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. more information

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 Noida.

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 persons.

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 sectors."

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