From:
Dr. M. V. Raghavalu,
Associate Professor,
Department of PG studies in Economics,
SSA. Government First Grade College,
Bellary-583101,
Karnataka State.
To,
The Editor,
Sedme,
Hyderabad
Respected Sir,
Sub: Publication of my research paper in your journal- Reg
Here with, I am submitting a research paper on “Development of Micro Enterprises in
Karnataka –An empirical study”, for its publication in your esteemed journal. I, therefore,
request you please give the consent for its publication in your esteemed journal.
Thanking you sir,
Yours’ faithfully,
M.V.Raghavalu
Development of Micro Enterprises in Karnataka-An Empirical Study
Dr.M.V. Raghavalu,
Associate professor,
Department of PG Studies Economics,
SSA. Government First Grade College, Bellary,
Email: raghavaluveera@gmail.com
Abstract
Small Scale Industrial sector takes a prominent place in the Indian industrial
sector. This is because; the sector provides more employment opportunities with
less investment, produces qualitative products to the needs of the people. And
also, it is possible to locate both in rural and urban areas, which helps to reduce
regional imbalance at the country level. And also, Small Scale Industrial units are
supplementing and complementing to large and medium scale units as ancillary
units, providing large number of employment opportunities. The present study is
aimed to attempt on the status of Micro, Small and Medium enterprises both in
India and in Karnataka and to analyse the industrial policy implications along with
the problems and prospects of MSMEs in Bellary district of Karnataka. As per field
survey results are concerned more than 70 per cent of the total respondents do
not know about the faculties from the Industrial policy and facilities available
from the various schemes relating to Central and State governments. And also,
SSI unit owners are facing several problems like finance, raw material, and
marketing problem etc., resulting the production and productivity is declining
continuously. Hence, there is a great need to solve all these problems both by the
Central and state Governments.
2
Development of Micro Enterprises in KarnatakaAn Empirical Study
Dr.M.V. Raghavalu,
Associate professor,
Department of PG Studies Economics,
SSA. Government first Grade College, Bellary,
Email : raghavaluveera@gmail.com
Small Scale Industrial sector takes a prominent place in the Indian
industrial sector. This is because; the sector provides more employment
opportunities with less investment, produces qualitative products to the needs
of the people. And also, it is possible to locate both in rural and urban areas,
which helps to reduce regional imbalance at the country level. Mr. Jawaharial
Nehru, the first Prime Minister of free India was given much importance to start
the Small Scale Industrial units at the country level for the development of the
country. In the words of our honorable Prime Minister Dr. Manmohan Singh,
“the key to our success in employment lies in the success of manufacturing in
the small scale sector. However, the Small Scale Industrial sector contributes
more in GDP with significant employment opportunities in the industrial sector
in the Indian economy. And also, Small Scale Industrial units are supplementing
and complementing to large and medium scale units as ancillary units, providing
large number of employment opportunities. With this, the sector contributes
about 95 per cent of industrial units in the country, 45 per cent of value addition
in the manufacturing sector, 65 per cent of services and more than 40 per cent
of the country’s total exports and nearly 80 per cent of the industrial
employment is accounted at the country level.
Objectives of the study
The main objectives of the present study is to know the status of Micro,
Small and Medium enterprises both in India and in Karnataka, and to find the
problems and prospects of MSMEs in Bellary district of Karnataka.
Methodology
3
The present study is based on both primary and secondary data. The
primary data is collected from field survey through structured schedule in
Bellary district of Karnataka, which is one of the industrial potential States in the
Indian economy. Bellary district has been divided into seven taluks viz., Bellary,
HB. Halli, Hadagali, Hospet, Kudligi, Sandur, and Siruguppa. About 10 women
entrepreneurs have to be selected in each taluk in the district for the purpose of
the study. The study covers mainly problems and policy implications of the SSIs
in Karnataka in general, Bellary district in particular. With regard to secondary
data, various published and unpublished books, reports, five Year documents
and internet sources are reviewed for the present study.
Definition
Many of the financial institutions, Governmental agencies and State
Governments have been given the definitions in different ways for Small Scale
Industrial units. With regard to ceiling limit of investment in plant and machinery
there have been many changes from time to time. The Small Scale Industrial (SSI)
sector nomenclature has been changed to Micro, Small and Medium Enterprises
(MSMEs). The MSME sector has been contributing significantly to Industrial
Production, Exports and Gross Sate Domestic Product (GSDP). The Government
had formulated a comprehensive new Industrial Policy in 1996 and has modified
the policy in 2006. The Micro, Small and Medium Enterprises (MSMED) Act, 2006
has been enacted to facilitate the promotion and development of Micro, Small
and Medium Enterprises. The Act has come into effect from 2nd Oct, 2006. Under
this Act, enterprises have been categorized broadly into those engaged in
manufacturing and providing rendering services. The term industries are
replaced with the enterprises. Both categories have been further classified in to
Micro, Small and Medium Enterprises based on their investment in plant and
machinery. However, on the basis of investment ceiling limit the enterprises are
classified as under:
A) As per the MSMED Act, 2006, Manufacturing Enterprises have been
defined based on investment in plant and machinery and classified into:
 Micro Enterprises- Investment up to Rs. 25 lakhs.
4
 Small Enterprises- Investment above Rs. 25 lakh and up to Rs. 500
lakhs.
 Medium Enterprise- Investment above Rs. 500 lakhs and up to Rs.
1,000 lakhs.
A) As per the MSMED Act, 2006, Service Enterprises have been defined
based on investment equipment and classified in to:
 Micro Enterprises- Investment up to Rs.10 lakhs.
 Small Enterprises- investment above Rs. 10 lakhs and up to Rs 200
lakhs.
 Medium Enterprises- Investment above Rs. 200 lakhs and up to Rs.500
lakhs.
B) Large Scale Industry:
An Industrial Unit which is not classified as Micro, Small and Medium
Enterprises and with investment up to Rs 250 crores shall be classified as
large scale industry.
C) Mega Project:
Project with an investment of Rs. 250 Crores and above.
Small Scale Industrial units in India:
The Micro, Small and Medium Enterprises (MSMEs) sector
contributes significantly to the manufacturing output, employment and
exports of the country. It is estimated that in terms of value, the sector
accounts for about 45 per cent of the manufacturing output and 40 per
cent of the total exports of the country. The sector is estimated to employ
about 732 lakh persons in over 311.52 lakh enterprises throughout the
country. Further, this sector has consistently registered a higher growth
rate than the rest of the industrial sector. There are over 6000 products
ranging from traditional to high-tech items, which are being manufactured
by the MSMEs provide good opportunities for both self-employment and
wage employment
5
Table-1, Particulars of products of MSMEs more than 6000 products
S.
Particulars
percentage
1.
Machinery& Equipment
4.66
2.
Other Non-metallic Mineral Products
3.77
3.
Repair& Maintenance of Motor vehicles; retail Sale
3.72
of automotive fuel
4.
Wood &Wood Products
3.53
5.
Others
25.82
6.
Food Products & beverages
14.26
7.
Wearing apparel
13.67
8.
Fabricated Metal Products
8.96
9.
8.46
10
Repair & Maintenance of Personal & Household
goods; retail trade
Textiles
11
Furniture
6.36
12
Total
100.0
6.78
Source: Final Report of the Fourth All India Census of Micro, Small &
Medium Enterprises 2006-07.
6
Type of MSME products
Machinery& Equipment
100
80
Other Non-metallic Mineral Products
60
Repair& Maintenance of Motor
vehicles; retail Sale of automotive
fuel
40
20
Wood &Wood Products
0
1
Others
Food Products & beverages
7
Years
Table-2
Year-wise Small Scale Industrial units in India
No. of
Employment SSI Exports
Production
Units( in
(in Lakhs)
(Rs. in Crores)
lakhs )
1993-94
Current
Rs in
US in Dollar
prices
Prices
Crores
Millions
1960-61
0.36
1426.50
-
21.6
-
-
1973-74
4.20
34200.00
7200.00
39.7
400
500
1975-76
5.50
42500.00
11600.00
45.9
500
615
1980-81
8.70
722200.00 28100.00
71.0
1600
2078
1985-86
13.50
118100.00 61200.00
96.0
2800
2263
1990-91
67.90
682950.00 63518.00
158.3
9664
5386
1995-96
82.80
121649.00 148290.00 197.9
36470
10903
2000-01
101.10
184428.00 261289.00 239.1
69797
15278
2005-06
123.4
418884.00 497856.00 299.85
150242
NA
2006-07
261.12
471663.00 709398.00 595.66
182538
NA
2007-08
272.79
522942.00 790759.00 626.34
202017
NA
2008-09
285.16
NA
880805.00 659.35
NA
NA
2009-10* 298.08
NA
982919.00 695.38
NA
NA
2010-11# 311.52
NA
1095758.00 732.17
NA
NA
Note: The data for the period up to 2005-06 is Small scale Industries (SSI). Subsequent to 200506, data with referee to Micro, Small and Medium enterprises are being compiled. *:
Provisional,#:Projected, NA: Not Available,
Source: Economic Survey-2008-09 and Annual Report -52011-12 for MSME.
8
Table- 2 represents about size of SSIs, its production, employment level
and exports value in India from 1960-61 to 2010-11. The total number of SSIs
during 1960-61 is only 0.36 lakhs; it rose to 311.52 lakhs in 2010-11. While in the
case of production value of SSIs in 1973-74 at current prices is Rs 7200.00 and it
raised to Rs.1095758. With regard to employment, about 21.6 lakhs were
accounted in 1960-61 and it rose to 732.17 lakhs in 2010-11. Further, the
exports were increased significantly. Evidentially, the export value during 197374 is Rs. 400 crores and it raised to Rs 202017 in 2007-08, which clearly shows
that the size of SSIs, its production, employment and exports are significantly
increased under the reference period. The additional information relating to
rural and urban areas, type of activity, organization, employment, output and
finance for Small Scale industries and Medium Scale industries depicts from
following table.
9
Table-3, Particular of Micro, Small and Medium Industries in India(During2010-11).
Particulars
Size
percentage
1.
Total No. of Enterprises(Lakh)
15.64
---
2.
No of Rural Enterprises(Lakh)
7.07
45.23
3.
No of Women Enterprises(Lakh)
2.15
13.72
4.
No of Micro Enterprises(Lakh)
14.85
94.94
5.
No of Small Enterprises(Lakh)
0.76
4.89
6.
No of Medium Enterprises(Lakh)
0.03
0.17
7.
Enterprises by Type of Activity(lakh)
a)Manufacturing
10.49
67.10
b)Repairing & maintenance
2.52
16.13
c)Services
2.62
16.78
a) Proprietary
14.09
90.08
b) Partnership
0.63
4.01
c) Private company
0.43
2.78
d) Public Limited Company
0.08
0.54
e) Co-operatives
0.05
0.30
f) Others
0.36
2.30
a) Micro Enterprises
65.34
70.19
b)Small Enterprises(Lakh)
23.43
25.17
c)Medium Enterprises(Lakh)
4.32
4.64
8.
9.
10.
11.
Enterprises by type of organization (lakh)
Employment(Lakh)
Gross Output (Rs in Crores)
a)Micro Enterprises
312973
44.24
b)Small Enterprises
318794
45.06
c)Medium Enterprises
75743
10.71
Enterprises by Source of Finance (Lakh)
10
a) No finance/Self Finance
13.64
87.23
b) Finance through Institutional Source
1.70
10.87
c) Finance through Non- Institutional
0.16
1.05
0.13
0.84
d) Finance through Institutional Source
and Non- Institutional
Source: Economic Survey-2010-11
According to the Table-3, more than 40 per cent of the units are located
in rural areas and more than 94 per cent of the units belong to microenterprises, covering the employment, output is 70.19 per cent and 44.24 per
cent respectively. It is disheartening to say that only 11 per cent of the unit
owners getting institutional finances, who contributed 90 per cent of the total
MSMEs.
11
Table-4
Major State-Wise distribution of Working Enterprises during 2010-11
Sl.No.
Name of the State/UT
No. of Working
Enterprises (lakh)
% Share
1.
Tamil Nadu
2.34
14.95
2.
Gujarat
2.30
14.70
3.
Uttar Pradesh
1.88
12.00
4.
Kerala
1.50
9.60
5.
Karnataka
1.36
8.71
6.
Madhya Pradesh
1.07
6.84
7.
Maharashtra
0.87
5.54
8.
Rajasthan
0.55
3.51
9.
Bihar
0.50
3.20
10.
Punjab
0.48
3.08
11.
Total of above states
12.85
82.13
12.
Others
2.79
17.87
13.
All
15.64
100
Source: Economic Survey-2010-11
Table-4 reveals that Tamil Nadu and Gujarat states had the highest per cent
age of the industries are accounted at 14.95 and 14.70 respectively. It is followed
by UP and Kerala (12.00% and 9.60%) and the lowest at 3.08 % in Punjab. However,
Karnataka State had only 8.71 per cent of the total units under the reference
period.
12
Small Scale Industrial units in Karnataka:
Karnataka is one amongst the industrially developed States in the Country.
The State has all potential to stand out on the fore front and has been focusing on
development of industries, trade and service sectors. The State Government
understands that the challenges poised due to global economic recession have to
be addressed to promote economic growth of the State. A stimulus to boost
economic activities needs to be given to sustain the current pace of overall
development. Further, the State is endowed with rich natural resources across the
State and such resources need to be optimally utilized for the benefit of local
people. The State Government realizes the limitation of agriculture sector to
generate large scale employment to the local youths. About 56% of the State’s
workforce is estimated to contribute 19.13% of the GSDP. It is the agreed fact
that, the manufacturing sector has high potential to create maximum employment
that too, to all sections and levels of job aspirants.
13
Table-5
Year-wise Small Scale Industrial units in Karnataka
Sl.
Year
No.
No
SSIs
of
Investment(Rs
In Lakh)
Employment (in
(Thousands)
1
Up to 1982-83
33272
34163
382
2
1985-86
64347
55671
543
3
1990-91
115451
108868
810
4
1995-96
175380
226778
1150
5
2000-01
269225
527656
1595
6
2001-02
286189
575540
1668
7
2002-03
298148
616374
1725
8
2004-05
321606
691969
1820
9
2005-06
334386
735616
1888
10
2006-07
346966
782158
1946
11
2007-08
361950
894817
2069
12
2008-09
377655
999851
NA
13
2009-10
394852
1111015
NA
14
2010-11
413286
1231638
NA
15
2011-12 up to
427864
1321841
NA
December 11)
Source: Economic Survey-2008-09.
14
Axis Title
Number of SSI Units
450000
400000
350000
300000
250000
200000
150000
100000
50000
0
Number of SSI Units
The Table-5 depicts about size of SSIs, its investment and employment in
Karnataka from 1982-83 to 2011-12. According to the table, the total number of
SSIs in Karnataka up to 1982-83 is 33,272 with an investment of Rs. 34,163
lakhs, providing employment to 382 thousands. It is significantly increased to
2011-12, accounting at 427864 units with an investment of Rs. 1321841 lakhs.
The total workers in the SSIs up to 2006-07 are 2067 thousand persons. The
State government has already enacted Karnataka Industries (Facilitation) Act,
2002 to provide enabling environment for investors. The State Government has
introduced Industrial Policy 2006-11 with an aim to increase the growth of GDP,
strengthen manufacturing industries, increase share of exports from Karnataka,
to generate additional employment of at least 10 lakh persons in the
manufacturing and service sectors, reduce regional imbalance and ultimately
aim at overall socio-economic development of the State. In this scenario, the
Government of India enacted Micro, Small and Medium Enterprises
Development Act, 2006 and requested all the States to provide required
support and encouragement to make MSMEs more competitive. According to
Dr. D M Nanjundappa Committee Report, several promotional steps like
attractive package of incentives, concessions and modernization efforts being
taken in the State. The State also understands the need to provide stimulus
15
measures for industries to combat the prevailing financial crisis. Keeping these
points in view, the State intends to formulate a new Industrial Policy with a
determination to provide level playing field to all investors, to build prosperous
Karnataka through development of human and natural resources in a
systematic, scientific and sustainable manner. As such the State government
launched new Industrial Policy with the broad guiding principles of creation of
employment, development of backward regions and value addition to local
resources with the mission of i) To create enabling environment for robust
industrial growth; ii) To ensure inclusive industrial development in the State;
iii) To provide additional employment for about 10 lakh persons by 2014. And
to enhance the contribution of manufacturing sector to the State’s GDP from
the current level of 17% to 20% by the end of policy period. The following are
the strategies are framed to achieve the above said aim and mission:
 Classification of the taluks of the State into four zones depending on
backwardness of the taluks and also based on broad guidelines of Dr.
D. M. Nanjundappa Committee Report.
 Thrust on provision of world-class infrastructural facilities for
industries with active participation of private sector/ industry.
 Implementation of Suvarna Karnataka Development Corridor
Programme (SKDCP) through length & breadth of the State and
develop industries at the potential locations along with corridor.
 Safeguarding the socio-economic interests of both farmers and
investors while acquisition of land.
 Preferential treatment for MSME sector enabling to meet the global
challenges.
 Attractive employment and performance linked package of
incentives and concessions to attract investments to backward
regions and also to provide a leverage to MSME sector.
16
 Additional incentives for entrepreneurs belonging to underprivileged sections of the society to bring them to the main stream
in order to achieve much needed inclusive growth.
Focus on skill development in order to enhance the employability of
youth especially, women and also to make ready-to-employ human resource to
the industry. However, several measures are taken for the growth and
development of the Micro, Small and Medium industries in the state of
Karnataka, like Streamlining land acquisition process through inclusive
development; Measurement of industrial areas to provide basic amenities and
to provide quality infrastructure to these industries; And also, special
concessions, incentives, rebates are given to MSMEs sector for its growth and
development.
Study Area
The present study is related to Bellary district, which is one of the backward
districts in Hyderabad-Karnataka region in Karnataka State. According to the 2001
census, the total population is 20, 27,140. Of which, male and female population is
10, 29,714 and 9, 97,426 respectively. The density of the population in the district
is 238. The district literacy rate is 58.04 percent and. the percentage of rural
population in the district is 56.3. The district had exploitable iron ore deposits are
estimated at 1032.4 million tones and that of Manganese ore at 18.81 million tones.
Annual production of iron and manganese ore varies from 2 .75 to 4.5 million
tones and 0.13 to 0.32 tones respectively. Despite the availability of minerals in
large quantities, the district had limited industries. Evidently, only 49 Large and
Medium scale industries are located with an investment of Rs 445297 lakhs,
providing employment to 7199 persons in the district. With regard to the total
number of Small Scale Industrial units, the district had 26,264 units with an
17
investment of Rs 35,053.63 crores, providing employment to 16,155 persons. That
means, limited number of SSI units were located in the district of Bellary.
However, the highly concentrated trades of SSIs in the district are Textiles-Jeans
cloth Garments, Chemical and General engineering units, which are providing
more employment opportunities to the unemployed youth. Bellary district has been
divided into seven taluks viz., Bellary, HB. Halli, Hadagali, Hospet, Kudligi,
Sandur, and Siruguppa. About 10 women entrepreneurs have been selected in each
taluk in the district for the purpose of the study. The results are presented in the
following paragraphs.
Table-6 Type of problems faced by the selected entrepreneurs
Sl.No.
Type of problem
No. of respondents (%)
1
Financial problem
74
2
Raw material problem
58
3
Technical problem
62
4
Lack of Government assistance
56
5
Marketing problem
76
6
Personnel problem
46
7
Other problem
38
Source: Field Survey data.
Financial Problem:
Finance is the lifeblood of any business or manufacturing activity. The SSI
unit owners are facing financial problem to meet the working capital, resulting
18
production and productivity is very low. This has happened in about 74 percent
of the total selected units. It is necessary to solve the financial problems by
concerned departments for the growth and development of these units (Table6).
Raw material Problem:
Availability of adequate raw material on sustained basis is a serious
problem in these units. Many of the entrepreneurs are facing with this problem
in the district. About 58 per cent of the total respondents are suffering from this
problem. The problem may be solved by the establishment of societies to
purchase the adequate raw material at in-time. And also the Government
should take appropriate steps in order to solve this problem (Table-6).
Technical Problem:
Though these units are not using high technology, the entrepreneurs
required good technical skills. This was affected in about 62 per cent of the total
selected units. Hence, concerned Government authorities and voluntary
organizations have to provide better technical skills to these entrepreneurs
through different programs. This would help to increase the production,
productivity and quality of the products according to the needs of the markets
(Table-6).
Government Assistance:
In order to develop the Village and Small Scale Industrial units in
Karnataka, the Union and the State Governments have been providing several
facilities like Subsidies, Margin money, Tax concessions and other incentives.
But, actual entrepreneurs are not getting these facilities due to lack of
awareness, Official support and mediator’s involvement. Evidently, about 56 per
cent of the total respondents are unable to get the Government assistance to
develop their working units. These units would develop certainly, if the
Government assistance would reach directly to the entrepreneurs in the district
(Table-6).
19
Marketing problems:
One of the main problems faced by Village and Small Scale Industrial units
is marketing problem. These small units often do not possess any marketing
organization. In consequence, their products compare unfavorably with the
quality of the products of the large- scale industries. Therefore, they suffer from
comparative disadvantage vis-à-vis large –scale units (Table-6). In order to save
small units from this comparative disadvantage, the Government of India has
reserved certain items for SSI sectors. The list of reserved items has
continuously expanded over the periods. Besides, many institutional agencies
and other organizations also support to the small units in obtaining the
Government orders and locating export market. However, the field survey
reveals that about 76 per cent of the total respondents facing with market
problems. It is great need to solve these problems both by Central and State
governments.
Personnel Problems:
The fields study also reveals that the SSI unit owners are facing with
personnel’s problems like irregularities and laziness in the working centers, lack
of cooperation and coordinating among the workers and unit owners. This type
of problem is accounted at 46 per cent of the total respondents. The problem
would be solved by proper managerial skills, periodic training to the unit owners
and workers who were working in these units (Table-6).
Other problems:
In addition to the above said problems, the SSIs have been constrained by
a number of other problems like imperfect knowledge of market conditions,
unorganized nature of operations, inadequate availability of credit facility,
constraints from infrastructure facilities including power etc. Hence, concerned
departments and organizations has to take appropriate steps to solve these
problems in the district(Table-6).
20
To sum up, the district had sufficient resource potential for the
development of the industrial sector in the district. But, the district has been
facing the problem of proper usage of the available resources for this vital sector
due to many reasons. The field study reveals that it is not easy task to solve all
the problems and to develop the backward areas like Bellary. This is because,
suitable economic conditions and co-operation and coordination from officials
are necessary. Hence, the State and Central governments have to solve all these
problems by formulating suitable policies and programmes. Further, the field
survey results reveals that more than 70 per cent of the total respondents do
not have awareness about the facilities of the Industrial policy of Karnataka and
various governmental schemes. It is great necessary to provide awareness to the
concerned by arrangement of workshops, advertisements through mass media
for the development of these units.
References:
1. Arora, R.C., Industry and Rural Development, S. Chand & Company Ltd., New
Delhi, 1978.
2. Gadgil, DR, Industrial Evolution in India in Recent Times-1860-1939, Oxford
University Press, Bombay, 1971.
3. Five year Plan documents India and Karnataka.
4. Economic Surveys-India and Karnataka.
5. Action Plans-Directorate of Industries and Commerce, Bangalore.
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Authors(S)’ Declaration
I hereby undertake that the paper “’’Development of Micro Enterprises -An
Empirical Study “, is my original research, prepared for publication SEDME journal.
It has not been sent for publication, nor is it pending favour of publication with
any other periodical, newspaper, etc. Further, I also undertake that the same shall
not be sent to any other periodical, newspaper, etc., for publication, while it is
resting with SEDME journal.
Date: 25-07-2013
Signature of the author
22