Management Consulting/MS-93


Dear Sir

Pls Ans the Following Question.

1) Define Small Scale Enterprise (SSEs) ? Explain the features of SSEs which make have an impact on the economic growth of the nation.

2) Identify an entrepreneur of your choice who has set up a small scale unit.Enumerate the steps, which helped him/her reach the final projects.

Thanks in Advance


1] Define Small Scale Enterprises (SSEs)? Explain the features of SSEs which make have an impact on the economic growth of the nation.
Definition of Small Scale Industrial (SSI) Undertakings
Policy Support
2.1 The investment limit for the Tiny Sector will continue to be Rs. 25 lakhs.
2.2 The investment limit for the MSME sector will continue to be at Rs. 1 crore.
2.3 The Ministry of MSME & ARI will bring out a specific list of hi-tech and export oriented industries which would require the investment limit to be raised upto Rs. 5 crores to admit of suitable technology upgradation and to enable them to maintain their competitive edge.
2.4 The Limited Partnership Act will be drafted quickly and got enacted. Attempt will be made to bring the Bill before the next session of the Parliament.
3.0 Fiscal Support
3.1 To improve the competitiveness of Small Scale Sector, the exemption for excise duty limit raised from Rs. 50 lakhs to Rs. 1 crore.
4.0 Credit Support
4.1 The composite loans limit raised from Rs. 10 lakhs to Rs.25 lakhs.
4.2 The Small Scale Service and Business (Industry Related) Enterprises (SSSBEs) with a maximum investment of Rs. 10 lakhs will qualify for priority lending.
4.3 In the National Equity Fund Scheme, the project cost limit will be raised from Rs. 25 lakhs to Rs. 50 lakhs. The soft loan limit will be retained at 25 per cent of the project cost subject to a maximum of Rs. 10 lakhs per project. Assistance under the NEF will be provided at a service charge of 5 per cent per annum.
4.4 The eligibility limit for coverage under the recently launched (August 2000) Credit Guarantee Scheme has been revised to Rs.25 lakhs from the present limit of Rs. 10 lakhs.
4.5 The Department of Economic Affairs will appoint a Task Force to suggest revitalisation/restructuring of the State Finance Corporations.
4.6 The Nayak Committee's recommendations regarding provision of 20 per cent of the projected turnover as working capital is being recommended to the financial institutions and banks.
5.0 Infrastructural Support
5.1 The Integrated Infrastructure Development (IID) Scheme will progressively cover all areas in the country with 50 per cent reservation for rural areas.
5.2 Regarding upgrading the Industrial Estates, which are languishing, the Ministry of MSME & ARI will draw up a detailed scheme for the consideration of the Planning Commission.
5.3 A Plan Scheme for Cluster Development will be drawn up.
5.4 The funds available under the non-lapsable pool for the North-East will be used for Industrial Infrastructure Development, setting up of incubation centres, for Cluster Development and for setting up of IIDs in the North-East including Sikkim.
6.0 Technological Support and Quality Improvement
6.1 Capital Subsidy of 12 per cent for investment in technology in select sectors. An interministerial Committee of Experts will be set up to define the scope of technology upgradation and sectorial priorities.
6.2 To encourage Total Quality Management, the Scheme of granting Rs.75,000/- to each unit for opting ISO-9000 Certification will continue for the next six years i.e. till the end of the 10th plan.
6.3 Setting up of incubation Centres in Sunrise Industries will be supported.
6.4 The TBSE set up by SIDBI will be strengthened so that it functions effectively as a Technology Bank. It will be properly networked with NSIC, SIDO (SENET Programme) and APCTT.
6.5 SIDO, SIDBI and NSIC will jointly prepare a Compendium of available technologies for the R&D institutions in India and abroad and circulate it among the industry associations for the dissemination of the latest technology related information.
6.6 Commercial Banks are being requested to develop Schemes to encourage investment in technology upgradation and harmonise the same with SIDBI.
6.7 One time Capital Grant of 50% will be given to Small Scale Associations which wish to develop and operate Testing Laboratories, provided they are of international standard.
7.0 Marketing Support
7.1 SIDO will have a Market Development Assistance (MDA) Programme, similar to one obtaining in the Ministry of Commerce & Industry. It will be a Plan Scheme.
7.2 The Vendor Development Programme, Buyer-Seller Meets and Exhibitions will take place more often and at dispersed locations.
8.0 Streamlining Inspections/Rules and Regulations
8.1 To minimise harassment to Small Scale Sector a Group will be set up to recommend within 3 months, means of streamlining inspections. This will include repeal of laws and regulations applicable to the sector that have since become redundant.
8.2 Self-certification will be progressively encouraged in lieu of inspections, which should be prescribed under the three following conditions:
- On receipt of specific complaint;
- Selection of unit for sample check (Say 10 per cent of total units); and
- For audit and safety purposes.
9.0 Entrepreneurship Development
9.1 Capacity building in the MSME sector, both for entrepreneurs as well as workers, will be given top priority. The Ministry of MSME & ARI and Ministry of Labour will work out the strategy jointly.
10.0 Facilitating Prompt Payment
10.1 The Reserve Bank of India is being requested to appoint a Task Force to go into the question of strengthening and popularising factoring services, without recourse to the MSME suppliers. The Task Force shall give its report within six months of its constitution.
10.2 RBI is being requested to take up with the banks, the question of sub-allocating overall limits to the large borrowers specifically for meeting the payment obligations in respect of purchases from the MSMEs, either on case basis or on bills basis.
11.0 Rehabilitation of sick units
11.1 RBI is being requested to draw up revised guidelines for the rehabilitation of currently sick but potentially viable MSME units. Such guidelines should be detailed, transparent and non-discretionary. (
12.0 Promoting Rural Industries
12.1 To support the Handloom Sector "Deendayal Hathkarga Protsahan Yojna" has been announced. The scheme has a total financial implication of Rs. 447 crores and will provide comprehensive financial and infrastructural support to weavers.
12.2 The Government is working out new comprehensive package to strengthen Khadi and Village Industries that will further upgrade the skills of Khadi Workers.


Employment Generation

SSI Sector in India creates largest employment opportunities for the Indian populace, next only to Agriculture. It has been estimated that a lakh rupees of investment in fixed assets in the small scale sector generates employment for four persons.

According to the SSI Sector survey conducted by the Ministry and National Informatics Centre with the base year of 1987-88, the following interesting observations were made related to employment in the small scale sector.

Generation of Employment - Industry Group-wise

Food products industry has ranked first in generating employment, providing employment to 4.82 lakh persons (13.1%).

The next two industry groups were Non-metallic mineral products with employment of 4.46 lakh persons (12.2%) and Metal products with 3.73 lakh persons (10.2%).

In Chemicals & chemical products, Machinery parts and except Electrical parts, Wood products, Basic Metal Industries, Paper products & printing, Hosiery & garments, Repair services and Rubber & plastic products, the contribution ranged from 9% to 5%, the total contribution by these eight industry groups being 49%.

In all other industries the contribution was less than 5%.

Per unit employment

Per unit employment was the highest (20) in units engaged in Beverages, tobacco & tobacco products mainly due to the high employment potential of this industry particularly in Maharashtra, Andhra Pradesh, Rajasthan, Assam and Tamil Nadu.

Next came Cotton textile products (17), Non-metallic mineral products (14.1), Basic metal industries (13.6) and Electrical machinery and parts (11.2.) The lowest figure of 2.4 was in Repair services line.

Per unit employment was the highest (10) in metropolitan areas and lowest (5) in rural areas.

However, in Chemicals & chemical products, Non-metallic mineral products and Basic metal industries per unit employment was higher in rural areas as compared to metropolitan areas/urban areas.

In urban areas highest employment per unit was in Beverages, tobacco products (31 persons) followed by Cotton textile products (18), Basic metal industries (13) and Non-metallic mineral products (12).


Non-metallic products contributed 22.7% to employment generated in rural areas. Food Products accounted for 21.1%, Wood Products and Chemicals and chemical products shared between them 17.5%.


As for urban areas, Food Products and Metal Products almost equally shared 22.8% of employment. Machinery and parts except electrical, Non-metallic mineral products, and Chemicals & chemical products between them accounted for 26.2% of employment.

In metropolitan areas the leading industries were Metal products, Machinery and parts except electrical and Paper products & printing (total share being 33.6%).

State-wise Employment Distribution

Tamil Nadu (14.5%) made the maximum contribution to employment.

This was followed by Maharashtra (9.7%), Uttar Pradesh (9.5%) and West Bengal (8.5%) the total share being 27.7%.

Gujarat (7.6%), Andhra Pradesh (7.5%), Karnataka (6.7%), and Punjab (5.6%) together accounted for another 27.4%.

Per unit employment was high - 17, 16 and 14 respectively - in Nagaland, Sikkim and Dadra & Nagar Haveli.

It was 12 in Maharashtra, Tripura and Delhi.

Madhya Pradesh had the figure of 2. In all other cases it was around the average of 6.


The small scale industries sector plays a vital role for the growth of the country. It contributes 40% of the gross manufacture to the Indian economy.

It has been estimated that a lakh rupees of investment in fixed assets in the small scale sector produces 4.62 lakhs worth of goods or services with an approximate value addition of ten percentage points.

The small scale sector has grown rapidly over the years. The growth rates during the various plan periods have been very impressive.

The number of small scale units has increased from an estimated 8.74 lakhs units in the year 1980-81 to an estimated 31.21 lakhs in the year 1999.

From the year 1990-91 this sector has exhibited a comparitively lower growth trend (though positive) which continued during the next two years. However, this has to be viewed in the background of the general recession in the economy. The transiti on period of the process of economic reforms was also affected for some period by adverse factors such as foreign exchange constraints, credit squeeze, demand recession, high interest rates, shortage of raw material etc.

When the performance of this sector is viewed against the growth in the manufacturing and the industry sector as a whole, it instills confidence in the resilience of the small scale sector.

The estimates of growth for the year 1995-96 have shown an upswing.The growth of SSI sector has surpassed overall industrial growth from 1991 onwards.The positive trend is likely to strengthen in the coming years.This trend augurs a bright future for the small scale industry.

Export contribution

SSI Sector plays a major role in India's present export performance. 45%-50% of the Indian Exports is being contributed by SSI Sector. Direct exports from the SSI Sector account for nearly 35% of total exports. The number of small scale units that undertake direct exports would be more than 5000.

Besides direct exports, it is estimated that small scale industrial units contribute around 15% to exports indirectly. This takes place through merchant exporters, trading houses and export houses. They may also be in the form of export orders from large units or the production of parts and components for use for finished exportable goods.

It would surprise many to know that non traditional products account for more than 95% of the SSI exports.

The exports from SSI sector has been clocking excellent growth rates in this decade. It has been mostly fuelled by the performance of garment, leather and gems and jewellery units from this sector.

The lucrative product groups where the SSI sector dominates in exports, are sports goods, readymade garments, woollen garments and knitwear, plastic products, processed food and leather products.


Small industry sector has performed exceedingly well and enabled our country to achieve a wide measure of industrial growth and diversification.

By its less capital intensive and high labour absorbtion nature, SSI sector has made significant contributions to employment generation and also to rural industrialisation. This sector is ideally suited to build on the strengths of our traditional skills and knowledge, by infusion of technologies, capital and innovative marketing practices.

The opportunities in the small scale sector are enormous due to the following factors :

- Less Capital Intensive

- Extensive Promotion & Support by the Government

- Reservation for Exclusive Manufacture by small scale sector

- Project Profiles

- Funding

- Finance & Subsidies

- Machinery Procurement

- Raw Material Procurement

- Manpower Training

- Technical & Managerial skills

- Tools & Tools utilisation support

- Reservation for Exclusive Purchase by Government

- Export Promotion

- Growth in demand in the domestic market size due to overall economic growth

- Increasing Export Potential for Indian products

- Growth in Requirements for ancillary units due to the increase in number of greenfield units coming up in the large scale sector.

So this is the opportune time to set up projects in the small scale sector. It may be said that the outlook is positive, indeed promising, given some safeguards. This expectation is based on an essential feature of the Indian industry and the demand structures. The diversity in production systems and demand structures will ensure long term co-existence of many layers of demand for consumer products / technologies / processes. There will be flourishing and well grounded markets for the same product/process, differentiated by quality, value added and sophistication. This characteristic of the Indian economy will allow complementary existence for various diverse types of units.

The promotional and protective policies of the Govt. have ensured the presence of this sector in an astonishing range of products, particularly in consumer goods. However, the bug bear of the sector has been the inadequacies in capital, technology and marketing. The process of liberalisation will therefore, attract the infusion of just these things in the sector.

Economic Indicators

The Small Scale Industry today constitutes a very important segment of the Indian economy. The development of this sector came about primarily due to the vision of our late Prime Minister Jawaharlal Nehru who sought to develop core industry and have a supporting sector in the form of small scale enterprises.

Small Scale Sector has emerged as a dynamic and vibrant sector of the economy.

- Today, it accounts for nearly 35% of the gross value of output in the manufacturing sector and over 40% of the total exports from the country.

- In terms of value added this sector accounts for about 40% of the value added in the manufacturing sector.

- The sector's contribution to employment is next only to agriculture in India. It is therefore an excellent sector of economy for investment.

2]Identify an entrepreneur of your choice who has set up a small scale unit. Enumerate the steps, which helped him/her reach the final project.

The entrepreneur  is  a small scale  manufacturer  of   garments.

First  step

PRODUCT IDENTIFICATION The overriding reason for anyone to think of establishing a SSI unit can be summarised in one word - OPPORTUNITY. If one can see an opportunity to provide a product or service in a manner to generate sufficient surplus, then one way is to start up a SSI unit. This is the first step towards setting up a industry and is called…

This  entrepreneur  surveyed  the  market  for  various
Products  in  the  market  demand. He found  a  great
the  opportunity  in  the  garment  segment. He  could
sell  in the  local/ national  and  also   export.

He  decided  to  keep  the ownership  within   the  family.
Location of unit :

He decided  to  locate  the  plant/office, just  outside the  city  of  Mumbai—close  to  the  market/ supply  of  fabrics/ transport/shipping  facilities.  
APPROVALS Every SSI unit has to comply with various regulations in force. These include regulatory, taxation, environmental and certain product specific clearances.

APPROVALS Licensing in the Industries sector is governed by the licensing exemption notification issued by Govt. of India in July 25 1991 under the Industries (Development and Regulation) Act, 1951. In SSI, there are virtually no licensing restrictions. No industrial license is required except in case of 6 product groups included in compulsory licensing (These products groups mainly cover products that can only be made in large sector)

He  applied  for  all  the  required  approvals  with  the  help  of  a legal  counsel.
CLEARANCES An entrepreneur has to obtain several clearances or permissions depending upon the nature of his unit and products manufactured
clearances Regulatory or Taxation Clearances Registration under Sales Tax Act - Commercial Tax officer of area concerned Registration under Central Excise Act - Collector of Central Excise or his nominee for area Payment of Income Tax - ITO of the area concerned Registration of Partnership deed - Inspector General of area concerned Calibration of weights & measures - Weights and Measures Inspector of State Power Connection - Designated Officer of State Electricity Board Employee strength exceeding 10 with power connection or 20 without power - Chief Inspector of Factories

He  obtained  all  clearances  from  the  various government  departments  with  the  help  of   the  legal  counsel.
Arrangement of finance :

With  the  help  of  a  professional  technical  consultant, and   a  chartered  accountant, he  arranged  the  fixed  capital   requirements,
ARRANGEMENT OF FINANCE WORKING CAPITAL: It is necessary for buying raw materials and recurring expenditure. It hugely depends on the financial position of the firm.

With  the  help  of  a  professional  technical  consultant, and   a  chartered  accountant, he  developed  the  business  plan.

He  developed   an  organization , with  some  experienced  managers.
1.production/operation  manager
2.merchandising  manager  manager  manager

starting production :
He  conducted  the starting production After the basic trial runs, commercial production has to begin with proper quality checks in place.
Marketing the product :
Marketing the product This is the last but the most important step in realizing the business ambition. No business is complete without selling the products and ensuring that the revenues flow into the organisation. Marketing is the prime way to enhance the business and the best way to survive in this competitive world.
He  asked  the  marketing  manager  to  prepare  a  market  plan ---national  market  / export  market [usa].

Sources of capital to finance

He  started looking  for  other  forms  financing,other  than  the banks  ,  like
Joint  ventures/ investors etc  


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Leo Lingham


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18 years working managerial experience covering business planning, strategic planning, corporate planning, management service, organization development, marketing, sales management etc


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