Transcript Strategies for sustainable development of SMEs

Strategies for sustainable development
of SMEs
Contents
• India’s economy at a glance
• Industrial situation-present
• SMEs-characteristics
• Issues and challenges
• Technological issues
• Management challenges
• Sustainability outlook
• Way forward
India’s Economy
$ 2 trillion size to reach $ 6 trillion by 2020
Growth rate
6-8% pa
Sector wise contribution (%)
Agriculture
17
Industry
28
Services
55
Population:
1210.1 million growing @1.64 %
Supports 1/6th of World Population in 2.3% of landmass
0-14
age group
30.1
%
15-64
age group
64.6
%
+65
5.3
%
Indian Industry
• Industrial production measures the output of businesses integrated
in industrial sector such as manufacturing, mining, and utilities
• Current situation of IIP and Mfg growth declining
• IIP of August 2013 stands at 165.7, which is only 0.6% higher as
compared to the level in the month of August 2012.
• Manufacturing growth rate declined to -0.01 during Apr-Aug 2013’14 from 0.0 during the same period previous year.
• Decline of growth in the manufacturing sector is largely due to
Sluggish growth of investment
Squeezed margins of the corporate sector
Deceleration in the rate of growth of credit flows and
The fragile recovery of global economies
Growth in industrial production 1992-2012
SMEs –current situation
• Growing with problems:
– Despite showing a robust growth rate of over 10%
over the last 5 years, the SME sector is beset with
operational problems due to size and nature of
business.
• Potent enough to contribute to national economy
– SME sector if properly guided can help realise the
target of the proposed National Manufacturing Policy
of raising the share of the manufacturing sector in
GDP from 16% at present to 25% by the end of 2022
MSMEs India
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361.8 lakh units
3000 medium
16.64 lakh regd MSMEs
Employment 805.2 lakhs
Mfg& services 45% of industrial prodn
Exports 40%
» 4th All India Census of MSMEs
SMEs-Why sustainability matters?
• Large volume of manufacturing
– MSMEs accounts for about 45 per cent of manufacturing output,
• Large number of units: 450 lakh units
– 95 % of the total industrial units
• Gross output: Rs 18.3 lakh Cr
• Big exporter: 40 per cent of total exports.
• Large employer: To 10 Cr people, mostly in the rural areas
– Largest employer next to agriculture sector.
• Development of this sector holds key to
– Inclusive growth and
– Sustainable development of the country.
Sustainable development of SMEs
• SMEs are to be guided to pursue green growth strategies as a
prelude to combating global environmental issues.
• Environmental burden of their production shall be reduced
• Creation in the green markets – market for environment friendly
products and services
• SME entrepreneurs’ awareness to be aroused towards a green and
low carbon economy
• SME knowledge and skill gaps in relation to green technologies,
practices and business models shall be reduced
• SME access to the emerging markets of environmental goods and
services increased
Key characteristics of Indian MSMEs
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High contribution to domestic production
Significant export earnings
Low investment requirements
Operational flexibility
Location wise mobility
Capacities to develop appropriate indigenous technology
Import substitution
Contribution towards defence production
Technology-oriented industries and
Market competitiveness
SME CLUSTERS
Textiles
Auto Components
Leather Products
Machine Tools
Rice Mills
Plastic Products
Packaging
Food Processing
Coir
Chemicals
Handlooms
Ceramic Tiles & Sanitary
Dyes & Pigments
Pumps & accessories
Gems & Jewellery
Re-Rolling Mills
Poultry
Refractories
Sea- Food
Rubber
Petrochemicals
Handicrafts
SME Issues & Challenges
• Technical
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Technology & Production
Infrastructure& utilities
EH&S issues
R&D efforts
• Management
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Credit flow
Market reach & competition
HR and Skill upgradation
Government support/regulation
Inter institution linkages
Technology & Production
 No access to state of art technologies- Most operate at Low level
technologies
 High cost of production, low productivity, wastage
 Shall move to appropriate and affordable technologies
 Barriers: Propriety technologies- closely guarded
 Poor Technology transfer, lack of optimization of operating unitsenergy, safety, water, environment audits, ICT usage in procurement,
contracting & marketing
 Poor technological development in SME sector- support to acquire
modern technologies.
 CSIR labs/NRDC not rising to expectations- need based R&D
 Little efforts towards adoption of BATs
 Global Benchmarking
 Increased Industry-Institution linkage
 Govt , IAs, Professional bodies, Trade & Industry associations
Infrastructure & Utilities
• Most SME industry estates, parks and clusters are grossly deficient
in all kinds of basic infrastructure
• Common infrastructure for SME clusters to be built
• Develop transport network- railways, waterways, roadways and
airways
• Warehouses- suitable to different industry segments
• Efficient communication facilities- telecom, internet
• Reliable supply of water, power, captive & emergency power
• Environment management set up-CETPs
• Waste recycle facilities
• Tool rooms, Testing house, Design centres, Training schools
• Combined efforts of Central/State and Local Govt needed for
development of Physical & knowledge infrastructure.
EHS issues
• Weak environmental performance of SMEs
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Better environment management contribute to efficiency, profitability, and
competitiveness for the unit
Sectors having large scale EHS impact include speciality chemicals, food
processing, dyes, printing, paper, textiles, leather, timber, metal articles etc
Major concerns are effluents, toxic waste, air pollution, ozone depletion,
waste management, fire and explosion and work place safety
Technological improvements- in-house and acquired
Modern environment management techniques – source reduction,
conservation, recycle & reuse
Common ETPs
Product Stewardship: Responsibility for the product through the value chain
from raw materials to end use
Financing SMEs-Credit flow
• Cost of finance is high compared to large
corporate/overseas manufactures
• Despite budgetary increase in SME lending Banks
remain reluctant. This needs to be addressed.
• Consider public equity to reduce cost of capital
• Turnaround SIDBI/State FCs to enable funding SMEs
• Relook at the CGTMSE so that SME funding become
easy and depend only on project viability and without
insisting collaterals.
• Cluster specific soft loan support scheme.
Industrial financing
Source
SMEs
Corporate
Internal funding
15
47
Banks/ FI s
25
19
Capital Market
10
5
Others*
50
29
*Others include trade credit, local money lenders which are costly
ISB survey 2010
Marketing SME products
• Innovative marketing strategies needed to compete in the global
market.
• Technology solutions, internet, social media, direct marketing tools
• Trade fairs
• Competition mapping & re-engineering
• Go beyond traditional marketing approaches create brand equity
and compete globally.
• Avail Govt purchase preferences
• Development support for exposure to overseas markets.
• NMCP assistance for adoption of bar code, technology upgradation
in packaging and skill development for modern marketing
techniques
HR and Skill upgradation
• The biggest challenge of SMEs for talent attraction and
retention
• Partly due to inability to pay competitive compensation
packages and inadequate employer branding.
• Competence and Skill development
• Gap between performance and potential
• Strengthen employee Communication, Training &
Development
• Reform redundant labour laws
• Develop All India Management Cadre for SMEs
• Succession planning
Government Supports
• Energize industrial promotion agencies in Govt
towards SME development
• Simplify procedures, widely publicize available
Govt supports and render it easy to avail for
genuine SME developers
• Specific support for energy conservation, waste
reduction, Start ups, innovation, employment
generation may be given
• Involve Industry associations in related policy
making
Institutional linkages
• Develop strong bonding between industry,
Universities and R&D institutions to work
together
• Encourage patenting of technologies, practices
• Entrepreneurship development shall be part of
curriculum of professional courses
• Start up encouragement
Sustainability outlook
• As bulk of manufacturing output is from the SME sector It has a
strong bearing on the global environment in terms of CO2 and other
GHG emissions leading to climate change
• Thus life cycle analysis of products shall contribute to little
environment burden
• Most raw material inputs are sourced from nature. Resource
depletion is to addressed properly
• Waste generation from large number of widely distributed units is
a major issue. Treatment of multi component waste streams need
utmost care
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Way forward
• National policies directed towards environmental
sustainability and combating climate change
shall have a thrust on the SME sector
• Technology missions needed to focus attention
on in critically polluting and energy intensive
SME manufacturing sectors and develop new
strategies
• SMEs to foster traditional knowledge and
manufacturing capabilities