1. Evolving Need to use Technology Infusion in the MSME Sector & the Barriers Evolving Need to use Technology Infusion in the MSME Sector & the Barriers Presented by: Shri P. Udayakumar Director (Planning & Marketing) National Small Industries Corporation

2.  MSMEs account for about 45% of India’s manufacturing output.  MSMEs account for 95% of the industrial units.  MSMEs account for about 40% of India’s total exports.  The sector is projected to employ about 73 mn people in more than 31 mn units spread across the country.  MSMEs manufacture more than 6,000 products ranging from traditional to high tech items.  20 % Procurement Policy from MSEs by PSUs and Govt  Defence Offset Policy with 1.5 times multiplier and indigenisation  FDI in Retail with optional sourcing from MSMES

3. MANUFACTURING SECTOR SERVICE SECTOR Micro EnterprisesSmall EnterprisesMedium Enterprises Does not exceed Rs. 25 Lac (USD 40500) More than Rs. 25 Lac (USD 40500) but does not exceed Rs. 5 Crore (USD 810000) More than Rs. 5 Crore (USD 810000) but does not exceed Rs. 10 crore (USD 1620000) Micro EnterprisesSmall EnterprisesMedium Enterprises Does not exceed Rs. 10 Lac (USD 16200) More than Rs. 10 Lac (USD 16200) but does not exceed Rs. 2 Crore (USD 324000) More than Rs. 2 Crore (USD 324000) but does not exceed Rs. 5 Crore (USD 810000)

4.  Enhancing the credit limit to MSMEs  Issue of collateral securities  Higher interest rates as compared to other countries  Delayed payment issues despite an Act  Longer registration process (35 days in India) whereas some countries do it in 2 days  Multiple registration for MSMEs (VAT, CST, Excise, PAN, Service Tax, IEC etc.)  Outdated Acts like- Contract Act, Factories Act, Central Labour Act, EPF, ESI, Land Acquisition Act, Industrial Disputes Act, Insolvency Act  Very poor ranking in the Ease of Business index (142)

5.  Multiple legal entities without scale of economy to seek exemptions and regulatory compliances  Changing production systems  Increase in FDI in Defence/ Insurance/ Railways/ Infrastructure  Youth population 300 Million whereas job availability only 100 Million  Only three out of ten employable due to lack of skills  Need for time bound tax exemption/relaxation for start-ups  Lower investment limit for MSMEs creating hurdles in technology up gradation and capacity build up  Increasing trend in online marketing and absence of regulatory framework

6.  Multiple legal entities without scale of economy to seek exemptions and regulatory compliances  Changing production systems  Increase in FDI in Defence/ Insurance/ Railways/ Infrastructure  Youth population 300 Million whereas job availability only 100 Million  Only three out of ten employable due to lack of skills  Need for time bound tax exemption/relaxation for start-ups  Lower investment limit for MSMEs creating hurdles in technology up gradation and capacity build up  Increasing trend in online marketing and absence of regulatory framework

7.  Out of total MSMEs in the country, 95% are Micro and only 5% are Small & Medium category enterprises.  Technology adoption in case of Micro enterprises is very poor & not feasible due to investment limit and an area of concern.  No technology banks and poor IPR/Patent Registration habit  Multiple agencies like CSIR,DRDO,ICMR working in compartments  Though India has a vast pool of technical talent with a well developed intellectual infrastructure, the country still scores low in the matter of developing and adapting new technologies in the MSME sector.  Lower investment ceilings for the MSMEs and Tax concessions to remain as MSMEs  Futuristic sectors like IT, ICT, Defence, Renewable energy etc. are capital intensive sectors requiring huge investments.  Need for change in the criteria for classification of MSMEs- a separate category may be introduced to bring in technology oriented units.

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9.  Technology is the foremost factor for enhancing the global competitiveness of the Indian MSME sector  Govt. planning to invest in sustainable development.  Vast market opportunity to the tune of $1.6 trillion waiting to be seized in Clean Technology in the developing countries.  Large scale investments in Defence,Infrastructure,Inland Security with Off set provisions and multiplier effect.  Demographic dividend- key to success for India possible only thro Technology adoption.

10.  The 'Make in India' campaign is aimed at making India a manufacturing hub, and the government is pulling out all the stops for ensuring a smooth sailing for investors, by setting up a dedicated cell to answer queries of business entities within 72 hours. It will also closely monitor all regulatory processes to make them simple and reduce the burden of compliance. Here,the technology is the Key.

11. Categor y Manufacture (Plant & Machinery)Services (Equipment) Micro Less than or equal to Rs. 2.5 millio n Less than or equal to Rs. 1 million Small Greater than Rs. 2.5 million but not more than Rs. 50 million Greater than Rs. 1 million but not mor e than Rs. 20 million Medium Greater than Rs. 50 million but not more than Rs. 100 million Greater than Rs. 20 million but not mo re than Rs. 50 million Multiplier of 1.50 : Avenues for Discharge : IOP ► OEM’s are now being incentivized to pick up SME’ s. In turn the OEM’s will have to work harder to e nsure the SME’s will be able to meet the global aer ospace quality standards. ► SME’s would be provided a better chance of winn ing orders in comparison to the large-established players.

12. Total Internal Security spending in the Indian market under all the 8 threat domains is expected to amount to a total of US $9.7 bn by the year 2016 Over the past five years, private security business in the country has grown at a CAGR of 25% to reach an estimated value of USD2 bn 81.4% of all Internal Security spending by the year 2016 will be focussed on mass transport security, airport security and maritime security EY has limited or no presence in these areas Total Internal Security spending in the Indian market under all the 8 threat domains is expected to amount to a total of US $9.7 bn by the year 2016 Over the past five years, private security business in the country has grown at a CAGR of 25% to reach an estimated value of USD2 bn 81.4% of all Internal Security spending by the year 2016 will be focussed on mass transport security, airport security and maritime security EY has limited or no presence in these areas

13. India’s homeland security agencies received a substantial 25% y-o-y increase in their budgetspending for 2009–10 vs only Approx 3% increase in the Defence Budget. In 2009–10, Paramilitary forces were allocated USD 4.3 Billion as against USD3.4 billion in 2008–09. Additional amount of USD 100 Million is being proposed for modernization of police forces in the current year. Additional amount of USD 500 Million is being provided for construction of fences, roads etc. on the international borders. Delhi Police was allocated USD 1.5 Billion for Commonwealth Games Delhi 2010 security requirements. India’s homeland security agencies received a substantial 25% y-o-y increase in their budgetspending for 2009–10 vs only Approx 3% increase in the Defence Budget. In 2009–10, Paramilitary forces were allocated USD 4.3 Billion as against USD3.4 billion in 2008–09. Additional amount of USD 100 Million is being proposed for modernization of police forces in the current year. Additional amount of USD 500 Million is being provided for construction of fences, roads etc. on the international borders. Delhi Police was allocated USD 1.5 Billion for Commonwealth Games Delhi 2010 security requirements. Restraints Budgetary Constraints Manpower intensive security measures Prosecution Increased threat perception across all threat domains Liberalisation and op ening up of Market to Private Players Growth of Indian Economy Drivers

14. The CISF has close to 100 pending requests for security cover. It has recently received approval from the MHA to raise additional manpower to the tune of 400,000. India has emerged as the largest and most preferred Outsourcing location. NASSCOM had carried out an extensive survey on the IT Security requirements for Outsourcing facilities. However only 5% of the centers in India have actually implemented the same. Nearly 10% of the Private Firms evaluate the IT Security of their 3rd Party Vendors. INFOSYS Technologies became the first private company to receive CISF cover in November 2009, for its Bangalore facility alone it is spending US$0.6 million/annum. The Reliance group has begun operations of India’s first Privately run Metro rail service- Delhi Airport Express line. Refineries Banks / Financial Institutions Malls / Retail Industry Hotels / Leisure The Security market is growing at the rate of 23% CA GR and could potentially hit 40% by 2016. In 2009, the spending reached a level of US$ 1B Consumers

15.  ISRO / BRAHMOS IN THE PROCESS OF DEVELOPING TECHNOLOGIES/EQUIPMENTS FOR SOLAR MISSIONS  TECHNOLOGY AND EQUIPMENTS DEVELOPMENT ARE UNDER PROTO TYPE STAGE.  PLANNED TO EXPLORE AND EXTRACT MINERALS AND RESOURCES FROM OTHER PLANETS BY 2030-50  VENDOR DEVELOPMENT /ANCILLARIES TO BE DEVELOPED THRO’ SMEs  EXTRACTION OF MENERALS AND SEA BED METHANE USING ADVANCED TECHNOLOGIES WHICH NEED VENDORS.  R&D ACTIVITIES,TECHNOLOGY TRANSFERS /BANKS TO BE CREATED

16.  India has been consistently ranked among the top five countries (globally) in terms of its market potential for renewable energy.  The Renewable Energy (RE) industry is expected to grow at a high rate in the Twelfth Five Year Plan period (2012 – 2017).  With power generation from renewable sources on the rise in India, share of renewable energy in country’s total energy mix increased from 7.8% in financial year 2008 to 12.1% in financial year 2012.  India had around 26 GW of installed renewable energy capacity as on August 31, 2012 and plans to more than triple its renewable energy capacity in the next 10 years, driven mainly by wind and solar energy.

17.  Allocation of Rs. 100 Crore to set up the Technology Development Fund to Public and private companies include SMEs to support and develop the Defence sector and cutting-edge technologies is going to help the core MSMEs in accessing global technologies and make them compete at a global scale.  Thrust on Manufacturing and improving the Ease of Doing Business index to 50 from 142  Rs. 10000 Crore venture capital fund to be set up for MSME sector.  Definition of MSME to be revised for high capital ceiling.  Increase of FDI to 49 % in Defence and FDI in Railways  Simplification of FDI investments in Infra Projects

18. 18 THANK YOU