Driving Innovation in MSME s Ms. Deepali Shahane Lecturer, I.M.E.D. Bharati Vidyapeeth, Pune email: shahanedeepali@gmail.com Mr. Dhananjay Shahane Principal Designer, Aakruti consultants email: dshahane@aakruticonsultants.com ABSTRACT Worldwide, the micros, small and medium enterprises (MSMEs) have been accepted as the engine of economic growth and for promoting equitable development. In India MSMEs play a pivotal role in the overall industrial economy of the country. Key factors contributing to the growth of MSME s are cluster development, adaption of organizational culture and better understanding of financial aspects of the business. Formation of consortia, self support group and affiliation to the associations has started playing important role. Technology improvement, skill improvement and access to capital and access to market are crucial factors. Healthy competition from global player and signing WTO s 1 treaty opening local will drive innovation to this sector. It is time for Indian MSME s explore global market and be competitive; Innovation will be the buzz word for coming years. Innovation thru modern Gandhian co-operation will definitely bring prosperity to India. KEYWORDS MSME, innovation, sustainability, competitiveness, Scenarios, Design Intervention, Design Clinics Scheme, Best Practices, Cluster development, 1 WTO- world trade organisation
INTRODUCTION Worldwide, the micros, small and medium enterprises (MSMEs) have been accepted as the engine of economic growth and for promoting equitable development. The major advantage of the sector is its employment potential at low capital cost. The labour intensity of the MSME sector is much higher than that of the large enterprises. The MSMEs constitute over 90% of total enterprises in most of the economies and are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports. In India too, the MSMEs play a pivotal role in the overall industrial economy of the country. In recent years the MSME sector has consistently registered higher growth rate compared to the overall industrial sector. With its agility and dynamism, the sector has shown admirable innovativeness and adaptability to survive the recent economic downturn and recession. As per available statistics (4 th Census of MSME Sector), this sector employs an estimated 59.7 million persons spread over 26.1 million enterprises. It is estimated that in terms of value, MSME sector accounts for about 45% of the manufacturing output and around 40% of the total export of the country. Currently, MSMEs including Agriculture s share in national GDP is measured around 45% as in the last couple of years, the small scale part of Micro small and medium enterprises, have been facing not only recession but credit challenged and variety of regulations from centre, states and local governments. The scenario has started changing after enactment of Micro, Small & Medium Enterprises Development Act (MSME) 2006, the fruits of which have started flowing in as the sector has
become more competitive and innovative and is projected to go up to by a minimum of 5% and touch 55% share of India s GDP by 2011, since over 55% of MSMEs are aggressively upgrading themselves technologically to reduce their input costs and increase production and exports. Ever since, MSME 2006 has been enacted, the cluster development has been the driving force with more and more assistance both to the formal as well as non formal clusters flowing ranging from better infrastructure, marketing assistance, fiscal stimulus, and host of other incentives including better technology and global sourcing of raw material. The special mention of NSIC, who have assisted in capacity building as well as technology up gradation, pooling for raw material and marketing on a pool basis, has built up stability and better price realization for MSME sector. MSMEs have been given two classifications, one is that of manufacturing and those industries that provide and render services have also been brought under the MSMEs jurisdiction. The activity has been classified as Enterprise. SCENARIO The main constraints which the MSME still faces are the timely and affordable credit. This sector is still neglected by banks and financial institutions, mostly in the private sector domain. Since, banks, financial institutions, cooperatives still hesitate to lend money to MSMEs as per their mandatory requirement of nearly 40% of their total lending (Priority Lending). The public sector banks in India are the only hopes for MSMEs as it is they who meet their mandatory requirement for lending to MSMEs, rest have ignored them. But with the norms more stringent, there is hope that this sector will get its due share.
The credit that they receive is at very high cost and therefore their margins are minimum and input costs increase vis-à-vis their counterparts but the ASSOCHAM 2 pointed out that since over 55% of SMEs have done technological tie-ups with their counterparts to upgrade their production facilities, their input costs would come down in future and supplies to their vendor be maintained at effective cost factor. The proposed SME Exchanges will provide opportunities to SMEs to raise capital for their capacity building as well as price preference. The Ministry of MSME, Government of India (GoI) has adopted the cluster development approach as a key strategy for enhancing the productivity and competitiveness as well as capacity building of Micro and Small Enterprises (MSMEs) and their collectives in the country. Clustering of units also enables providers of various services to them, including banks and credit agencies, to provide their services more economically, thus reducing costs and improving the availability of services for these enterprises. Objectives of the Scheme: To support the sustainability and growth of MSMEs by addressing common issues such as improvement of technology, skills and quality, market access, access to capital, etc. To build capacity of MSME s for common supportive action through formation of self help groups, consortia, up gradation of associations, etc. To create/upgrade infrastructural facilities in the new/existing industrial 2 ASSOCHAM- Association of chambers
areas/ clusters of MSMEs. To set up common facility centers (for testing, training centre, raw material depot, effluent treatment, complementing production processes, etc). Scope of the scheme: Diagnostic body Resourcing Technology Facilitating the transfer of technology from producer to end user. Setting up of Common Facility Centres (CFCs) R & D needs. Organising workshops, Seminars, Training and Study visits for quicker diffusion of technology across the cluster of small enterprises. Infrastructure Development for facilities like power distribution network, water, telecommunication, drainage and pollution control facilities, roads, banks, raw materials, storage and marketing outlets, common service facilities and technological backup services for MSEs in the new/ existing industrial estates/areas. Driving innovation is a key challenge in MSME sector since most of them lack in having in-house R&D, designers and support from skilled professionals. Entrepreneurship development and training is one of the key elements for the promotion of micro, small and medium enterprises
(MSMEs), especially for creation of new enterprises by the first generation entrepreneurs. In order to inculcate the entrepreneurial culture amongst the first generation of entrepreneurs on a regular basis, the Ministry has set up three national Entrepreneurship Development Institutes viz: National Institute for Micro, Small and Medium Enterprises (NI-MSME) at Hyderabad, National Institute for Entrepreneurship and Small Business Development (NIESBUD) at NOIDA (Uttar Pradesh) and Indian Institute of Entrepreneurship (lie) at Guwahati, as autonomous societies. These institutes are engaged in developing training modules; undertaking research & training; and providing consultancy services for entrepreneurship development & promotion of MSMEs, including enhancement of their competitiveness. Marketing Assistance Scheme This is an ongoing old scheme. Marketing, a strategic tool for business development, is critical for the growth and survival of micro, small & medium enterprises in today's intensely competitive market. One of the major challenges before the MSME sector is to market their products/ services. NSIC acts as a facilitator to promote marketing efforts and enhance the competency of the micro, small & medium enterprises for capturing the new market opportunities by way of organizing/ participating in various domestic & international exhibitions/trade fairs, buyer-seller meets intensive- campaigns & other marketing events.
NSIC helps micro and small enterprises to participate in International National exhibitions/trade fairs at the subsidized rates to exhibit and market their products. Participation in the marketing events provides micro, small & medium enterprises an exposure to the National/ International markets. Other schemes: International Cooperation Scheme International Cooperation (IC) Scheme, being implemented by M/o MSME, is an ongoing Scheme of the Ninth Plan (under implementation since 1996), which is continuing in the Eleventh Plan (2007-2012) with an outlay of Rs. 1000.00 lakh. Technology infusion and/or up gradation of Indian micro, small and medium enterprises (MSMEs), their modernization and promotion of their exports are the important objectives of the Scheme. (a) Deputation of MSME business delegations to other countries for exploring new areas of technology infusion up gradation, facilitating joint ventures, improving market of MSMEs products, foreign collaborations, etc. (b) Participation by Indian MSMEs in international exhibitions, trade fairs and buyer-seller meets in foreign countries as well as in India, in which there is international participation. (c) Holding international conferences and seminars on topics and themes of interest to the MSMEs. Design clinic Scheme
Jointly held by NID 3 and GOI 4, it helps MSME s to come up with world class innovative products. Companies needing assistance in design inputs to compete with international competition, high quality design inputs and design interventions. This scheme subsidy up to 60 % or maximum of 9 Lacks to MSME for a single project and it budgetary allocation of over 80 Crore funds is available. The main objective of the scheme is to bring the MSME sector and design expertise into a common platform and to provide expert advice and solutions on real time design problems, resulting in continuous improvement and value-addition for existing products. It also aims at value-added cost effective solutions. The broad activities planned under the scheme include creation of Design Clinics Secretariat along with regional centers for intervention on the design needs of the MSME sector. Challenges in Entrepreneurship 3 NID- National institute of design 4 GOI- Government of India
CONCLUSION Design driven strategic planning will help MSME s in future to complete globally. Incoming flood of container loads of goods & importing mind set will convert to export oriented genuine global products & services which are performing better than their expectations and will be affordable and available locally. The results suggest that perhaps the government should play a facilitator role and improve access to finance by encouraging more banks and other financial institutions to enter the local market, instead of becoming an active player itself. The results also suggest the core competence of the government in certain roles, example creating a facilitating environment such as improved connectivity by roads, railways and airways, improved availability of electricity and water supply. Design plays a strategic role in overall economy and will bring bright future in the coming years. FUTURE SCOPE MSME s new schemes should reach out to masses for the economic transformation to happen. Country wide cluster formations and self sustainable business center will certainly be a power engine for the future.
REFERENCES 1. Annual Reports, Ministry of Small Scale Industries, Government of India 2. Micro, Small and Medium Enterprises Development Act Background Paper, Jessica Wade, Small Enterprise Finance Centre, IFMR. 3. Ministry of Micro, Small & Medium Enterprises, 2007: Micro, Small and Medium Enterprises in India: An Overview, Ministry of Micro Small and Medium Enterprise, Government of India 4. MSME Development Act 2006, Ministry of MSME, Government of India 5. Final Results: Third All India Census of Small Scale Industries 2001-2002, August 2004 Edition, Ministry of Small Scale Industries, Government of India. 6. Guidelines for Rehabilitation of Sick Small Scale Industrial Units, Reserve Bank of India Document, January 2002.