Entrepreneurship & Indian Policies

In an interaction with a faculty at the leading entrepreneurship development institute lamented over uncertain policy issues related to entrepreneurship. And he said that we don’t have comprehensive entrepreneurship policy at the Union level, it is a policy for MSMEs. In this backdrop, I will shed light on various policy pronouncements by the Union Government in India which is based on publicly available sources.
“The importance of the MSME sector in the growing Indian economy has long been recognized; so also has the fact that the MSME sector faces several major hindrances to growth such as complicated bureaucratic registration procedures, accessing finance and working capital loans from banks and other institutional sources, accessing information and management skills.”(1)

A research study by International Finance Corporation (IFC) stated that the Micro, Small and Medium Enterprise sector is crucial to India’s economy. There are 29.8 million enterprises in various industries, employing 69 million people. The sector includes 2.2 million women-led enterprises (~7.4 percent) and ~15.4 million rural enterprises (51.8 percent). In all, the MSME sector accounts for 45 percent of Indian industrial output and 40 percent of exports. Although 94 percent of MSMEs are unregistered, the contribution of the sector to India’s GDP has been growing consistently at 11.5 percent a year, which is higher than the overall GDP growth of 8 percent. (2)
(Above mentioned figures are based on the Government data and IFC.)

Since Independence to the Sixties, Indian policy makers emphasize on the socialist model of development. During that time span, the Government provided a favorable condition for the State Owned Enterprises (SOEs) in India and the then political leadership leveled them as ‘Temple of Modern India’.  In this backdrop, the Union Government pronounced some policy measures in order to accelerate industrial growth. But the small scale industries remained ignored at the large extent.

The first industrial policy in Independent India announced in April 1948. In order to meet industrial requirement, the Union Government announced industrial policies 1956, 1980 and 1991 which is closely associated with business activities in India. Finally, the Union Government enacted the Micro, Small and Medium Enterprises (MSME) Development Act in 2006.

 

INDUSTRIAL POLICIES & SMALL SCALE INDUSTRIES

Industrial Policy Resolution, 1948: The Policy aimed at outlining the approach to Industrial growth & development. It emphasised the importance to the economy of securing a continuous increase in production and ensuring its equitable distribution

Industrial Policy Resolution, 1956:  Under the Policy the role of State was given more importance as an engine for accelerating the economic growth and speeding up the industrialization as a means of achieving a socialist pattern of society.

Industrial Policy Statement, 1973:  The thrust of this Policy Statement was an identification of high-priority industries where investment from large industrial houses and foreign companies were permitted.

Industrial Policy Statement, 1977:  The Policy emphasized on decentralization and growth of small scale industries

Industrial Policy Statement, 1980:  The Policy einusaged promoting competition in domestic market, technology upgradation and modernization. The policy laid the foundation for an increasingly competitive export based and for encouraging foreign investment in high-technology areas.

Industrial Policy 1991
The main objectives of the Policy were as follows:

• To maintain a sustained growth in productivity and gainful employment and attain international competitiveness.
• Self-reliance or building up the ability to pay our import bills through our own foreign exchange earnings and developing indigenous capacity in technology and manufacturing
• Pursue sound policy framework encompassing encouragement to entrepreneurship, development of indigenous technology, dismantling of the regulatory system
• Development of capital markets and increasing competitiveness
• Spread of industrialization to backward areas through appropriate incentives, institutions and infrastructure investments
• Encourage foreign investment and technology collaboration
• Abolish monopoly of any sector or any individual enterprise in any field of manufacture except on strategic and military considerations and open all manufacturing activity to competition
• Ensure that public sector plays its rightful role in strategic areas of national importance.
• Protect the interests of labour, enhance their welfare and equip them to deal with technology Change
Source: http://eaindustry.nic.in/handbook_200809/Chapter%201.pdf

 

The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006

The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 seeks to facilitate the development of micro, small and medium enterprises. 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 a statutory consultative mechanism at the national level with balanced representation of all sections of stakeholders, particularly from these three categories.

 

Source: http://pib.nic.in/release/rel_print_page1.asp?relid=46960

This Act emphasized on various issues related to MSME Sector. These are access to financing, skill development, access to market, competitive technology and quality improvement.
In order to promote entrepreneurship in India, several ministries started programmes for intended beneficiaries. Some of them are successful in achieving desired goal but many of them are struggling at the ground level.

National Science & Technology Entrepreneurship Development Board (NSTEDB)
The National Science & Technology Entrepreneurship Development Board (NSTEDB), established in 1982 by the Government of India under the aegis of Department of Science & Technology, is an institutional mechanism to help promote knowledge driven and technology intensive enterprises. The Board, having representations from socio-economic and scientific Ministries/Departments, aims to convert “job-seekers” into “job-generators” through Science & Technology (S&T) interventions.

Major Objectives of NSTEDB
To promote and develop high-end entrepreneurship for S&T manpower as well as self-employment by utilising S&T infrastructure and by using S&T methods.
To facilitate and conduct various informational services relating to promotion of entrepreneurship.
To network agencies of the support system, academic institutions and Research & Development (R&D) organisations to foster entrepreneurship and self-employing using S&T with special focus on backward areas as well.
To act as a policy advisory body with regard to entrepreneurship

The programmes are broadly classified into the following areas:
Training programmes
Entrepreneurship Awareness Camp (EAC)
Entrepreneurship Development Programme (EDP)
Faculty Development Programme (FDP)
Technology Based EDP (TEDP)

Institutional mechanisms for entrepreneurship development
Innovation and Entrepreneurship Development Centre (IEDC)
Science & Technology Entrepreneurship Development (STED) Project
Science and Technology based Entrepreneurship Development (i-STED)
Science & Technology Entrepreneurs Park (STEP)
Technology Business Incubator (TBI)
Information dissemination
Source: http://www.dst.gov.in/scientific-programme/st-nstedb.htm#2


National Scheduled Castes Finance and Development Corporation(NSFDC)
NSFDC was setup by the Govt. of India on February 08, 1989 with the name National Scheduled Castes and Scheduled Tribes Finance and Development Corporation (NSFDC) . It was incorporated as a fully owned Government Company under Section 8 of the Companies Act, 2013.

VISION: Fighting Poverty through Entrepreneurship.
MANDATE: Providing concessional finance for setting up of self-employment projects and skill-training grants to unemployed SC persons living below Double the Poverty Line.
NSFDC: NSFDC is an institution under Ministry of Social Justice & Empowerment, Government of India for financing, facilitating and mobilizing funds for the economic empowerment of persons belonging to the Scheduled Castes families living below Double the Poverty Line. NSFDC finances income generation schemes for the target group through the State Channelising Agencies (SCAs) nominated by respective State/UT Governments.
BROAD OBJECTIVE: NSFDC is the apex institution for financing, facilitating and mobilizing funds from other sources and promoting the economic development activities of the persons belonging to the Scheduled Castes living below double the poverty line.
It has been assigned the task for financing, facilitating and mobilizing funds for the economic empowerment of persons living below Double of the Poverty Line (DPL). It provides financial assistance for income generating schemes for the target group through state Channelising Agencies (SCAs) which are nominated by respective State/UT Government.

This is managed by a Board of Directors with representation from Central Government, State Scheduled Castes Development Corporations, Financial Institutions and non-official members representing Scheduled Castes.
Source: http://www.nsfdc.nic.in/


The Khadi and Village Industries Commission (KVIC)

The Khadi and Village Industries Commission (KVIC) is a statutory body established by an Act of Parliament (No. 61 of 1956, as amended by act no. 12 of 1987 and Act No.10 of 2006. In April 1957, it took over the work of former All India Khadi and Village Industries Board.

Objectives
The social objective of providing employment
The economic objective of producing saleable articles
The wider objective of creating self-reliance amongst the poor and building up of a strong rural community spirit

Functions
The KVIC is charged with the planning, promotion, organisation and implementation of programs for the development of Khadi and other village industries in the rural areas in coordination with other agencies engaged in rural development wherever necessary. Its functions also comprise building up of a reserve of raw materials and implements for supply to producers, creation of common service facilities for processing of raw materials as semi-finished goods and provisions of facilities for marketing of KVI products apart from organisation of training of artisans engaged in these industries and encouragement of co-operative efforts amongst them. To promote the sale and marketing of khadi and/or products of village industries or handicrafts, the KVIC may forge linkages with established marketing agencies wherever feasible and necessary.

The KVIC is also charged with the responsibility of encouraging and promoting research in the production techniques and equipment employed in the Khadi and Village Industries sector and providing facilities for the study of the problems relating to it, including the use of non-conventional energy and electric power with a view to increasing productivity, eliminating drudgery and otherwise enhancing their competitive capacity and arranging for dissemination of salient results obtained from such research.
Further, the KVIC is entrusted with the task of providing financial assistance to institutions and individuals for development and operation of Khadi and village industries and guiding them through supply of designs, prototypes and other technical information.
In implementing KVI activities, the KVIC may take such steps as to ensure genuineness of the products and to set standards of quality and ensure that the products of Khadi and village industries do conform to the standards.
The KVIC may also undertake directly or through other agencies studies concerning the problems of Khadi and/or village industries besides research or establishing pilot projects for the development of Khadi and village industries.
The KVIC is authorized to establish and maintain separate organisations for the purpose of carrying out any or all of the above matters besides carrying out any other matters incidental to its activities.
Source:http://kvic.org.in/index.php?option=com_content&view=article&id=257&Itemid=147

 

Dairy Entrepreneurship Development Scheme (DEDS)

Dairy/Poultry Venture Capital Fund scheme was started in December 2004 with an outlay of Rs. 25.00 Crore.  The fund was released during 2005-06 for the first time for implementation of the scheme. This scheme has been fragmented into two separate scheme viz. Dairy Venture Capital Fund & Poultry Venture Capital Fund from the financial year i.e. 2008-09.
Dairy Venture Capital Fund Scheme (DCVF)) was evaluated by Centre for Management Development (CMD) Thiruvanthapuram, Kerala and final report was submitted by them in the year 2009.  The modification was made under the scheme on the basis of recommendation made in the independent evaluation study done by CMD, changes suggested by the beneficiaries, implementing agency (NABARD) and lead banks.  In the EFC meeting held on 24th June, 2010 under the Chairmanship of Secretary (ADF ,it was decided to modify the Dairy Venture Capital Fund and change it’s name to Dairy Entrepreneurship Development Scheme to make the scheme more effective through  wider coverage, enhanced component-wise outlays and by including new components for assistance under the scheme. The scheme DVCF came to a close on 31st August, 2010. The new modified scheme DEDS was started from 01.09.2010 with an outlay of Rs 250 crore during the 11th Plan.

Objectives of the Scheme
Setting up modern dairy farms for production of clean milk
Encourage heifer calf rearing for conservation and development of  good breeding stock
Bring structural changes in unorganized sector so that initial processing of milk can be taken up at village level.
Up gradation of traditional technology to handle milk on commercial scale
Generate self-employment and provide infrastructure mainly for unorganized dairy sector.

Pattern of assistance
Entrepreneur contribution (Margin)-10% of the outlay (Minimum)
Back ended capital subsidy –25% of the outlay – general category (33.33% for SC/ST farmers)
Effective Bank Loan – Balance portion/Minimum of 40% of the outlay.
Government of India will provide 25% back ended capital subsidy to General category and 33.33% for SC/ST farmers of the cost of project subject to its component wise ceiling which will be adjusted against the last few instalments of repayment of bank loan.

Implementing Agencies: National Bank for Agriculture & Rural Development (NABARD) will be the Nodal Agency for implementation of the scheme. Commercial Banks, Co-operative Banks and Regional Rural and urban Banks will implement the scheme. The scheme is open to organized as well as unorganized sector.

Target group/beneficiaries: The Department has proposed this scheme for dairy development and the eligible beneficiaries of the scheme are agricultural farmers, individual entrepreneurs and groups of unorganized and organized sector. Group of organized sector, includes self-help groups, dairy cooperative societies, Milk unions, milk federation, etc…This scheme shall also help in employment generation at village level as well as Dairy Co-operative Society level.
Source: http://dahd.nic.in/dahd/deds.aspx

 

National Bank for Agriculture and Rural Development

National Bank for Agriculture and Rural Development (NABARD) was set up on 12 July 1982 with the mandate to achieve rural prosperity through credit and related activities. Recognizing the importance of the Rural Non-farm Sector (RNFS) in the faster economic development of rural areas, NABARD had taken a number of initiatives, both with refinance support and promotional assistance, for development of this sector. Of these, Rural Entrepreneurship Development Programme (REDP) is a major promotional initiative, which aims at developing enterprise and creating employment opportunities in rural areas.

Rural Entrepreneurship Development Programme (REDP)
Rural Entrepreneurship Development Programme (REDP) is one of the important NFS promotional programmes supported by NABARD for creating sustainable employment and income opportunities in a cost effective manner for the benefit of educated unemployed rural youth.

Objective: Developing entrepreneurial and activity-oriented skills among unemployed rural youths willing to set up small/ micro-enterprises by assisting Voluntary Agencies (VA)/ Non- Governmental Organisations (NGO)/ Development Agencies (DA)/ RUDSETIs etc. with good track record in conducting REDPs. 

Features and Coverage of REDP
REDP comprises 3 distinct phases, viz., pre-training, training and post-training phase. The success of the programme depends on the strict adherence to these phases.

(i) Pre-training
Detailed survey for identifying potential business activities/ market, publicity, awareness creation and motivational campaign, Coordination with various agencies – especially banks, Government  Department Formation of Selection Committee, Project Monitoring Committee, Selection of trainees etc… 

(ii) Training
The duration of the programme is 6-8 weeks. Training module comprises : Achievement motivation, Opportunity identification and guidance, Knowledge on supporting agencies and schemes, Preparation of project reports/profiles, Management of resources (men, material, money), Marketing aspects, Book-keeping/Accounting. In case of technical/ activity based REDP, inputs on technical aspects/ skill development/appropriate technology will be included. Case-studies on potential activities, field visits, practical work, visit to successful units, etc., to be integral part of training programme

(iii) Post-training
Facilitating credit linkages for setting up units and Escort services to trainees for atleast two years.

Eligible Institutions
NGOs / Voluntary Agencies / Development Agencies and RUDSETI type institutions. NABARD provides promotional assistance to capable agencies with good track record and professional competence to successfully implement REDP.
Source: http://oldsite.nabard.org/nonfarm_sector/pp_de_redp.asp

Small Industries Development Bank of India (SIDBI)
Small Industries Development Bank of India (SIDBI), set up on April 2, 1990 under an Act of Indian Parliament, is the Principal Financial Institution for the Promotion, Financing and Development of the Micro, Small and Medium Enterprise (MSME) sector and for Co-ordination of the functions of the institutions engaged in similar activities. 

Business Domain of SIDBI
The business domain of SIDBI consists of Micro, Small and Medium Enterprises (MSMEs), which contribute significantly to the national economy in terms of production, employment and exports. MSME sector is an important pillar of Indian economy as it contributes greatly to the growth of Indian economy with a vast network of around 3 crore units, creating employment of about 7 crore, manufacturing more than 6,000 products, contributing about 45% to manufacturing output and about 40% of exports, directly and indirectly. In addition, SIDBI’s assistance also flows to the service sector including transport, health care, tourism sectors etc …Source: http://www.sidbi.in/?q=about-sidbi

 

RAJIV GANDHI UDYAMI MITRA YOJANA

It is a scheme of Promotion and Handholding of Micro and Small Enterprises under the Ministry of MSMEs.

Eligibility
Under RGUMY, financial assistance would be provided to the selected lead agencies i.e.  Udyami Mitras for rendering assistance and handholding support to the potential first  generation entrepreneurs. Following agencies/ organizations can be appointed as the lead  agency i.e. Udyami Mitra:
i. Existing national level Entrepreneurship Development Institutions (EDIs).
ii. Micro, Small and Medium Enterprises Development Institutes (MSMEDIs)/  Branch MSMEDIs.
iii. Central/ State Government public sector enterprises (PSEs) involved in  promotion and development of MSEs e.g. National Small Industries Corporation (NSIC) and State Industrial Development Corporations etc.
iv. Selected State level EDIs and Entrepreneurship Development Centers (EDCs) in public or private sectors;
v. Khadi and Village Industries Commission (KVIC).
vi. Special Purpose Vehicles (SPVs) set up for cluster development involved in entrepreneurship development;
vii. Capable associations of MSEs/SSIs;
viii. Other organizations/training institutions/NGOs etc. involved in entrepreneurship development/ skill development.
Source: http://rgumy.nic.in/RGUMY/rgumy_doc/RGUMY_ENGLISH_Booklet_revised_11052010.pdf

 

REFERENCE

(1) http://www.isb.edu/faculty/shamika/MSME%20chapter_Shamika%20Ravi.PDF

(2) Micro, Small and Medium Enterprise Finance in India
A Research Study on Needs, Gaps and Way Forward (November, 2012) by International Finance Corporation (IFC)

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