www.mbainfoline.com

Source: E-mail dt. 13 September 2013

 

Distribution of Micro Enterprises in India

 

R. Azhagu Raja

Ph. D Full Time Research Scholar,

PG & Research Department of Commerce,

Periyar EVR College, Trichy – 23

 

Abstract

 

            Micro-enterprise is important in improving economic and technical development, and creating wealth and jobs. They play a central role in poverty reduction. But, how do people without access to funds, training and resources break into the highly competitive world of business. Micro-enterprise (also known as small business) enables people to generate an income by starting and growing their own small business. Many of the businesses start as part-time or home-based business and, in time, they can provide jobs for other people within community. This article made an attempt to discuss the financial assistance to micro enterprises.

 

Key Words: Micro Enterprises, MSME, Manufacturing Sector, Service Sector.

 

Introduction

 

            Micro enterprises are the back bone of the industrial and economical development of the country which constitutes more employment opportunities, income generation, export potentials and utilization of local resources. Hence it is treated as traditional and domestic industries in the country.

 

            India’s economy grew slowly for more than thirty years following its independence in 1947 due to tight government control and adherence to socialist policies. In the late 1970s, the Janata Party came to power and enacted a series of economic reforms that paved the way for further liberalization and higher growth throughout the next decade. India’s economy grew at a much faster pace until problems arose beginning in the late 1980’s and culminating in 1991 with a severe external debt crisis. Yet rather than defaulting on foreign debt obligations, Indian leaders responded by embarking on a new period of economic liberalization marked by significant changes in the country’s development strategy and increasing integration into the world economy.

 

Early 1990s: focus on MSMEs

 

            Within this context, the government also turned its attention toward the growth potential and economic importance of smaller enterprises. Parliament created the Small Industries Development Bank of India (SIDBI) in 1990 as the main financial institution to promote, finance, and develops small-scale industry. Today, according to SIDBI’s annual report, it provides direct financing to the MSME sector and operates two funds of Rs 2,000 crores each to focus on “risk capital financing” and enhancing the MSME sector’s refinancing capabilities.

 

            In 1991, the government created the Ministry of Small Scale Industries (SSI) and provided direct assistance to the MSME sector by giving smaller enterprises priority production rights to a list of towards more liberal economic policies, this protection has been gradually phased out. As of March 2005, the list contains only 506 goods/services.

 

Micro, Small and Medium Enterprises

 

            In accordance with the provision of Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSMED) are classified in tow Classes:

 

Manufacturing Enterprise

 

Manufacturing Enterprise means an industrial undertaking or a business concern or any other establishment, by whatever name called, engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation Act, 1951.

 

§  Manufacturing enterprises, where the investment in plant and machinery does not exceed Rs. 25 lakhs are classified as Micro Manufacturing enterprises.

§  Manufacturing enterprises, where the investment in plant and machinery is more than Rs. 25 lakhs but does not exceed Rs. 5 crores are classified as Small Manufacturing enterprises.

§  Manufacturing enterprise, where the investment in plant and machinery is more than Rs. 5 crores but does not exceed Rs. 10 crores are classified as Medium Manufacturing enterprises.

 

Service Enterprise

 

            “Service Enterprise” means an industrial undertaking or a business concern or any other establishment, by whatever name called, engaged in providing or rendering of any service or services;

 

·         Service enterprises, where the investment in equipment does not exceed Rs. 10 lakhs are classified as Micro Service enterprises.

·         Service enterprises, where the investment in equipment is more than Rs. 10 lakhs but does not exceed Rs. 2 crores are classified as Small Service Enterprises.

·         Service enterprises, where the investment in equipment is more than Rs. 2 crores but does not exceed Rs. 5 crores are classified as Medium Service Enterprises.

 

Review of Literature

 

Nurbani Binti Hassan et al. In their article entitled “Financial Constraints and Opportunities of Micro Enterprise Entrepreneurs: A Theoretical framework”, studied that the micro enterprises is to analyses and present the financial opportunities and constraints faced by the micro enterprise entrepreneurs face financial difficulties particularly during the start up. A large number of micro enterprises have yet to tap into the funds provided by the banks. Only 13 per cent thus far have successfully received this funding.

 

Surjit Kumar Kar in his study, “Knowledge process of rural handloom community enterprise: A narrative study of Sambalpuri Bastralaya in India”, this paper explains the process of knowledge preservation and dissemination in rural weaving community enterprises and can also be used to understand rural micro enterprises.

 

Prasad et al. in their article entitled, “Micro-enterprise quality”. They studied in the developing world most citizens rely on self-employment and micro-enterprise operations as their only source of income. Given competition from large-scale industrial outfits, most micro-enterprises are finding it difficult to compete in terms of quality or price.

 

Wawire et al. in their article entitled, “Factors affecting the management of women groups’ micro and small enterprises in Kaka mega District, Kenya”. The study found that the factors that affect management of WGs’ MSEs could be categorized as financial, administrative, managerial, technical, political, traditional and cultural. The WGs lack skills in these areas, which adversely affects the MSEs.

 

Table - 1 Percentage distribution of working enterprises by nature of activity

 

Nature of Activity

No. of Working Enterprises (Lakhs)

 

Percentage of Share

 

Manufacturing

10.50

67.10

Services

2.62

16.78

Repairing & Maintenance

2.52

16.13

Total

15.64

100

Source: Final Report of MSME (2006-2007)

 

Table No 1 shows that the percentage distribution of working enterprises by nature of activity. Manufacturing activities constitutes 67.10 per cent with 10.50 lakhs of working enterprises, service activities constitutes 16.78 per cent with 2.62 lakhs of working enterprises, repairing and maintenance activities constitutes 16.13 per cent with 2.52 lakhs of working enterprises. Majority of the micro industries 67.10 per cent are belongs to manufacturing sector.

 

Table - 2 Percentage distributions of enterprises

 

Regional

Proprietary

Partnership

Pvt. Company

Public Ltd. Company

Cooperative

Others

Rural

92.40

2.82

1.89

0.43

0.38

2.08

Urban

88.16

4.99

3.51

0.62

0.24

2.48

Total

90.08

4.01

2.78

0.54

0.30

2.30

Source: Final Report of MSME (2006-2007).

 

Table No 2 revealed that the percentage distribution of enterprises by type of organization in rural and urban areas. Enterprises were highly recorded in proprietary sector 92.40 per cent followed by partnership 2.82 per cent, Pvt. Company 1.89 per cent, Public Ltd. Company 0.43 per cent, Cooperative 0.38 percent, and others sector 2.08 percent. A maximum of 90.08 per cent of micro industries under the categories of proprietary type of organization and a minimum of 0.30 per cent are belongs to Co-operative structure of ownership.

 

Table 3 - Percentage distribution of enterprises by gender

 

Regional

Female

Male

Rural

15.27

84.73

Urban

12.45

87.55

All

13.72

86.28

Source: Final Report of MSME (2006-2007).

 

It is seen from above the table that the percentage distribution of enterprises by gender of owner in rural and urban areas. Rural areas were highly recorded in male enterprises 84.73 per cent followed by female enterprises 15.27 per cent. Gender of owner in urban areas were highly recorded in male enterprises 87.55 per cent followed by female enterprises 12.45 per cent. Majority of the micro industries 86.28 per cent owned by male entrepreneurs.

 

Table 4 - Percentage distribution of enterprises by social group of owner

 

Regional

SC

ST

OBC

Others

Rural

10.20

4.02

43.67

42.11

Urban

5.45

1.92

33.82

58.81

Total

7.60

2.87

38.28

51.26

Source: Final Report of MSME (2006-2007).

 

Table No 4 reveals that the percentage distribution of enterprises by social group of owner in rural and urban areas. Social group of owners in rural areas were 43.67 per cent of OBC in highly recorded, compare with others Social group 42.11 per cent, SC 10.20 per cent, and ST 4.02 per cent. Social group of owners in urban areas were 58.81 per cent of Other social group in highly recorded, compare with OBC 33.82 per cent, SC 5.45 per cent, and ST 1.92 per cent. A maximum of micro enterprises 51.26 per cent owned by other categories of community and a minimum of micro enterprises 2.87 per cent owned by ST community.

 

Table 5 - Distributions of enterprises by religion of owner

 

Sl.

No.

Religion of Owner

No. of Working Enterprises

(lakhs)

Percentage of Share

1

Hindu

12.70

81.22

2

Muslim

1.43

9.11

3

Sikh

0.52

3.31

4

Christian

0.64

4.12

5

Jain

0.08

0.52

6

Buddhist

0.01

0.07

7

Others

0.26

1.64

Total

15.64

100

Source: Final Report of MSME (2006-2007)

 

Table No 5 reveals that the distribution of enterprises by religion of owner, 81.22 per cent of highly recorded in Hindu with 12.70 working enterprises, Muslim 9.11 per cent with 1.43 working enterprises, Sikh 3.31 per cent with 0.52 working enterprises, Christian 4.12 per cent with 0.64 working enterprises, Jain, Buddhist less than 1 per cent with 0.08, 0.01 working enterprises, and Others 1.64 per cent with 0.26 working enterprises. A maximum of micro enterprises 81.22 per cent of Hindu and a minimum of micro enterprises 0.07 per cent of Buddhist.

 

Table 7 - Major state –wise distribution of working enterprises

 

SI. NO.

State/UT Name

No. of Working Enterprises

(lakhs)

Percentage of Share

1

Tamil Nadu

2.34

14.95

2

Gujarat

2.30

14.70

3

Uttar Pradesh

1.88

12.00

4

Kerala

1.50

9.60

5

Karnataka

1.36

8.71

6

Madhya Pradesh

1.07

6.84

7

Maharashtra

0.87

5.54

8

Rajasthan

0.55

3.51

9

Bihar

0.50

3.20

10

Punjab

0.48

3.08

11

Total of above 10 States

12.85

82.13

12

Others

2.79

17.87

Total

15.64

100

    Source: Final Report of MSME (2006-2007).

 

Table No 7 shows that the major state wise distribution of working enterprises of highly recorded in Tamil Nadu 14.95 per cent 2.34 lakhs in working enterprises compare with other ten states. Gujarat 14.70 per cent with 2.30 lakhs in working enterprises, Uttar Pradesh 12 per cent with 1.88 lakhs in working enterprises, Kerala 9.60 per cent with 1.50 lakhs in working enterprises. Karnataka, Madhya Pradesh, Maharashtra, Rajasthan, Bihar and Punjab less than 8.71 per cent with 1.36 lakhs in working enterprises. A maximum of micro enterprises 14. 95 per cent of Tamil Nadu and minimum of micro enterprises 3.08 per cent of Punjab.

 

Suggestions

 

1)      Service sector and Repairs and Maintenance sector has been improve due to entrepreneur skills development and technology after globalization.

2)      MSME owned by proprietary structure of organization performed well, because of timeless effort and dedicated hard work in their business. More over there sector largely depends upon the traditional and technical bared. Therefore there sector is the major choice for the new entrepreneurs.

3)       SC & ST owned MSME in the country is very poor due to cross rote level of various socio-economic discrimination among them. Even though Government has been given various incentives and assistance, they could not become an entrepreneur. Therefore a special ministry should be created to promote the awareness on entrepreneurship among the SC & ST.

 

Conclusion

 

            Indian economy largely depends on the agriculture and allied activities such as Micro, Small and Medium Enterprises which are mostly belongs to rural and labour intensive based. There industries are more powerful to promote the sustainable development of the country, through massive employment potentials. Therefore, there is a need to regulate their industries according to the modern trends and global competence. There is a need of more financial and technical assistance to MSME sector to modernize production capacity and popularize the quality services to the potential customers.

 

References

 

1.      Marcia Parada, Aayush Sakya, Kathryn Seitz and Shwetha Shwetha (2010) “Evaluating Access to Finance Constraints for Micro, Small and Medium Enterprises in India”, International Policy Studies/Masters in Public Practicum Standford University, March 18.

2.      Nurbani Binti Hassan, Susan Tee Suan Chine, Jian Ai Yeow, Noor Ashikin Binti Mohd Rom (2011) “Financial Constraints and Opportunities of Micro Enterprise Entrepreneurs: A Theoretical Framework”, International Conference on Business and Economics Research, Vol. 1, IACSIT Press, Kualalumpur, Malaysia.

3.      Prasad, Sameer, Tata and Jasmine (2009) “Micro-enterprise quality”, International Journal of Quality & Reliability Management, Vol. 26, No 3, pp 234-246.

4.      Surjit Kumar Kar (2012) “Knowledge process of rural handloom community enterprise: A narrative study of Sambalpuri Bastralaya in India”, Society and Business Review, Vol. 7, Issue 2, pp 114-133.

5.      Wawire, Nelson H.W, Nafukho and Fredrick M (2010) “Factors affecting the management of women groups’ micro and small enterprises in Kakamega District, Kenya”, Journal of European Industrial Training, Vol. 34, No 2, pp 128-152.

6.      Annual Report 2006 – 2007.