An Assignment On Indian Legal System in Respect To The SME Sector

An Assignment On Indian Legal System In Respect To The SME Sector
By: Abhra Mukherjee Roll No: 11MBA0026 Batch 1 DEFINITION OF SME:
SME basically stands for Small and Medium-sized Enterprise. The term refers to the small and medium sized industries or businesses present in a country. In India enterprises qualify as micro, small and medium-sized enterprises (SMEs) if they fulfill the criteria laid down in the Recommendation which are summarized in the table below. In addition to the staff headcount ceiling, an enterprise qualifies as an SME if it meets either the turnover ceiling or the balance sheet ceiling, but not necessarily both. Category Micro Enterprises Small Enterprises Medium Enterprises Investment (Plant & machinery) Less than 25 lakhs Less than 5 Crores Less than 10 Crores Services Less than 10 lakhs Less than 2 Crores Less than 5 Crores
IMPORTANCE OF SME TO A COUNTRY:

It is necessary to know why small and medium sized businesses are important to a country. Basically SMEs are the lifeblood of most economies. On average, they represent over 90% of enterprises in a nation and account for 50-60% of employment at a national level. SMEs are particularly important in supporting economic growth and livelihoods in developing countries, because they: tend to use more labour-intensive production processes than large enterprises, boosting employment and leading to more equitable income distribution; provide livelihood opportunities through simple, value-adding processing activities in agriculturallybased economies; nurture entrepreneurship; and support the building up of systemic productive capacities and the creation of resilient economic systems, through linkages between small and large enterprises.
RISE OF SME IN INDIA:

With the advent of planned economy from 1951 and the subsequent industrial policy followed by Government of India, both planners and Government earmarked a special role for small-scale industries and medium scale industries in the Indian economy. Due protection was accorded to both sectors, and particularly for small scale industries from 1951 to 1991, till the nation adopted a policy of liberalization and globalization.
PRESENT SCENARIO OF SMES IN INDIA:
SME sector of India is considered as the backbone of Indian economy contributing to over 40% of the industrial output of the country and also to over 35% of Indias industrial exports, providing employment to over 28 million people in India and generating 1.2 million jobs annually. Currently there are over 11 million SMEs in our country that produce over 8000 different products. The sector is growing at a rate of 8% per year. Government of India has and is taking different measures so as to increase their competitiveness in the international market. Enactment of new Micro, Small and Medium Enterprises Development Act, 2006, pruning of reserved SSI list, advising investors to increase their flow of credit to the SME sector and other initiatives to boost entrepreneurship in the sector are some of the steps taken so far in this respect.
INDIAN LEGAL SYSTEM AND ITS NEED TO SMES:

As the process of globalisation and liberalisation gathers momentum across the globe, SMEs are facing tremendous challenges to survive and sustain. Some of the major challenges faced by SMEs include lack of access to finance, low R&D investment, lack of access to technology, lack of product innovation, inadequate marketing support in an increasingly competitive environment, etc. The small and fragmented structure makes these units more vulnerable. Despite their immense contribution, the sector is largely informal. According to the Third Census of Small Scale Industries (SSI), 90 per cent of the units are not registered, and are not covered by annual formal data collection exercise like the Annual Survey of Industries. Around 97 per cent of them are either proprietorship or partnership enterprises. SMEs in India, which constitute more than 80 per cent of the total number of industrial enterprises, are still in technological backwaters. They suffer from problems of suboptimal scales of operations and technological obsolescence. Thus this sector needs to be protected and safeguarded by respective authority, namely the Government of India. Accordingly, the government has and is taking different measures so as to protect the small and medium enterprises. Policies have been framed under the Indian Judicial System as per directions of the Indian Government giving protection and privileges to the SME sector since1948. The Micro Small and Medium Enterprises Development (MSME) Act, 2006 and its revisions have also provided a framework in protecting and guiding the micro and small scale sectors. Thus a brief overview of the policies and the MSME act is necessary.
RECENT POLICY REFORMS OF SME SECTOR IN INDIA:
A single comprehensive legislation for the promotion, development and enhancement of the competitiveness of the SME sector- Micro Small & Medium Enterprises Development (MSMED) Act, 2006 which came into effect from October, 2006. National Manufacturing Competitiveness Council (NMCC) is set up to energise and sustain the growth of the manufacturing industry. New promotional packages for SMEs and focus on development of clusters. Revised strategy of lending including establishment of Small Enterprises Financial Centres for strategic alliance between branches of banks and SIDBI located in 388 clusters. Promotion and financial support for credit-cum-performance rating in the MSME sector in India, to facilitate greater and easier flow of credit from banking sector to SMEs. The National Commission for Enterprises in the Unorganised Sector (NCEUS) has been set up as an advisory body and a watchdog for the informal sector to bring about improvement in the productivity of these enterprises. Facilitation of technology transfer through Technology Bureau for Small Enterprises (TSBE). Accelerating initiatives to address various developmental needs for the SMEs in the11th Five Year Plan.
HIGHLIGHTS OF MSMED ACT 2006:

The MSMEs Act, 2006 inter-alia seeks to facilitate the promotion, development and enhance the competitiveness of the MSMEs. The measures as envisaged by the Act, includes the following: (a) Provisioning for technical upgradation, marketing assistance or infrastructure facilities and cluster development of such enterprises with a view of strengthening of backward and forward linkages. (b) Progressive practices and policies in respect of credit to these enterprises. (c) Preference Policies in respect of procurement of goods and services, produced and provided by these enterprises by the Government and its aided institutions. (d) The buyer shall make payment to the supplying MSMEs before the appointed day and in no case the period of payment shall exceed 45 days and that any delay thereafter shall give rise to liability to pay compound interest as notified with monthly rests.
SOME OTHER STEPS TAKEN BY GOVERNMENT:
The Ministry of Agro & Rural Industries and the Ministry of Small Scale Industries have been merged into a single Ministry, namely, the Ministry of Micro, Small & Medium Enterprises so as to provide unitary command and cohesiveness in implementing the law. The Government has identified three thrust areas for increasing competitiveness namely technology (including quality), skills development and finance. It has since launched the National Manufacturing Competitiveness Programme (NMCP).The problems of credit, technology and market access are being addressed by focusing on clusters as they provide collective guarantee.
CONCLUSION:
Protecting fragmented and disorganized SMEs interest in the context of highly concentrated market structures is a formidable challenge. However, a coherent policy and concerted actions on suggested measures by the policy makers, trade associations, SMEs, the CCI and fans of free and fair competition in markets in India can make significant contribution in strengthening the SMEs. It must be remembered that all policy initiatives and measures are aimed to strengthen the disadvantaged enterprises, to enable them to have level playing, to afford them equal opportunity to participate in the economy and thereby promote a greater spread of ownership. Nonetheless, the SMEs increase competition, contribute comprehensively in the GDP, ensure varied supply of goods and services, give customers wider and customised choice, put new ideas to the test and speed up the dissemination of new economic knowledge.21 All these lead credence to say that SMEs are beautiful as well as precious too.

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An Assignment On Indian Legal System In Respect To The SME Sector

By: Abhra Mukherjee Roll No: 11MBA0026 Batch 1 DEFINITION OF SME:

IMPORTANCE OF SME TO A COUNTRY:

RISE OF SME IN INDIA:

PRESENT SCENARIO OF SMES IN INDIA:

INDIAN LEGAL SYSTEM AND ITS NEED TO SMES:

RECENT POLICY REFORMS OF SME SECTOR IN INDIA:

HIGHLIGHTS OF MSMED ACT 2006:

SOME OTHER STEPS TAKEN BY GOVERNMENT:

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