more in demand than the original products.

• Social Capital – personal relationship – pehchan connection, with the powerful people is more important than the quality of the product.

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Doing Business in India -- Some Issues• The ‘Doing Business’ report is published

annually by the World Bank. About 178 countries are ranked and India’s rank if 120 (2008 report).

• For enforcing contracts India’s position is 177. the courts take too much time in deciding business related disputes

• Even for closing a business it is very difficult• That is the reason for insufficient FDI in India.

China gets 10 times more FDI than India.

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Why Start a Business• Dream come true• Thrill of being your own boss• Self esteem – from job seeker to job giver• No restraints on your innovative ideas• Money is the most common reason for starting a

business• Exponential growth possible as against a time-

bound career• Creating a successful business is an insurance

cover and training opportunity for the next generation

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Disadvantages • You are alone• You are the risk-bearer• You can’t blame others for bad decisions• All losses are yours• Work may not be satisfying• Long hours at the establishment unlike

employees• Lack of success will affect self-esteem• Difficult to exit from a failed business• An employee may get a new jobs in a couple of

months but starting a new business may take years.

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Entrepreneurial Characteristics & Skills• Most common characteristics of

entrepreneurs across the world1.Commitment and determination2.leadership3.Opportunity obsession4.Tolerance of risk, ambiguity, and uncertainty5.Creativity, self-reliance and ability to adapt6.Motivation to excel and the skill to motivate

subordinates to excel.

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Demographic and Cultural Backgrounds1. Offspring of self-employed parents2. Being fired from more than one job3. Being an immigrant or a child of immigrants4. Previous employment in a firm with more

than 100 people5. Being the eldest child in the family6. Being a college graduate7. Being a widow, single parent without

economic support

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Entrepreneurial Skills1. Curiosity, Craziness, and Creativity2. Real-time strategy and decision making3. Comfort with change and chaos4. Teamwork5. Good judge of people6. Tolerance of imperfections7. Extremely efficient negotiator8. Good mastery of the basics of finance,

accountancy, marketing, and communication skills

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Entrepreneurial Skills…

9. Comfortable with life style changes10.Willing to break/bend/stretch laws11. Patience to start from the scratch12. Prepared to make enemies13. Comfortable with confrontations14. Dealing with failure15. Willingness to learn

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Types of EntrepreneursClassification based on the Timing of Venture Creation• Early Starters – with little or no full-time work experience.

Normally the entrepreneur is from a business family. An extreme case of an early starter is Suhas Gopinath who listed his company Globals Inc, in the USA because Indian laws do not permit a minor to run a company.

• Experienced – few years experience in family business or as employee for some years – Narayan Murthy and five colleagues launched Infosys at the age of 35 years with practically no resources

• Mature – Ex-CEOs, senior mangers taking VRS and starting their ventures Jagdish Khatter of MUL started his own venture, Ashok Soota and Subroto Bagchi quit Wipro to start Mindtreee, and B V R Subbu, the ex- CEO of Hyundai India, started his own venture by buying the Daewoo plant in India.

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Types of Entrepreneurs…• Based on Socio-cultural Variables• First-generation Entrepreneurs – Dhirubhai

Ambani and Narayan Murthy• Entrepreneurs from Business Families – few

socio-ethnic family groups have dominated the business scene in India – Parsee, Gujarati, Sindhi, Chettiyar. Tatas,Birlas, Wadias, Murugappas, and Singhanias are from these groups. Road-transport business is dominated by Punjabis, particularly Sikhs.

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Jagadish Khattar• Ex IAS and the CMD of Maruti Udyog Limited

has launched his new venture Carnation, a network of multi-car sales and after sale service outlets. Carnation plans to pumps a whopping Rs1000 Cr for developing it’s business model.

• Carnation planning to focus on sales, service, lease and finance multi-branded cars. Also they are planning to sell value added products and accessories like batteries, tyres etc.

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Suhas Gopinath• Born in Bengaluru (1986), Suhas launched a web site

called CoolHindustan.com at the age of 14, and incorporated his company in the USA, since Indian Laws do not permit minors to register a company, making him the world's youngest CEO at that time.

• Gopinath taught himself how to build websites and sold portals to bricks-and-mortar firms in the US.

• Achievements• He has received awards from his home state,

European Parliament and he has advised World Bank for the development of computer skills in Africa for generating employability in poor countries.

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Micro, Small & Medium Industries• Ministry of Agro and Rural Industries (Krishi

Evam Gramin Udyog Mantralaya) and Ministry of Small Scale Industries (Laghu Udyog Mantralaya) have been merged into a single Ministry, namely, “MINISTRY OF MICRO, SMALL AND MEDIUM ENTERPRISES (SUKSHMA LAGHU AUR MADHYAM UDYAM MANTRALAYA)” since May 2007

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Micro, Small & Medium Enterprises - The Engine of inclusive growth & development

• Worldwide, the micro small and medium enterprises (MSMEs) have been accepted as the engine of economic growth and for promoting equitable development.

• The major advantage of the sector is its employment potential at low capital cost.

• The labour intensity of the MSME sector is much higher than that of the large enterprises.

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Engines of Economic Development• The MSMEs constitute over 90% of total

enterprises in most of the economies and are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports. In India too, the MSMEs play a pivotal role in the overall industrial economy of the country. In recent years the MSME sector has consistently registered higher growth rate compared to the overall industrial sector. With its agility and dynamism, the sector has shown admirable innovativeness and adaptability to survive the recent economic downturn and recession.

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MSME Importance• The MSMEs constitute over 90% of total enterprises in

most of the economies and are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports.

• In India too, the MSMEs play a pivotal role in the overall industrial economy of the country.

• In recent years the MSME sector has consistently registered higher growth rate compared to the overall industrial sector.

• With its agility and dynamism, the sector has shown admirable innovativeness and adaptability to survive the recent economic downturn and recession.

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Importance of MSME…• As per available statistics (4th Census of MSME

Sector), this sector employs an estimated 59.7 million (about 6 crore) persons spread over 26.1 million (2.6 crore) enterprises.

• It is estimated that in terms of value, MSME sector accounts for about 45% of the manufacturing output and around 40% of the total export of the country.

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Definitions of MSMEsProduction

• A micro enterprise, where the investment in plant and machinery does not exceed Rs 25 lakh

• A small enterprise, where the investment in plant and machinery is more than twenty five lakh rupees but does not exceed Rs. five crore or

• A medium enterprise, where the investment in plant and machinery is more than five crore rupees but does not exceed ten crore rupees

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Definitions of MSMEs…Services

• In the case of the enterprises engaged in providing or rendering of services, as –

• A micro enterprise, where the investment in equipment does not exceed ten lakh rupees;

• A small enterprise, where the investment in equipment is more than ten lakh rupees but does not exceed two crore rupees; or

• A medium enterprise, where the investment in equipment is more than two crore rupees but does not exceed five crore rupees

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Clarification regarding investment limits

• For the removal of doubt, it is hereby clarified that in calculating the investment in plant and machinery, the cost of pollution control, research and development, industrial safety devices and such other items as may be specified, by notification, shall be excluded.

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RAJIV GANDHI UDYAMI MITRA YOJANA • (A Scheme of “Promotion and Handholding of Micro

and Small Enterprises”) • The objective of Rajiv Gandhi Udyami Mitra Yojana

(RGUMY) is to provide handholding support and assistance to the potential first generation entrepreneurs, who have already successfully completed EDP/SDP/ESDP or vocational training from ITIs, through the selected lead agencies i.e. 'Udyami Mitras', in the establishment and management of the new enterprise, in dealing with various procedural and legal hurdles and in completion of various formalities required for setting up and running of the enterprise.

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Background • World over, micro and small enterprises (MSEs)

are recognized as an important/constituent of the national economies, contributing significantly to employment expansion and poverty alleviation. Recognizing the importance of micro and small enterprises, which constitute an important segment of Indian economy in terms of their contribution to country’s industrial production, exports, employment and creation of entrepreneurial base, the Central and State Governments have been implementing several schemes and programmes for promotion and development of these enterprises.

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• The small scale industries in India, including the tiny or micro industries and service/business entities, collectively referred as micro and small enterprises (MSEs), have a long history of promoting inclusive, spatially widespread and employment-oriented economic growth. In terms of employment generation, this segment is next only to agriculture.

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EDP- Entrepreneur Development Program• Entrepreneurship development and training is one of the key

elements for development and promotion of micro and small enterprises, particularly, the first generation entrepreneurs.

• Entrepreneurship Development Programmes (EDPs) of various durations are being organized on regular basis by a number of organizations e.g. national and state level Entrepreneurship Development Institutes (EDIs), Micro, Small and Medium Enterprises Development Institutes (MSMEDIs) [earlier known as Small Industries Service Institutes (SISIs)], national and state level Industrial Development Corporations, Banks and other training institutions/agencies in private and public sector etc., to create new entrepreneurs by cultivating their latent qualities of entrepreneurship and enlightening them on various aspects necessary for setting up micro and small enterprises.

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EDP- Entrepreneur Development Program• Besides, various Industrial Training Institutes

(ITIs), other private training institutions are also organizing vocational training (VT) programmes, skill development programmes (SDPs) and entrepreneurship-cum-skill development programmes (ESDPs).

• However, there are still wide spread variations in the success rate, in terms of actual setting up and successful running of enterprises, by the EDP/SDP/ESDP trained entrepreneurs.

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EDP- Entrepreneur Development Program• It has been observed that entrepreneurs particularly

new entrepreneurs, generally face difficulties in availing full benefits under available schemes of the Governments / financial institutions, completing and complying with various formalities and legal requirements under various laws/regulations.

• In selection of appropriate technology, tie-up with buyers and sellers etc. In order to bridge the gap between the aspirations of the potential entrepreneurs and the ground realties, there is a need to support and nurture the potential first generation as well as existing entrepreneurs by giving them handholding support, particularly during the initial stages of setting up and managing their enterprises.

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Objectives of Rajiv Gandhi Udyami Mitra Yojana (RGUMY)

1. To provide handholding support and assistance to the potential first generation entrepreneurs, who have already successfully completed or undergoing Entrepreneurship Development Training Programme (EDP) / Skill Development Training Programme (SDP)/ Entrepreneurship cum Skill Development Training Programme (ESDP) /Vocation Training Programmes (VT), through the selected lead agencies i.e. 'Udyami Mitras', in the establishment and management of the new enterprise, in dealing with various procedural and legal hurdles and in completion of various formalities required for setting up and running of the enterprise.

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Objectives…

2. To provide information, support, guidance and assistance to first generation entrepreneurs as well as other existing entrepreneurs through an ‘Udyami Helpline’ (a Call Centre for MSMEs), to guide them regarding various promotional schemes of the Government, procedural formalities required for setting up and running of the enterprise and help them in accessing Bank credit etc.

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Udyami Mitras • Eligibility • Under RGUMY, financial assistance would be provided to

the selected lead agencies i.e. Udyami Mitras for rendering assistance and handholding support to the potential first generation entrepreneurs. Following agencies/ organizations can be appointed as the lead agency i.e. Udyami Mitra:

i. Existing national level Entrepreneurship Development Institutions (EDIs).

ii. Micro, Small and Medium Enterprises Development Institutes (MSMEDIs)/ Branch MSMEDIs.

iii. Central/ State Government public sector enterprises (PSEs) involved in promotion and development of MSEs e.g. National Small Industries Corporation (NSIC) and State Industrial Development Corporations etc.

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Udyami Mitras iv. Selected State level EDIs and Entrepreneurship

Development Centers (EDCs) in public or private sectors;

v. Khadi and Village Industries Commission (KVIC). vi. Special Purpose Vehicles (SPVs) set up for cluster

development involved in entrepreneurship development;

vii. Capable associations of MSEs/SSIs; viii. Other organizations/training institutions/NGOs

etc. involved in entrepreneurship development/ skill development.

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Role and Responsibilities of Udyami Mitras

• The selected lead agencies i.e. Udyami Mitras would be expected to render assistance and handholding support for following services:

• Networking, coordinating and follow up with various Government departments/ agencies/ organizations and regulatory agencies on the one hand and with support agencies like Banks/financial institutions, District Industries Centers (DICs), technology providers, infrastructure providers on the other hand, to help the first generation entrepreneurs in setting up their enterprise.

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Role and Responsibilities of Udyami Mitras …• Udyami Mitras are expected to help the first

generation entrepreneurs in: • a) Identification of suitable

project/product/enterprise and preparation of bankable project report for the same

• b) Creation of the proprietorship firm/ partnership firm/ Company/ Society/ Self Help Group (SHG) etc;

• c) Filing of Memorandum (as prescribed under MSMED Act 2006);

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Role and Responsibilities of Udyami Mitras …d) Accessing bank loans, admissible capital subsidy/

assistance under various schemes of the Central /State Government and other agencies/organizations/financial institutions/ Banks etc. by networking with respective agencies

e) Assistance and support in establishment of work shed/office;

f) Sanction of Power load/connection; g) Selection of appropriate technology and

installation of plant and machinery/office equipment etc;

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Role and Responsibilities of Udyami Mitras …• h) obtaining various registrations/ licenses/

clearances / No Objection Certificates (NOCs) etc. from the concerned regulatory agencies/ Government departments/ local bodies/ Municipal authorities etc.;

• i) Allotment of Income Tax Permanent Account Number (PAN) and Service Tax/ Sales Tax/ VAT registration etc;

• j) Sanction of working capital loan from the banks; • k) Arranging tie up with raw material suppliers;

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Role and Responsibilities of Udyami Mitrasl) Preparation and implementation of marketing

strategy for the product/ service and market development; and

m) Establishing linkage with a mentor for providing guidance in future

n) Creation of web page and email identity; (ii) Once the enterprise has been successfully set

up, the Udyami Mitras would also monitor and follow up on the functioning of the enterprise for a further period of minimum 6 months and provide help in overcoming various managerial, financial and operational problems.

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Setting up a Micro, Small and Medium Enterprise

• The main steps involve in setting up a Micro, Small & Medium Enterprise are as below :-

• (a) Project Selection

(b) Technology and Machinery

(c) Arranging Finance

(d) Unit Development

(e) Filing of Entrepreneurs’ Memorandum

(f) Approvals

(g) Clearances

(h) Quality Certification

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Women Entrepreneurs• Traditionally, Indian women had their position

restricted to the house-hold and lack of education and opportunities – Abla nari

• Social stigma for working women.• Limited career opportunities –school teachers,

nurses, clerks, receptionists etc.• Empowerment of women through higher

education, SHG, and institutional financial help have created room for women entrepreneurs.

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Setting up a new unit is a big challenge.

• The overriding reason for anyone to think of establishing a MSME unit can be summarised in one word - OPPORTUNITY.

• If one can see an opportunity to provide a product or service in a manner to generate sufficient surplus, then one way is to start up a MSME unit. This is all the more true if one believes in the maxim, "Small is Beautiful"

• Opportunities emerge out of ideas that one comes across by thinking about lives of friends and neighbours. This can generate ideas about products and services that can make things easier, and improve quality of life of people.

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Women Entrepreneurs• The GoI has defined women entrepreneurs based

on women participation in equity and employment of a business enterprise

• Enterprise owned and controlled by women having a minimum financial interest of 51 % of the capital and giving at least 51 % employment generated in the enterprise to women

• Women Entrepreneurs are those who think of a business enterprise, initiate it, organize, combine the factors of production, operate the enterprise and undertake risks and handle economic uncertainty involved in running a business enterprise.

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Functions of Women Entrepreneurs• Frederick Harbison – five functions1. Exploration of the prospects of starting a new

business enterprise2. Undertaking risks of economic outcome

uncertainty3. Introduction of innovations or imitation of

innovations 4. Coordination, administration and control5. Supervision & leadershipInternal assessment test– profile of at least two

women entrepreneurs

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Growth of Women Entrepreneurs• In India Women Entrepreneurs is a new phenomenon• Traditionally women entry into business is traced to an

extension of their kitchen activities• 3 Ps – Pickle, Powder and Pappad• Push factor – that compel women to take up their own

business to tide over their economic difficulties and responsibilities

• Pull factors – imply factors which encourage women to start an occupation or venture with an urge to do something, independently.

• With women professional education 3 Ps have become 3 Es Engineering, electronics, and energy. More Es --education, entertainment, event management…

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Women Entrepreneurs…Examples

• Solar cookers in Gujarat• Small foundaries in Maharashtra• TV capacitors in Orissa• Famous Indian Women Entrepreneurs• Sumati Morarji– Shipping Corporation• Yamutai Kirloskar – Mahila Udyog• Neena Malhotra –Exports• Shahnaz Huaasain – Beauty Clinics and Personal

care products• Kiran Mazumdar Shaw – Bio-Technology

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Dr. Kiran Mazumdar Shaw• Entrepreneur Dr. Kiran Mazumdar-Shaw, Chairman &

Managing Director of Biocon Ltd., who became India's richest woman in 2004 (an estimated Rs.2,100 crore -US$480 million), was educated at the Bishop Cotton Girls School and Mount Carmel College in Bangalore. She founded Biocon India with a capital of Rs.10,000 in her garage in 1978 - the initial operation was to extract an enzyme from papaya. Her application for loans were turned down by banks then - on three counts - biotechnology was then a new word, the company lacked assets, and (most importantly) women entrepreneurs were still a rarity. Today, her company is the biggest biopharmaceutical firm in the country.

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Ekta Kapoor• Ekta Kapoor, creative head of Balajji Telefilms,

is the daughter of actor Jeetendra, and sister of actor Tushar Kapoor. She has been synonymous with the rage of soap operas on Indian TV, after her most famous venture 'Kyunki Saas Bhi Kabhi Bahu Thi', which started airing on STAR Plus in 2000. Ekta dominates Indian television with shows in multichannels. At the 6th Indian Telly Awards 2006, she bagged the Hall of Fame award for her contributions to Indian TV.

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Sunita Narain• Sunita Narain, an environmentalist and political

activist as well as a major proponent of the Green concept of sustainable development, was awarded the Padma Shri by the Government of India in 2005.

• Narain, who has been with the India-based Centre for Science and Environment since 1982, is currently the director of the Centre, and the director of the Society for Environmental Communications, and publisher of the fortnightly magazine, 'Down to Earth'.

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Major constraints faced by Indian Women Entrepreneurs

a) Lack of confidence – In general, women lack confidence in their strength and competence. The family members and the society are reluctant to stand beside their entrepreneurial growth. To a certain extent, this situation is changing among Indian women and yet to face a tremendous change to increase the rate of growth in entrepreneurship.

b) Socio-cultural barriers – Women’s family and personal obligations are sometimes a great barrier for succeeding in business career. Only few women are able to manage both home and business efficiently, devoting enough time to perform all their responsibilities in priority.

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Constraints…c) Market-oriented risks – Stiff competition in the market

and lack of mobility of women make the dependence of women entrepreneurs on middleman indispensable. Many business women find it difficult to capture the market and make their products popular. They are not fully aware of the changing market conditions and hence can effectively utilize the services of media and internet.

d) Motivational factors – Self motivation can be realized through a mind set for a successful business, attitude to take up risk and behavior towards the business society by shouldering the social responsibilities. Other factors are family support, Government policies, financial assistance from public and private institutions and also the environment suitable for women to establish business units.

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Constraints…e) Knowledge in Business Administration – Women must

be educated and trained constantly to acquire the skills and knowledge in all the functional areas of business management. This can facilitate women to excel in decision making process and develop a good business network.

f) Awareness about the financial assistance – Various institutions in the financial sector extend their maximum support in the form of incentives, loans, schemes etc. Even then every woman entrepreneur may not be aware of all the assistance provided by the institutions. So the sincere efforts taken towards women entrepreneurs may not reach the entrepreneurs in rural and backward areas.

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Overcoming Constraintsg) Exposure to the training programs - Training programs

and workshops for every type of entrepreneur is available through the social and welfare associations, based on duration, skill and the purpose of the training program. Such programs are really useful to new, rural and young entrepreneurs who want to set up a small and medium scale unit on their own.

h) Identifying the available resources – Women are hesitant to find out the access to cater their needs in the financial and marketing areas. In spite of the mushrooming growth of associations, institutions, and the schemes from the government side, women are not enterprising and dynamic to optimize the resources in the form of reserves, assets mankind or business volunteers.

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Over coming Constraints• Highly educated, technically sound and

professionally qualified women should be encouraged for managing their own business, rather than dependent on wage employment outlets.

• The unexplored talents of young women can be identified, trained and used for various types of industries to increase the productivity in the industrial sector.

• A desirable environment is necessary for every woman to inculcate entrepreneurial values and involve greatly in business dealings

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Emerging Business Opportunities for Women • Eco-friendly technology

• Bio-technology

• IT enabled enterprises

• Event Management

• Tourism Industry

• Telecommunication

• Plastic materials

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Emerging Business Opportunities for Women

• Vermiculture• Mineral water• Sericulture• Floriculture• Herbal & health care• Food, fruits & vegetable processing

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Women Empowerment for Sustainable Development

• Empowering women entrepreneurs is essential for achieving the goals of sustainable development and the bottlenecks hindering their growth must be eradicated to entitle full participation in the business.

• Apart from training programs, Newsletters, mentoring, trade fairs and exhibitions also can be a source for entrepreneurial development.

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Empowerment for Sustainable Development

• As a result, the desired outcomes of the business are quickly achieved and more of remunerative business opportunities are found.

• Henceforth, promoting entrepreneurship among women is certainly a short-cut to rapid economic growth and development.

• Let us try to eliminate all forms of gender discrimination and thus allow ‘women’ to be an entrepreneur at par with men.

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Project Identification and Selection

J M OVASDI

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Ideation & Project• An entrepreneur chooses an idea, an opportunity

to start her enterprise• Business Environment scanning is done to make

the choice like• What are the unfulfilled needs of the customers• How to fulfill their needs• What are your strengths and weaknesses• Are you confident of the support of your family,

friends and any other support agency.• Based on these factors select a project.

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What is a Project• The very foundation of an enterprise is a project• It is a distinct mission to achieve and a clear

termination point• It is a set of activities involved in using resources

to gain benefits. Every project has three basic attributes

1. A course of action – definite plan2. Specific objective – what do you what to achieve3. Definite time perspective

Procedure – project identification and project selection.

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Identification & Selection• Idea Generation is done through internal &

external sources1. Knowledge of potential customers2. Watching emerging trends3. Scope for good copying of existing products4. Study magazines , journals5. Success stories of known entrepreneurs, friends

etc.6. Visiting fairs and exhibitions7. Meeting government agencies, Udhyami Mitras8. Knowledge about government policy,

concessions and incentives etc.

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Selection • After collecting data and information about

various opportunities we have to make a short list of choices according to our strengths & weaknesses

• We have to list the requirement of financial investment and other resources

• Some projects may be very beneficial but require resources that are not easy to get.

• There may be technical problems• Considering all the opportunities, and constraints

the final selection is made.• Then a project report is made. It is the most

important step if we have to apply for a loan.

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Contents of a Project Report• A good project report should have the following

contents1. General Information – bio-data of the single or

multiple promoters; their specific capabilities and professional, technical qualifications, experience etc

i) Industry profile in which the project will fallii)Organizational structure of the enterpriseiii)Product details – product utility, product range,

product design, advantages to be offered by the product over its substitutes

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Contents of a Project ReportProject Description – • i) Site• Physical infrastructure• Availability of raw material, skilled labor,

utilities like power, water• ii) pollution control requirements – sewage

system, sewage treatment plant requirements• Iii) Communication system – facilities available

and required• Transport facilities – existing, expected

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Contents of a Project Report• Production process – period of conversion of

raw material into finished goods• Machines & equipment – complete list, cost

& sources of supply• Capacity of the plant and the number of shifts

proposed• Technology selected• R & D – proposed research & development

activities proposed to be undertaken in future

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Contents of Project Report… • Market potential1.Demand & supply position – how the gap

between the two will be filled up2.Expected price of the production per unit• Marketing Strategy – arrangements for selling

the products• After-sales Service – state the execution

procedure• Transportation – what facilities are available

or will be required

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Contents of Project Report… • Capital Costs and Sources of Finance –

estimates of capital items like land & buildings, plant, machinery, installation costs, preliminary expenses, margin for working capital

• The present probable sources of finance should be included in the project report

• Sources should indicate the owner’s funds together with funds raised to be raised from financial institutions and banks.

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Project Appraisal• Every industrial project involves risk• Project appraisal is a process to reduce the risk• Ex-ante analysis for proposed project• Post-ante analysis is for the executed project• Project appraisal is a cost & benefit analysis of

different aspects of the project to adjudge its viability• Economic, financial, technical, market, managerial and

social aspects are analyzed• Project appraisal is done by financial institutions to

assess its credit worthiness before extending finance to a project. They also get it evaluated by other agencies

• Sometimes the scope and contents of the project are modified after the appraisal & evaluation

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Methods of Project Appraisal1. Economic analysis – requirement of raw material,

level of utilization, anticipated sales, expenses and probable profits

2. Financial analysis –most important exercise – fixed & working capital

3. Market analysis – no profit if goods are not sold. Methods used are ‘management economics’, ‘demand forecasting’ though survey, sales experience, opinion poll, vicarious method – selling the goods through dealers on test basis. Life Cycle Segmentation analysis – introduction, growth, maturity, saturation, decline

4. Technical feasibility5. Managerial competence

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Financing of Enterprise

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Need for Financial Planning• Production is the outcome of five factors1.Land2.Labour3.Capital4.Entrepreneurship 5.Organization

These are mutually dependent on each other. Availability of these factors in right proportion is needed for success.

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Need for Financial Planning• Finance is the lubricant to the process of

production.• It is the life blood of enterprise.• Whoever has the gold makes the rule.• Make an assessment1.How much money is needed2.Where will it come from3.When does the money need to be available in

two forms – fixed and working capital, short-term, long term (over five years)

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Entrepreneurial Finance• Entrepreneurs raise funds to start their business

though various sources like –internal & externalInternal sources

• Self-generated funds that can be spared from the business, plus savings, property, investments, rents. Priority to internal resources

External sources• Help from family and friends• Loans from banks /non-banking financial

institutions (NBFC)• Loans from State Financial Corporations

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Entrepreneurial Finance• RBI has identified lending to MSMEs as one of the

priority sector advances• MSMEs may get loans up to Rs 25 lakhs without

collateral• RBI has fixed time limits for dealing with a loan

application from MSMEs• The lender organization studies the business plan

of the applicant and get it reviewed by experts.• Series of meetings are held between the lender

and the borrower before loans are granted.

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Government Initiatives for Promoting MSMEs

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MSMI MINISTRY• Ministry of Micro, Small and Medium Scale

Industries is primarily responsible for promotion and development of SMEs in India, and has evolved several policies, institutional and support measures, spread all over the country, in order to enable them to meet their changing needs.

• Small Industries Development Bank of India (SIDBI) has developed various financing schemes.

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MSMI MINISTRY• Ministry of Science and Technology (DST,

DBT, DSIR) has evolved several measures and programs for technological assistance and development and transfer of technologies for SMEs.

• Some of the economic ministries such as Ministry of Textiles, Department of Food Processing and Department of Handicrafts etc. have also recently announced initiatives for technical assistance in various firms

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New initiatives to promote MSMEs• Some of the measures and new initiatives to promote SMEs

include:• SME development fund • A specialized stock exchange for SMEs • Encouragement for patenting and ISO Certification • SME venture capital fund • National Commission for Small Industries (informal sectors) • SME development bill • Credit Rating Agency • Promoting special venture capital companies and risk

financing companies for SMEs • Improve the working of credit guarantee and export

promotion institutions

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New initiatives• Progressively reduce protection measures and simplify

implementation policies and control mechanisms • SME Development Centres at SIDBI and IIFT • Considering liberalizing FDI in SMEs and encouraging

their linkages with TNCs and large companies • Promoting industrial growth centres/clusters,

EOUs(export oriented units), district industry centres, business incubators and business parks

• Market assistance and export promotion • National Small Industries Corporation • Small Industries Development Organization • Limited Liability Partnership Bill 2006

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Technology Support Initiatives • Proto-typing and product development centres • Design, engineering and development centres • Small industries and services institutes • Tool rooms • Specialized development centres with

international assistance in areas such as electronics, toys, handicrafts, etc.

• Technology business incubators • Software technology parks • S&T Entrepreneurship Development Board • Techno-preneur Promotion Program

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Technology Support Initiatives…• Consultancy Development Program • Tax incentives, fiscal incentives, custom duty

exemptions, grants & other financing mechanisms

• In-house R&D recognition scheme for industry • National Innovation Foundation • Technology Development Board • Technology, Information and Forecasting

Assessment Council (TIFAC) • Innovation centres, entrepreneurship

development institutes

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Technology Support Initiatives…• National Institutions for specific industries such

as fashion design, packaging, glass and ceramics etc.

• Small Industries Information and Resource Centre Networks (SENET)

• S&T Parks • Technical Consultancy Organizations (TCOs) • Technology Up gradation Fund • The Asia and Pacific Centre for Transfer of

Technology

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National Manufacturing Competitiveness Council (NMCC)

• NMCC has also recognized in its national strategy for manufacturing announced in March 2006, the need for ensuring the competitiveness of small scale sector as it would help in overall growth of manufacturing sector as also the national economy. The strategy report has identified the following important impediments, among others:

• Access to timely and adequate credit • Technological obsolescence (old technology)• Infrastructural bottlenecks (power, communication…)• Lack of R&D linkages – no tie up • Marketing constraints, disabling rules and regulations

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National Strategy for Manufacturing• The National Strategy for Manufacturing has

recognized the need for a focused project on advance technology products and has recommended the constitution of a special group to study the potential for manufacture and export of such products. It has also recommended the establishment of technology parks around institutions of higher technological learning on the lines of those existing in USA. Another important recommendation relates to setting up a “Global Technology Acquisition Fund” to enable Indian industry to acquire very high technology intensive companies abroad. (National Manufacturing Competitiveness Council, 2006)

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National Strategy for Manufacturing• The strategy suggests a cluster approach for

improving the manufacturing competence. • New and innovative approach to cluster

development should be adopted. • Further, small scale sector should be encouraged

as breeding ground of innovation and technology development where it becomes the technology sources for large companies.

• Towards this, government must incentivise technology development in SMEs to enhance their competitiveness.

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National Strategy for Manufacturing…• A National Manufacturing Competitiveness Program

(NMCP) is being developed which includes objectives to support SMEs.

• A Design Clinic approach is suggested to bring Indian manufacturing sector and design expertise on to a common platform and to provide expert advice and cost effective solution, resulting in continuous improvement and value addition for existing products.

• Emphasis is also laid down to enable SMEs to be competitive through quality management standards and quality technology tools. These are only some of the strategies among those suggested in the Report.

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NMCC Funds• NMCC seems to have prepared Rs. 1,000 crore

National Manufacturing Competitiveness Program for small and medium enterprises jointly with Ministry of Small Scale Industries.

• This aims to benefit over 10,000 firms in more than 500 SME Clusters. The thrust of the plan is towards technology infusion.

• The areas for support include “lean” manufacturing, ICT, technology and quality up gradation, increasing number of tool rooms, encouraging patents and so on.

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NMCC Funds• National Knowledge Commission has also

identified SMEs as a thrust sector for education, skills up-gradation, training and ICT encouragement.

• Various studies have shown that ICT and technology levels are higher in internationalized SMEs in sectors such as food processing, auto components, ICT, leather, to engineering, garments etc. compared to non-exporting or domestic SMEs.( Agarwal 2005, 1b)

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Private Sector Initiatives • There are a few national level associations and several

state level associations for promotion of SMEs.• Federation of Small and Medium Enterprises (FISME),

Confederation of Indian Industry(CII), PHD Chamber of Commerce, Federation of Indian Chamber of Commerce and Industry (FICCI), and World Assembly of Small and Medium Enterprises (WASME), etc. have evolved various program towards technological capability building and enhancing competitiveness of SMEs.

• Public-Private Partnership (PPP) Projects are also being recently evolved for sustainable support to SMEs in some areas such as food processing and handicrafts.

• However, the expertise and capabilities to provide effective technology related services are generally limited.

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Academic and R&D Organizations • Some of the engineering and technical institutions such as

IITs, National Institutes of Technology and CSIR Research Laboratories, are also providing R&D and technology related support facilities and services to the SMEs including training and skill development programs.

• However, access to these facilities are generally not easy, and often lack the business needs of entrepreneurs. There are very limited start-up enterprises based on technologies or intellectual property from academic and R&D institutions.

• Ministry of Small Industries and Development Commissioner, have a wide network of technical, design, training, pro-type development, testing etc., facilities all over the country spread up to district levels. But, these facilities need to be modernized and tuned to emerging needs.

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Foreign Tie Ups and FDI• Internationalization of SMEs usually refers to the SMEs

engaged in international businesses, have developed cooperation, partnerships, linkages and networks with foreign companies and institutions.

• Imports and exports tend to enhance the efficiencies, capabilities, competitiveness and vision of SMEs.

• FDI is considered to be an important channel for internationalization, besides catalyzing technology flows and investments.

• Most countries are aiming at attracting larger FDI which poses challenges and provide opportunities to SMEs.

• The domestic policies therefore need to be finely tuned to take full advantage of FDI and international aid/support measures or loans. However, the SMEs need to be growth oriented and forward looking, with innovative capacities, for internationalization.

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SME Global Survey• A survey of over 8000 SMEs in Europe in 2003

revealed that internationalization spurs growth and competitiveness (http://ec.europa.eu).

• The foreign supply relationships are the most common forms of internationalization while exporting is the next and some establish foreign subsidies and branches. Access to know-how is a frequent motive for going abroad.

• The study has revealed that smaller countries with small domestic markets are more internationalized. Further the study point to three elements as crucial for developing holistic measures with regard to internationalization.

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Problems – Current Issues• SMEs’ managers often have limited time and management

skills. A policy measure should consider providing some practical tasks to support the manager, especially in the case of SMEs with low international experience.

• Studies indicate that SMEs often need specific, targeted support. Such ‘customized’ support comprises, for instance, assistance in identifying an appropriate foreign business partner for a joint venture or collaboration.

• Moreover, recent studies indicate that SMEs’ awareness of support measures is low due to the measures’ traditional focus on export activities. The studies suggest that policy measures, in order to be effective, need to focus on the experience of the entrepreneur and on developing his/her qualifications in a broad sense.

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Problems – Current Issues…• Internationalization is more than just exporting.

Policy measures, whether general or company-specific, need to encompass all the different approaches to internationalization and the support to include a wide range of international activities.

• Foreign partnerships, foreign investments and cross boarder clustering represent new viable ways to strengthen the international business strategies of SMEs. Such diverse international activities may integrate different business functions (i.e. R&D, production and marketing) and thus involve elements across the entire value chain.

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Problems – Current Issues…• Most developing countries have adopted or are

adopting a liberalized FDI regime in various sectors of development, though the degree of liberalization may vary.

• In case of SMEs, several countries have opened up to 100% FDI while in some it is restricted, say up to 24% in India, in general. Limited studies are available (UNCTAD 1998) related to FDI flows to SMEs, specially in developing countries.

• A study of technology financing through FDI, for SMEs in India and other select countries, (Agarwal, 2005) was carried out in 2004-05 at IIFT, based on the FDI approvals of the government.

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Problems – Current Issues…• This study indicated that FDI approvals for

SMEs accounted for about 6.0% of total approvals while the amounts were about 2% of the total amount approval.

• One can infer that FDI approvals were mainly perhaps intended to internationalize markets and technologies rather than investments. The extent of amounts and the number of approvals vary from sector to sector.

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Discussions

• A quick analysis of various studies and data indicates that SMEs are going through a transition phase and are generally restructuring their strategies and capabilities to remain competitive and grow in the emerging world trade environment.

• The government are also evolving policies, strategies and modes of implementation to encourage and support SMEs for their growth, capacity building and international competitiveness.

• The issues and strategies vary with the level of development and priorities in national economies.

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Discussions• Some of the countries such as Republic of Korea, Singapore

and Taiwan have been able to adopt and implement new policies and measures to promote and support SMEs more successfully than many other countries. Innovation, technology, productivity and quality, though inter-related, are assuming greater significance for competitiveness in manufacturing and businesses.

• Foreign Direct Investments (FDI), networking and technical tie ups are being encouraged to facilitate access to newer technologies, strengthening technological and management capabilities, and access to market information. Creation of training and skill up gradation facilities, ICT applications, and sharing of risks in financing and development, are the thrust areas.

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Discussions• In India, effective implementation of policies

and delivery of results to the satisfaction of the SMEs, remain much below than desired, though there are a large number of institutional mechanisms and support measures available and concerns shown by the government.

• There is a need to critically review the existing policies and mechanisms, to assess the constraints and gaps in delivering the desired outputs.

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Discussions…• For example, there are overlapping agencies and

programmes for development of technologies and technological assistance to the SMEs, but the SMEs continue to be weak in R&D, technology development, acquisition and induction of new technologies, productivity and quality among other factors.

• The technology support programmes are largely implemented from Delhi or the capitals of the states and the awareness about programmes and fiscal incentives available is limited among SMEs.

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Discussions….• Proposals of NMCC are praiseworthy, but the

implementation mechanisms are not clear, and also the focused targets likely to be achieved. Hopefully these proposals will not be just an addition to the existing set of support measures, without effective monitoring and assessment mechanisms for the intended results.

• What is needed perhaps is a strong innovation & technology development policy with legal instruments for implementation, clearly meeting the needs of SMEs at different stages of their development.

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Discussions….• National Knowledge Commission has been

generally active in evolving strategies for education and skill up gradation, and employment or entrepreneurship opportunities in ICT and other areas.

• Digital divide has been an area of concern but at the same time offers opportunities for SMEs.

• National Small Industries Commission is engaged in evolving policy instruments and mechanisms to utilize and support SMEs.

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Needs of MSMEs• Access to Latest Technologies --Most SMEs, need

easier access to new or modern technologies abroad, technology support facilities and easier access to finance, including technology finance, besides marketing information and incentives for training and skills development.

• Differentiated policies and mechanisms are needed for SMEs in different sectors, stages of their development, nature of operations.

• For example, the technological needs of SMEs in traditional sectors such as food processing, leather textiles, toys etc. would be different than those in new and advanced technological areas such as micro-electricals, pharma, precision instruments and so on.

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Needs of MSMEs• Strategies --There is a need to have short term

and long term strategies for enhancing competitiveness of SMEs in one broad based strategy.

• The R&D expenditure and technological capacities of most of the SMEs would continue to be limited because of their inherent constraints in the resources and vision.

• The support structures should recognize this fact.• However, the SMEs have enormous potential for

innovations and incremental development, which need to be nurtured for production of new goods and services at competitive costs.

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Innovations --IT & Auto Parts• The IT and auto-component SMEs are

examples of the successes through innovations.

• Such policies should lead to wider dispersal of economic benefits, capacity building, and utilization of resources, creating employment, etc. across the society.

• Economic, education, trade, technology and society need to be interdependent.

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Innovations --IT & Auto Parts…• The SMEs development project should

recognize the needs of internationalizing companies or those who have the potential to internationalize, differently than those of domestic oriented companies or stagnating companies.

• The analysis of FDI data for SMEs in India tend to show that some SMEs are internationalizing or willing to internationalize through various types of collaborations through FDI route since the amounts involved are small.

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Globalization and SMEs• In the context of WTO and other emerging

trade mechanisms including Regional Trade Agreements(RTAs), Free Trade Agreements(FTAs) and bilateral or special economic cooperation agreements, the technological preparedness of SMEs need to be studied and support mechanisms evolved to overcome the gaps or constraints being faced or likely to be faced by them in the international businesses.

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Globalization and SMEs• In view of the wide variations in definitions of

SMEs in various economies, the harmonization of definition of SMEs in India, with those in developed or advanced developing countries would facilitate international assistance for technology transfer, development and evolving measures for enhancing competitiveness in export markets. Preparedness of SMEs for WTO is still another issue. Innovations and trade agreements are likely to be the thrust areas in near future.

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IT, ITEs & BPO SMEs becoming Global…• January 2008 Survey report of Dun &

Bradstreet• The small and medium enterprises (SMEs) in the

Indian IT space are confident of achieving 65 percent growth in the next two years, surpassing 43 percent growth rate posted for the last two years (2006-7)

• The study titled 'Emerging IT SMEs of India 2007', provides insights into 244 IT companies involved in providing software and hardware products and services. All the companies profiled were in the below-Rs 100 million-turnover bracket during the previous fiscal year.

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IT, ITEs & BPO SMEs becoming Global…

• The study notes that close to 53 percent of companies faced moderate problems in acquiring funding and 43 percent felt the proposed withdrawal of tax sops for the IT, ITEs (IT enabled call centres), BPO industry by 2009, will be significant in terms of deciding future industry growth.

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IT, Ites & BPO SMEs…• Of the 437 locations, from which these 244

companies operate, Bangalore and Mumbai emerged as the top locations for operations. 18 percent and 17.6 percent of the profiled companies were operating from these two cities, respectively.

• The overseas presence of 28 percent of the sample audience encapsulated the changing trend in the SMEs' perspective, which are now willing to cross borders to pursue growth. Companies with Rs 10-50 million turnover accounted for almost 50 percent of the profiled companies.

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IT, Ites & BPO SMEs…• IT SMEs in India are growing at a rate of about

30 percent YoY. This indicates that there is huge growth opportunity in the market and IT adoption is rapid within the SME space.

• The government seems to be the biggest adopter of technology and has been one of the key drivers for the growth of IT SMEs in India.

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Success of SMEs in India• It can be observed that by and large, SMEs in

India met the expectations of the Government in this respect.

• SMEs developed in a manner, which made it possible for them to achieve the following objectives:

• High contribution to domestic production• Significant export earnings• Low investment requirements

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Success of SMEs in India…• Operational flexibility• Location wise mobility• Low intensive imports• Capacities to develop appropriate indigenous

technology• Import substitution• Contribution towards defense production• Technology – oriented industries• Competitiveness in domestic and export

markets

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Limitations of SMEs• At the same time one has to understand the

limitations of SMEs, which are:• Low Capital base• Concentration of functions in one / two persons• Inadequate exposure to international environment• Inability to face impact of WTO regime• Inadequate contribution towards R & D• Lack of professionalism• In spite of these limitations, the SMEs have made

significant contribution towards• technological development and exports.• SMEs have been established in almost all-major

sectors in the Indian industry such as:

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Reach of SMEs• Food Processing• Agricultural Inputs• Chemicals & Pharmaceuticals• Engineering; Electricals; Electronics• Electro-medical equipment• Textiles and Garments• Leather and leather goods• Meat products• Bio-engineering• Sports goods• Plastics products• Computer Software, etc.

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