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CHAPTER–VI

GROWTH PATTERN OF MSMEs

In the previous chapter, it is studied that the various assistance, incentives, and

subsidies given to the MSMEs that help them to face the challenges and grow in the

industry. This chapter deals with the study of growth pattern of MSMEs. This study

will help one to understand the contribution of MSMEs in production, exports and

employment to the economy, because this sector has become an integral part of the

Indian economic growth. Their role in terms of employment creation, upholding the

entrepreneurial spirit and innovation has been crucial in fostering competitiveness in

the economy.

6.1 GROWTH PATTERN OF MSMES - INDIAN SCENARIO :

As mentioned earlier, Micro, Small and Medium Enterprises (MSME) play a

strong role in the growth of the country and can be rightly referred as backbone of the

Indian economy, and it is seen that worldwide, MSMEs have been recognized as the

engines of economic growth. Towards this, Government’s policy initiatives like

enactment of the new Micro Small and Medium Enterprises Development Act, 2006,

pruning of reserved MSME list, advising financial institutions to increase their flow of

credit to the MSME sector, are all initiatives towards boosting entrepreneurship,

investment and growth.

As it is seen that the role of small industry sector is phenomenal, this sector has

seen a rapid growth in the post independence era. The emphasis on village and small

scale industries has always been an integral part of India’s industrial strategy, more so,

after the second Five Year Plan. The cottage and rural industries play an important role

in providing employment opportunities in the rural areas, especially for the traditional

artisans and the weaker sections of society. These industries contribute more to other

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socio-economic aspects, such as reduction in income inequalities, dispersed

development of industries and linkage with other sectors of the economy. In fact

promotion of small scale industries and rural industrialization has been considered by

the Government of India as a powerful instrument for realizing the twin objectives of

‘accelerated industrial growth and creating additional productive employment

potential in rural and backward areas.’1

6.2 PROFILE OF INDIAN MSME SECTOR:

In the last decade, the growth rate of MSMEs has been consistently higher than

the overall growth rate of the industrial sector, crossing the 12% mark in the terminal

year of the Tenth Plan.4 The MSMEs are, however, more than just GDP earners; they

are instruments of inclusive growth which touch upon the lives of the many persons. It

is being the largest source of employment after agriculture, the MSME sector in India

enables 695 lakh men, and women2, living in urban slums, upcoming towns, remote

villages and isolated hamlets to use indigenous knowledge, cultural wisdom, and

entrepreneurial skills for the sustenance of their lives and livelihoods. In addition, this

sector is capable of giving the country a strong presence in the global market. India has

seen increase in the small sector since 19th century. As already mentioned, prior to the

formation of the MSMED Act 2006, it was known to be the small scale industry and

later it was bifurcated into various categories. The present position of the MSME sector

is given below.

Table-6.1

PROFILE OF INDIAN MSME SECTOR

S.No. Particular Value

1 http://www.dcmsme.gov.in/ssiindia/MSME_OVERVIEW09.pdf 2 Annual Report 20010-11, Ministry of Micro, Small and Medium Enterprises

134

1. Number of micro, small and medium enterprises 298 Lakh units

2. Share in total industrial production 45%

3. Employment 695 lakh

4. Share in GDP 17%

5. Share in manufacturing output 45%

6. Share in exports 40%

Source: Annual Report 2009-10, Ministry of Micro, Small and Medium Enterprises

As it is seen in the above table that the number of MSMEs in India accounts for

nearly 298 Lakh units, there are registered and unregistered units which are shown in

a table below. This sector accounts for almost 45% of the total industrial production,

95% of the industrial units (along with medium industries), 17% to the GDP of India

and 40% of the exports and generating employment to around 695 lakhs of people

throughout the country. They manufacture over 6000 products ranging from

traditional to hi-tech items and to the supply of machine parts for large industries. 3

As already mentioned in the chapter-III (Regulatory framework of MSMEs),

the Ministry of Small Scale Industries and the Ministry of Agro and Rural Industries

were merged to form the Ministry of Micro, Small and Medium Enterprises. The role

of the Ministry of Micro, Small and Medium Enterprises (M/o MSME) and its

organizations as mentioned in the Chapter IV (Government Organisations/Agencies

assisting MSMEs) is to assist the States in their efforts to encourage entrepreneurship,

employment and livelihood opportunities and enhance the competitiveness of MSMEs

in the changed economic scenario. The schemes/programmes undertaken by the

Ministry and its organizations seek to facilitate and provide the adequate flow of credit

from financial institutions/banks; any support required for technology upgradation

and modernization; integrated infrastructural facilities; modern testing facilities and

3 Annual Report 20010-11, Ministry of Micro, Small and Medium Enterprises

135

quality certification; access to modern management practices; entrepreneurship

development and skill upgradation through appropriate training facilities; support for

product development, design intervention and packaging; welfare of artisans and

workers; assistance for better access to domestic and export markets and cluster wise

measures to promote capacity-building and empowerment of the units and their

collectives.

The various assistance, incentives and subsidies provided by both the Central

Government and the State Governments undoubtedly providing support for

sustenance. All these collectively resulted in a good growth pattern of the MSMEs. The

study of growth of MSMEs revolves around four major aspects and they are ‘the

number of units started, investment pattern, employment generated, and sales pattern

along with exports (if any)’.

6.3 DISTRIBUTION OF MSMEs IN INDIA:

The micro, small and medium enterprises are classified into manufacturing and

services enterprises, registered and unregistered units which is shown in the following

table.

Table-6.2

DISTRIBUTION OF MSMES IN INDIA

Sl. No.

Parameters Registered

Units Unregistered

Units Total

18453267 9225250 27678517 1 Manufacturing

66.67 26.15 28.56

2 Services 709757 1419726 2129483

136

33.33 73.85 71.44

19163024 10644976 29808000 3 Total Enterprises

100.00 100.00 100.00

Source: Annual Report, 2009-10 Department of Industries and Commerce, New Delhi.

The above table gives the in formation on the number of registered and

unregistered Micro, Small and Medium Enterprises in the country which is assessed

through periodic conduct of All India Census for the sector. Accordingly, it is seen that

the total micro, small and medium Enterprises in India as per the data given upto

2009-10 is 2,98,08,000 out of which, 1,91,63,024 units are registered while

1,06,44,976 units are unregistered. It can be further seen that among the total

enterprises, the manufacturing enterprises which are registered are 66.67% and the

service enterprises registered are 33.33% whereas the unregistered manufacturing and

services enterprises are 26.15% and 73.85% respectively. It is also observed that most

of the micro, small and medium enterprises are service businesses (71.44%) as

compared to manufacturing units (28.56%).

6.4 STATE-WISE DISTRIBUTION OF MSME UNITS:

These MSMEs are not evenly spread through out the country. In some parts of

the nation, they are densely populated and in other parts, they are scarcely spread. As

an evident fact, India is a country with diverse allocation of resources, which directly

reflects on the distribution of industries.

The following is the state-wise distribution of MSME units in India.

Table-6.3

STATE-WISE DISTRIBUTION OF MSME UNITS

Sl. No. Name of State/UT Registered

units Unregistered

units Total

1. Jammu and Kashmir 14,534 2,46,803 2,61,337

2. Himachal Pradesh 11,937 1,72,914 1,84,851

3. Punjab 50,113 7,53,872 8,03,985

4. Chandigarh 1,001 30,746 31,747

137

Sl. No. Name of State/UT Registered

units Unregistered

units Total

5. Uttarakhand 23,767 2,02,746 2,26,513

6. Haryana 33,783 5,70,312 6,04,095

7. Delhi 728 6,16,479 6,17,207

8. Rajasthan 55,108 12,16,355 12,71,463

9. Uttar Pradesh 1,87,522 29,25,794 31,13,316

10. Bihar 52,188 9,50,071 10,02,259

11. Sikkim 123 11,716 11,839

12. Arunachal Pradesh 452 19,971 20,423

13. Nagaland 1,331 25,807 27,138

14. Manipur 4,507 60,295 64,802

15. Mizzoram 3,714 18,665 22,423

16. Tripura 1,253 1,08,412 1,09,665

17. Meghalaya 3,063 45,627 48,690

18. Assam 18,671 5,84,870 6,03,541

19. West Bengal 42,635 24,70,668 25,13,303

20. Jharkhand 18,200 3,57,433 3,75,633

21. Orissa 19,587 10,42,099 10,61,686

22. Chhattisgarh 26,235 3,38,316 3,64,551

23. Madhya Pradesh 1,08,804 11,81,732 12,90,536

24. Gujarat 2,29,830 8,67,271 10,97,101

25. Daman & Diu 595 6,612 7,207

26. Dadra & Nagar Haveli 1,715 4,412 6,127

27. Maharashtra 86,635 24,96,235 25,82,870

28. Andhra Pradesh 24,892 19,80,152 20,05,044

29. Karnataka 3,94,920 14,72,015 18,66,935

30. Goa 3,137 48,354 51,491

31. Lakshadweep 89 1,097 1,186

32. Kerala 1,49,847 13,18,257 14,68,104

33. Tamil Nadu 2,33,996 23,61,131 25,95,127

34. Puducherry 2,109 32,300 34,409

35. Andaman & Nicobar Islands

750 8,767 9,517

138


It is clearly seen from the table that the states like Uttar Pradesh, West Bengal,

Maharashtra, Andhra Pradesh, Tamil Nadu and Karnataka have high number of

MSMEs functioning. The highest being the Uttar Pradesh with almost 31 lakh of

MSMEs. The next highest is in the State of Maharashtra, West Bengal and Tamil Nadu

with almost 25 lakhs units followed by the State of Andhra Pradesh with 20 lakhs units

and the next is Karnataka with 18 lakh units of MSMEs. Therefore, it is clear that the

State of Karnataka also has more number of MSMEs, which are further categorized

into registered and unregistered.

6.5 GROWTH OF MSMEs IN INDIA:

To make an in-depth study of the growth of MSMEs in India, a study pattern

has been selected where in the financial year 2006-07 has been taken as the middle

year because it is the year when MSMED Act came into effect. Therefore, three

previous years and three consecutive years are taken into consideration for the study.

The number of MSMEs in India is shown below in the following table.

Table-6.4

NUMBER OF MSMES IN INDIA

Total MSMEs Sl. No.

Year (In Lakh numbers)

Percentage Growth over the previous year

1 2003-04 113.95 4.07

2. 2004-05 118.59 4.07

3. 2005-06 123.42 4.07

4. 2006-07 261.01 111.48

5. 2007-08 277.79 4.51

6. 2008-09 285.16 4.53

7. 2009-10 298.08 4.53


Fig-6.1

139

PERCENTAGE GROWTH OF MSMES IN INDIA

0

20

40

60

80

100

120

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

4.07 4.07 4.07

111.48

4.51 4.53 4.53

Pe

rce

nta

ge

Gro

wth

Years


The above table and figure relate to the number of MSME units and their

percentage growth as compared to the previous year. It is seen clearly that in all the

previous years the percentage growth was constant at 4.07%, but in the financial year

2006-07, there was a leap forward in the no. of registered units from 4.07% to 111.48%.

In the subsequent years, the growth rate decreased to 4.51% and 4.53% levels.

6.6 GROWTH IN FIXED INVESTMENT OF MSMEs IN INDIA :

Investment in fixed assets is a good indicator of the growth of an industry. The

table given below highlights the year-wise fixed investment growth of MSMEs in India

and the percentage growth over the previous years.

Table-6.5

YEAR-WISE GROWTH IN FIXED INVESTMENT OF MSMES IN INDIA

Fixed Investments Sl. No.

Year (In Crores) Percentage Growth

140

over the previous year

1 2003-04 170219 4.87

2. 2004-05 178699 4.98

3. 2005-06 188113 5.27

4. 2006-07 500758 166.20

5. 2007-08 558190 11.47

6. 2008-09 621753 11.39

7. 2009-10 693835 11.59


141

Fig.6.2

YEAR-WISE PERCENTAGE GROWTH IN FIXED INVESTMENT OF MSMES IN INDIA

0

20

40

60

80

100

120

140

160

180

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

4.87 4.98 5.27

166.2

11.47 11.39 11.59

Pe

rce

nta

ge

Gro

wth

Years


The above table and figure clearly indicate that the fixed investment in the

MSMEs was not increasing significantly from the year 2003 to the year 2006. It was

only in the year 2006, there was a steep growth in the fixed investment of MSMEs in

India. It was the year when the investment amount under each category of micro, small

and medium enterprises was clearly defined. Post 2006, it is seen that there was

increase in the investment pattern but at a low pace. The percentage growth in the

investment made in MSMEs over the subsequent years does not show substantial

growth. This could be because of lack of adequate credit facilities, market volatility etc.

142

6.7 GROWTH IN PRODUCTION OF MSMEs IN INDIA:

The MSME sector in India accounts for 40% of industrial output. The year-wise

growth in production of MSMEs in India and the percentage growth over the previous

years are presented in the following table.

Table-6.6

YEAR-WISE GROWTH IN PRODUCTION OF MSMES IN INDIA

Production Sl. No.

Year (In Crores)


1 2003-04 364547 15.78

2. 2004-05 429796 17.90

3. 2005-06 497842 15.83

4. 2006-07 709398 42.49

5. 2007-08 790759 11.47

6. 2008-09 880805 11.39

7. 2009-10 982919 11.59


Fig.6.3

YEAR-WISE PERCENTAGE GROWTH IN PRODUCTION OF MSMES IN INDIA

0

5

10

15

20

25

30

35

40

45

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

15.78

17.915.83

42.49

11.47 11.39 11.59

Pe

rce

nta

ge

Gro

wth

Years


143

The above table and figure clearly indicate that the production pattern of the

MSMEs in India from the year 2003-04 to the year 2009-10. It could be seen that

though there was substantial growth in the production but it was only in the 2006,

when there was a steep growth in the production of MSMEs in India with 42.49%

growth. This is the year as already mentioned when there were a lot of changes that

came about in the micro, small and medium enterprises. Post 2006, it is seen that

there is constant production growth rate of around 11.3%. The percentage growth in

production in the subsequent years does not show substantial growth. This could be

because of less demand, lack of technological upgradation, increase in the cost of

production etc.

6.8 GROWTH IN EMPLOYMENT OF MSMEs IN INDIA :

India is second largest populated country in the world. Naturally,

unemployment is a major problem in India. MSME sector being labour intensive plays

a significant role in mitigating this problem. The table given below brings to limelight

the year-wise growth in employment of MSMEs in India and its percentage growth

over the previous years.

144

Table-6.7

YEAR-WISE GROWTH IN EMPLOYMENT OF MSMES IN INDIA

Employment (Persons) Sl. No.

Year (In Lakhs)


1 2003-04 271.42 4.31

2. 2004-05 282.57 4.11

3. 2005-06 294.91 4.37

4. 2006-07 594.61 101.62

5. 2007-08 626.34 5.34

6. 2008-09 659.35 5.35

7. 2009-10 695.38 5.47


Fig-6.4

YEAR-WISE PERCENTAGE GROWTH IN EMPLOYMENT OF MSMES IN

INDIA

145

0

20

40

60

80

100

120

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

4.31 4.11 4.37

101.62

5.34 5.35 5.47

Pe

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nta

ge

Gro

wth

Years


The above table and figure clearly shows the employment pattern of the

MSMEs in India from the year 2003-04 to the year 2009-10. It could be observed that

the employment growth rate was however around 4.3%. It was only in the year 2006

when there was a steep growth in the employment to an extent of 101.62%. This change

in the employment pattern could be related to the increase in the number of MSME

units in that year. But post 2006, we find a constant growth rate around 5.3% level.

MSME sector is considered to be one of the main sectors generating substantial

employment and it is further seen that the employment generation has recorded a level

of 695.38 lakhs in the year 2009-2010 in the MSME sector.

6.9 GROWTH IN EXPORTS OF MSMEs IN INDIA:

Exports determine the prospects of the country’s economy. A sound export

policy would attract more entrepreneurs to the system.

Table-6.8

YEAR- WISE GROWTH IN EXPORTS OF MSMES IN INDIA

Sl. Year Exports

146

No.

(In crores) Percentage Growth

over the previous year

1 2003-04 97644 13.52

2. 2004-05 124417 27.42

3. 2005-06 150242 20.76

4. 2006-07 182538 21.50

5. 2007-08 202017 10.67

6. 2008-09 NA NA

7. 2009-10 NA NA


Fig.6.5

YEAR WISE PERCENTAGE GROWTH IN EXPORTS OF MSMES IN

INDIA

0

5

10

15

20

25

30

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10


The above table and figure clearly show the export pattern of the MSMEs in

India from the year 2003-04 to the year 2009-10. It is vivid that though there was

significant growth in exports since 2003 and not much difference was seen in the

147

growth rate of exports during the year 2006 or even after that. In fact in the year 2007-

08, it is seen that the growth rate of exports decreased from 21.5% in 2006 to 10.67%.

This change in the export pattern could be related to recession in the economy and

very stringent export policy of the Government.

6.10 GROWTH OF GDP IN INDIA:

India is one of the fastest growing economies in the world. The Gross Domestic

Product (GDP) of a country indicates its economic stability and prosperity. Inspite of

global recession, India is able to maintain a decent GDP growth. The table given below

illustrates this point.

Table-6.9

YEAR-WISE GROWTH IN GDP IN INDIA

Sl. No.

Year GDP

1 2003-04 5.79

2. 2004-05 5.84

3. 2005-06 5.83

4. 2006-07 7.44

5. 2007-08 8.00

6. 2008-09 6.10

7. 2009-10 7.20

Source: a) Annual Report 2009-10, Ministry of Micro, Small and Medium Enterprises

b) Business today, edition, February 19th 2012;

148

(http://businesstoday.in.today.in/story/indias:best:smes:full:list/1/21914.html)

Fig.6.6

YEAR-WISE GROWTH IN GDP IN INDIA

Source: a) Annual Report 2009-10, Ministry of Micro, Small and Medium Enterprises

b) Business today, edition, February 19th 2012;

(http://businesstoday.in.today.in/story/indias:best:smes:full:list/1/21914.html)

It is seen from the above table that India has grown in its stature over the past

years. Its GDP growth accelerated steadily after India liberalised its economy in 1991,

taking a decisive step towards open policies and relinquishing inward looking policies.

The average annual GDP growth went up to 7.44 per cent in the year 2006-07 from

Growth rate of GDP

0 1 2 3 4 5 6 7 8 9

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

GDP

149

5.83 per cent in the preceding year, as can be clearly seen from the table. The GDP of

India in the year 2009 was around 7.20% - 8% and the MSME’s contribution towards

GDP is substantial.

Industrial growth, however, has now become volatile and is slowing in recent

months, from an average 16 per cent growth in 2009-10 to 9 per cent in 2010-11. With

a support from a lower base, this sector is likely to grow greater than its long-term

average growth over the last two decades. Significantly, the MSME sector has

maintained a higher growth rate vis-à-vis the overall industrial sector during the past

decade. According to the respondents, exports from these enterprises have been on the

rise, despite increased cost of raw materials, sluggish global demand and stiff

international competition. Today, the sector produces a wide range of products from

simple consumer goods to high-precision, sophisticated finished products, as already

discussed earlier. The MSME sector has emerged as a major supplier of mass

consumption goods as well as a producer of electronic and electrical equipment and

drugs and pharmaceuticals. An impetus to the sector is likely to have a multiple impact

on economic growth.

The MSME sector has slowly come into the limelight, with increased focus from

the government and other government institutions, corporate bodies and banks, policy

based changes; investments into the sector; globalisation and India’s robust economic

growth have opened up several latent business opportunities for this sector. The

National Manufacturing Competitiveness Programme (NMCP), implemented by the

Ministry of MSME with an objective of ‘National Strategy for Manufacturing’ aiming

to ensure healthy growth of the MSME Sector.

The Planning Commission has constituted a Task Force with a view to integrate

production by cultural and creative industries with the development strategy. The

recommendations of the Task Force were examined in the implementation of the

150

Eleventh Plan. 4 The report of the Task Force on MSMEs provides a roadmap for the

development and promotion of the Micro, Small and Medium Enterprises (MSMEs). It

recommends an agenda for immediate action to provide relief and incentives to the

MSMEs, especially in the aftermath of the recent economic slowdown accompanied by

institutional changes and detailing of programmes, to be achieved in a time bound

manner. In addition, it suggests for the setup of appropriate legal and regulatory

structures in order to create a congenial environment for entrepreneurship and growth

of micro, small and medium enterprises in the country. To encourage the growth of

small scale industries in India, the Government has reserved certain products to

manufacture in the micro, small and medium scale sector, where there is techno-

economic justification for such an approach. (This is shown in the Annexure II)

The MSME business opportunity in India can be seen possibly in every sector -

financial services, telecom, education, automobiles, media, food, real estate and so on.

This makes India a hub for best small business opportunity in various segments. Thus,

one who wishes to explore the business opportunity in India must have a look at the

MSME and retail business sectors to get an idea about the business scenario in India.

Micro, small and medium sized enterprises play a central role in the Indian economy

as already mentioned. They are a major source of entrepreneurial skills, innovation

and employment. MSME businesses are the biggest contributor to the economy of any

country and the same goes with Indian economy. After agriculture, small business in

India is the second largest employer of human resources.

The MSME business market of India is large and is bubbling with newer

opportunities. Increased purchasing power and consumerism is what drives the

business scenario. Thus, there is an opportunity for competitive advantage that can

benefit investors and entrepreneurs to a large extent. An investment in any best small

business opportunity promises lucrative returns and success in less time.

4 http://planningcommission.nic.in/

151

6.11 GROWTH PATTERN OF MSMES - KARNATAKA SCENARIO:

The presence of micro, small and medium enterprises plays a pivotal role in the

balanced and holistic industrial development of any State, as MSMEs is the main

source for employment and adds value to the products and services while encouraging

entrepreneurship. The Government of Karnataka is nowhere behind in promoting the

MSMEs sector for its overall growth and development. The table below shows the

district-wise distribution of MSMEs, the investment and the employment generated.

The following is the district-wise distribution of MSMEs in the State of

Karnataka. The total amount of investment made in each district and the total number

of employment provided is given in detail.

Table-6.10

NUMBER OF MSMES, ITS INVESTMENT AND EMPLOYMENT IN EACH OF THE DISTRICT OF KARNATAKA UP TO THE YEAR 2009-10

Sl. No.

District Unit in Nos. Invest Rs. Lakhs.

EMP in Nos

1. Bangalore (U) 67,553 321,679.27 622,327

2. Chitradurga 9,886 174,433.43 40,071

3. Belguam 33,737 68,748.58 143,036

4. Bellary 15,924 56,779.16 76,571

5. Bangalore (R) 16,966 55,465.54 91,758

6. Tumkur 21,864 54,627.02 115,093

7. Mysore 22,788 52,129.24 119,751

8. Kolar 14,125 51,642.26 90,044

9. Dharwad 16,626 49,598.40 140,289

10. Dakshina Kannada 20,031 47,470.65 10,272

11. Udupi 8,210 42,142.97 57,402

12. Gulbarga 16,352 33,124.87 69,487

152

Sl. No.

District Unit in Nos. Invest Rs. Lakhs.

EMP in Nos

13. Shimoga 15,094 25,825.44 66,063

14. Koppal 5,297 25,176.12 34,152

15. Raichur 9,172 22,893.82 43,365

16. Uttar Kannada 9,424 21,614.57 50,178

17. Hassan 11,427 20,882.13 48,911

18. Mandya 9,361 20,020.50 43,298

19. Davangere 8,700 19,597.32 39,511

20. Bagalkot 7,738 17,649.81 36,404

21. Bijapur 8,692 15,450.44 43,811

22. Bidar 7,661 15,316.31 42,180

23. Chikmagalur 8,251 13,933.93 34,205

24. Haveri 9,181 13,393.02 34,374

25. Gadag 7,550 10,481.23 28,725

26. CH Nagar 8,127 9,810.52 35,370

27. Kodagu 3,573 7,189.41 24,217

28. Ramanagara 928 66,66.45 7,795

29. Chikkkaballapur 682 2,507.09 3,765

Total 3,94,920 1,119,249.5 2,284,225

Source: Commissioner for Industrial Development and Director of Industries & Commerce, Bangalore [email protected]

From the above table, it can be seen that not all the districts of Karnataka are

industrially viable and do not have the same distribution of MSME units. The highest

no. of MSMEs is concentrated in Bangalore (u), where there are around 67 thousand

units, generating employment to around 6 lakhs people. The next in the ladder is

Belgaum, where there are around 34 thousand units, generating employment to

around 1,50,000 people. Then we have Dakshina Kannada, where Mangalore is one of

153

the important cities where 20,000 MSME units are situated and generating

employment to the tune of around 1,30,000 people. Hubli-Dharwad, the twin city of

Karnataka has around 17,000 units providing employment to 1, 40,000 people. All

other districts also have taken steps to become industrially viable and will take some

time to come up the ladder.

The Karnataka Government is in the forefront in implementing the modern

techniques and in providing any kind of help for the upliftment of the MSME sector.

The State has around 20 MSME Industrial Clusters that focuses on various products.

There are 10 handloom clusters and more than 140 handicraft MSME clusters. In

addition to these clusters, the Karnataka State Small Industries Development

Corporation Ltd. (KSSIDC) has established a network of 159 Industrial Estates

throughout the State in almost all the districts and taluks, constructed 5,746 Industrial

Sheds and alloted 3,976 Industrial Plots.5 The districts like Tumkur, Mysore and

Dharwad also are attractive locations for MSME investments. In recent years, the

MSME Sector in Karnataka has extended itself into the new areas such as business

services, computer related activities, maintenance & repair of personal & household

goods, etc., other than the traditional units. There is a wide scope for the growth in this

sector in the State of Karnataka. This point can be substantiated with the following

data.

Table-6.11

NUMBER OF MSMES REGISTERED AND UNREGISTERED IN KARNATAKA UPTO THE YEAR 2009-2010

Name of State No. of Registered

units No. of

Unregistered units Total

Karnataka 3,94,920 14,72,015 18,66,935

Source: www.karnatakaindustry.gov.in

5 www.karnatakaindustry.gov.in

154

The above table illustrates that out of total 18,66,935 units in the State of

Karnataka, 3,94,920 are registered units and the remaining 14,72,015 are unregistered

units. In Karnataka, the industries are not evenly distributed. Some of the districts

have all the resources and facilities required for setting up an industry, whereas some

do not have the required facilities. The following table is the number of MSMEs in

Karnataka and the percentage growth over the previous year.

6.12 NUMBER OF REGISTERED MSMEs IN KARNATAKA:

The year-wise number of registered MSMEs in Karnataka and their percentage

growth over the previous years are stated below.

Table-6.12

YEAR-WISE NUMBER OF REGISTERED MSMES IN KARNATAKA

Total MSMEs Sl. No.

Year (In Lakh numbers)


1 2003-04 298,218 0%

2. 2004-05 298,218 0%

3. 2005-06 334,456 12.15%

4. 2006-07 347,036 3.76%

5. 2007-08 362,020 4.3%

6. 2008-09 377,725 4.3%

7. 2009-10 394,920 4.6%

Source: a) www.kumbangalore.com b) www.karnatakaindustry.gov.in

Fig-6.7

PERCENTAGE GROWTH OF MSMES IN KARNATAKA

155

0%

2%

4%

6%

8%

10%

12%

14%

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Source: a) www.kumbangalore.com

b) www.karnatakaindustry.gov.in

It is seen from the above table that the small scale industries in Karnataka did

not witness any growth in the year 2003-04 and 2004-05 with regard to the number of

units. It was only in the year 2005-06 that there was a leap in the no. of MSMEs in the

State having a phenomenal growth rate of 12.15%. However, in the year 2006-07 there

was a decline in the growth rate to 3.7%. In the subsequent years we could find a small

increase in the growth rates pegged at 4.3% levels.

6.13 INVESTMENT PATTERN OF MSMEs IN KARNATAKA:

The following table shows the investment pattern of MSMEs in Karnataka and its

growth over the previous years.

Table-6.13

INVESTMENT PATTERN OF MSMES IN KARNATAKA

156

Investment Sl. No.

Year (In Lakhs)


1 2003-04 616,374 0%

2. 2004-05 616,374 0%

3. 2005-06 726,616 17.89%

4. 2006-07 782,160 7.64%

5. 2007-08 894,816 14.40%

6. 2008-09 996,434 11.35%

7. 2009-10 1,119,249.5 12.32%


Fig-6.8

PERCENTAGE GROWTH IN INVESTMENT OF MSMES IN KARNATAKA

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10


It is seen from the above table and graph that the MSMEs in Karnataka did not

have any growth in investments during the years 2003-04 and 2004-05. The

investment was Rs. 6, 16,374 lakhs for the two years without any change. It is only in

the year 2005-06 that there was a steep rise in the investment in MSMEs which had an

accelerated growth rate of 17.89%. However in the next year the growth rate declined

157

to 7.64% and after this there was a steady growth in the investment pattern in MSMEs.

This could be because of the various policy reforms which had taken place with regard

to the availability of easy credit, competition as to the usage of upgraded technology

etc. The investment approval in the State is governed and administered by two bodies

for the sanction of projects.

a. Mega Projects: The State High Level Clearance Committee (SHLCC) under

the chairmanship of the Hon’ble Chief Minister clears projects with investment

above 50 crores

b. Small Medium and Large Project: Karnataka Udyog Mitra acts as a

Secretariat for State Level Single Window Clearance Committee (SLSWCC)

under the Chairmanship of the Hon’ble Minister for Large and Medium

Industries, Government of Karnataka which clears projects with investment

between Rs. 3 crores and 50 crores ( applicable to small and medium

enterprises under the category of manufacturing enterprises).

158

6.14 NUMBER OF PROJECTS APPROVED IN KARNATAKA:

The year-wise number of projects approved and investment made which is

approved by the SHLC and SLSWC committees are given in the following table.

Table-6.14

YEAR-WISE PROJECTS APPROVED IN THE STATE OF KARNATAKA

Sl. No.

Year No. of Projects Investment approval in

Rs. Crores

1. 2003-04 115 11,568

2. 2004-05 231 36,242

3. 2005-06 352 51,198

4. 2006-07 946 1,02,210

5. 2007-08 836 1,70,832

6. 2008-09 354 1,10,447

7. 2009-10 546 2,92,384


Fig-6.9

YEAR-WISE PROJECTS APPROVED IN THE STATE OF KARNATAKA

0

100

200

300

400

500

600

700

800

900

1000

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10


159

It is seen from the above table that the number of projects approved in the

State of Karnataka has increased steadily since 2003. 2006-07 has witnessed a steep

increase in the number of units and the investment made in this sector from 352 units

(2005-06) to 946 units (2006-07), and an investment of Rs. 51,198 (2005-06) to Rs.

1,02,210 (2006-07).

6.15 NUMBER OF PERSONS EMPLOYED IN MSMEs IN KARNATAKA:

The employment rate in a State directly focuses on its socio-economic status

and its overall development. The following table shows the year-wise employment in

MSMEs in the State of Karnataka over a period of time.

Table-6.15

YEAR-WISE EMPLOYMENT IN MSMES IN KARNATAKA

No. of Persons employed Sl. No.

Year (InPersons)


1. 2003-04 17,78,980 3.29%

2. 2004-05 18,28,978 2.81%

3. 2005-06 18,87,111 3.19%

4. 2006-07 19,44,628 3.05%

5. 2007-08 20,68,027 6.34%

6. 2008-09 21,73,061 5.08%

7. 2009-10 22,84,225 5.12%


Fig-6.10

160

PERCENTAGE GROWTH OF EMPLOYMENT IN MSMES IN KARNATAKA

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10


It is seen from the above table that the employment in MSME units in

Karnataka has congenial percentage growth since the year 2003. The employment

growth sloped down in the year 2004-05 but subsequently gained momentum. It is in

the year 2007-08 that there was an appreciable growth in the employment rate of

MSMEs in Karnataka i.e., to an extent of 6.34%. This is a substantial growth as

compared to the previous years. Since then, the growth has been good and many

people are taking the responsibility of job providers than job seekers.

Karnataka has a unique distinction among the states of India with regard to the

scale of economic performance. In addition, the State has great potential for growth

and development in several areas and it has proved this beyond doubt. Over the last

five decades, it has been treading through the development in various sectors and it

has been an exemplary. It is considered as one of the most deserved industrial

locations for setting up industries in the country. The State has been consistently

pursuing progressive outlook to meet the changing needs of the economy and industry.

Karnataka is also considered one of the states comprising large public sector industrial

161

undertakings, large privately owned industries like steel, sugar, textiles etc., In recent

times, Karnataka has emerged as the leader in IT & BT and knowledge based industrial

sector while making rapid strides in IT & computer related industries and

biotechnology with a strong research and development base. The State has a number of

traditional cottage, handicrafts, micro enterprises like handlooms, power looms, silk

weavers, khadi and village industries etc... Moreover, for several years now, the State

has been consistently pursuing progressive industrial policies to meet the changing

needs of the State's economy and Industry. Over the last 100 years, the State has had

the distinction of building a strong and vibrant industrial base, which combines the

intrinsic strengths of large industrial public sector undertakings, large and medium

privately owned industries and a very wide and dispersed small scale sector.

The State is blessed with considerable nationalized financial institutions and

private banks which have come forward to extend financial help to the MSME sector.

Without their support, this rate of growth would not have been possible. One of the

important ways to promote access to new technologies among MSMEs is to provide

venture capital, which helps in indigenous development of technologies in its own way.

The financial institutions such as Industrial Development Bank of India (IDBI),

Industrial Credit and Investment Corporation of India (ICICI), Industrial Finance

Corporation of India (IFCI), and other banks are providing assistance for

commercialization of indigenously developed technologies and adoption of imported

technologies for wider domestic applications through venture capital companies. This

is one of the important factors contributing to the growth of MSMEs in Karnataka.

6.16 MSME INDUSTRIAL CLUSTERS IN KARNATAKA:

The Cluster Development Programme (CDP) has been started to support the

MSME networks within a cluster. A cluster refers to the concentration of economic

enterprises, producing a typical product/service or a complementary range of

162

products/services within a specific geographical area. The Clusters form a kind of

knowledge network and it works like a honey beehive, where there is a constant

sharing of knowledge and the benefits. It links not only people, but both formal and

informal science, i.e. tacit knowledge. The innovative atmosphere and entrepreneurial

dynamism are a part of the secret of success of these clusters situated in the various

States of India such as Uttar Pradesh, Maharashtra, Andhra Pradesh etc., and the

various districts in the State of Karnataka. The Clustering and networking has helped

the small and medium enterprises in boosting their competitiveness. India has over

400 SME clusters and about 2000 artisan clusters.6 It is estimated that these

clusters contribute 60 per cent of the manufactured exports from India. Almost all the

gems and jewellery exports are from the clusters of Surat and Mumbai. Some of the

small scale enterprise’ clusters are so big that they account for 90 per cent of India's

total production output in the selected products. For example, the clusters of Chennai,

Agra and Kolkata which are well known for leather and leather products.

As already mentioned above, there are around 20 MSME industrial

clusters, 10 handloom clusters and more than 140 handicraft MSME

clusters in Karnataka that focus on the various products ranging from food

products, leather goods, light engineering, power looms, etc. This is another important

factor which led to the growth of MSMEs in the State of Karnataka. The details of

MSME industrial clusters which are scattered around the various districts of Karnataka

are given below.

Table-6.16

MSME INDUSTRIAL CLUSTERS IN THE STATE OF KARNATAKA

Location Product

6 http://karnatakaindustry.gov.in/cluster.html

163

Hubli, Dharwad Agricultural Implements and Tractor Trailer

Arasikara Coir & Coir Products

Gulburga, Gadag belt Dal Mills

Bangalore Electronic Goods, Leather Products, Light Engineering, Machine Tools, Powerloom, Readymade Garments

Mysore Food Products, Silk

Mangalore Food Products

Belgaum Foundry, Powerloom

Bellary Jeans Garments

Raichur Leather Products

Bijapur Oil Mills

Gadag Betgeri Powerloom

Shimoga Rice Mills

Source: http://karnatakaindustry.gov.in/cluster.html

The above table shows in detail the clusters situated in the various districts of

State of Karnataka. Most of these small units are very famous for their work such as the

food products, leather products, technological goods, silk products etc.

The MSME sector in India and especially in the State of Karnataka has

undoubtedly witnessed significant growth in the post liberalization period since 1991.

In this chapter, the researcher has studied the data from 2003 to 2010. The facts and

figures clearly show the number of registered units both in India and in Karnataka has

increased, which has also led to substantial growth in investment and employment.

This clearly indicates an increasing trend in growth of MSME sector all over India in

general and the State of Karnataka in particular.

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