Transcript Mission - Double Digit Sales 05-06

Challenges before Indian
SME’s
&
Consultancy interventions
needed
By
Dr. Pradeep Bavadekar
Managing Director,
MITCON Consultancy & Engineering Services ltd.
Indian SME’s
 SME’s play a vital role in Indian Economic
Growth.
 40% share in industrial output, produce
8000 + 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
Technology & 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.
Innovation & 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.
Limitations of 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.
Capacity of Indian 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.
Consultancy for Indian SME’s
All points open opportunities for Consultancy

To enhance capacity

IT Consultancy

Financial Consultancy

Technological Consultancy

R&D Consultancy
Consultancy to enhance capacity

Government of India, SIDO websites:
www.smallindustryindia.com
www.laghu-udyog.com

NSIC websites:
www.nsicindia.com
www.techshowindia.com
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.
IT Consultancy for SME’s
 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
Financial 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 14001 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 www.smallindustryindia.com and
www.laghu-udyog.com ]
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
2004.
 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 Excellence @ $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.
Technological Consultancy for SMEs
 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)
R&D Consultancy to Indian SME’s
 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 2000.
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
Conclusions
 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.
Thank You