By: Bharath.

p
Naveen Moras

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CONTENTS:
I)INTRODUCTION

II)DEFINITION

III) FEATURES

IV)IMPORTANCE OF SME’S

V)PROBLEMS FOR SME”S

VI)SUGGESTIONS TO OVERCOME THE PROBLEMS

VII)CONCLUSION
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INTRODUCTION:
Small  and  medium  enterprises  (SMEs ) also 
known  as  small  and  medium  scale  enterprises 
are  the  essential  part  of  healthy  economy.
The small – scale industry has emerged as the most dynamic sector
of Indian industrial economy accounting for over 55% of the total
value of industrial production.

The growth recorded by SSI in India is 2% more

than any other sector; it accounts for 40% of the
country’s GDP, 35% of Direct exports, 15% of
Indirect Exports (through Merchant Exporters,
Trading Houses & Export Houses) and employs
more than 20 million people

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Definition of Micro, Small and Medium
Enterprises
A micro enterprise is an enterprise where
investment in plant and machinery does
not exceed Rs. 25 lakh

•A small enterprise is an enterprise where

the investment in plant and machinery is
more than Rs. 25 lakh but does not
exceed Rs. 5 crore

•A medium enterprise is an enterprise

where the investment in plant and
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 Characteristics of the SMEs
•The growth recorded by SSI in India is 2% more than
any other sector

•The sector accounts for 9% of the country’s GDP

•The sector employs more than 20 million people

(Employment contribution by SMEs in Andhra Pradesh is
7.5%)

•It has been estimated that a lakh rupees of investment

in fixed assets in the small scale sector generates
employment for four persons

•Among the large PSBs, state bank of India’s SMEs

exposure grew by 24% in 2008

•All banks are targeting SMEs credit growth of 25%

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•Public sector banks’ overall credit to SME sector grew
by 26% in 2006-2007, which amounted to Rs.1,85,000
cores

•Reserve Bank of India has advised all commercial banks

to achieve 20% annual growth in SME lending
till 2010

•Non-traditional products constitute a massive 95% of

the SSI exports

•SIDO, SIDBI, NABARD, NSIC, export promotion

authorities are actively involved in the development of
SMEs in India

•45%-50% of the Indian Exports is being contributed by

SSI Sector A.J.INSTITUTE OF MGT(AJIM) 6
 ADVANTAGES OF SME’S

More jobs per unit capital

Integrated in to the domestic co.

Rapid growth of large scale co in the long run

Increase d employment

Flexible
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 SME’S IN DIFFERENT SECTORS OF INDIAN
INDUSTRY:
Food Processing
Agricultural Inputs
Chemicals & Pharmaceuticals
Engineering; Electricals; Electronics
Electro-medical equipment
Textiles and Garments
Leather and leather goods
Bio-engineering
Sports goods
Plastics products
Computer Software, etc.
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 IMPORTANCE OF SMES
Employment

Regional and local development

Contribute significantly to export revenues

A positive effect on the trade balance

Helps LSE’s

Attracts direct foreign investment

Act as engines of growth

It generates more jobs per unit of capital and

is more capital efficient

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 Small makes Big Difference

Small industries Contributes 39% of the manufacturing output and

around 33% of the total export of the country

This sector employs an estimated 31 million persons spread over

12.8 million enterprises

The labour intensity in the MSE sector is estimated to be almost 4

times higher than the large enterprises.

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 PROBLEMS OF SME’S
Under-utilization  of capacity.

Inadequate  and  untimely  credit  flows

Inability  in  technology  up gradation

Insufficient  raw-material  procurement

Inability  to  market  finished  goods  and

Ineffective  monitoring  and  feedback 

mechanism

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SMERA (SME Rating
Agency of India Limited)
India’s first dedicated rating agency for SME segment.
Joint initiative of SIDBI, Dun & Bradstreet and CIBIL
(Credit Information Bureau (India) Limited) along with
leading PSU, Private and foreign Banks.
Rating cost substantially reduced in case of coverage of
eligible SSI units under NSIC (National Small Industries
Corporation) Subsidy Scheme
Already done > than 2350 ratings.
Incentives for SMERA Rating for SIDBI’s Customers
– Nominal Rating fees.
– Reduction in rate of interest by 0.50% p.a. on existing
loans if the customer is rated in the first three grades
– Would facilitate approval of applications for fresh loans
in future
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There is an unprecedented importance of
Small and medium Enterprises in the country.
This is because this sector, contributes a major
amount in the development and employment.

It  is  a  very  crucial  sector  being  the 

second  largest  sector  after  agriculture.In 
recent  years  the  SME  sector  has 
consistently  registered  higher  growth  rate 
compared to  industrial sector.
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