Indian Govt Initiatives to Promote Startup Companies
SME Role Critical For Indian Economy
The Union Government has decided to implement a National Strategy for Manufacturing,
drawn up by the National Manufacturing Competitiveness Council (NMCC), which will
enable SMEs to achieve competitiveness. The Strategy has identified various priority
areas for action viz., textiles & garments, food processing, IT hardware & electronics,
leather & footwear, automobiles & auto-components and chemicals & petrochemicals
and pharma sectors.
The Cluster Concept clearly seems to be India's answer to global competition. Last
year the government had proposed to increase financial assistance to existing clusters
of Micro, Small and Medium Enterprises (MSME) up to as high as 80 per cent of their
financial requirements under the 11th Plan. This apart, the government proposes
to build a pool of consultants under its National Manufacturing Competitiveness
Programme to enable MSMEs to become competitive. The consultants would be deployed
to a cluster of 8-10 companies for about one year to a year-and-a-half, with their
cost being borne by the government.
In the focus on SMEs, the government is supported by the United Nations Industrial
Development Organisation (UNIDO), which has proposed a five-year country strategy
for India. Cluster development is one integral part of this strategy along with
programmes aimed at upgrading technological capability and building social capital
in the country's industrial sector. UNIDO is also exploring a new experiment of
Twinning of Clusters as is seen in the India-Italy Cluster Development Cooperation.
In addition, it is exploring new applications of Industrial cluster-based approaches
focusing on Corporate Social Responsibility and poverty alleviation in micro enterprises.
Planning Commission Supports SMEs
The growing importance of Small and Medium Enterprises (SME) has been taken note
of by the Planning Commission too. Its deputy chairman, Montek Singh Ahluwalia,
said SME hold the key to the country's industrial progress, at a function organized
by the Indian Merchants Chamber (IMC) to recognize the mettle of SMEs for the Ramkrishna
Bajaj Award 2007.
It is strange that an award for SME was instituted three years ago and it is only
now for the first time that there is a recipient. The very acknowledgement of this
sector shows that the there is a dawning of realisation of the structural changes
that have taken place, said the deputy chairman.
Clearly, SMEs have emerged as a vibrant tier of the economy as they have already
taken over as key contributors to the country's GDP. Precisely for this reason,
the Planning Commission is looking into the existing policies and considering the
necessary changes required to make the SMEs role more proactive to help achieve
greater economic goals.
The Commission is of the firm opinion that in the drastically changing economic
scenario, SMEs are the future. They are likely to play a pivotal role in immediate
future, as they can carve out unit growth model for the country. The time has come
to change corporate perspective and not to get swayed by financial highs. more information
Open Your Purses to the Smallest.
Regretting that Micro and Small Enterprises, which contribute about 40 per cent
to the country's exports, remain neglected and unnoticed by lending institutions,
the Union Finance Minister P Chidambaram urged bankers to 'open their purses' to
help this fast-growing sector.
At a function to release one lakh Credit Guarantee Approvals, organised by the Credit
Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), in Bangalore last
month, Chidambaram said the sector was only second to agriculture and was growing
at a 'furious pace.' However, a meagre 22 lakh MSE entrepreneurs were registered
as against 1.30 crore others who went untouched by lending institutions.
"A large number of young men and women are no longer looking for jobs. They are
willing to take risks, become entrepreneurs and create wealth. More importantly,
they are willing to create employment and share their wealth with their employees.
Bankers should never ignore this class," he emphasized.
Accordingly, a radical change is being witnessed in the mindset of Young India and
that the credit and lending institutions should adapt to meet the growing demands.
"You (bankers) are too conservative to take risk. For every entrepreneur willing
to take risk, there must be a banker at the other side of the table willing to do
the same," he added.
The Finance Minister was keen that the CGTMSE should strive to achieve a bigger
target and cover 50,000 more MSE entrepreneurs by year-end.
CGTMSE had a corpus fund of Rs 1,584 crore, of which Rs 1,257 crore was contributed
by the Centre. "We are committed to increase this corpus to Rs 2,500 crore. As and
when CGTMSE requires additional capital, we will give it immediately. But, we should
ensure timely credit to smallest of small entrepreneur," he asserted. more information
SME Summit on Exports
A Summit to bridge the gap between the SMEs and Government policies was recently
held in the Capital. Its aim: to help SMEs grow to their full potential by not only
focusing on the policies initiated by the government but using these to the maximum
for their benefit.
Inaugurating the Summit, the Minister of State for Industry, Ashwani Kumar was happy
that a proactive step in the SME's direction had been taken and that the Summit
would provide a platform to them to explore their potential. The SMEs Summit 2008
was organized by the Birla Institute of Management Technology (BIMTECH), Greater
Unhesitatingly, the SME sector is being termed as the backbone of the Indian economy.
This sector accounts for 95% of the industrial units, is contributing around 40%
of the value addition in the manufacturing sector, offers nearly 80% of the manufacturing
employment and enjoys around 35% of exports. Over 32 lakhs units are spread over
the country, producing about 7,500 items and providing jobs to more than 178 lakh
The Institute is of the firm opinion that there was a need to boost the SMEs sector
as it had a tremendous potential. In fact, the SMEs capability to compete in the
International market is reflected in it having a 35 per cent share in national exports.
However, it is being held back from achieving its full potential because of various
problems, including lack of information and awareness. Undoubtedly, the SMEs, need
international exposure and outlook, which is vital for successful market penetration
in global markets. A flexible combination of government policies and market freedom,
together with a mix of macro and micro policies are necessary for the creation of
vibrant and dynamic SMEs in the export sector.
According to Dr. H.P. Kumar, CMD, NSIC, "India's SME sector has the potential of
becoming an important sourcing base for MNCs. But, this requires a national strategy
for the promotion of exports from this sector, including greater coordination among
different wings of the government, identification of sub-sectors with high export
potential and adequate infrastructural support."
The Executive, Director, ITPO, Rajiv Yadav said, "It is true that SME accounts 35%
of country's total exports. However, exports from the SME sector are just 10% of
its total output, which is meagre compared to figures in other competing countries.
There is also a lack of diversification in the SME export basket, with just five
items garments, leather goods, basic chemicals, marine and processed foods and engineering
products forming 3/4 of the total exports from the sector."
Kishore Balaji, Microsoft India Ltd. said, "Unfortunately, due to a combination
of circumstances, the last few years have seen this industry losing its path. It
has also had to face the onslaught of globalization, when in 2003 the import tariffs
and quantitative restrictions were withdrawn as per WTO commitments. All of us know
very well that the appreciation of the rupee has also hit them very badly. But again
how many SMEs know that sops have been announced by the Indian Government in various
The Summit dealt with issues such as Governmental infrastructure and institutional
framework, environmental and social issues, sector specific issues and financial
issues from SME viewpoint. It also brought out key aspects on how best to increase
the capability of Indian SMEs and provide the right information to move ahead in
the global arena. more information