Journal of Small Business and Enterprise - March, 2013 - CII

Small WorldMadhav Lal new MSME SecretaryMr Madhav Lal has been appointedas Secretary, Ministry of Micro,Small and Medium Enterprises(MSME), Government of India. He hassucceeded Mr Vivek Rae, who has becomeSecretary in the Ministry of Petroleumand Natural Gas. Mr Lal, 57, is a 1977-batchIAS officer of J&K cadre. Before joining theMinistry of MSME, he was Chief Secretaryof Jammu and Kashmir. He was decoratedthe post of the Chief Secretary of J&K fora little over two years. Earlier, he wasAdditional Secretary and DevelopmentCommissioner, Ministry of MSME. Mr Lalhas also served in the Government ofIndia as Deputy Secretary in the Ministryof Finance (Department of EconomicAffairs) and as Member (Finance andAdministration) in the National HighwayAuthority of India (NHI).Core Groups to Look into MSME issuesThe Government of India hasdecided to form 2-3 small groupsto look into the issues faced by themicro, small and medium enterprises(MSME) sector and give suggestions. MrAjit Seth, Cabinet Secretary, Governmentof India, has announced the formation of2-3 small groups to look into the issuesfaced by MSME sector. MSME sectoris the backbone of manufacturing.On immediate basis, I announce theformation of 2-3 small groups so thatsuggestions offered here can be lookedinto. This will help us in ascertainingthat what can be done quickly and I willtake another review with the Secretariesin three weeks time so that we can dosomething quickly for this sector, MrSeth said in a statement. He stressedon the need for constant technologyupgradation and innovation to staycompetitive in the global market. Healso underscored the importance ofconcerted efforts to increase the share ofMSMEs in these technological areas andthe necessity for creation of intellectualproperty rights.Govt to MonitoringEffectiveness ofProcurement PolicyThe Ministry of Micro, Small andMedium Enterprises (MSMEs) iscurrently reviewing how muchsuccessful the public procurementpolicy has been during the first one yearafter its implementation. “In the publicprocurement policy, it has been said that20 percent would be procured from MSEsat the end of three years. Right now, weare at the end of first year. So, we arenow beginning to review with the variousPSUs as to how much they have beenable to procure,” told MSME secretaryMadhav Lal to media. In November 2011,the government approved the procurementpolicy mandating all state-run companies,ministries and departments to procure 20percent of their products and service needsfrom Small and Medium Enterprises (SMEs).Of the 20 percent target, there is a subtargetof four percent that is earmarkedfor procurement from the SMEs owned byentrepreneurs from the Scheduled Castesand Scheduled Tribes (SC/ST) communities.SME Collaboration Key to BoostIndia-France Trade: HollandeFocusing on enhancing collaborationbetween Indian and French smalland medium enterprise (SME)sectors is the way forward to give afillip to France-India trade in comingdays, said French President FrancoisHollande recently. The way forward toboost France-India trade is to focuson collaborations with the small andmedium enterprises (SMEs) in all sectorsof the Indian economy, said Hollande,addressing an India-France businessmeet held in New Delhi. The Frenchpresident also said every type of Frenchcompany, from the small to the big,should have access to the Indian market.SMEs make up 99.8 percent of Frenchbusinesses, while micro-firms accountfor 93 percent. French micro enterpriseshave a higher labour productivity thanmany of their counterparts in otherEuropean countries.3MSME Business March 2013

BudgetMr Ramesh Datla, Immediate Past Chairman, NationalMSME Council, CIILooking at the economic scenario inIndia and globally the union budget2013 was balanced by addressingcertain key issues related to MSMEs. CIIMSME Council has been pursing for manypolicy changes with the government and weare happy that this budget has address someof the key issues pursued by CII including (i)extending of preferential benefits for theMSMEs for 3 years after they outgrow fromtheir existing category, (ii) CSR activity canfund Technology Incubators certified byMinistry of S&T and MSME, (iii) Rs 500crfor SIDBI to setup factoring guaranteescheme, (iv) doubling of allocation toSIDBI. Other key announcements wherethe Rs 2200 fund for tool rooms and sectorspecific duty reductions and additionalallocation for the NSDC will definitely helpthe MSME's in today's difficult times.Toencourage the listing on SME Exchange,giving support to the start-ups and firstgeneration entrepreneurs through listingon SME Exchanges without an IPO is alsoa welcome move. Delayed Payment wasone key issue which was very critical forMSME's in today's environments, has notbeen addressed in this budget.MSME Business March 20136Mr Kavi Arora, CEO & MD, Religare Finvest LimitedThe budget this year has been aprogressive and forward lookingone with special mention to MSMEs.Government has realized the financegap to the sector and has announcedsome primary steps to bridge this hiatus.Announcements such as non-tax benefitsfor three years, more funds to SIDBIto support refinancing and factoring,extension of technology fund scheme(TUFs) for textile industry, fund of Rs.2200 cr for tool-room and technologydevelopment and lower interest for handloomweavers, will all add to the motivationfor this sector. Especially for textiles whichcontributes to almost 10% for the totalmanufacturing output from MSMEs inIndia, this announcement of providingtechnology support will give an impetusto the sector. I believe sector focusedNBFCs like us had some more expectationsin terms of special incentives and costbenefits to service MSMEs in India, thatare not directly covered in this budget buthopefully we can get some refinancingbenefits from funds allotted to SIDBI.Mr P Ganesh, Chairman MSME Sub-Committee SR &Chief Executive GEFAB Facade Solutions P LtdCII should strongly take up extending thebenefit of 15% investment allowanceto MSMEs also by withdrawing the minlimit of 100 Crores proposed in the budget.Incentivize the MSME sector basedon performance. Most of units in thesector become sick due to high costof finance. Encourage more number ofunits to establish shop, produce and sell.MSME sector is the largest employmentgenerator in India after agriculture. A smallpercentage of the indirect taxes paid (ED,CST, VAT, Service Tax) by the unit may beused to incentivize the unit say 8 to 10%.Mr M Babu Rao, Managing Director,GSB Forge Pvt LtdThis provision is rather discriminatory andshould be done away with for the healthygrowth of MSMEs in the country and givinga boost to the manufacturing sector.This amount could be used to reduce thecost of finance by financial institutions.Only the deserving units will be benefitted.All public sector and private sector banksshould be mandated to participate in equityof MSME's aspiring to get listed. This will bea great help to the MSME's and the financialinstitutions will also get benefited by wayof good returns. The banks can retire theequity after the lock in period of 3 years.

Growth DriverRevving Up For VerticalTake-OffWith global aircraft companies and OEMs turning to India for assured suppliesat competitive costs, niche SMEs operating in the aerospace industry are seeingunprecedented growth opportunitiesMSME Business March 20138Aircraft manufacturing companiesand large original equipmentmanufacturers (OEMs) areincreasingly turning to Indiansuppliers due to costconsiderations, especially in the wakeof an extended period of globaleconomic slowdown.Moreover, global firms producingcommercial aircraft have cut downdevelopment time using computeraideddesign and drafting (CADD),which allows them to design and test anentire aircraft, including the individualparts, by computer. The specificationsof these parts can be sent electronicallyto subcontractors around the worldincluding India who use them toproduce the parts.Emerging OpportunitiesIndian SME manufacturers linkedwith the global aerospace industryare poised to leverage these emergingmarket opportunities. They would alsobenefit from global aerospace suppliersentering into joint venture arrangementswith major Indian aerospace companies.In fact, many traditional first tieraerospace supplier responsibilities arebeing pushed down the supply chain tosecond and third tier suppliers. As thelarger firms move into aerospace systemintegration, lower-tier firms are calledupon to globalise themselves.Once established in India, many ofthe first tier firms require their supplychain partners to begin dealing directlywith Indian members of the supplychain. While extremely challenging forSME suppliers, these new relationshipsbring an added benefit, the opportunityfor additional sales with other aerospacecompanies doing business in India.The SMEs are also seeing a raftof opportunities springing from theexpansion of India's own aerospaceindustry, with all its segments includingcivil aviation, military aviation and spaceresearch showing remarkable growth.Renewed thrust on modernisation ofairports, communication, navigationand surveillance systems for aircraftmanagement and facilities formaintenance repairs and overhaul(MRO) of aircraft and subsystems arecreating new growth opportunities forthe SMEs operating in this industry.Ministry of Civil Aviation, Governmentof India, has estimated that the Indianaerospace industry needs investment of$200-$300 billion. A major proof-pointthat the industry has set sights on a veryhigh growth trajectory.India also represents a large andgrowing annual market for air defenceequipment with major procurementof military hardware and also forupgrading its surveillance, defence andstrike capabilities.The Defence Offset Policy has alsospurred Indian SME to address the globalaerospace value chain. Informationtechnology systems, simulators, andsuch advances are coming into defencein a big way.Also, the scope of offset policyguidelines has been expanded toinclude civil aerospace, internalsecurity and training. The list of eligibleoffset obligations will cover most aspects

Growth Driverof civil aerospace including aircraft, airengines, aircraft components, design,engineering services, etc. A widerange of weapons and servicesfor counter-terrorism have beenincluded in the list of products underinternal security.Niche SMEsHowever, these opportunities areopen only to niche SMEs that have thewherewithal to cater to this market.These niche SMEs are today seeingmultiple opportunities in design,development, and manufacturing in theaerospace sector. At the same time, tomove up the global defence value chain,these enterprises should have to focuson innovation, building intellectualproperty, and adopt quality and processstandards to be able to offer completesub-systems or assemblies.Aerospace manufacturing is ahigh technology and capital intensiveindustry. Its value chain is characterisedby a long project life cycle spanningR&D, engineering design, manufacturing,assembly, maintenance, repair andoverhaul. Intensive technology andsafety requirements require significantinvestments in R&D and quality control.Firms that focus on multipurposetechnology have secured their positionin the market by becoming specialisedsuppliers serving different globalvalue chains. SMEs of aerospace andprecision engineering sectors havebecome conscious of their competitivestrengths, which they associate inparticular to flexibility and qualityof their offer.Looking ahead, two key areas thatmerit expeditious interventions areMSME R&D in aerospace industry, andtalent development for building a globalworkforce for the niche SMEsPrivate sector participation indefence R&D is growing. Governmentshould look to create an ecosystemthat encourages more private playersto pursue high-level R&D in theaerospace industry.Meanwhile, United Nations IndustrialDevelopment Organisation (UNIDO)and the Society of Indian AerospaceTechnologies and Industries (Siati)have partnered to create a longtermdevelopment programme forBangalore-based aerospace SMEs. Thetwo organisations are to help SMEs insub-contracting and partnershipexchange, prepare for supplierdevelopment programmes and helpthem through matchmaking services viaglobal networks.As regards talent management,the focus for SMEs should be todevelop new employees throughspecialised training programs andassimilation, while keeping currentemployees and attracting highly skillednew workers to join the workforce. Itis a highly strategic effort and takes aconscious effort from management tosource, attract, select, train, develop,promote, and move employees throughthe organisation.Way ForwardIndian industry has time to timemade various suggestions to helpSMEs take full benefit from the newdevelopments in the global aerospaceindustry. They are:India should leverage its strengthsin the information technology andautomotive industries to graduate intodesign, development and manufacturingin the aerospace and defence sector.Indian SMEs should aim tointegrate into the global aerospaceand defence value chain throughIndian prime contractors involvedin global defence programs and/orbuild relationships with internationalSMEs in niche technology areas.OEMs in the aerospace and defencesector are shifting their focusto design and systems integration fromvertically integrated manufacturing.This provides an added opportunity toSMEs to venture into areas of aerospaceand defence manufacturing which wereearlier the exclusive domains of OEMs andlarge prime contractors.The Indian aerospace and defenceindustry needs rapid development ofdomain knowledge. This would requireactive industry-government-academiapartnership with leading technologyinstitutes across the globe, to upgrade,design and offer tailor made coursesfor the aerospace and defenceindustry in India.SMEs in the aerospace anddefence industry should focus onbuilding complementary activities andcapacities and sharing common facilitiesthrough clusters.Government may consider focusingon areas of strategic importance andgradually integrate the private sectorinto non-strategic areas. To enable theprivate sector to plan their investmentsand supply chain in advance, the privatesector could be closely involved inplanning and project categorization.Private sector participation indefence R&D should be activelyencouraged and primarily financed bythe government, given the fact thatdefence R&D is expensive and markedby an element of uncertaintyOverall, there is a need to mitigatethe common challenges faced by SMEs,like credit shortage, through urgentpolicy interventions by governmentto support SMEs, which in turn willsustain and enhance the businesscompetitiveness.These steps will greatly help theIndian aerospace industry to account fora larger share of the $930 billion globalaerospace industry.9MSME Business March 2013

SUCCESSMSME Business March 201310There's Value In WasteBangalore-based Daily Dump has developed innovative terracotta products thathelp people manage waste with minimal effortBangalore-based Daily Dump (www.dailydump.org), an innovativeMSME doing business in thearea of waste management, hasdemonstrated how a small enterprisecould make a big difference to societyin a short span of time without dilutingits business goals and profitability.Daily Dump was founded by PoonamBir Kasturi in 2006 to make an attemptto see if waste in our country can bemanaged better, to regenerate the earthand the people.Kasturi studied various compostingmethods and experimented withseveral of her own techniques beforeintroducing Daily Dump's terracottaproducts that help people do thecomposting at home with minimaleffort. The best way for an individualto help the waste issue in their city isto manage it at source. The Daily Dumpmethod of composting does not requireelectricity and is done in terracottacomposters. The material needed tolook after and maintain the compostingprocess is organic and totally chemicalfreelike neem powder, EM, biocullum,lemongrass oil, etc, thus making it ecofriendly,she explains.Kasturi started Daily Dump by digginginto her personal funds. Impressed withDaily Dump team's performance in astartup competition, a Netherlandsbasedsupport group called SharePeoplesent a marketing expert to guide thecompany in its initial growth phaseGrowth has not come easy to Daily Dumpgiven that it was pioneering a conceptthat would find takers gradually throughawareness building.Speaking about this challenge,Kasturi says, Our biggest challengeis to make composting seem simple,doable and fun. It is a very hardthing to do with the price point andmanufacturing scale we are operatingat. We have monetised a market thatdid not exist previously. And ourchallenge remains, product, productionand price, with the overarchinggoal on customer convenience.Elaborating on the innovation,she says, When I was prototypingcomposting, I found that terracotta wasthe best material because it was porousand controlled the excessive water thatis discharged during decomposition.Also having worked with crafts for a longtime, I had found that the potter's skillswere being lost; potter families no longerwanted their children to continue in thetrade because we had stopped using potsto cook, store or use in our daily lives. SoI thought this would be a great startingpoint, to be able to provide pottersa product that would provide them asteady income; while simultaneouslysolving an urban problem.In the longer run Daily Dumpwould be looking at a considerablylarge market in view of the wastemanagement challenges that Indiancities face today. She explains thatbig Indian cities produce about 3,000tonnes of waste every day. Eachhousehold generates approximately750-1,500 gm of organic waste daily.This works out to be 70% of the totalhousehold waste. Each house generatesabout 20% recyclable waste and 10%rejects daily in addition to the 70% oforganic waste that is generated.Most of waste generated by householdsand commercial establishments reachdumps that are illegal and unscientific,adversely affecting communities and thebio-diversity around them. Organic wastemixed with batteries, plastic, tubelightsand medicine pollutes ground water,soil and air. Organic waste is 60% water.The municipal department spends fuel,cartage and labour transporting water.If our cities manage organic waste atsource, we could spend tax-payers moneyon more urgent project like schools,health and infrastructure, she adds.Organic waste like vegetable scraps,fruit peels, leftover food like bread, rice,dal, bones, pasta, garden clippings, oldenvelopes (without the plastic), kitchentissue paper, etc., can be recycled intocompost by using Daily Dump products.Now, our customers keep 3,500kg of organic waste out of landfill sitesevery day in Bangalore alone by usingour products, says Kasturi, adding thatmost people have never consideredcomposting as an alternative wastemanagement process. The challenge isto convert them into believers.The other challenge is the widespreadperception of waste management assomething that the Government has todo. Daily Dump strives to get peopleto take ownership for managing theirwaste. The team aims to make peopleself-driven composters, not motivated byany extrinsic reward/device, to make it acool activity, rather than a chore.Kasturi's advice to buddingentrepreneurs: Know what you want to doand why you want to do it; be clear andhonest about that and then stick with itfor a long time before you give up.

StrategyBusiness Plan: Must for SMEMaking a business plan plays a pivotal role in the success of the firm and thus needsto be followed with a scientific approachIn today's highly competitive andever-changing market conditions, itis vital for businesses to define theirobjectives, develop strategies, forecastgrowth and plan for contingencies. Inother words, create a solid business plan.So what is a business plan and why is ituseful for SMEs?A business plan outlines the roadmapto achieve both long and short termbusiness objectives. This documentalso states a company's vision, missionand financial goals. A plan helps tonot only sharpen business focus andprioritize actions, but also gauge actualperformance against business goals.ForAn SME, having a structured businessplan serves two significant objectives:The first objective is to presentbusiness details and strategies to externalaudiences prospective investors, financialinstitutions etc. to generate funding,which is essential for growth and smoothfunctioning of the business.The second objective is to keep theorganizational workforce updated aboutthe future plans and goals, and theroadmap to achieve these. This helpsin steering the organization towardsits objectives by keeping the businessentrepreneur and all the employeesaligned in the same direction. In addition,well-devised business plans provide anoperational framework that allows thebusiness to enjoy distinct competitiveadvantages. This, in turn, results inincreased profits.How does one create a business planand what should it contain?Making a business plan also plays apivotal role in the success of the firm andthus needs to be followed with a scientificapproach. Below are the key componentsof a good business plan and how oneshould go about developing it :1. Executive Summary: The summaryshould be the reflection of the businessand should help reader to understand thekey facts about the business at a glance.The summary should be kept short, crispand clear. It should fit in a page, unless anduntil some key information such as capitalstructure, prime events etc. have to bementioned. Ideally, this is the section thatwill be made last, after all the followingsections are done.2. Vision, Mission business structureand promoter background : This section iswhere you outline your business vision andmission clearly, e.g. To become the leadingsupplier of springs to the automotiveindustry for a spring manufacturer, or Toprovide the most authentic Chinese cuisinein New Delhi for a Chinese restaurantbeing set up in New Delhi. You should alsogive a description of how your businessis structured, i.e. the legal structure (asole proprietorship, a partnership or acompany), and a brief description of thebackground of the promoters education,work experience, etc3. Market sizing, growth prospects andcompetition Firstly, you should define themarket in terms of size, structure, growthprospects, and other trends. After that,you should list out the key competitorsin the market, and an assessment of theirrelative strengths and weaknesses as well.Many times, you might be able to obtainindustry and market data from differenttrade bodies (e.g. CII, FICCI, Assocham)or Government agencies and institutionsspecially tasked for this (e.g. SIDBI)4. Products and Services: This sectioncontains the description of the productsand services that the business will supplyto its customers. Your product pricingshould also be included here5. Sales and Marketing: In thissection, you should detail out your salesand distribution plans, e.g. which cities/localities will you set up a branch ifnecessary, will you appoint your ownsales force or agents, or is it just directmarketing to businesses, etc6. Operations: This section detailsout the manufacturing process or servicedelivery process of the business, includingwhat equipment/machinery will be used, etc7. Organization structure : Here,you should detail out the organizationstructure, roles and responsibilities ofsenior management and the overallmanpower requirements.8. Financials: The trickiest part comestowards the end, as it is interlinked toall the past steps and leads to financialstatements such as Income statement,cash flow statement and balance sheet.This section is the backbone of the planas the overall capability of the businessis mirrored here. Sound financials arekey to raising capital in the form ofequity or for obtaining loans. If the planis for an existing business, then you willhave to provide historical data as well asfuture projections.How often does the business plan needto change?A business plan is valid only for a finiteperiod of time, i.e. 1-2 years at best. Forthe plan to be effective, it needs to bereviewed regularly, as certain strategiesmight require changes to adapt tochanging market conditions.Some sections of the plan, such asmarketing plans, pricing, product andservice features, etc., change in sync withchanging external factors.However, other sections like thecore business model are less likely tochange often.Getting help Of course, all this mayseem daunting at first sight! But youwill realize the benefits of building abusiness plan in a structured manneras it forces you to think through allthe aspects of the business somethingwhich you may not have done before.Also, one can take professionalhelp here as well. There are manyChartered Accountants and otheradvisors who can help you with this;another option is to ask your financepartner (bank or NBFC) who may bedoing this as a value added service toSMEs (Read more about choosing yourright finance partner here).Kavi Arora is Managing Director & Chief Executive Officerat Religare Finvest Limited Managing the Small andMedium Enterprises (SME) focused commercial lendingbusiness. For any suggestions and feedbacks related tothe article kindly write to marketing.rfl@religare.comMSME Business March 201311

Sector FocusClimbing Growth LadderThe growth in adoption of agricultural machinery in the country has been madepossible due to their local manufactureMSME Business March 201312Indian automotive major Mahindra& Mahindra on March 6 launched itsRs.300-crore tractor manufacturingplant in Andhra Pradesh's Zaheerabadwith an annual capacity of 100,000tractors, claimed to be the biggest in Asia.The plant, some 110 km from Hyderabadin Medak district, also attracted sevencomponent manufacturers who would setup their operations there.This reflects how far the farmmechanization in India has come in thepast 50 years. Tractors were introducedin the country through importation. Thelocal production started in 1961 with atotal production of just 880 tractors ayear. Nearly 52 years later, Mahindra &Mahindra's Zaheerabad plant alone plansto manufacture 1,000 units a month,which will be increased gradually, saysPawan Goenka, president, automotiveand farm equipment sectors, Mahindra& Mahindra Ltd. Goenka adds that theancillary units will play an important rolein this project and about 20 such farmimplement SMEs are expected to relocateat the 100-acre compound.The growth in adoption of agriculturalmachinery in the country has been madepossible due to their local manufacture.According to Tractors ManufacturersAssociation, Lodhi Road, New Delhi,although there are presently about1,000 major manufacturers of farmequipment in the country, the supplyof crucial components to these unitsis mainly undertaken by Small andMedium Enterprises (SMEs). While the26,000-crore tractor segment leads thefarm equipment sector, the 3,000-croreIndian farm equipment sector is largelyconcentrated in the unorganised sector.Agricultural machines are reservedfor small-scale units. The demand forirrigation pumps, power tillers, chaffcutters, threshers, reapers, combineharvesters and milling & dairyingequipment, etc, has been growing inIndia because of a robust rural economy,government subsidies, farm labourshortage, improved availability of farmcredit and custom hiring.The union budget for 2012-13 withproposed outlay of Rs.27,049 crore for theagriculture ministry is expected to furtherspur this demand. The proposed NationalFood Security Act and Rs.1,000 crore tosupport a new green revolution in easternstates like Assam, Bihar, Chhattisgarhand West Bengal to increase the riceproduction, too, brings good news forSMEs in the farm equipment sector.Programmes like the Rashtriya KrishiVikas Yojana with an outlay of Rs.9,954crore for 2013 and the National FoodSecurity Mission with the programmeoutlay of Rs.2,250 crore are also expectedto work in favour of raising productivity ofthe sector.Farm mechanisation is covered underthe government's Agriculture Policy. Itclearly states the benefits of agriculturalmechanization should be extended to allcategories of farmers and to all regionsof the country to achieve the goal of 4percent growth of the agricultural sector.It also says that agricultural mechanizationshould lead to reduced costs of productionof different commodities, to increaseincome of farmers and to impart a priceadvantage to Indian agriculture forcompeting in the international market.This means the SMEs in the sector are setfor an accelerated growth.

Sector FocusThe National Manufacturing Policy,2011 advocates value addition andtechnological depth in manufacturing. ATechnology Acquisition and DevelopmentFund would be established for acquisitionof appropriate technologies includingenvironment-friendly technologies. Thereare also provisions for incentives to clusters,guidelines for standardization of quality,product testing, skill development, accessto capital and marketing to enhance globalcompetitiveness of Indian manufacturing.SMEs present in farm equipmentclusters including those in Ludhinana,Karnal, Ghaziabad and Kanpur in northernregion; Mumbai-Pune, Junagarh, Anandand Bhopal in Western region; Hyderabad,Guntur, Anantpur, Kakinada, Chennai andSalem in southern India; and Calcutta,Vardhaman, Durgapur, Dhanbad andMuzaffarpur in eastern part of the countrystand to benefit from the policy.Farm Machinery Training and TestingInstitutes at Budni (MP), Hissar (Haryana),Garladinne (Andhra Pradesh) andBishwanath Chariali (Assam) establishedby the government have also been playinga vital role in integrating farm equipmentSMEs into the global supply chain.The Bureau of Indian Standards (BIS)with its network of centers and laboratoriesin the country is mandated to ensurequality manufacture and marketing ofagricultural and industrial products in thecountry. The BIS formulates specificationsof agricultural machinery and otherappliances and prescribes test codes.The recommendation of the WorkingGroup on MSMEs Growth for the 12th FiveYear Plan aims at giving a new thrustto the MSME sector to enable them toincrease their global footprints. SinceIndian farm machinery sector is morecompetitive due to lower labour wagesand cost of production, the importersfrom various countries find Indian farmequipment sector more attractive.According to Lemken, a Germanfarm equipment manufacturer, theequipment manufactured in India areat least 40 per cent cheaper than thosemade in Germany.With foreign farm equipmentmajors such as Lemken and Italy'sMaschio Gaspardo setting up theirmanufacturing units in India, evenas many more are in queue, there isenough opportunity for SMEs in the farmequipment space to grow and competein global market, especially when thegovernment is by their side with theNational manufacturing CompetitivenessProgramme (NMCP). However, deliveringquality the investors are lookingfor is imperative.More than 18,000 SMEs in the sectorscattered all over the country fabricateimplements and equipment for tractorand power tiller manufacturers, usingmaterials from mild steel to mediumcarbon steel. Heat treatment practicesare generally inadequate except in fewindustries manufacturing knife andtillage tools, says a research paperfrom the Central Institute of AgriculturalEngineering, Bhopal.The answer to such challenges liesin innovation, competitiveness andsustainability, and making the most ofthe government support in terms oftechnology transfer, patent bank, financialassistance, skill development, testing andstandardization and global exposurethrough international exhibitions andfairs. Some of the examples of thelatest innovations by SMEs in tools andimplements segment include zero till seeddrill, strip till drill, raised bed planter,sugarcane cutter planter, rice planter,tractor/power tiller operated rotavator,sunflower thresher, aero blast sprayer,power weeder, etc.Given that the farm equipment sectoris gradually coming into its own, it'shigh time that SMEs get more and moreactively involved in economic activitiesalong the global value chain, especially inthe export sector.MSME Business March 201313

TransformationThe Game ChangerFDI in multi-brand retail will spur Indian MSMEs to boost their globalcompetitiveness and tap into new growth opportunitiesMSME Business March 201314In 2006 Government of India allowedFDI in single-brand retail to giveconsumers greater access to foreignbrands. However, the entry of globalbrands through single-brand retailingfailed to increase Indian consumerschoice of goods and services as mostlyluxury brands took this route.Several foreign retailers and brandsentered the Indian market throughdifferent routes like wholesale cashand carry, wholly-owned subsidiary inmanufacturing, licensing and distributionagreements, joint ventures for eachbrand (or single-brand retail route),franchising and commission agents.In the effort to open up the retailsector, Government allowed 51 percentFDI in multi-brand retail in September2012, but left it to the state governmentsto permit global retailers to open storesin their respective regions.Government also tweaked thesourcing norms for FDI exceeding 50percent in single brand retail, requiringforeign firms, which want a relaxationof the 30 percent procurement norms,to set up manufacturing facilities inthe country. Cabinet gave its nod tothe policy in November 2012. However,the policy has been put on hold due topolitical opposition.The situation demands a carefulscrutiny of the likely impact of a liberalFDI retail policy on Indian producers,kirana merchants, consumers and theworkforce. What emerges is that globally,FDI inflows and the presence of globalretail majors have not undermined thebusiness interests of local retail players.The acceptance of any brand local orforeign depends on how long it is presentin any particular market.Moreover, consumer demand fora wide variety of products and brandswill prevent any firm from absorbingthe entire market share no matter howsuperior its technology or how low itsprice be even if it is far more efficientthan its average rival. Therefore, FDIcoming into domestic markets cannotallow any firm to gain substantialmarket power.Growing consumer awareness ofdifferent brands will also increase theoverall consumer spend which in turn willcontribute to the GDP growth.

TransformationMulti-Stakeholder BenefitsFDI in multi-brand retail will indeedbenefit industry, producers, kiranamerchants, consumers, and the workforcein very many ways. A CII survey of industryleaders revealed that an overwhelmingmajority (80 percent) of the respondentswere in favour of FDI in multi-brandretail. They also recognised that aliberal FDI policy will greatly benefit theMSME sector.FDI in multi-brand retail will alsodrive industry to adopt more consumerorientedpractices including closemonitoring of consumer preferences.Consumers who do their purchases atmodern outlets have experienced betterproduct quality, lower prices, one-stopshopping, choice of more brands andproducts, better shopping experienceswith family and fresh stocks.Moreover, where safety is a key factor,consumers tend to opt for branded goodsthat are perceived as safe and conformingto government regulations. They are alsobetter protected against incidence offood adulteration.Organised retail with FDI participationwill help Government to systematicallyenforce the regulatory norms. Thereis greater transparency and ease ofmonitoring in the case of organised retail,which sets stringent standards that areexecuted through pre-defined processesand technology.CII's considered view is that MSMEproducers will greatly benefit from thesourcing opportunities that stem fromFDI participation in the sector. Accordingto a CII survey, FDI in retail will push upsourcing from MSMEs to $298 billion fromthe present value of $157 billion.FDI in retail will also help MSMEsin terms of gross sales, new orders /contracts and overall growth.Besides, a liberal FDI policy will usherin advanced technologies and expertisethereby augmenting the supply chainmanagement of recipient firms. CIImaintains that supply chain efficiencieswill help reduce wastage, such as seen infruits and vegetables production. This inturn will help government curb inflationand bring down the interest rates.FDI in multi-brand retail is expected toaugment the business prospects of some12 million kirana stores in the country.Merchants who are looking to scale upwill gain access to patience capital whichis relatively scarce in the country. Manymore brands and products entering theIndian market can be retailed at thekirana stores.The kirana merchants will also gaineasier access to credit and financefacilities, logistics support and modernsystems and processes that drive upefficiency levels. Pertinent to note thatmany of the new-generation kiranamerchants are already using technologieslike mobility, e-commerce and socialmedia to run their business and meetcustomer expectations.Moreover, according to a CII survey,nearly 70 percent of the employees inthe retail industry see FDI as a growthopportunity for them. They believe theemployment levels will rise with neworders coming in from around the world.FDI in retail is likely to encourage firms tohire more. Demand for contract labour toowill increase. So the notion about peoplelosing their jobs in the wake of FDI in retailis completely unfounded.Way ForwardKeeping in view the key benefitsthat FDI in multi-brand retail will likelydeliver, CII has recommended a set ofsteps and guidelines for seamless foreigninvestments in the sector. They are:Kirana stores can be organised intolarger cooperatives to make them moreattractive for investments.Encourage SMEs supplying to globalretail majors in India to focus upon thequality standards set by the majors, andhelp them gain deep understanding of thecomplex vendor management systems.Improve public and privateinfrastructure around multimodaltransport hubs, warehouses, distributioncenters, mismanaged supply chainswith cold-storage and other facilitiesdrive inefficiencies.Empower consumers throughawareness programmes, helping them setthe right expectations from all categoriesof brands and products.Bring about changes in legal normssuch as those on zoning, store sizes,opening hours, import taxes whichcan shape the emergence of retail andselect formats.Government and industry need to becognizant of the fact that FDI in retail cansometimes negatively impact consumers ifcorporate retailers adopt anti-competitivepractices such as predatory pricing. So,the Competition Act 2002 can be furtherstrengthened. Also protect consumersagainst predatory pricing.Simplify and streamline thelicensing and approval processes, createa single window clearance up to theextent feasible.Ensure uniform implementation ofupdated laws like APMC Act, etc.Update existing laws like Shops andEstablishment Act to make it audit basedor self reporting.The retail industry in India facesmultiple challenges in terms of scale,employability and shortage of relevantskills. Managing this challenge requiresthe Government to create recognizedcourses and industry wide accreditationsfor basic training for entry level employeeswith pre-defined quality standards;provide an impetus to Governmenteducational establishments to introduceretail programs and extend incentivesand support to retailers to create trainingbodies for development of employees.On a larger plane, organised retailindustry in India is expected to grow to$535 billion by 2013 with modern retail(organised retail) accounting for a 10percent share. Experts expect the industryto scale the $1,250-billion level by 2020.MSME Business March 201315

FinanceMSME Business March 201316Small Sector to get InclusiveInnovation FundThe fund will be capitalised to an eventual target size of Rs 5,000 crore in phases.Initially, it is pegged at Rs 500 crore with an investment of Rs 100 crore by theGovernment of IndiaThe Government of India is inthe process of establishingan Inclusive Innovation Fundto build an ecosystem ofenterprises, entrepreneurship,and venture capital that promotes thedevelopment of innovative solutionstargeted at the bottom of the pyramid.The Inclusive Innovation Fund will bebased on the premise that innovativeenterprises can be profitable and scalableand can competitively engage people atthe bottom of the economic pyramid.The fund will be capitalised to aneventual target size of Rs 5,000 crore inphases. Initially, the fund is pegged at Rs500 crore and to kick-start investment aseed money of Rs 100 crore will providedby the Government of India. Eventually,80% of its capital will be sourced fromprivate investors, philanthropists, andbilateral and multilateral institutions whoshare the objectives of the fund and theremaining 20% will be provided by theGovernment of India.The life of the fund has been proposedat 10 years, extendable by up to 3 years. Itwill be managed by a highly professionalmanagement team. The team will guidethe fund, and its investee companies, toachieving its target returns.``The challenge is not in creating fundsand various financial schemes, ratherthe challenge lies in creating conduciveoperating environment and businessecosystem for sustainable development.And the MSME needs protection from theclutches of the creditors by developinginnovative financial products,'' saidMr Vivek Rae, former Secretary, Ministryof MSME at a conclave, organized byConfederation of Indian Industry (CII)on Credit and Finance for MSMEs:Securing Credit and Finance for MSMEsand Entrepreneurs.Mr Rae said MSME sector suffers fromfinancial exclusion and lending banks andthe RBI should be held responsible forthis. There is no mechanism to enforcethe accountability on lending banks forachieving the target of reaching to thefinancially excluded small units. The targetis meaningless if the there no penaltyclause for achieving the target.He said that larger enterprises shouldplay a more enlightened leadership forvendor development and in integratingsmall sector units into the entirebusiness ecosystem. On the issue ofease of doing business in the country,he candidly admitted that the countryis placed far below global ranking.He said many of the south Asian andAsian counterparts have better rankingin ease of doing business in a country.Poor credit and financial availability isdue to the procedural complexities ofbusiness and governance mechanism.Many of the foreign investors shy awayMr CK Mishra,Joint Secretary,Ministry of MSMEs,Government of IndiaMSMEs need better technology and fundsThe two major issues that are prevailing inthe sector are lack of technology and funds.Better technology will lead to better products,which lead to better pricing, subsequently betterprofitability. The technology is expensive andyou need funds for buying better technology.Ideally the technology should be made availableby financial institutions. However, the risk is toohigh. A new strategy needs to be developedwhere the sector can convince the financialinstitutions that the funds that are invested forbetter technology will have good returns. Thereis no dearth of government schemes and tailormadefinancial products specifically designed forthe MSME sector by lending banks. However, thesector is still reeling under the financial crisis. Itis important to make the sector more investorfriendly and attractive.

Financefrom investing in India, particularin the small sector because ofprocedural complexities.Talking about access to corpus ofinstitutional funds for MSMEs, Mr Satish KKaura, Co-Chairman, CII Defence Council,and Chairman & Managing Director,Samtel Colour Ltd, said that IndianMSMEs singularly depend on lendingbanks, and the key constraints for theMSME growth are huge dependenceon banks, absence of institutionalmechanism for raising risk capital andno alternative financing options.Mr Kaura said financing ecosystemfor MSME in India is lagging behindglobal financial market. Global trendsindicate that banks are generallyunimpressed by the MSME growth andits profit potential so it is futile to expectrisk capital from the banks. However,globally capital markets are very welldesigned to meet the risk capital needsof the small business sector.He suggested that exploring thepossibility of alternative financingoptions is needed to solve the riskcapital requirements of the MSME sectorin quicker terms and help the small unitsstay competitive.Talking about the issue of delay inpayments, he said the CII is in the processof proposing a Governance Code whichwill set a standard for procurementsand payments. The Governance Codewill encourage all players in the supplychain system to voluntarily adopt timelysettlement of payments and improve thecredit management system for creatingan effective market.Mr Kaura said the SME exchangeplatform will help small business unitsin rural areas in generating equity fundsfor expansion. It would eventually helpthe sector grow at a faster rate andthe multiplier of that would be hugeemployment generation in rural areas andnational wealth creation. For sustainabledouble digit growth, he said innovativefinancing mechanisms are required,particularly for MSMEs in the country.Mr NK Maini, Deputy ManagingDirector, Small Industries DevelopmentBank of India (SIDBI), said debt creditand equity gap is huge in the MSMEsector. The credit gap is around Rs 4.8trillion and the equity gap is estimatedat Rs 2.5 trillion. And, from the formalsources the equity available is only Rs10,000 crore.He said the SIDBI was primarily set upfor refinancing banks and other lendinginstitutions. However, over the years theSIDBI has gotten into direct financing inMSME sector. The SIDBI has repositionedits business model to fill the financialand non-financial gaps in the smallsector and for the overall developmentof the sector. The institution has beenfocusing on four niche areas includingrisk capital; receivable financing andfactoring; sustainable financing andfinancing of service sector.Mr Maini said there is a requirementof Rs 75,000 crore for fulfilling energyefficient equipment needs of MSMEsector. The need based financial productswill help MSME units in adopting energyefficient equipment and greenerproduction models. ``The lendingbanks are not in a position to fulfill thisrequirement, so Line of Credits (LoCs)are arranged from multilateral agenciesand routed through the SIDBI,'' he said.Regarding financing of servicesector, he said lending banks generallygive credits based on tangible collateralsecurity. However, the service sectorproducts are intangible and returnsare cash flow based. He said the wayforward is cash flow based financing anddevelop specialized need based financialproducts for each sector.Mr Maini said,``We realise thatfinancial health of a MSME unit dependssignificantly upon the speed at whichtheir receivables are realised. We have,therefore, devised a scheme to mitigatethe receivables problem of suppliersbelonging to MSMEs and improve thecash flow. However, he said it is importantto have more equity investment fortaking forward the factoring business.''About the risk capital, Mr Maini saidboth the new units as well as growingsmall units face scarcity of funds, so theSIDBI provides a certain percentage ofrisk capital and remaining amount canbe raised as debt fund from lendingbanks against the risk capital given bythe SIDBI. Besides, SIDBI Venture CapitalLimited, a wholly-owned subsidiary ofthe SIDBI provides growth capital in theform of equity through its MSME focusedventure capital funds.Mr Gurpal Singh, Principal Advisor& Head MSMEs, Confederation of IndianIndustry (CII), said CII is committed tosolving the financial problems faced bythe small sector in the country. He saidto take the small sector into next level aclose cooperation of all stakeholders inthe ecosystem is required. He said thesituation is a bit dicey as MSMEs are toosmall for big institutional investors toconsider and big for not in the ambit ofmicro financing.The concept of banking hasundergone enormous changes, he saidas the bank are much more proactivein developing need based financialproducts and schemes for MSMEs.The lending banks are in a position tosupport many small units that havegrowth potential.MSME Business March 201317Emerge offers opportunities to informed investorsMr Ravi Tyagi,Head of SME Project,National StockExchange IndiaTalking about the SME platform ofNational Stock Exchange he said Emergeoffers opportunities to informed investors toinvest in emerging businesses with excitinggrowth plans, innovative business models andcommitment towards good governance andinvestor interest.This platform will provide capital raisingopportunities to credible and fast growingbusinesses with good governance standards.It will be an ideal platform to raise funds forcompanies on a growth path, but not largeenough to list on the main board.The government, the market regulator(Sebi), the RBI, the SIDBI, insurance companies,the VCs and lending banks should cometogether and create an ecosystem for creatinga MSME success story.

Finance GapMSME Business March 201318Finance Gap a HugeChallengeWith appropriate policy interventions and support to the MSME sector, aconsiderable part of the currently excluded demand can be made financially viablefor the formal financial sectorThe overall finance gap in theMSME sector is estimated to beRs 20.9 trillion ($418 billion). Thepotential demand for externalfinance is estimated to be Rs 27.9trillion ($558 billion), while the total financechanneled by formal sources is estimatedto be Rs 7 trillion ($140 billion). The overallfinance (debt and equity) gap of Rs 20.9trillion ($418 billion) is split into a debt gapof Rs 19 trillion ($380 billion) and an equitygap of Rs 1.9 trillion ($38 billion).The potential demand is estimatedto be Rs 27.9 trillion ($558 billion), afterexcluding entrepreneur's own contributiontowards capital expenditure and workingcapital finance (Rs 4.6 trillion; $92 billion).Entrepreneurs finance this need throughinternal accruals, or by leveraging personalresources. Studies on the MSME sectorsuggest that entrepreneurs contributeapproximately 25 percent of capitalexpenditure demand and 20 percent of theworking capital finance demand.The International Financial Corporationstudy estimates that the viable debtgap that can be addressed by financialinstitutions in the near term in themanufacturing and services sector isRs 2.15 trillion ($42 billion) and Rs 0.78trillion ($16.6 billion), respectively.Manufacturing SectorManufacturing enterprises accountfor 73 percent of the sector's viable andaddressable debt gap. Some of the keyreasons for the gap in the sector are:(i) Manufacturing MSMEs oftenexperience delays in payments, resultingin considerable capital being tied up inreceivables. Such a situation increasesthe working capital requirement. Forinstance, if the working capital cycle ofan enterprise increases from 60 days to90 days, the working capital requirementtoo increases by approximately 50percent. Since suppliers credit remainslimited, the working capital demandof enterprises tends to far exceed theshort-term credit limits allocated byfinancial institutions, resulting in a largefinancing gap.The InternationalFinancial Corporationstudy estimates that theviable debt gap that canbe addressed by financialinstitutions in the nearterm in the manufacturingand services sector is Rs2.15 trillion ($42 billion)and Rs 0.78 trillion ($16.6billion), respectively.(ii) The problem of working capitalshortfall is more severe in export/import-oriented MSMEs. In additionto delayed payments, cash flows ofthe enterprise are also vulnerable tocurrency rate fluctuations, and withlimited formal finance, such enterprisestend to be underserved.(iii) Enterprises in the sector alsoface challenges in financing growth. Mostmanufacturing enterprises plan growtharound capacity expansion as opposedto productivity enhancement throughprocess efficiencies. Financial institutionsare wary of financing regular capacityexpansion as they perceive MSMEs to bevulnerable to economic downturn, whencapacity expansion goes underutilized.Services SectorServices enterprises make up27 percent of the overall viable andaddressable debt gap. Financing is better intraditional services industries such as retail,small transport operators, and hospitality,as financial industries have a betterunderstanding of these sectors. Some of thereasons for gap in the sector are:(i) Traditional services experiencea greater debt shortfall in capitalexpenditure financing compared toworking capital requirements becausethere is a high level of cash transactionsin business operations that can be usedto finance working capital needs. Limitedraw material and market linkagesmake MSME vulnerable to bull-whipeffect during economic downturns,consequently debt financed capitalinvestment strains the cash flow andinduces sickness financial institutionsperceive higher debt financed capitalinvestment as risky(ii) Although traditional servicesenterprises often have access to primarysecurity, they tend to transact mostlyin cash, with limited records of theirfinancial transactions. Due to inadequateinformation on financial behavior ofthe enterprise and entrepreneur; thesanctioned finance limits tend to be lowerthan what they need.(iii) Financial institutions do nothave reliable financing benchmarksfor the services sector unlike forthe manufacturing sector, for whichthere are benchmarks based onthe recommendations of the NayakCommittee. As a result, there is greaterdifficulty in determining the actualfinancing needs of different types ofenterprises in the services sector, leadingto under-financing of the sector.

DifferentiatorBoosting MSME Brand PowerCII calls for a Branding & Export that helps position brand Indian MSME globallyAfund to subsidise Indian MSMEsbranding and marketingoperations is the need of thehour, according to Mr DeepKapuria, Chairman, CII NationalMSME Council. The primary objectiveof such a fund is to promote and createinternational awareness of the IndianMSME label in markets overseas and tofacilitate the dissemination of knowledgeof Indian MSME products and services.In the backdrop of opening up of FDIin multi-brand retail, the fund will enablepositioning the Indian MSME brand globallyand create new market opportunitiesfor a swathe of Indian MSMEs, as foreignretailers that invest in India would berequired to source at least 30 percent oftheir goods from Indian MSMEs.Going forward, the proposed fundwould help MSMEs supplying to globalretail majors in India to focus upon thequality standards set by the majors, gainfirm understanding of their complexvendor management systems, and scaleup as per demands placed by those firms.Economist Paul Deng has analysedthat firms with advanced technology inthe domestic market compete neck-toneckwith the foreign competitors andthe inefficient firms are driven out of themarket. He has termed this driving out ofthe technologically obsolete firms as thediscouragement effect. This dynamismpromotes innovation and competitiveness.In this context, the Foreign InvestmentPromotion Board (FIPB) nod to Swedishfurniture retail giant Ikea to invest in theIndian retail sector is expected to createbusiness opportunities for a variety ofIndian MSMEs that can supply to thisretail major. Ikea plans to open 25 outletsin India, investing $2 billion over thenext 10-15 years. While initially, Ikea hadexpressed reservations about sourcingfrom Indian SMEs, citing its own complexglobal vendor management processes,the group has now agreed to adhere tothe sourcing norm.It is well recognised that MSMEscontribution to employment generationcannot be understated, and therefore thesector deserves unwarranted attentionby the Union Commerce Ministry, whileupdating the Export Import Policy 2009-2014, for the growth and development ofthe Indian economy, says Mr Kapuria.While thanking the Finance Minister,Mr P Chidambaram, for taking cognizanceof the CII Pre-Budget Memorandumfor MSMEs, Mr Kapuria shared thatout of the 12 recommendations madeby CII, five recommendations, founda mention in the Union Budget 2013-14 these include, (i) Continuation ofthe benefits or preferences enjoyed byMSME for up to three years; (ii) Provisionof a corpus of Rs 500 crore to SIDBIto set up a Credit Guarantee Fund forFactoring; (iii) Provision of a sum ofRs 2,200 crore during the 12th Plan periodto set up 15 additional tool rooms andTechnology Development Centres; (iv)Funds provided to technology incubatorslocated within academic Institutionswill qualify as CSR expenditure; (v) SMEswill be permitted to list on the SMEExchange without being required tomake an initial public offer (IPO).The Budget's announcements werepredicated to social and financialinclusion to catalyse economic growth,according Mr Kapuria.Last year, the Parliamentary StandingCommittee on Commerce, Chaired byMr Shanta Kumar, had suggested thesetting up of an export marketing fundwith a corpus of at least Rs 1,000 crorefor MSMEs. The committee in its reporttabled in Parliament had mentioned thatto double India's share in world trade by2020, it is necessary to create a robustMSME segment that is oriented to exportpromotion. The panel said a fund shouldbe set up to subsidise the marketingefforts of MSMEs.However, CII is of the view that amarketing fund by itself cannot help theMSMEs tackle all the problems they arefacing now. MSMEs on their own shouldbe willing to adopt modern marketingtechniques to tap the huge marketopportunity that is available to them.Branding, especially, is a big challengefor MSMEs as it calls for a lot of investment,which these firms cannot afford on theirown. To cap it all, there is no fundingavailable for brand building activity - fromGovernment of the banks. CII observesthat without proper brand building, thesefirms are finding it difficult to createbrand awareness and to compete withhigh visibility products from bigger rivals,let alone increase their market share.MSME Business March 201319

InternationalFueling Growth EngineAmid growing demand for inking a Free Trade Agreement, India and EuropeanUnion have opened a direct channel to link up their SMEs. Read on to find whatit has to offer.MSME Business March 201320As India joins the 54-memberEnterprise Europe Network(EEN) to facilitate the flowof trade, investment andtechnology between small andmedium enterprises (SMEs) in the tworegions, optimism and ambition levelshave been raised over opportunities thiscrucial channel is to open for the sector.Given the dynamics of trade relationsbetween India and its largest trading partnerEuropean Union (EU) -- the bilateral tradebeing $91.3 billion in 2010-11 -- from theperspective of Indian SMEs, the partnershipmeans it's time to home in on suchcollaborations that can help increase theirglobal reach and build competitiveness.Once the Bilateral Trade andInvestment Agreement (BTIA), thenegotiations on which are on since June2007, gets signed between India and theEU, the trade between the two regions islikely to more than double to exceed $207billion by 2015, says an industry study.The talks were to conclude in 2011 butdifferences over the level of opening ofthe market have delayed the pact. Indiahas been seeking a single visa for itsprofessionals on short-term contractualvisits to the European Union. On the otherhand, the EU has been asking for significantreduction in customs duty on cars, winesand spirits in their exports to India.Nevertheless, the EEN platform,conceptual underpinnings of which aregrounded in the need to share, learn andcollaborate to grow together, providesIndian SMEs, accounting for about 45percent of the country's manufacturingoutput, huge gains.The advantages are in terms of accessto Europe's largest database of cuttingedgetechnologies, with firms fromcountries in the 27-member bloc offeringand requesting research and commercialapplications in as many as 17 sectorsincluding agro-food, automotive, transportand logistics, biotech, healthcare.The sector groups often form thelink between EEN and other Europeanactors and projects including Europeantechnology platforms, Europe INNOVAprojects and Business Innovation Centres(BICs), as well as research-driven clustersand National Contact Points of theEuropean Commission's 7th ResearchFramework Programme (FP7).While India's nearly 26 million SMEsproduce over 6,000 products for theglobal market, complexities involved infinance, infrastructure, skill development,marketing, networking and regulatoryframework act as barriers for their growth.According to Gurpal Singh,Principal Advisor and Head of MSME atConfederation of Indian Industries (CII),the EU has been a very difficult market forthe Indian SMEs, given its complexities,stringent rules and regulations and overalla very protected market.However, things will certainly look upfor MSMEs with India becoming an officialmember of the EEN. The EEN platform wouldhelp to combine core strengths of Indianand EU companies which will be mutuallybeneficial to both sides, says Singh.The CII along with European Businessand Technology Centre and Federation ofIndian Export Organisations are partnersin this initiative and are network contactpoints for Indian SMEs.

InternationalThe network serves as one-stopshop for enterprises looking to go globalwith their innovative ideas. Joining thenetwork means they don't have to worryabout resource constraints. While theEEN can be the answer to such questionsas: who can offer venture capital orloans, what's the best way to sell abusiness plan to investors, how to get aidfrom regional, national or EU authorities,or how to access public funds andgrants for research and development,the handholding SMEs get from expertsprepare them to face acid tests from themost demanding investors.With one of the world's largestbusiness cooperation database of morethan 23,000 profiles and businesssupport organisations from more than 50countries, the EEN is where an SME canstart search for international businesspartners, source new technologies andadvisory services on issues as diverse asintellectual property, going international,or EU law and standards.The idea is to ensure that SMEs benefitfrom the EU Single Market as much as thebig players do. In Europe, 99 percent ofall GDP is with SMEs, but the importancealways goes to MNCs as they do the bigdeals. The brunt of the economy is withthe SMEs. In CII too, 60 percent of itsmembers are SMEs, says Poul V. Jensen,director of European Business andTechnology Centre (EBTC).The EEN helps sort out IntellectualProperty Rights (IPR) issues duringcollaborations between Indian andEuropean firms, does the handholding toguide them through red tape and helps innetworking, says Jensen.It will open the doors of EuropeanUnion to India and vice versa, he adds.The EU technology platform canadvise and assist SMEs from the initialcontacts to making the deal. When SMEsjoin the Network their cooperation offeror request is entered into the databaseand alerts are sent regularly to updatethem if their cooperation needs matchwith that of others. Matchmaking eventslike business-to-business meetings areorganized across Europe. Such meetingsare often organized at internationalfairs, keeping in mind the travel andaccommodation costs.Moreover, the network ensures thatSMEs looking to expand their businessto another country find competent andtrustworthy partners. The network helpsSMEs find out that how EU laws andregulations affect businesses. Its expertshelp find the way through the legal mazeand make it easier to sell product orservices in another EEN country.For instance, an SME selling Ayurvedicproducts stands to gain by linking tothe EEN platform. Since such productshave to contend with a lot of regulationand stringent testing in EU that areprohibitively high, the network canhelp find a good European partner withwhom sharing of the cost of testing andmarketing can be worked out.Similarly, the revised defenceprocurement procedure (DPP) focuseson the technology transfer to boostindigenisation. SMEs engaged in thesegment can realign their businessprocesses for strategic alliances andjoint ventures using this technologyplatform to gradually assume therole of system integrator andmanufacturer of complete defenceequipment and systems.Besides EU countries, Russia, Turkeyand Israel have also joined the platform.In Asia, the partners are China, Japan,South Korea and the latest is India.Alerts on new EU legislations,tender opportunities and specialistmarket information for companies thatare exporting or preparing to importkeep SMEs updated. The network alsoorganizes from time to time trainingprogrammes to help members withEuropean policies and programmesrelevant to their business and how theycan be made to work for them.India has declared 2010-2020 as theDecade of Innovation for SMEs. The unionbudget 2012-13 too had several pluses forthe sector as was reflected in doubling there-finance funding of the Small IndustriesDevelopment Bank of India (SIDBI) andthey can also avail the non-tax benefitsfor three years even after growing out ofthe category.Efforts are on to protect theirinnovations, inventions and designsthrough patents and copyrights andraise funds through external commercialborrowing (ECB). The government recentlyrelaxed ECB norms to allow easier accessto cheap dollar funds to housing financecompanies such as HDFC and SIDBI, andpermitted non-resident entities to providerating enhancement facility to Indians.Thus keeping in view thesedevelopments, forging collaborativepartnerships between SMEs of India andEU through EEN is another importantstep towards ensuring their growth, andthereof their contribution in creatingjobs and innovative products & servicesto increase India's share in the globalmarket place.MSME Business March 201321

RegionsRoundup of Major MSME LinkedInitiatives Taken By CII Regional OfficesMSME Business March 2013222ND EDITION OFINDUSTRIAL EXPO HELDMr Harish Durgapal, Minister SSI,Govt of Uttarakhand addressing theValedictory Session of IndustrialExpo 2013The 2nd edition of the IndustrialExpo was held from 18-21 January2013 at the Integrated IndustrialEstate (IIE), SIDCUL, Haridwar, Uttarakhand.The event was jointly organised by CII withSIIDCUL. Industrial Expo is CII NorthernRegion's flagship event on manufacturingfocusing on MSMEs and businessdevelopment. The focus sectors for theexpo were automobile, auto components,electronics and electrical, engineeringgoods, pharmaceuticals, FMCG, industrialsupplies, machine and hand tools,material handling equipments, packagingand logistics, green technologies.A Second meeting of the reconstitutedMSME Facilitation Council was heldsuccessfully on 30-31 January, 2013 at UdyogBhawan, Jaipur. Mr Dileep Baid, Chairman,CII Rajasthan State Council, attendedthe meeting. Mr Rajhans Upadhyay,Commissioner Industries is the Chairman ofthe Council. Many pending cases of MSMEswere resolved during the meeting.In the modern era, survival of thefittest has been converted to survival ofthe fittest and quickest. The winners ofthe present day competition thrive ontheir competency of proactively leadingthe market. At the same time, one needsto be very conscious about the qualityof its products and services. To attainManufacturing Excellence, productivity isthe most important criteria that need to beattained at the highest level. To attain thisobjective, a workshop on ManufacturingExcellence was organised. The Workshopdwelled on 5S Seiri, Seiton, Seiso, Seiketsuand Shitsuke; 3M Muda, Muri & Mura; Kaizen;Poka Yoke and Flow Manufacturing.INTERACTIVE SESSIONWITH SME SECRETARY(L-R) Mr Soeb Bandukwala, Convenor,CII Maharashtra MSME Panel & ,Partner,Ansons; Electro Mechanical Works, MrsRadhika Rastogi, IAS, Secretary, SME andDevelopment, Commissioner, IndustriesMr Umesh Chande Head CII MaharashtraState Office.CII organized an exclusive InteractiveSession with Ms Radhika Rastogi,Secretary SME & DevelopmentCommissioner, Industries. The objective ofthe interaction was to give an opportunityto the members to raise their issues relatedto SME and industry and seek solutionson the same. This platform also enabledMs Rastogi to explain the initiatives andfunctions of Secretary SME & DevelopmentCommissioner, Industries. The sessionwas much appreciated by the industrymembers. Mr Soeb Bandukwala, Convener,CII MSME Panel chaired the session.The CII western region organisedWorkskills Competition in the four regionsand this was followed by the Nationalfinals. This initiative has created a platformfor competition for industrial workers ofsmall, medium and large industrial housesby recognizing the excellence of skills indifferent trades including newer tradeskeeping in mind the changing technologyin Industry. The competition was held atITI, Aundh, Pune from 6 - 8 February 2013,under the directive of DGET New Delhi. Theworkers from different states of westernregion participated in the competition.To create an awareness of the KaizenPractices in the industry and make themknown to all, we had organised the EighthKaizen Competition. The First edition of thecompetition received participation from 40Kaizen teams in the year 2005. This year wehad overwhelming response and over 128teams from 63 companies participated.MSME EAST ORGANISEDAT BHUBANESWAR(L-R): Mr J B Pany, Co-Chairman, CII ERMSME Subcommittee, Mr D K Singh, IAS,Commissioner-cum-Secretary, MSMEDepartment, Govt of Odisha, Dr DamodarRout, Minister, MSME, Governmentof Odisha, Dr A K Chattopadhyay,Chairman, CII ER MSME Subcommittee,Mr A K Bohra, CEO, Discoms; Ms SuparnaNanda, Head, CII Odisha State Office.CII Eastern Region MSMESubcommittee in association withDepartment of MSME, Governmentof Odisha has organized MSME Eastat Bhubaneswar. The main objectiveof MSME East was to draw insights onenabling suitable policy and regulatoryenvironment for MSMEs, Access tofinance, Vendor Development, Supportinginfrastructure for business and technologycapability. The focused sessions forMSME East were: (i) Financial Support:Imperative to the Growth of MSME, (ii)

Call to ActionReinforcing Case For GSP BenefitsIndustry to list key benefits, share job creation detailsMSME Business March 201324The Generalized System of Preferences(GSP) is a programme undertakenby the US government to promoteeconomic development in the developingworld by providing preferential duty-freeentry for up to 5,000 products (whenimported) from designated beneficiarycountries, including India.According to the Embassy of India inWashington DC, USA, India has been thelargest beneficiary of the GSP last year andtrade worth $4.4 billion was conductedUpcoming EventsMSME focused Events/Programmes (April 2013)CII Northern Regionunder the GSP program by India.The GSP programme is up for renewalagain this year. India needs to make aPlease share your views withus by writing to us atgurpal.singh@cii.in /fax: 0124-4014080strong case to be once again consideredas a beneficiary country under thisprogramme. Toward this end, the EmbassyTitle / Theme Date VenueSession on Investing in Stock Market April JammuContact: Vinod Dhiman, Phone: 0172-5022522, Email ID: vinod.dhiman@cii.inof India has requested CII to help providedata on the type of companies that availof this programme, and consequently theemployment generated in the rural areas.Members are requested to sharethe relevant details about the benefitsaccrued from the GSP programme, and theemployment generated, more specificallyin the rural areas.A brief data sheet from Government ofIndia can be found here: http://eicindia.gov.in/eic/certificates/genralized-bg.htmTitle / Theme Date VenueOne Day Training Program on “Applying Theory of Constraints for ImprovingManufacturing Performance”12 April 2013 IndoreContact: Satish Boddu/Khushbo Joshi, Phone: 0731-4009061/917389900878, Email ID: b.srinivas@cii.in or khushboo.joshi@cii.inCII Southern RegionTitle / Theme Date VenueMfg Excellence Mission to Caterpiller & Delphi-TVS April 2013 ChennaiContact: S Muruganandham, Phone: 0452-4391434, Email ID: muruganandham@cii.inTitle / Theme Date VenueVendor Development Programme - March / April 2013 Yet to decide HyderabadContact: Murthy KNVN, Phone: 040-27765933, Email ID: knvn.murthy@cii.inFor further details please contact Mr Gurpal Singh, Confederation of Indian Industry (CII), 249-F, Sector 18, Udyog Vihar, Phase IV, Gurgaon 122015, (Haryana, India);tel: +91(124) 4014060-67; Fax: +91(124)4014080; email: gurpal.singh@cii.inCopyright 2013 by Confederation of Indian Industry (CII), All rights reserved.DISCLAIMER: No part of this publication may be reproduced, stored in, or introduced into a retrieval system, or transmitted in any form or by any means (electronic, mechanical,photocopying, recording or otherwise), without the prior written permission of the copyright owner. CII has made every effort to ensure the accuracy of information presented in thisdocument. However, neither CII nor any of its office bearers or analysts or employees can be held responsible for any financial consequences arising out of the use of information providedherein. However, in case of any discrepancy, error, etc., same may please be brought to the notice of CII for appropriate corrections.Published by Confederation of Indian Industry (CII), The Mantosh Sondhi Centre; 23, Institutional Area, Lodi Road, New Delhi-110003 (INDIA), Tel: +91-11-24629994-7,Fax: +91-11-24626149; Email: info@cii.in; Web: www.cii.in