The Micro, Small Medium Enterprise (MSME) Sector is the most vibrant and dynamic sector of our country. It is recognized as an engine of economic growth all over the world. By employing 40% of India’s labour force and contributing 45% of India’s manufacturing output, MSME’s have been regarded as the backbone of our economy. At present 4.4 million MSME’s in India accounts for about 40% of the country’s Exports. The MSME Sector plays an important role in the form of balanced and inclusive growth and further it is helpful in reducing the regional disparities.
Micro, Small & Medium Enterprises (MSMEs) form an important and growing segment of Karnataka's industrial sector. As per MSME Act 2006, MSMEnterprises have been categorized broadly into those engaged in Manufacturing and providing /Rendering Services, based on their investment on plant and Machinery.
MSME New Definition: Union Cabinet has approved the revised new definition of the MSME. The MSMEs have been redefined on the basis of investment limit and turnover size. The Medium Units will now be defined as companies with up to Rs 50 crore investment and turnover of Rs 250 crore.
Main Features of MSME:
- Works for the welfare of artisans and workers.
- Provides credit limit or funding support from banks.
- Promotes entrepreneurship development and skill upgradation via specialized training centers.
- Supports technology upgradation, infrastructural development and modernization.
Major Challenges Faced by the MSME Sector:
- Ease of doing business remains a bottleneck. ...
- Lack of financial expertise. ...
- Lack of Access to Financing Solutions. ...
- Technology remains a major deterrent. ...
- Labour issues. ...
- Lack of Trust. ...
- Absence of collateral in loan.
Karnataka Industrial Policy 2020 – 25 – Objectives:
The main objectives of the new industrial policy in Karnataka are:
- Create at least 2 million jobs
- Facilitate investments in advanced R&D, manufacturing and innovation
- Maintain an annual industrial growth rate of 10%
- Attract investments of at least 5 lakh crore
- Reach the 3rd rank amongst Indian states for merchandise exports in the next 5 year
Industrial Policy In Karnataka 2020-25 – Highlights:
Zoning Of Karnataka’s Districts
The new industrial policy categorizes the state’s districts into zones. This is aimed at developing industrially backwards areas.
- Zone 1 and 2: industrially backward districts
- Zone 3 and 4: industrially developed districts like Bengaluru and Mysuru
Identification Of Focus Sectors:
The key sectors identified by the policy include:
- Automobiles and auto components
- Electric vehicles
- Pharmaceuticals and medical devices
- Knowledge-based industries
- Engineering and machine tools
- Renewable energy
Mechanism to deal with potentially viable sick MSME units:
State Level Inter-Institutional Committees (SLIICs) have been set up in all the States under the Chairmanship of Secretary, Industries Department of the concerned State to deal with the problems of co-ordination for rehabilitation of sick MSME units.
A Sub-Committee of SLIIC has also been set up wherein borrowers and concerned bankers are invited to discuss the issue.
Elaborate guidelines issued by the Reserve Bank of India for extending rehabilitation assistance to eligible units.
Major Causes of sickness:
There are many and varied reasons for sickness in MSME sector. Some of these are:
- Inadequacy of working capital, delay in sanction of working capital and time gap between sanction of term loan and working capital.
- Poor and obsolete technology
- Problem related to availability of raw material
- Inadequate demand and other marketing problems
- Erratic power supply
- Labour problems
- Infrastructural constraints
- Poor Management
- Inadequate attention to R&D
- Diversion of resources
- Inability of the units to face growing competition due to liberalisation and globalisation
Working Group on rehabilitation of Sick units:
As per the recommendation of the Group of Ministers, RBI had set up a Working Group under the chairmanship of Shri S.S. Kohli, the then Chairman of Indian Banks Association to review the exiting guidelines in regard to rehabilitation of sick MSME units and to recommend revision of guidelines making them transparent and non-discretionary for the rehabilitation of current sick and potentially viable MSME sick units. The Working Group submitted its report in May, 2001. All the major recommendations were accepted by the RBI, including a change in the definition of sick MSME units, norms for deciding on the viability of sick units, etc. The revised definition would enable Banks to take action at an early stage for revival of the units. Based on the accepted recommendations of the Working Group, the RBI had drawn up the Revised Guidelines for Rehabilitation of sick MSME units, which were circulated on 16th January, 2002 to all the Scheduled Commercial Banks for implementation.