For the village and micro industries, mostly in the unorganised sector, the government schemes do not mean a thing to them. That?s because those reaping the benefits of these schemes are just a minuscule part of a huge base of such enterprises.

Additional secretary and development commissioner in the Union ministry of micro, small and medium enterprises (MSMEs), Jawahar Sircar, explains: ?There are about 12.9 million SMEs, of which only 2.6 million are registered. There are also a large number of artisans, particularly in the semi-urban and rural areas, and if their numbers are to be taken into consideration, the total number of MSMEs would swell up to at least 61 million.?

According to a document prepared by Confederation of Indian Industries, SMEs account for nearly 40% of the country?s GDP and around 35% of the total exports. Not just this, SMEs provide employment to more than 31.252 million people.

But the contribution of SMEs should not be considered in isolation. It is the entire chain of activity that is responsible for the achievement. According to Sircar, it is a six-tier chain in India, beginning with original equipment manufacturers (OEMs) at the top. Then there are vendors, sub-vendors, assemblers, sub-suppliers, micro-entrepreneurs and artisans. He says that sub-vendors, assemblers and sub-suppliers are those SMEs that are able to reap the benefits of government schemes. The micro-entrepreneurs and artisans who are at a rank below are out of the reach of any substantial benefits doled out by the government.

“If our concept of inclusive growth is to be a reality and if we are to sustain an 8%-plus growth of the economy, it is necessary that we reach out the benefits to the micro-entrepreneurs and artisans, Sircar had said at the India Global Summit on MSMEs recently in Delhi.

In the present liberalised economy, MSMEs are open to competition and today, only 35 items have been reserved for exclusive manufacture by MSMEs. But MSMEs have braved the situation and have been able to compete in unreserved items with the big units.

The government had announced a package for promotion of MSMEs in February 2007 as part of the implementation of the Micro, Small and Medium Enterprises Development Act, 2006. This includes measures like addressing concerns of credit, fiscal support, cluster-based development, infrastructure, technology and marketing. Capacity-building of MSME associations and support to women entrepreneurs are the other important features of the package. To make the credit guarantee scheme more attractive, the eligible loan limit has been enhanced from Rs 2.5 million to Rs 5 million.

The guarantee cover for micro, small and medium enterprises owned and operated by women, and all such enterprises in the Northeast, has been raised from 75% to 80% for loans up to Rs 5 lakh. Exclusively for the Northeast, the one-time guarantee fee has been reduced from 1.5% to 0.75% for all loans.

Surinder Kapur, chairman, manufacturing innovation mission in the CII is, however, of the view that that if MSMEs are to survive in the era of liberalisation and globalisation, they have to be innovative. And Sircar says the government is trying to help the MSMEs in this regard through the programmes of capacity-building.

Financial constraints also act as a barrier towards innovations for MSMEs, particularly the micro enterprises. Just a few micro enterprises can access credit.

In this connection, Kapur says there are instances where big firms that depend upon supplies from SMEs have tried to help them to upgrade and become innovative. He says Crompton Greaves Ltd, one of the 30 largest firms manufacturing a range of equipment driven by electric motors, has had for many years a sophisticated programme of supply-chain upgrade based on the global best practices. Crompton Greaves suppliers are classified into four groups, namely those whose deliveries are checked at the company, self-certified vendors who take the responsibility for their own quality auditing before delivery, zero-defect suppliers who achieve consistent defect-free output and total-quality suppliers who complement their activities with wide-ranging improvement programmes. The company?s supplier development programme is designed to assist its suppliers to move through these stages.

Perhaps the most successful story of clustering in India is the garment sector. The garment cluster in Tirupur portrays some of the best practices through clustering. The cluster has over 2,000 garment exporters that are supported by thousands of value chain players like subcontractors, dying units and knitting units.

A study conducted by PricewaterhouseCoopers on possible ICT intervention in the clusters, has highlighted some of the best practices of collaborative order fulfillment present in the clusters. The garment cluster has developed amazing agility and response to reducing order fulfillment lead times through sharing capacity and orders.

The closer relationships between different value chain entities have made the cluster stronger than the sum of individual entities. Auto component SMEs are the fastest growing in this category of industries?these units are key contributors to the total production of auto components and also have a significant share in the exports of the industry.

As part of a highly fragmented industry, these companies mostly are part of the unorganised sector. They operate in a tier framework and most of the companies in the SME segment are in tier-II or below. Few of the suppliers to OEMs are medium scale enterprises. The Indian success in the automobile industry has been due to the natural clustering approach of the suppliers and SMEs, along with adoption of innovation.

Recently, the National Board for Micro, Small and Medium Enterprises (NBMS&ME) at its fourth meeting presided over by the minister, Mahabir Prasad deliberated on the issue on entrepreneurship development. Prasad informed the Board members that the government has set up three national level entrepreneurship development institutes (EDIs).

Besides, the ministry has also been implementing an important scheme, namely Scheme for Assistance for Strengthening of Training Infrastructure and new Entrepreneurship Development Institutes. Under this scheme a maximum of Rs one crore assistance is given to new Entrepreneurship Development Institutes as also to existing institutes. Expressing satisfaction that the General Budget 2008-09 has made a provision of Rs 2,000 crore Risk Capital Fund for Small Industries Development Bank of India (SIDBI), the minister said that some more proposals would be taken up during the Budget discussions.

Some of the members raised the issue of extending collateral free loans of up to Rs 5,00,000 to the MSME sector (both manufacturing and services enterprises) to which the minister said the Reserve Bank of India (RBI) had already issued a circular on September 21, 2007 to all scheduled commercial banks that they should extend collateral free loans up to Rs 5,00,000 to the units of MSME sector as defined under MSMED Act 2006.

The Reserve Bank of India (RBI) advised all scheduled commercial banks to issue necessary instructions to the branches or controlling offices in this regard, the minister added. Some of the members raised the issue of steel-price hike, which was affecting the micro and small industries. The minister assured the members that the issue would be taken up at the appropriate level.