A STUDY ON OPPORTUNITIES FOR MICRO ENTREPRENEURSHIP DEVELOPMENT IN INDORE AND ITS FUTURE PROSPECTS

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1 A STUDY ON OPPORTUNITIES FOR MICRO ENTREPRENEURSHIP DEVELOPMENT IN INDORE AND ITS FUTURE PROSPECTS Antara Kirkire ISSN ABSTRACT: Entrepreneurship is considered as an important pre-requisite for economic development. In a developing nation's economy it is the micro and small enterprises which play a vital role. They not only give employment to large number of people but also support big industries by supplying raw material, basic goods, finished parts and components. This paper is an attempt to explore possibilities for micro enterprise development in Indore city which is commercial capital of M.P. and a hub for major business activities. KEYWORDS: Micro Entrepreneurship, Development, Economy, Enterprise

2 INTRODUCTION Entrepreneurs customarily write about the economic destiny of nations. They change the ways people live; they alter the path of growth and development; they trigger innovations that redraw economic contours and bring revolution. They tread unbeaten paths and create wealth out of their creativity. Economic history is littered with examples of these courageous and outstanding persons who changed the course of history by introducing new processes of economic development and growth. They have been instrumental in bringing about radical socio-economic transformations. That is why entrepreneurship is considered as the engine of economic growth in industrialized western countries. Schumpeter (1934) argued that entrepreneurial manifestations in form of new business ventures have been instrumental in economic transformation of the Western Europe and North America. Countries the world over, have taken rapid strides in their material well- being by promoting entrepreneurship in the society. It is precisely for these reasons that there is a renewed focus on fostering entrepreneurship. Realizing the importance of entrepreneurship in economic development, various governmental, non-governmental, educational and developmental institutions have started pursuing entrepreneurship development through training interventions. Entrepreneurship development is considered as a very effective and potent tool for wealth creation, employment generation and poverty alleviation in India. CONCEPT OF MICRO AND SMALL ENTERPRISES Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. MSMEs not only play crucial role in providing large employment opportunities at comparatively lower capital cost than large industries but also help in industrialization of rural & backward areas, thereby, reducing regional imbalances, assuring more equitable distribution of national income and wealth. MSMEs are complementary to large industries as ancillary units and this sector contributes enormously to the socio- economic development of the country. The Micro, Small and Medium Enterprises Development (MSMED) Act was notified in 2006 to address policy issues affecting MSMEs as well as the coverage and investment ceiling of the sector. The Act seeks to facilitate the development of these enterprises as also enhance their competitiveness. It provides the first-ever legal framework for recognition of the concept of "enterprise" which comprises both manufacturing and service entities. It defines medium enterprises for the first time and seeks to integrate the three tiers of these enterprises, namely, micro, small and medium. The Act also provides for a statutory consultative mechanism at the national level with balanced representation of all sections of stakeholders, particularly the three classes of enterprises; and with a wide range of advisory functions. Establishment of specific funds for the promotion, development and enhancing competitiveness of these

3 enterprises, notification of schemes/ programs for this purpose, progressive credit policies and practices, preference in Government procurements to products and services of the micro and small enterprises, more effective mechanisms for mitigating the problems of delayed payments to micro and small enterprises and assurance of a scheme for easing the closure of business by these enterprises are some of the other features of the Act. Salient Features of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 Salient features of Micro, Small and Medium Enterprises Development Act, 2006 are as follows: 1. Classification of Enterprises The earlier concept of 'Industries' has been changed to that of 'Enterprises'. Enterprises have been classified broadly into: (i) Enterprises engaged in the manufacture/production of goods pertaining to any industry; and (ii) Enterprises engaged in providing/rendering of services. Manufacturing Enterprises have been defined in terms of investment in plant and machinery (excluding land & buildings) and further classified into: - Micro Enterprises - investment up to Rs. 25 lakh. - Small Enterprises - investment above Rs. 25 lakh and up to Rs. 5 crore -Medium Enterprises - investment above Rs. 5 crore and up to Rs. 10 crore. Service Enterprises have been defined in terms of their investment in equipment (excluding land & buildings) and further classified into: - Micro Enterprises - investment up to Rs. 10 lakh. - Small Enterprises - investment above Rs. 10 lakh and up to Rs. 2 crore.

4 -Medium Enterprises - investment above Rs. 2 crore and up to Rs. 5 crore. ISSN Scope of entrepreneurship development in India In India there is a dearth of quality people in industry, which demands high level of entrepreneurship development programme through out the country for the growth of Indian economy. India, a country with a strong social system, and large variety of intellects has its own scope for the giving new entrepreneurs to the global economy. The scope of entrepreneurship development in country like India is tremendous. The high growth in employment achieved during the first half of the present decade is one of the positive outcomes of the fairly high growth of 6 to 8% per annum of the Indian economy during the same period. The high economic growth provided enhanced business opportunities in the country leading to increased demand for labour and hence employment growth. Gaining entrepreneurial competitiveness through clusters: Both developed and developing countries have often witnessed congregated emergence of small and medium enterprises, engaged in producing some homogeneous or related products at a point in time. These spatial concentrations give rise to various kinds of economic and non- economic inter-firm linkages. Such a form of industrial organization is also known as, `industrial cluster' or `industrial district'. Experiences of a large number of clusters in developed countries indicate that owing to inter-firm linkages in various areas of business, all the SMEs in the clusters experience economies of scale and scope leading to efficiency and international competitiveness. Clusters are defined as sectoral and geographical concentration of micro, small & medium enterprises with interconnected production system leading to firm/unit level specialization and developing local suppliers of material inputs and human resources. Availability of local market/intermediaries for the creation of the cluster is also a general characteristic of a cluster. The Ministry of Micro, Small and Medium Enterprises, Government of India, has laid special emphasis on development of clusters. In August 2003, the Small Industry Cluster Development Programme (SICDP) was launched by the Ministry to give special attention to cluster development. It was made broad-based by adopting holistic pattern of development of the cluster encompassing marketing, exports, skill development, setting up of common facility centre, etc., including technology up gradation of the enterprises. After widening the scope of the scheme, there was a sudden jump in the performance of scheme during For a systematic implementation of the plan, a cadre of Cluster Development Executives (CDEs) has been trained and developed at Entrepreneurship Development Institute of India through imparting a specialized training in the methodology of cluster development programme. EDI has so far trained about 600 CDEs. Close to 500 clusters are currently being developed by various organizations and ministries across the country.

5 The Government strategy for promoting entrepreneurship in India: Following the guidelines provided in the Industrial Policy Resolution 1956, planners increasingly laid emphasis on promotion of small industries. Since 1956, the government has strived to promote this sector through various promotional policies consisting of various incentives such as provision of concessional finance, infrastructural facilities, creation of support institutions and technical and managerial guidance and protective measures such as reserving 675 products exclusively for the Micro, Small and Medium Enterprises (MSME). The government makes its purchases from the MSME on the price preferential terms to provide the sector with marketing support, besides purchasing 358 items exclusively from small-scale industries. The government has created a wide network of institutions that supports emergence and growth of micro and small enterprises in the country. As a result, small enterprise sector in India has attained very impressive growth. Entrepreneurship Skill Development Programmes (ESDPs) Comprehensive training programmes are organized to upgrade skills of prospective entrepreneurs, and existing workforce and also develop skills of new workers and technicians of MSEs by organizing various technical-cum-skill development training programmes with the basic objective of providing training for their skill up gradation and to equip them with better and improved technological skills of production. The specific tailor made programmes for the skill development of socially disadvantaged groups (OBC, SC/ST, minorities and women) are organized in various regions of the states, including the less developed areas. The target group for these programmes are SC, ST, OBC, women, minorities and other weaker sections. Management Development Programmes (MDPs) The objective of imparting training on management practice system is to improve their decisionmaking capabilities resulting in higher productivity and profitability of existing and potential entrepreneurs and developing new enterprises. Inputs on a variety of topics of managerial functions are provided to the participants by experts, which aims at dissemination of knowledge of scientific/modern management techniques/practices. Management Training course in various areas of industrial management are devised for ownercum-managers and supervisory level personnel of small scale industries. These training programmes are designed keeping in view the demands of the area and the local requirements of the industries. The nature of target groups and its profile determines the course content to be made in order to make them suitable for contemporary managerial practices which may be used by MSMEs executives for attaining desired strength of managerial action.

6 Business Skill Development Programme (BSDP) The programme has been devised to encourage educated youth (students) basically the final year and pre-final year students of Business Schools/Technical Institutes to start selfemployment ventures of micro or small enterprises and thus instrumental in employment generation. The programme is known as Business Skill Development Programme (BSDP). The programmes provide useful information on Product/Process design, Manufacturing Process involved, Testing, Selection and Usage of appropriate machinery and equipment, Marketing avenues/ techniques, product /service pricing, export opportunities, cash flow, field visits to small scale units, market study, preparation of project profiles, ISO, Quality management tools etc. These 22 working days programmes are conducted by MSME-DIs jointly with selected Business Schools/Engineering Colleges in their respective jurisdictions. The participating institute/college need to be AICTE approved and should have a cell for entrepreneurship development functioning for the last three years. No fee is charged toward training under this programme. Scheme to Support 5 Selected Universities to Run 1,200 Entrepreneurship Clubs: The scheme is also known as e-club scheme. It provides support to form entrepreneurship club at select universities throughout India so that a kind of communication between universities, entrepreneurs, development institutes and students can be established by providing financial help in formation and maintenance of e-club at universities. This scheme aims to develop linkages of the entrepreneurs with the knowledge institutions while MSME-Development Institutes (MSME- DIs) act as a facilitator. In addition, it provides a base to entrepreneurs for coming together to solve their common problems, a shift from Lobbying Mode to Facilitation Mode, giving hard intervention in the form of technology and soft intervention like arranging workshops, seminars, guidelines to obtain ISO Certification, ISI Marks, participation in Trade Fairs, implementation of Quality Management Tools. Salient Features (i) (ii) The scheme is to support 5 universities to run Entrepreneurship Clubs (One each from Northern, Western, Southern, Eastern and North Eastern Region). The Universities with whom the MSME-DIs have signed MoUs are: (a) For the Northern Region-GGSIP University, New Delhi

7 (b) For Southern Region-Vellore Institute of Technology, Vellore (c) For Eastern Region-Ravenshaw University, Cuttack (d) For North Eastern Region- Guwahati University, Guwahati (e) For Western Region-Rajasthan Technical University, Kota, Rajasthan. Rajiv Gandhi Udyami Mitra Yojana (RGUMY) Objectives The objective of Rajiv Gandhi Udyami Mitra Yojana (RGUMY) is to provide handholding support and assistance to the potential first generation entrepreneurs, through the selected lead agencies i.e. 'Udyami Mitras', in the establishment and management of the new enterprise, completion of various formalities required for setting up and running of the enterprise and in dealing with various procedural and legal hurdles. Under this Scheme, the selected lead agencies i.e. 'Udyami Mitras' provide guidance and assistance to the potential entrepreneurs registered with them, in preparation of project report; arranging finance; selection of technology; marketing tie-ups with buyers; installation of plant and machinery as well as obtaining various approvals, clearances and NOCs etc. Apex organizations under the Ministry, namely, Office of DC (MSME), KVIC, NSIC and three national level EDIs through their field offices are working as deemed Udyami Mitras. The eligible organizations at State level and District level duly recommended by the concerned State Commissioner/Director (Industries), are also empanelled as Udyami Mitras. The Udyami Mitras are paid handholding charges under the Scheme, including nominal contribution of the concerned entrepreneur. However, the beneficiaries belonging to SC/ST/ Physically Handicapped/Women and beneficiaries from NER are not required to pay any contribution to Udyami Mitra for availing the handholding support. Funds have been released to apex Organizations and Director/Commissioner (Industries) in all States and Union Territories for implementing the Scheme. A new component has been added in the existing scheme of 'Rajiv Gandhi Udyami Mitra Yojana' (RGUMY), namely, 'Udyami Helpline' to give free access of information and guidance to potential entrepreneurs throughout the country by making a provision of toll free Telephone Number Under this component, any potential entrepreneur desirous of getting any information regarding schemes of Ministry of MSME or anything related to small businesses may get information by dialling up this toll free number. A Call Centre with trained manpower has been put in place under this component to give information as well as guidance to potential entrepreneurs.

8 GROWTH AND PERFORM ANCE OF M ICRO, SMALL AND MEDIUM ENTERPRISES (MSME'S) Performance of Micro, Small & Medium Enterprises (MSME) sector is assessed by conduct of periodic All India Census of the Sector. The latest census conducted was Fourth All India Census of MSME. The Census was conducted with reference year , wherein the data was collected till 2009 and results published in Fourth All India Census of MSME is the first census conducted post implementation of Micro, Small and Medium Enterprises Development (MSMED) Act, Prior to implementation of MSMED Act, 2006, the sector was defined, as per the provision of Industries Development and Regulation Act 1951, as Small Scale Industries (SSI) sector and its constituent tiny and auxiliary units as per periodic revision of criteria for defining such units. Third All India Census of SSI was conducted with coverage and concepts as prevailing during The scope and coverage of the MSME sector was broadened significantly under the MSMED Act, 2006, which recognized the concept of "enterprise" and to include both manufacturing and services sector, besides defining the medium enterprises under MSME sector. Thus the entire non-agricultural sector of economy was brought under the coverage of MSME sector subject to the revised criteria prescribed for defining Micro, Small and Medium Enterprises separately for manufacturing and services sectors. The census adopted different methodology for Registered and Unregistered Sectors. While complete enumeration of enterprises was adopted in Registered Sector, sample survey was resorted to in Unregistered Sector. However, activities under wholesale/ retail trade, legal, educational & social services, hotel & restaurants, transports and storage & warehousing (except cold storage) were excluded from the coverage of sample survey. Fo r t h es e activities, data was extracted from Economic Census, 2005 (EC, 2005) conducted by Central Statistics Office of Ministry of Statistics and Program Implementation (MOSPI) for estimation of MSME relevant enterprises. The estimated numbers of enterprises and employment, as per Fourth All India Census of MSME, have increased at an annual compound growth rate of 28.02% and 26.42% respectively as compared to third All India Census of SSI, during the period to

9 ROLE OF MSE'S IN ECONOMY OF MADHYA PRADESH Madhya Pradesh's economy largely depends on agriculture, industries and minerals. About 70% of the total work force of the state depends directly or indirectly on agriculture. Mines and industries play important roles in economic development of the state. There are many flourishing textile mills in the stale and artificial silk manufacturing plants located at Ujjain, Nagda, Indore and Gwalior. Public sector industries including the Bhilai Steel plant, the Heavy Electrical and the Bailadilla are the major achievements. The Nepa Mills produces newsprint for the country. Diesel engines are manufactured at Indore and attractive pottery and carpets are produced at Gwalior. For carrying out rapid industrial development in the state, the government of Madhya Pradesh has formulated an industrial promotion policy which is liberal enough for investment. The objectives of the new industrial promotion policy are to create industry-friendly administration, to maximize employment opportunities, to tackle industrial sickness, rationalize rates of commercial taxes and enlist participation of private sector in the efforts of industrialization. INDUSTRIAL SCENARIO OF MADHYA PRADESH MICRO AND SMALL ENTERPRISES IN MADHYA PRADESH ======================================================================= FINANCIAL YEAR NO.OF MSE'S INVESTMENT (in lac) EMPLOYMENT ======================================================================= (Up to December 2013) ======================================================================

10 LARGE AND MEDIUM SCALE ENTERPRISES IN MADHYA PRADESH ===================================================================== FINANCIAL YEAR NO.OF LME'S INVESTMENT (in lac) EMPLOYMENT ====================================================================== UP TO 31ST MARCH ====================================================================== Source: official website of ministry of commerce, industry and employment, Govt. Of MP From the above table it is evident that MSE's require less investment and generate more employment as compared to LME's. PROFILE OF INDORE CITY Location & Geographical Area Indore is located in the western region of Madhya Pradesh, on the southern edge of the Malwa plateau. It lies on the bank of Saraswati and Khan Rivulets, which are tributaries of the Shipra River and has an average elevation of meter above mean sea level. It is located on an elevated plain, with the Vindhyas range to the south. Apart from Yashwant Lake, there are many lakes that supply water to the city including Sirpur Tank, Bilawali Talab, Sukhniwas Lake and Piplyapala Talab. Soil cover in the city region is predominantly black. The underlying rock of the region is composed of black basalt, and their acidic and basic variants dating back to the late Cretaceous and early Eocene eras. The area is classified as Seismic Zone III region.

11 Why Indore is suitable for Micro Enterprise Development As MP geographically represents the heart of India, Indore is the heart of MP. Indore is the commercial capital of the state and hub for all major business activities in the state. In recent years as the state has advanced, Indore has grown manifold and has more business potential to offer than other city of similar stature in the state. Major corporate and business houses including foreign investors have already invested huge sum of money in the concurrent projects going on in and around Indore. Major industrial areas surrounding the city include the Pithampur Special Economic Zone and the Sanwer Industrial belt. Indore provides the industries with complete civic and up to a large extent industrial infrastructure. Soya, pharmaceuticals, automobiles, plastics and packaging are some of the key industries operating here. The city of Indore is well connected by Air, Rail and Road to almost all the major towns of India which is a boon for industries. With well developed infrastructure, transport facilities and cheap manpower, the city also turns out to be educational centre of central India. Institutes like IIM, IIT, SGSITS ensure that there is regular inflow of skilled professionals. With multiplex theatres, game parks, discos, golf courses, open air restaurants, hotels, malls, Indore has become an inviting proposition for many a business houses. REVIEW OF LITERATURE A literature review is written to give an overview of the factors affecting development of microenterprises referring to contemporary debates, issues and questions in the field with supporting evidences, thereby underlining its significance. FACTORS AFFECTING DEVELOPMENT OF MICROENTERPRISE Storey (1994) reported significance of three key components viz., the characteristics of entrepreneurs, characteristics of SMEs and type business operation strategy for the overall growth of a small firm. He illustrated that all three components (which further disaggregated into a variety of factors) are interlinked with each other and degree of appropriate linkage determine rapid growth Theoretical framework of growth in small firms (adapted from D.J. Storey 1994)

12 Characteristics of Entrepreneurs Age: Sinha (1996) noticed successful entrepreneurs were relatively younger in age while Reynolds et al. (2000) found that individuals aged between years of age were most entrepreneurially active. In another study, relatively older entrepreneurs (more than 25 years of age) were found significantly correlated with higher amount of revenue generated (Kristiansen et al., 2003). Gender: Mazzarol et al. (1999) found that female were generally less likely to be founders of new business than male. Similarly, Kolvereid (1996) found that males had significantly higher entrepreneurial intentions than females. Work experience: Kolvereid (1996) found that individuals with prior entrepreneurial experience had significantly higher entrepreneurial intentions than those without such experience. Mazzarol et al. (1999) observed that individuals with previous experience in government sector were less likely to be successful founders of small businesses. However, the study is not substantiated taking into account the relationship between employment experience in private companies and entrepreneurial intentions. Education: Charney and Libecap (2000) found that entrepreneurship education develops capacities of self-sufficiency in dealing day to day challenges. Furthermore, they found that entrepreneurship education increases chances of self employment through formation of new ventures and products. The study also revealed that entrepreneurship education imparted to the employees increases sales growth rates of emerging firms. Similarly, Sinha (1996) reported that entrepreneurs with business and technical educational background are in a better position to appreciate and analyse hard reality and deal with it intuitively which seems to play a critical role in entrepreneurial effectiveness and business success. Characteristics of the SMEs Origin of enterprise: According to Smallbone et al. (1995), in small firms, where ownership and management were typically combined in one or more individuals, future goals for the business might be determined as much by personal lifestyle and family factors as by commercial considerations. Further, they concluded that one characteristic which did distinguish the best performing firms from other firms in the study was their commitment to growth.

13 Length of time in operation: Length time in operation may be associated learning curve. Old players most probably have learned much from their experiences than have done by new comers. Kristiansen et al. (2003) found that length time in operation was significantly linked to business success. Size of enterprise: Size of enterprise reflects how large an enterprise in employment terms. McMahon (2001) found that enterprise size significantly linked to better business performance. Larger enterprises were found to have a higher level of success. Capital source: McMahon (2001) discovered that greater dependence upon external finance associated with better business growth. Kristiansen et al. (2003) found that financial flexibility was significantly correlated to business success in Indonesia. The SMEs that took advantage of family and third-party investment experienced higher level of success. OBJECTIVES OF THE STUDY: The objectives of this study are 1. To analyze the concept of entrepreneurship. 2. To study the potential for micro enterprises in Indore 3. To identify the role of micro and small scale units in entrepreneurship development. METHODOLOGY ADOPTED: The study is based on the secondary data gathered from official websites of various departments of Govt. of India and Madhya Pradesh and extensive review of research papers, books annual reports and other available material. An attempt has been made to study the role of micro and small scale enterprises in the economic development.

14 IMPORTANCE OF MSME The major advantages of the MSME sector are its employment potential at low capital cost, labour flexibility, use of local raw material and skills and wider geographical dispersal etc. It is the nursery for entrepreneurship, often driven by the individual creativity and innovation, with a significant contribution in the country's GDP, manufacturing output, exports and employment generation. MSMEs contribute 8% of the country's GDP, 45% of the manufactured output and 40% of exports (Prime Minister's Task Force on MSME, 2010). The labour and capital ratio in MSMEs and the overall growth in the MSMEs are much higher than in the larger industries. The MSME sector in India is highly heterogeneous in terms of the size of the enterprises, variety of products and services produced and the levels of technology employed. While one end of the MSME spectrum contains highly innovative and high growth enterprises, more than 94% of MSMEs are unregistered, with a large number established in the unorganized sector. As per the estimates of 4th All-India Census of MSMEs ( ), the number of enterprises is estimated to be about 26 million and provide employment to an estimated 60 million persons. Of the 26 million MSMEs, only 1.5 million are in the registered segment while the remaining 24.5 million (94%) are in the unregistered segment. The sector is dominated by micro units1, of the total working enterprises, the proportion of micro, small and medium enterprises were 95.05%, 4.74% and 0.21% respectively. Further, it has been found that two-third of Indian manufacturing MSMEs are present in cluster, with 95% of them being micro with dominant share (84%) of own account manufacturing enterprises (OAE)2 at all India level (67th NSSO Round, ). Generally these type of micro- enterprises use very simple and traditional technology, serve a limited local market and mostly unregistered. Vast numbers of men and women are engaged in different forms of employment which include home-based work, self-employment, employment in household enterprises, small units, on land as agricultural workers, labour on construction sites, domestic work and a myriad other forms of casual or temporary employment (NSS 66th Round, ). Though, the sector has consistently registered higher growth rate compared to the overall industrial sector, workers engaged in the sector could not enjoy the benefit of country's economic growth and largely remains poor (Sengupta Committee Report, 2009). The schematic and programmatic interventions during the last few decades has created many opportunities, however, also raised few questions. There is a lot still to be done in the areas of value chain up-gradation and linkage, financing, empowerment, highly competitive business environment, etc. Little efforts have been made to understand the problems that the micro enterprises face taking their own perception.

15 CONCLUSION: It has been depicted out that small scale units are bigger investors in the development of the state. The employment generated through these units is far more than that by large scale units. But undoubtedly, there are still some constraints in the way of development which can be treated and thus we can see Madhya Pradesh as an emerging transmitter in the entrepreneurship development and economic development also. There are ample opportunities for micro and small enterprise development in Indore. REFERENCES: 1. Annual report -MSME Entrepreneurship Development- An Analytical Study,, Akansha publishing house, pp 1 3. Entrepreneurship and small business, Mangal Deep Publications 4. Official websites of Ministry of commerce, industry & employment Govt of MP 5. Reports by M.P, State Industrial Development Corporation Ltd. 6. Skilling through Self Employment - Schemes and programmes- MSME