Challenges before Indian SME’s & Consultancy interventions needed By Dr. Pradeep Bavadekar Managing Director, MITCON Consultancy & Engineering Services ltd.

 SME’s play a vital role in Indian Economic Growth.  40% share in industrial output, produce value-added products.  Contribute 35% in direct Indian Exports  45% in the overall exports from India. Indian SME’s

 Biggest employment-providing sector after agriculture.  Constitute 80% of total number of industrial enterprises  Forms backbone of industrial development  Their growth is higher than rate of growth of industry sector as a whole, contributing 7% to our GDP Indian SME’s

 Facing tough competition from their global counterparts due to liberalization, change in manufacturing strategies, turbulent & uncertain market scenario.  Suffer from sub-optimal scale of operations & technological obsolescence.  Innovation has always been the hallmark of small and medium enterprises. Technology & Indian SME’s

 SME’s that integrate innovation can reap significant benefits.  Although Indian SME’s realize importance of technological innovation, most of them import technology, rather than developing it in-house or through / in association with, National Research & Dev. (R&D) Centers. Technology & Indian SME’s

 Indian SME’s, over years, have ignored R&D.  Not embarked on new product development and technological up-gradation.  Despite the fact, that India has third largest pool of technologically trained manpower. Technology & Indian SME’s

 Innovation is the means by which the entrepreneur creates new wealth producing resources or endows existing resources with enhanced potential for creating wealth. Viz.  Product Innovation  Process Innovation  Organizational innovation Innovation & Indian SME’s

 Product innovation : creative development and commercialization of radically new products or services, using new technology and linked to customer requirements.  Process Innovation : development of new ways of producing or delivering services that lead to cost efficiencies or speedier deliveries. Innovation & Indian SME’s

 Organizational innovation : development of new business processes and ways of conducting business, that provide competitive edge.  Indian SME’s finding it difficult to sell their products in domestic & international markets because of increasing competition.  To make their products globally competitive Indian SME’s need to up-grade technology emphasizing on innovation. Innovation & Indian SME’s

 Sharing of information at local and national clusters mostly informal.  Scant Information regarding latest development and competency.  Work sharing unknown in local and national clusters. Fight for same customer, in same markets. Limitations of SME’s

 Even though product and technology used could be similar, tendency to share is less among the cluster participants. Hence need for new approach of Cluster Development  Can’t match wage rate, job security and career development opportunities for employees available in larger organizations therefore unable to hire skilled & competent manpower. Limitations of SME’s

 Bottleneck : Just one or two people control the organisation, at decision making or operations  Keeping them busiest of all handling everything e.g. payroll, inventory, finances, personnel, suppliers and customer demands.  No time to think about making major changes or risk taking, or innovation. Limitations of SME’s

 Small traditional enterprises, with poor support system and little exposure face difficulties in the new e-business environment.  SME’s usually are diffident about adopting IT or solutions based on IT.  Lack of formalized contractual relations and preferred reliance on cash transactions. Limitations of SME’s

 While SME’s in developed countries have financial & technical capacity to identify technological sources and evaluate alternate technologies that suit them.  Unfortunately, this capacity is missing in most Indian SME’s.  This makes our SME’s an ideal partner for technological up-gradation, through technological cooperation with foreign enterprises. Capacity of Indian SME’s

All points open opportunities for Consultancy To enhance capacity IT Consultancy Financial Consultancy Technological Consultancy R&D Consultancy Consultancy for Indian SME’s

 Government of India, SIDO websites:  NSIC websites: Consultancy to enhance capacity

 Government of India provides financial assistance for surveys, studies, participation in foreign exhibitions, business meets, marketing assistance, vender development programme, subcontracting, Prime Minister’s employment scheme, Small industry Cluster Development Programme. Consultancy to enhance capacity

 Estimated 400 modern SSE and 2000 rural / artisan based clusters exist in India.  Contributing to 60 % of India’s manufacturing exports.  Some clusters produce 70 to 80 % of total volume of that particular product produced in India. e.g. Panipat produces 75 % of the total woolen blankets, Tirupur 80% of cotton hosiery. Consultancy to enhance capacity

 Ministry of Small Scale Industries, Govt. of India has been promoting use of IT in SME’s, to enhance SME competitiveness, in view of globalization.  The advisory and mentoring services are aimed at effectively addressing this impediment to growth. IT Consultancy for SME’s

 Providing Infomediary services to SSI units.  Hosting sector specific portals for focused information dissemination.  The portals, targeted at specific sectors, aim at providing information, facilitation, transaction and integration services. IT Consultancy for SME’s

 Value-added services. viz :  E-transaction portal  Supply databases  Advisory and Infomediary Services  Market intelligence  Technology providers  Information providers  Linkages with relevant institutions IT Consultancy for SME’s

 Non-availability of institutional finance on affordable and easy terms is hindering SME’s access to new technologies.  In India situation is further complicated as preferred mode of finance is either self or other sources.  Innovation in developing countries is promoted by venture capital, to help indigenous development of technologies. Financial consultancy for SME’s

 Indian Banks provide financial assistance, for commercialization of indigenously developed technologies and adoption of imported technologies for wider domestic applications through venture capital.  Small Industry Development organization (SIDO) offers financial services to SMEs. Financial consultancy for SME’s

 Some of its the popular schemes are  Credit Linked Capital Subsidy Scheme for Technology Up-gradation,  Credit Guarantee Scheme,  ISO 9000 / IS Certification Reimbursement,  Integrated Infrastructure Development Scheme Financial consultancy for SME’s

 Some popular schemes are  Cluster Development program,  Mini Tool Room Scheme etc. [more details at - and ] Financial consultancy for SME’s

 Recently Government of India has taken a number of initiatives to help SSI viz.  SED Bill  Credit Rating Scheme  SME Fund  Credit Cards Financial consultancy for SME’s

 Credit Rating Scheme  The scheme has been introduced to encourage the SSI Units to get their credit rating done, by reputed third party credit rating agencies.  The credit rating will facilitate hassle free flow of credit to SMEs, while enhancing comfort-level of lending banks. Financial consultancy for SME’s

 Credit Rating Scheme  The rating will bring out the strengths & weaknesses of unit, provide opportunities to enhance their competitiveness.  Rating will enhance capability and credibility of enterprises, to approach banks and financial institutions for capital and debt servicing on favourable terms, also project its strength before customers. Financial consultancy for SME’s

 Credit Rating Scheme  Government of India will reimburse 75% of the fees charged by the rating agency subject to a ceiling amount.  SME Fund  SIDBI : principal financial institution for promoting, financing and development of industries in the small-scale sector. Financial consultancy for SME’s

 SME Fund  To improve credit availability SME fund of $ 2 billion has been operational since  Credit Cards  Laghu Udyami Credit Card (LUCC) Scheme (Small Enterpreneur’s Credit Card) has been liberalised.  Credit limit enhanced from $4000 to $20,000 for borrowers with satisfactory track record. Financial consultancy for SME’s

 Credit Cards  Efforts being made to facilitate flow of institutional credit to SSIs on easy terms.  Other Initiatives  Allocation of $87 million towards Technology Upgradation Fund for Textiles  Setting up of Knowledge Commission Institutions of $20 million at IISC, Bangalore Financial consultancy for SME’s

 Other Initiatives  Weighted deduction of 150% of expenditure on in-house research and development facilities of companies, engaged in biotechnology, pharma, electronics, telecommunications, chemical, or other notified products.  Custom duty exempted on capital goods and raw materials to a company for R&D project. Financial consultancy for SME’s

 Technology is the key to enhance the company's competitive advantage in today's dynamic information age.  SMEs need to develop and implement a technology strategy in addition to financial, marketing and operational strategies, and adopt the one that helps integrate their operations with their environment, customers and suppliers. Technological Consultancy for SMEs

 Technology is the harbinger of change development.  Developed nations spend substantial amounts on technology.  It is believed that Japan spends not only on acquisition of technology but also spends seven times more on adoption of technology. Technological Consultancy for SMEs

 Technology in conjunction with finance management, marketing capabilities is a powerful tool of economic development.  Taiwan, which once had a productivity level equal to Indian SME’s has now enhanced it with usage of technology. Technological Consultancy for SMEs

 In India, technology used by SME’s ranges from primitive to sophisticated but Indian SME’s predominantly preoccupied with finance and management issues.  Ministry of SSI, Government of India, offers a number of technical services through NSIC & SIDO. Technological Consultancy for SMEs

 Organizations offering Technology To SME’s:  Council of Scientific & Indl. Research (CSIR),  Indian Institute of Technology (IIT),  Technology Information Forecasting and Assessment Council (TIFAC),  National Research and Development Corporation (NRDC),  National Institute of Design (NID), Technological Consultancy for SMEs

 Organizations offering Technology To SME’s:  Product and Process Development Centers (PPDCs),  Mechanical Engineering Research and Development Organization (MERADO),  National Small Industries Corporation’s (NSIC),  Asia Pacific Center for transfer of Technologies (APCTT) Technological Consultancy for SMEs

 Pace of technological transfer needs to be increased, linkages streamlined to plug gap.  R&D outputs do not get commercialized for want of initial investment plus lack of enabling environment and networking.  DST, Govt. of India, has been focusing attention on this aspect and has initiated many institutional based programmes. R&D Consultancy to Indian SME’s

 DST initiatives : Science & Technology Entrepreneurs Park (STEP) and Technology Business Incubator (TBI).  National Science and Technology Entrepreneurship Development Board of DST played pioneering,catalytic role in Indian Business Incubation arena since R&D Consultancy to Indian SME’s

 15 Technology Business Incubators set up at various institutions  17 Science and Technology Entrepreneur's Park  50 other such organisation promoted pan India R&D Consultancy to Indian SME’s

 Today organizations are knowledge based and their success and survival depend on creativity, innovation, discovery and inventiveness.  An effective reaction to these demands lead to innovative change in the organization, to ensure their existence.  The rate of changes is accelerating rapidly, as new knowledge idea generation and global diffusion are increasing. Conclusions

 Creativity and innovation have a bigger role in this change process for survival.  SMEs have to learn and imbibe the process of innovation, in their day to day working, to remain competitive.  Good Consultants thus shall be in demand to serve various requirements of SME’s. Conclusions

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