Overview of Indian SME - ADDVALUE Lean Consulting Firm

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SME OVERVIEW INDIAN CONTEXT
By Nilesh Arora Founder Partner, ADD VALUE
Consulting Inc. ,INDIA
Adding Value In Totality !!
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WHAT ARE SMES ?

• Manufacturing Enterprises Investment in Plant
  Machinery Description
• Micro Enterprises up to 62,500
• Small Enterprises above 62,500 up to 1.25
  million
• Medium Enterprises above 1.25 million up to
  2.5 million
• Service Enterprises Investment in Equipment
  Description
• Micro Enterprises up to 25,000
• Small Enterprises above 25,000 up to 0.5
  million
• Medium Enterprises above 0.5 million up to
  1.5 million

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WHY ARE SMEs CRUCIAL ?

• SME sector of India is considered as the backbone
  of economy contributing to 45 of the industrial
  output
• 40 of Indias exports, employing 60 million
  people, create 1.3 million jobs every year and
  produce more than 8000 quality products for the
  Indian and international markets
• With approximately 30 million SMEs in India, 12
  million people expected to join the workforce in
  next 3 years and the sector growing at a rate of
  8 per year

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WHY ARE SMEs CRUCIAL ? contd

• Several factors that have contributed towards the
  growth of Indian SMEs
• Funding of SMEs by local and foreign investors
• New technology in the market is assisting SMEs
  add considerable value to their business
• Various trade directories and trade portals
• Despite of this strong growth, there is huge
  potential amongst Indian SMEs that still remains
  untapped

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VARIOUS MSME SECTORS
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WHY ARE INDIAN SMEs CRUCIAL..?

• SMEs are the major source for entrepreneurial
  skills, innovation and employment, after
  agriculture
• After agriculture, SMEs are the second largest
  employer of human resources
• Number of people employed in SMEs has grown to
  approx. 75 million at a growth rate of 5.5
• 45 of the SMEs are in rural areas while 55 of
  the SMEs are in urban areas

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IMPORTANT DATA SMEs(2013-14) contd

• 67 of the SMEs are in manufacturing sector, 17
  in service sector and 16 in repairs and
  automation
• SMEs make up for 80-90 of all enterprises and
  generate about 50-80 of total employment in
  developing Asia

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IMPORTANT DATA SMEs(2013-14) contd
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IMPORTANT DATA SMEs(2013-14) contd
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REASONS FOR SME GROWTH

1. Low investment
2. High contribution to domestic production
3. Significant export earnings
4. Capacity to develop indigenous technology
5. Operational flexibility
6. Contribution to defense production
7. Technology oriented industries
8. Import substitution
9. Location wise mobility
10. Low intensive imports
11. Competitiveness in domestic markets
12. Competitiveness in export market

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SMEs.. Manufacturing Sector

• The various types of SMEs in manufacturing are
  textiles, machinery, plastics, auto components,
  rubber, foundries, paints, electrical, automation
  etc.
• SMEs contribute to 40 of total exports
• Form 95 of the total industrial units
• Manufacture 8000 quality products for Indian and
  international markets
• CHALLENGES
• Manufacturing SMEs in India are also facing a
  number of problems like.
• Sub-optimal scale of operation
• Technological obsolescence
• Supply chain inefficiencies
• Increasing domestic global competition
• Working capital shortages payment delays and
  Insufficient skilled manpower
• Change in manufacturing strategies and turbulent
  and uncertain market scenario
• OPPORTUNITIES
• There lies a huge opportunity in terms of
  technological advancement, financial assistance,
  manufacturing competitiveness, innovation,
  infrastructure development etc. 

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SMEs - SERVICE SECTOR

• CSO (Central statistics organization) of India
  has classified servicesector into 14
  classifications they are1) Trade, hotels and
  restaurants (THR)
• 2) Trade3) Hotels and restaurants4) Transport,
  storage and communication5) Railways6)
  Transport by other means7) Storage8)
  Communication9) Financing, Insurance, Real
  Estate and Business Services10) Banking and
  Insurance11) Real Estate, Ownership of Dwellings
  and Business Services12) Community, Social and
  Personal services13) Public Administration and
  defense (PA D)14) Other

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SMEs - SERVICE SECTORcontd

• Employment-intensity is highest in
  manpower-intensive services like security
  agencies, housekeeping, and facility management.
• CHALLENGES
• SME Sector is a handicap, despite of commendable
  contribution to nations economy
• Absence of adequate and timely banking finance
• Ineffective marketing strategy
• Constraints on modernization expansions
• Non availability of highly skilled labor at
  affordable cost
• Follow-up with various government agencies to
  resolve problems etc.
• OPPORTUNITIES
• There lies a huge opportunity in terms of
  available skilled and unskilled manpower

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SMEs AGRICULTURE SECTOR..

• The various types of agriculture sector SMEs are
  inputs and technology providers, producers
  (farmers), logistics trade and distribution,
  processors, wholesalers and retailers.
• CHALLENGES
• Fragile internal control systems
• Poor management culture
• Corruption and security risks
• Lack of skilled workers and reliable
  infrastructure
• The most significant barriers common are lack of
  access to financing and to markets.
• OPPORTUNITIES
• Addressing the lack of access to financing and
  to markets is instrumental to unlocking the
  potential of SMEs as engines of domestic growth.

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Agriculture Value Chain
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OPPORTUNITIES IN INDIAN SMEs..

• India is among the three most attractive FDI
  destinations in the world
• One of worlds leading technology centers
• India has highest return on foreign investment in
  the world
• By 2032, India will be among the three largest
  economies in the world
• India is a developed country as far as
  Intellectual Property is concerned
• The Indian market has two core advantages an
  increasing presence of multinationals and an
  upswing in the IT exports.
• In order to enable SMEs get easy access to the
  finance, government has also introduced priority
  sector lending and has made mandatory on the
  domestic and foreign banks to lend 40 and 32 of
  their Net Bank Credit (NBC) to the SMEs
• The opportunities exists for foreign SMEs looking
  to expand in the Indian market in the field of
  technology transfer, setting up the new business
  in the country, obtaining the sub-contracting
  rights, out-sourcing to their Indian partners
  etc.

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