PRESENTATION

ON

DEVELOPMENT OF
SMEs IN INDIA

&

RETAIL INDUSTRY
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CONTRIBUTION OF SMEs TO THE ECONOMY -

 REGIONAL DEVELOPMENT

 COMPLEMENTARY ROLE TO SUPPORT THE LARGE

SECTOR

 BASIS FOR INNOVATIONS AND ADAPTATIONS

 EMPLOYMENT GENERATION

 DIRECT MULTIPLIER EFFECT OF THE PERFORMANCE

ON THE GROWTH OF THE NATIONAL ECONOMY

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PREDOMINANT ROLE OF SMEs IN THE ECONOMY
DUE TO –

 ITS NUMBER

 VARIETY

 INVOLVEMENT IN ALL ASPECTS OF THE ECONOMY

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 INDIAN DEFINITION OF SMALL SCALE INDUSTRY (SSI)

 INVESTMENT IN PLANT AND MACHINERY DOES NOT

EXCEED Rs. 10 MILLION (US$1-Rs.49) –

WHETHER HELD ON OWNERSHIP/LEASE/HIRE PURCHASE

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 THE THIRD ALL-INDIA CENSUS OF SMALL SCALE
INDUSTRIES (AUGUST 2004)

 Size – approx.10.52 million units compared to 80,000 units in

the late 1940s
 Total employment contribution – 24.93 million with a per unit
contribution of 2.37
 Export contribution – Rs.14,199 crores
 Number of exporting units – 50,606
 Contribution to GDP – 7%
 Approx. 7,500 different products produced by SSIs in India
 Out of 878 items reserved for the sector, only 672 are actually
produced by SSIs
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 Based on products, SMEs in India can be broadly
classified into the following groups:

 Food products  Paper products and Printing

 Chemicals and chemical products  Transport equipment and parts

 Basic metal industry  Leather and leather products

 Miscellaneous manufacturing industries

 Electrical machinery and parts
 Other services and products
 Rubber and plastic products
 Beverages, tobacco / tobacco products
 Machinery and parts excluding
electrical goods  Repair services

 Cotton textiles
 Hosiery and garments
 Wool, silk and synthetic fibre textiles
 Wood products
 Jute, hemp and mesta textiles
 Nonmetallic mineral products
 Other services
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 Contributions of Indian SSIs to total exports by sector
(%)

Product SSI share in total

exports
Sporting goods 100

Ready-made garments 90

Woollen garments, knitwear 35

Processed foods 65

Marine Products 29

Leather products 80

Plastic products 45

Cosmetics, basic chemicals & 55

pharmaceuticals
Engineering goods 30 7
 Indian Government’s development strategy

 Protective discrimination e.g. reservation, priority-sector lending

 Integration between large and small e.g. subcontracting,

ancillarization and vendor development

 Institutional support through a network of testing centres, tool

rooms, entrepreneurship development institutes

 The setting up of a separate Ministry of Small Scale Industries in

1999 marked a major step towards providing a policy platform for
the SME sector.
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CHALLENGES FACED BY SME SECTOR IN INDIA
• The term “economic globalization” implies an evolving
pattern of cross-border enterprise activities. It implies a
change, broadly on the following lines :

Pre-Globalisation Post-Globalisation

Local/National Investment Collaborations

Single-firm activity Strategic alliances
Manufacturing for self- Outsourcing-
identified market local/international
Local market World market
Rigid production system Flexible production
system
Limited economic interest Focus on growth
Protective policies Survival of the fittest 9
NEED FOR NEW APPROACH
New policy for development of SMEs in regional setting by
encouraging Foreign Direct Investment
Innovative bottom-up development policies endowing
individuals, firms and territories with factors to place their
skills, products or services in the global competitive market
Encouraging Private-public partnerships which will generate
employment and stimulate economic activity
Modernizing the export-oriented clusters for enhancing global
competitiveness
Consortia approach for enhancing exports from SMEs
Fostering linkages between Indian SME clusters and similar
product cluster overseas for mutual benefit
Organizing product specific trade fairs with international
participation
Concentrate on developing and promoting service sector

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 RETAIL INDUSTRY IN INDIA
Some countries include retailing in its definition of SMEs alongwith
manufacturing and services
Indian retailing – largest industry – 14% of GDP
 Second largest source of employment next to agriculture
 Organized retailing accounts for just 3% of the total retail market;
projected to grow at 25-30 per cent a year
 Annual growth rate of 8.5% and amounting to Rs. 200 billion in 2003-04
 Untapped segment amounts to a whopping Rs. 9,800 billion (approx.
$222 billion)
 India’s estimated total retail market to be around $202.6 billion which is
expected to grow at a compounded 30% over the next five years
Government unlikely to announce any decision on allowing FDI in retail.
Revised safeguards for ensuring “livelihood protection” to ‘mom & pop’ stores
are yet to be finalized
FDI regime would provide opportunity for joint ventures, ease financial
crunch, bring in technical know-how and best management practices

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 ALL INDIA ASSOCIATION OF INDUSTRIES
Building bridges of prosperity through Industry

• Serving industry since 1956

• India’s premier business networking organisation and a centre for

excellence for international trade

• Membership - open to all sectors of the industry including agriculture,

service, entertainment, finance and also to professionals

• Representation -
- AIAI has representations on various national and regional
governmental bodies and financial institutions to address the issues of
its members.

• Agreements for co-operation

The All India Association of Industries (AIAI) has signed agreements for
co-operation with 70 international Trade Promotion Organizations and
Chambers of Commerce across the globe to promote bilateral trade,
exchange of trade-related information, trade delegations, joint ventures
and technology transfers

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 OVERSEAS MEMBERSHIP
of All India Association of Industries
• Our Overseas Membership scheme allows non-Indian based companies with no
Indian registered office to :
– Make new contacts by being part of one of India’s biggest business organisations
– Use AIAI’s Members’ Lounge as your base and meeting place and enjoy a range of
member benefits when visiting India. Located in the heart of the business capital, the
Members’ lounge offers a space from where you can work, connect your laptop, use the
internet or invite your Indian clients for meetings. Refreshments available.
– Raise your company profile by association with the recognised and respected AIAI
brand
– Receive the AIAI Newsletter
– AIAI’s team can help you identify organisations in India which can help you with your
business
– Make new business contacts and gain information by participating in AIAI’s programme
of networking events and seminars
• How much does it cost ?
– Our Overseas Membership costs US$ 225/- per annum. Payment must be made on-line
by credit card
• Terms and conditions
– Only non-Indian companies with no office in India may apply for overseas membership
– AIAI reserves the right to refuse an application from any overseas company at our
discretion
– AIAI reserves the right to revoke membership at any point without refund
– AIAI is not responsible for the conduct or actions of its members
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 ECONOMIC INDICATORS (2004-2005)

 Population 1 billion+
 GDP (in $ billion) 520
 GDP growth rate (%) 7.0
 Foreign Exchange Reserves (US$ billion) 143.5
 Inflation (%) 4.0
 Agriculture (% of GDP) 22
 Industry (% of GDP) 28
 Services, etc. (% of GDP) 48

 Source : Tata Services

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 MARKET OPPORTUNITIES

 Women’s wear - 37.5% of the clothing market – US$3.93bn

 Women’s western wear - $ 157 million
 Organized apparel retailing – to grow 5 times over next 5
years
 Fire fighting equipment estimated at about $34-40 million
 E-commerce –
 PC penetration – 14 million users (March 2005)
 E-commerce activity in 2004 – US$ 350 million (NASSCOM)
 B2C E-commerce to grow to $489 million by end of 2006

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 INDIA OFFERS

 Good command on English language

 Large, well-trained, low-cost workforce
 Very good pool of engineers, accountants, technicians
 Well developed R & D Infrastructure
 Well established legal system/courts
 Mature, nation-wide distribution system
 Foreign Investment regulations that provide freedom of entry,
investment, location, choice of technology for import & export
 Current account convertibility, capital account convertibility
for foreign investors
 Investment & tax incentives for exports

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Why you can’t ignore India
 A bridge between East and West
 Vast market: a fast-growing consumer market
 Growing economy: from agriculture to industry and now to
services, the Indian economy is acquiring depth and maturity
 Legal System: Well laid out legal procedures & systems
 Systems in place : India is one of those rare third world
countries where democratic systems are all in place, and though
it takes some time, the rule of law prevails
 Market-friendly approach : Successive governments from across
the political spectrum have committed themselves to a market-
friendly economic approach

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