Professional Bachelor’s programme

“European Business Studies”

BACHELOR THESIS

PROBLEMS FACED BY MSMEs OF

TEXTILE INDUSTRY IN INDIA

Author Mohammed Shibili Mavungal

Scientific Supervisor Dr.oec. doc. Fedotovs Aleksandrs

Program Director Dr.oec, prof. Irina Sennikova

Riga 2021

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ABSTRAKTS

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 ABSTRACT
MSMEs play a very important role in sustainable growth, especially in developed
economies. MSME growth appears to be a significant priority on the international
development agenda considering the present demand for jobs and growth in the restoration
process following the ongoing COVID-19 pandemic emergency. Owing to labour intensive
capital, this segment is more productive than other capital-intensive segments.

In a developing democratic country like India, the MSME (micro and small-scale
enterprises) sector must be evolved for the country to prosper. The textile industry, like many
other sectors, has a long history in India, and is one of the most competitive and forward
industries. As small and medium enterprises are the primary mechanism responsible for job
development, rising incomes, and poverty eradication in India. MSMEs are accordingly, and
appropriately, accorded high importance in our nation in ensuring sustainable development.

The author first discusses about the important role of MSME in the economy of any
country and later highlights the existing and new initiatives by the local government in the
country. The author has also carried out a case study on a regional MSME so problems that
are faced at ground levels can be analysed and based on the analysis has further concluded
the thesis and provided suitable recommendations to the case company and MSMEs in
general.

The author hopes that the thesis comprising of 74 pages, 3 figures, 15 tables, 37
references and 1 appendix will serve the purpose and the recommendations will be of some
practical use to the case company and other MSMEs in general.

Keywords: Micro, Small and Medium Enterprises, Textile Industry, MSME Policies.

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 ACKNOWLEDGEMENT
PROBLEMS FACED BY MSMEs OF TEXTILE INDUSTRY IN INDIA

This bachelor’s thesis is written as part of Professional bachelor’s degree in European

Business and Qualification of Business Executive course at RISEBA University of Applied
Sciences, Riga, Latvia. The idea to select the study topic on challenges faced by Micro,
Small and Medium Enterprises came during the discussion with my scientific supervisor
Dr.oec. doc. Fedotovs Aleksandrs, this motivated me to pursue the investigation on this
topic.

I would like to convey my unfeigned regards to my supervisor Dr.oec. doc. Fedotovs

Aleksandrs for his invaluable guidance, never ending support and insightful suggestions that
helped me during the entire process of research. Further, I would also like to thank Dr.oec,
prof. Irina Sennikova for providing me the opportunity to write this thesis and for guiding
us throughout the bachelor’s studies program.

Also, I would like to thank the senior management at Image Industries India Private
Limited for taking the time out of their busy schedules to attend the discussions and for
sharing valuable research data, I am hopeful that the work done during this study will help
the company in developing a resilient company strategy. Last but not the least, I would like
to thank my parents, friends and classmates as without their support and encouragement it
would have been impossible to accomplish this thesis work.

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 TABLE OF CONTENTS

INTRODUCTION
1. ROLE OF MSMEs IN INDIAN ECONOMY………………………………………….14
1.1. MSMEs Importance……………………………………………………………….14
1.2. Definition of SME and its evolution in India………………………………………15
1.3. Contribution of MSMEs to the GDP and Employment…………………………....18
1.4. Indian MSMEs in the Global Market………………………………………………21
1.5. Factors affecting the MSMEs……………………………………………………...23
2. MEASURES OF GOVERNMENT SUPPORT TO MSMEs IN INDIA………………..26
2.1. Organizational Framework…………………………………………….…………..26
2.2. Schemes provided by the Indian government in initiating the MSMEs……………30
2.3. Training institutes, educational institutions, and other agencies…………………..35
2.4. Sources of finance available to MSMEs…………………………………………..37
2.5. Comparison of MSME policy in India and European Union………………………44
3. Problems and prospects of MSMEs in Indian Textile Industry: A Case study with Image
Industries India Private Limited………………………………….………………………...47
3.1. Company Background……………………………………………………………...47
3.2. Research Strategy…………………………………………………………………..48
3.3. Research Design…………………………………………………………………....49
3.4. Data collection methods…………………………………………………………....50
3.5. Analysis and Findings on Problems Faced by MSMEs in Textile Industry………..51
Final Conclusions
Recommendations
List of sources
Appendices

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 LIST OF FIGURES
Fig. 1.1. MSME statistics firm share (young vs old), employment and NVA……………..18
Fig. 1.2. Ease of doing business scores for India…………………………………………...24
Fig. 1.3. IIIPL FY19 business revenue……………………………………………………..48

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 LIST OF TABLES
Table 1.1. Classification of MSMEs in India……………………………………………....13
Table 1.2. Employment in MSME sector…………………………………………...……...18
Table 1.3. Employment in MSME sector and region wise…………………………………19
Table 1.4. Employment in MSME gender wise…………………………………………....19
Table. 2.1. Schemes under KVIC…………………………………………………………..29
Table. 2.2. Schemes under NSIC…………………………………………………………..42
Table. 2.3. Financing to MSME Sector…………………………………………………….42
Table. 2.4. Category Wise Credit Exposure………………………………………………..42
Table. 2.5. Loan Application Processing Time…………………………………………….43
Table. 2.6. LoansIn59Minutes scheme by PSB…………………………………………….43
Table. 2.7. MSME definition India Vs EU………………………………………………....44
Table. 2.8. Organizational structure EU……………………………………………………45
Table. 3.1. IIIPL participants demographic information…………………………………...50

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 LIST OF ABBREVIATIONS
No. Abbreviation Decoding
1 MSMEs Micro, Small and Medium Enterprises
2 IT Information Technology
3 IASAM Integrated Acceptance and Sustainability Assessment Model
4 GoI Government of India
5 GDP Gross Domestic Product
6 WTO World Trade Organization
7 MSMED Micro, Small and Medium Enterprises Development
8 KVIC Khadi and Village Industries Commission
9 NVA Net Value Added
10 SSI Small Scale Industries
11 ECU European Currency Unit
12 EU European Union
13 VAT Value Added Tax
14 GST Goods and Service Tax
15 Rs Rupees
16 INR Indian Rupees
17 SIDO Small Industries Development Organization
18 MGIRI Mahatma Gandhi Institute for Rural Industrialisation
19 CCRI Central Coir Research Institute
20 CICT Central Institute of Coir Technology
21 NSIC National Small Industries Corporation
The National Institute for Entrepreneurship and Small Business
NIESBUD
22 Development
23 NI-MSME National Institute for Micro-Small and Medium Enterprises
24 NBMSME National Board for Micro, Small and Medium Enterprises
25 SFURTI Scheme of Fund for Regeneration of Traditional Industries
26 MDA Market Development Assistance
27 PMEGP Prime Minister's Employment Generation Programme
28 ISEC Interest Subsidy Eligibility Certification
29 DC Development Commissioner
30 MSE Micro and Small Enterprises
31 CDP Cluster Development Program
32 CGMSE Credit Guarantee Fund Scheme for Micro and Small Enterprises
33 CGTMSE Credit Guarantee Fund Trust for Micro and Small Enterprises
34 QMS Quality Management System
35 EMS Environment Management System
36 EM Entrepreneurial Memorandum
37 MTR Mini Tool Room
38 EDI Entrepreneurship Development Institutes
39 MFI Micro Finance Institutions
40 PRF Portfolio Risk Fund

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41 NIMSME National Institute of Micro, Smalt & Medium Enterprises
42 IIE Indian Institute Entrepreneurship
43 NEC North East Council
National Institute for Entrepreneurship & Small Business
NIESBUD
44 Development
45 RBI Reserve Bank of India
46 CGS Credit Guarantee Scheme
47 ICT Information and Communication Technology
48 PM Prime Minister
49 BC Business Correspondents
50 ED Executive Director
51 CPC Centralized Credit Processing Cell
52 MIS Management Information System
53 EXIM Export Import Bank of India
54 NABARD National Bank for Agriculture and Rural Development
55 NCDC National Co-operative Development Corporation
56 SFC State Financial Corporations
57 RRB Regional Rural Banks
58 SSDC State Small Industries Development Corporation
59 ECGC Export Credit Guarantee Corporation
60 DICGC Deposit Insurance and Credit Guarantee Corporation
61 SIDBI Small Industries Development Bank of India
62 SCBs Scheduled Commercial Banks
63 NBFC Non-Banking Financial Companies
64 PSB Public Sector Banks
65 MFA Multi Fibre Agreement
66 BNC Business Networking Centres
67 MIC Market Intelligence Centres
68 SEZ Special Economic Zones

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 INTRODUCTION
Across the globe, Micro, small and medium enterprises (MSMEs) have proven to be
the key driver behind any country’s growth story and are a significant contributor to the
nationwide economic development. The global business industry regards it as the key to the
development of the sector as well as a unique employer. After agriculture, the MSMEs form
the 2nd largest employer in India, which functions almost as the backbone of the economy.
The role of this small and mid-sector in India is clearly recognized; in the last two decades,
this sector has risen considerably as compared to global giants in terms of its contribution in
the national economy. MSMEs have the greatest advantage of its low cost of capital and the
potential of employment. A robust ecosystem of the MSMEs all over the world is the basic
to a nation’s economy. In the last few years this sector, which includes the production,
infrastructural, utility, food processing, logistics, plastics, and IT industries, are becoming
the most dynamic and sustainable growth driver of the economic development. Many such
self-funded private businesses, community joint ventures, independent self-help
organisations, farm and fiber enterprises often provide tremendous jobs and furthermore
geographical diversity via remote areas of the country for industrialization.

MSMEs further make a significant contribution to the socioeconomic advancement

of the nation through entrepreneurship education and creating broad access to jobs at
considerably lower capital structure compared to agriculture alone. As auxiliary entities,
MSMEs are supplementary to major factories and this industry substantially adds value to
the nation's economic and inclusive industrialisation. MSMEs continue expanding their
presence in the economic sector, manufacturing a broad array of goods and facilities to
satisfy international and domestic customer requirements. In order to facilitate the rapid
growth of the MSMEs, the Indian Government has introduced several policies and measures.
The research here, will examine the problems of MSMEs and methods in which the
entrepreneurial competencies can stimulate the sustainable performance, to limit the scope
of this thesis, the author has focused on the MSMEs in the textile industry.

Background to the topic and proposed research

The model of the socio-economic policies is represented by the MSMEs. They use
the foreign exchange method for generating employment, producing modes of labour
intensity and the import of goods. MSMEs also enhance the staff and expenditure of capital.
There are two types, namely manufacturing MSMEs and the service MSMEs. MSMEs
reportedly contribute 45% of the industrial production of the country and 40% of exports

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earnings, according to the MSMEs development Chamber of India. Though MSMEs have a
high growth rate in India, they fail to develop sustainable performance due many reasons.
As stated by Parida et al. (2012), the growth rate is declining every day due to the poor
decision-making capability of the managements. They face a lot of hindrances in the path of
sustainable performance. It is therefore important to find the answers to the challenges and
problems faced. The MSMEs often fail to thrive in this business environment due to
unavailability of finance and impediments in the path of obtaining credits. In order to
improve the judgements and analysis, surveys constituting both quantitative and qualitative
approach have been conducted. The challenges faced by the MSMEs in India in obtaining
finance options are demonstrated with the help of theoretical and conceptual frameworks.
The sources of the finances available to the MSMEs are described. Interviews with the
management teams have been carried out, questionnaires and study samples as part of
qualitative research have been carried out. The current research will try to analyse the
theoretical and conceptual framework of the phenomenon to understand the nature of
problems faced by MSMEs. This research has attempted to provide a framework for
enhancing the performance of MSMEs in India.

Research Aim
The main aim of the paper is to examine the problems of MSMEs particularly in
Indian textile industry and trace out the factors that influence the performance of small and
medium scale enterprises in India, and in the end targets to suggest recommendations for
enhancing sustainable performance for the MSMEs in the future.

Research objectives
To achieve the above-mentioned aim, the following objectives have been set:

 To Identify the factors that affect the efficiency of MSMEs

 To disclose the role of MSMEs to Indian economy
 To analyse the growth trends of MSMEs
 To trace out the sources of finance for MSMEs
 To examine and analyse the problems faced by MSMEs in textile industry
 To provide suitable and appropriate recommendations for enhancing sustainable
performance of MSMEs
Research questions
In order to meet the objectives and aim of the research, the following questions need
to be addressed:
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Research question 1:
What are the main challenges faced by MSMEs?
Research question 2:
How is Indian government supporting the MSMEs to enhance their sustainable
performance?
Research question 3:
How emerging technologies can help to maintain sustainable performance of MSMEs in
future?
Research Methods
This study uses the qualitative approach to data collection, and it was planned to
carry out face-to-face interviews, but the same was not feasible because of the continued
pandemic. The approach was chosen as a possibility for the researchers to obtain full insight
into the perspective of the people involved.

The author performed a detailed interview with various stakeholders of the company.
The topics were based on four core aspects:

 the dynamics of SMEs in the Indian textile industry.

 the problems connected with SMEs; and

 the measures taken by company/government to facilitate the sustainability of

SMEs in India.

Limitations of study
There are certain limitations to the research analysis. First off, it is a meso-level
analysis covering MSMEs centered on the textiles manufacturing sector which is still a
growing business sector. Based on the findings of the report, generalizations of the overall
MSME industry in India would not be appropriate.

In addition, observation from the field research suggests that:

 Many micro-enterprises are not systematically regulated. They may not have
appropriate financial reports. As part of the case study, the company involved
has no past records accessible concerning unit turnover. Hence, the research
focuses mainly on the latest financial data for previous year 2019.
 The research data in case study is typically gathered from interviews with
owner-company managers. It was a challenging activity to obtain relevant

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 information from the business owner due to the disruption caused by COVID-
19 pandemic.
 The research project is executed by the author with restricted physical and
economic capabilities. The business can hardly be visited because of the
current COVID-19 pandemic.

Research Structure
The thesis has been divided into following parts: Chapter 1 gives a theoretical
background on the research topic. This section discusses on the importance of the role played
by the MSMEs in Indian economy, the aim of this section is to understand what defines an
MSME as per the government policies laid down by the Government of India (GoI). Further,
this section sheds light on the contribution of MSMEs to the national Gross Domestic
Product (GDP) and employment in India. It also discusses about the existing condition of
MSMEs in the global market and the factors affecting the MSMEs in globalisation.
Chapter 2 discusses about the existing as well as upcoming new government policies
that directly affects the performance and efficiency of MSMEs, this includes the facilities
that are provided by the government in initiating the MSMEs. The section also introduces
the MSMEs policy and legal framework laid down by the Government of India. Information
and discussion about the number of training, educational institutes and agencies established
for the future development of MSMEs as well as sources of finance available to the MSMEs
are also presented.
Chapter 3 analyses the research work based on the data accumulated and is an
essential aspect of the thesis since it includes the data-gathering method, data-analysis
process, and penultimate evaluation of the information collected. The evaluation and
discussion of the findings is also discussed in this chapter. The results are summarized in
accordance research priorities and objectives.
The last section provides the conclusion of thesis. Results are summarized and a brief
assessment is carried out in relation to the research question. It concludes by giving
recommendations for MSMEs as well as the case company and scope for future research.

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 1. ROLE OF MSMEs IN INDIAN ECONOMY
1.1. MSMEs Importance
Various scholars across the world have written comprehensive papers on MSMEs.
This underlines the value of small and medium-sized businesses for growing a mature or
emerging economy. MSMEs have remained one of the main pillars of India 's progress and
prosperity tradition since democracy and hence occupies a position of significance. In
consideration of the tremendous promise, the Indian government has proposed to render
initiatives and services practical and useful to small and medium-sized businesses. In
addition to providing impressive contributions to the Indian economy through
industrialisation, jobs and exports, small and medium-sized enterprises have brought
revolutionary changes by promoting new creativity and promoting business
(Suryanarayanan & Kelkar, 2011). Considering its value to the economic system, Das (2008)
indicates that MSMEs can face various obstacles, primarily because of credit & funding
problems, insufficient infrastructure and due to the dearth of emerging technology. The
author further adds that the capacity to improve and expand as well as to foster creativity by
MSMEs depends on the availability and usability of physical and economic resources to
MSMEs at affordable costs.

In the globalized era now, more and more businesses are seeking to grow globally,
while encountering many barriers (Zain & Imm 2006). In fact, small and medium-sized firms
(MSMEs), which are rapidly growing internationally and becoming significant drivers of
development in socio-economic contexts (Anand 2015), are gaining broad attention in the
international sector. Their development is attributed to developments in technology, lessened
trade and investment hurdles and the emergence of previously blocked sectors (Axinn &
Matthyssens 2002). Such markets, widely known as developing economies, are lucrative and
opportunities-filled rising market. Since the 1990s, many improvements have taken place in
the world economies. Industries have been increasingly inter-connected, and economies are
more dynamic and accessible. Advancements in foreign markets and funding also modified
market trends and financing movements.

A more rule-based international economic trade framework is in effect and is likely

to have a large influence on developing countries, including India, under the context of
World Trade Organization (WTO) pacts. In frontier technologies, such as biology and the
knowledge-based enterprises, advances in technology are anticipated to accelerate
worldwide financial development. The modern policy architecture evolving at the outset of

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the 21st century is far more dynamic, less restrictive and strategically adaptive. India 's
socioeconomic regulations are also being revamped to respond to these increasingly complex
challenges by progressive policies. The key priority of strategic planning is to continue
supporting MSME sector development by targeted interventions. As of now, the MSME
sector has remained mostly isolated from competitive challenges both regionally and
globally. In view of their strategic significance in terms of capital productivity, job-
generating ability, lessening socioeconomic inequalities, improving exports and promoting
technical creativity and entrepreneurship, the prospect of small and medium sized businesses
is of global economic and political interest at present.

1.2. Definition of MSME and its evolution in India

Even before independence India 's economy was primarily based on financial capital,
old industrial markets, and regional factories and craftsmen. The growth of the small-scale
sector has always been a significant aspect of economic strategy since democracy, but the
emphasis has shifted after each 5-year project 's goals. The Industry development and
regulation act, 1951 established the fundamental basis for industrialisation after India got
independence. While in the 1950s the paradigm of industrialisation was focused on heavy-
capital-intensive factories, the priority to build jobs forced the national government to grow
large-scale, market segment and successful manufacturing sectors that were labour-intensive
industries. As the economic growth phase culminated in shifting goals, strategy centered on
solving geographical instabilities (1977), promoting partnerships between major
corporations and their private contractors (1980) and, increasingly, improving agricultural
exports (1990).

In updated Khadi and Village Industries Commission (KVIC) Act of 1956, the phrase
"village industries" was broadened as "Any business in a rural district that manufactures or
creates certain products or service with or without electricity usage and has a fixed resources
spending per head of the employee or worker not more than Rs. 0.1 million or Rs. 0.15
million in the case of the hilly areas or some other amount that may, by regulations made
under this act, be defined by the central government periodically.

However, the whole industrial sector was regulated by the authorities through an
industrial permit scheme; commerce and international investment were often managed at the
international borders or ports. A broad variety of rebates, incentives and government funding
have been poured into the economic system through the Government of India's supportive
initiatives in favour of small industry. The Indian state model-federal structure had a

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significant impact on trade policy enforcement with the national government implementing
programs and the countries becoming extremely flexible to follow their own laws and
regulations. There however are central rules. Central statute of guidelines and regulations
are stipulated by state legislatures and state laws. That being said, the idea that laws increase
the costs of doing business does not necessitate the abolition of the policy: environmental
norms, for instance, add costs on the enterprise sector but these costs are mitigated by
achieving enhanced environmental efficiency promoting to better health for general public.

A significant reform on the classification of micro, small and medium-sized

businesses (MSMEs) was adopted by the economic affairs committee on 1st June 2020.
MSMEs presently have been established on the 2006 Micro, Small and Medium-sized
businesses Act. The legislation categorizes MSMEs as micro- and small and medium-sized
companies centered on: (i) machinery and equipment investments for the production or
manufacturing of products and (ii) investment in machinery for the provision to provide
services. Based on the reform revised expenditure caps would be updated upwards and the
company's annual revenues will also be used as part of the new considerations for the
definition of MSMEs under the board approval. Table 1.1. shows the existing capital
spending thresholds for businesses and the revised thresholds listed for MSMEs:

Table. 1.1 Classification of MSMEs in India (Cyrill, 2020)

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 MSMEs had always been a model framework for the Government of India's socio-
economic reforms that highlighted the careful and deliberate use of foreign exchanges for
goods imported: labour-intensive production methods, job creation, non-concentration of
monetary power dissemination into hands of few (as in the case of large firms); discouraging
exploitative manufacturing and sales activities. Lastly, a beneficial component to the country
's foreign exchange income with small imports, combined with a proposal on the de-
concentration of businesses for few regional centres, it could be ascertained that, overall,
MSMEs in India have fulfilled GoI's anticipations throughout this area.

Positive effects of MSMEs on national economy:

 Strong regional growth contribution

 Large revenues through exports
 Low criteria for capital expenditure
 Agility in business processes
 Imports of limited value
 Capacity to build effective native Indian technologies
 Substitution for imported products
 Role in contributing to development of defence technologies
 Markets centered on promoting future technologies
 Increased competition in national and international business segments
Indian MSMEs are present virtually in all main segments of the Indian economy,
such as:

 Processing of nutrition products

 Inputs through agricultural production
 Chemical compounds and prescription drugs
 Consumer electronics; small size engineering firms
 Electro-medical applications
 Textile products and clothing accessories
 Leather products and accessories
 Lines of meat
 Organic products
 Goods and services for leisure activities
 plastics and packaging

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  Technology applications and IT software’s

1.3. Contribution of MSMEs to the GDP and Employment

Small and medium-sized firms in India are an essential part of the Indian economic
system. (Indian Institute of Banking and Finance, 2017) The MSMEs by itself add well over
8% to India’s GDP as well as 45% to infrastructure development. It also is the 2nd biggest
employment generator after agriculture in the country. India's main export industries,
especially textiles and apparel, leather products, sport items, Gems and jewels, the MSMEs
contributes 40 per cent of total exported items directly and noticeable exports indirectly via
larger trading companies or 3rd parties which also includes handicrafts. MSMEs further hold
a major position in the consumer products markets including electronic, computer, and
rubber products industries.

(Indian Institute of Banking and Finance, 2017) MSMEs are projected to witness
growth 20% annually with 90% of the manufacturing units already in the business. This rise
may be due to the relatively lower expenditure criteria of these groups, some of which even
earn domestic and international support. According to the 4th All India census on Micro,
Small and Medium Enterprises, there are 36,17 million in the MSMEs Market. Out of these,
there are 1,564 lakhs listed establishments.

Table 1.2. shows that the sector most importantly provides employment to 110,98
million individuals as of today. (Indian Institute of Banking and Finance, 2017) Of the total
operating companies, the percentage of micro, small and medium-sized companies was
94,94%, 4,89% and 0,17% overall. These enterprises cover 67,10 percent production firms
and 32,90 percent distribution businesses. Around 45,23% of such businesses are based in
rural areas and the rest in metropolitan areas.

Table 1.2. Employment in MSME sector (GoI MSME Report, 2017-18)

Activity Employment (in millions)

Share (%)
Category Rural Urban Total
Manufacturing 18,656 17,386 36,042 32
Trade 16,064 22,654 38,718 35
Service Industry 15,053 21,169 36,222 33
Electricity 0,006 0,002 0,008 0
All 49,778 61,21 110,988 100

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 The sector - specific classification of job creation in MSMEs is shown in Table 1.3.

Table 1.3. Employment in MSME sector and region wise in millions (GoI MSME Report,
2017-18)

Share
Sector Micro Small Medium Total
(%)
Rural 48,93 0,788 0,06 49,778 45
Urban 58,688 2,406 0,116 61,21 55
All 107,61 3,19 0,017 110,98 100

The gender specific percentage wise distribution in employment by MSMEs is shown in

Table 1.4.

Table 1.4. Employment in MSME gender wise (GoI MSME Report, 2017-18)

Category Male Female All

Micro 79.56 20.44 100
Small 94.74 5.26 100
Medium 97.33 2.67 100
All 79.63 20.37 100

As shown in Fig. 1.2., although small older companies with 100 or fewer workforce
control the economic growth, their job market contribution is just 14.1 percent, the results
of the survey confirmed. Large yet older businesses (enterprises with over 100 workers and
over 10 years of period) constitute for just 10.2 percent of enterprises by proportion yet
generate almost half of job opportunities and Net Value Added (NVA) by proportion.
Companies that develop over time are therefore the ultimate drivers in creating job
opportunities and growth.

Fig. 1.1. MSME statistics firm share (young vs old), employment and NVA (Khan, 2019)

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 Small businesses have a meagre 7.6% stake of the NVA even though they control
nearly half the business environment. In comparison, young but large enterprises (with over
100 workers but less than ten years) form just 5.5% of corporations but add value of 21.2%
in jobs creation and 37.2% of the Net Value Added. The report determined that businesses
that can evolve into big companies over time help in creation of highest job opportunities,
while small enterprises that tend to stay small in the process of becoming larger are the
weakest contributors in job creation as well as productivity.

MSME Textile Industry

Textile has been one of the industries that hires the maximum proportion of labourers
as well as direct employees. The huge number of employees who are poorly organized within
the industry reflects a considerable number of labourers and workers, who are frequently
overlooked. In addition to its extensive presence in the clothing sector, the enterprise often
generates work for a wide community in terms of back-end functions. The industry adds
substantially to development, job opportunities and export markets. Although, the absence
of relevant market statistics is a problem in MSME textile sector’s real-time assessment. The
sector faces numerous obstacles that would need to be minimized if not removed in order to
secure income for MSMEs.

India is the world ’s second largest manufacturer and distributor of textiles. It has all
the capabilities for manufacturing a variety of organic fabrics, along with different regional
and climatic variations. As the world's second largest supplier of silk and cotton as well as
largest producer of jute and the 3rd largest source of cellulose fibre, India makes up for about
14 percent of garments fiber and yarn worldwide. The MSME textile industry is one of the
main sectors for employment opportunities. 45 million employees work in this industry
directly (organized sector) and another 60 million indirectly (unorganized sector). Though
organized sector that provides employment includes wool, fabrics and ready-made products
while the unorganized sector includes back-end activities such as crop cultivation, silkworm
rearing and more which provides indirect jobs in rural areas. It includes some of the
geographically vulnerable territories, which are neglected, and this territory also expands to
urbanized regions, providing equitable opportunity for all.

Although recent changes in the concept of MSMEs might contribute to a re-

classification of certain businesses technically categorized as small enterprises into micro
enterprises and re-classification of those categorized as medium into small enterprises. In
addition, there could be several businesses currently not listed as MSMEs that will be
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categorized as MSMEs in compliance with the revised concept. Those businesses would also
profit mostly from government initiatives. The MSME committee implements different
schemes for: (i) credit flow to MSMEs, (ii) funding for enhancements and updates of
technologies, (iii) market and skills growth, and (iv) cluster-based initiatives to facilitate the
strengthening of resources and advancement of MSME units. For eg, the credit assurance
policy for micro and small companies offers up to 75% of the loan coverage to such
enterprises. The restructuring will then facilitate a considerable improvement in the
expenditure utilization for the MSME market.

1.4. Indian MSMEs In the Global Market

Internationalization and economic reforms, along with the WTO system, have
contributed to a period of transition for Indian MSMEs. With the slowdown in world
economy multiple sectors have faced troubling times, especially countries like the United
States and the European Union, with intensified competitive pressure from China and several
other low-cost manufacturing hubs from foreign countries. Concrete steps have been made
to improve and encourage MSMEs through the adoption of the MSMED Act 2006 and the
revamped regulation in June 2020 this year after COVID-19 pandemic, in the sense of
globalized dynamic atmosphere.

Micro, small and medium-sized enterprises not only structure the foundation of India
as a country, but also in countries with developed economies. MSMEs in the past has seen
many limitations, many products were retained for manufacturing in the small - scale
industry, the business units often gained additional fiscal benefits and a variety of support
services were created to ensure the sustainability of small enterprises.

The Indian MSME sector in recent years has seen significant development. It has
typically reported increased levels of development relative to the manufacturing sector in
general. Beginning 1991, the condition has changed drastically for the entire manufacturing
industry and also for the small enterprises. Export duties have been dramatically decreased.
India has increasingly become an important part of the global economy; new trading
frameworks are being developed and several industrialized nations such as India have signed
extensive economic and trade deals to promote cooperation in areas of comparative
advantage. In this phase, the Indian market is rapidly accessible, and the industry desperately
needs to adapt to it. In order to thrive and expand, the Indian industry would have to grow
efficient by reducing overall expense.

21
 Government of India is seeking to facilitate modern technologies, creativity, and
productivity in MSMEs in a variety of ways. Indian micro-enterprises are gradually grouped
in clusters, which boost their direct link as technical and administrative service providers to
industry organizations. It helps to create inter-company collaboration that improves
competitiveness and growth. The efficiency of the cluster formation in MSME environments
will begin to improve as clusters try to take advantage of linkages. However, the rise in this
business sector's market capitalisation is mainly due to small scale industries (SSI)
redefinition. Development in this industry on its own is sufficiently remarkable, suggesting
a positive answer to the country's socio - economic structural reforms which started in 1991.
Nevertheless, yet another conceptualization of this industry is required by expanding the
spectrum of modernisation to improve productivity. The MSME development sector in India
is quite well positioned to expand and the driving forces are appropriate. Sustained
engagement of MSMEs would allow them to achieve long-term growth that is strong and
sustainable.

Small to medium-sized business definition globally is not standardized. The term

varies based on the level of industrial growth and the general progress. There are more than
60 small and medium-sized company definitions that are officially used in 75 countries (Kim
Seung Jin and Suh Jang-Won, 1992; 9). The definitions are more widely employed apply
either to workforce size and/or capital quantities) cash flow / property and equipment. In
particular, the scenario surrounding small enterprises offers both prospects and obstacles.
There is a chance for Indian MSMEs to develop in a global environment to access the global
value chain by becoming successful globally. For others to thrive, they will have to
reposition themselves to become successful.

This aims to eliminate the challenges facing the MSME in global market are as
below:

 Competition between local and MNC firms

 Lack of accessibility to funds due to inadequately structured and non-formal
business governance.
 Inability to enter the Regional and multinational marketplaces.
 Risks to volatility in the market.
 lack of knowledge on world – leading quality standards.

22
 1.5. Factors affecting the MSMEs
The MSME Sector in India has demonstrated impressive ingenuity and capacity to
respond to the ongoing economic slump and slowdown with resilience and solidity. For eg,
GoI has recently embraced the segmentation and collaboration model to enhancing the
productivity of these MSMEs in challenging moments. Indian MSMEs often introduce
modern and creative knowledge and networking technology across a wide range, such as
Service platforms and applications to deal with challenging circumstances. Despite this, in
the age of modernization and structural reforms the Indian MSMEs face significant
challenges. Major difficulties are described below.

1. Increased business credit costs: A very important challenge this industry faces
are accessibility to sufficient and appropriate credit at affordable rates. Recent analysis
studies (Mukherjee, 2018 and Nagpal, Saini and Gupta, 2009) have found that Indian
MSMEs are being hampered by low credit provision. The key cause of this is the significant
risk evaluation amongst banks of this industry and the increasing processing costs associated
with the loan evaluation. Moreover, MSME players are not in a condition to pledge
guarantees in return to take benefits of banks loans and thus refuse eligibility to credit.

2. The sourcing of raw materials at affordable costs: It is necessary for the

advancement of industry to ensure sufficient economic tools are available. The knowledge
and supplies required to execute entrepreneurship innovations, be successful, succeed in
adverse conditions and expand. This is a soaring obstacle facing the sector because raw -
materials sourcing is carried out at regional level due to the financial restrictions in place by
financial institutions and sourcing is significantly lower than it is in large industrial sector.

3. Insufficient facilities, including utilities, clean water, highways, etc. Small and
medium-sized businesses are impacted adversely by the lack of power / electricity facilities
(Akinwale 2010; Doe and Asamoah 2014). It is important that the supply of facilities,
technologies and professional workforce are aligned with growing international
developments in order to ensure competitive balance of MSMEs. MSMEs are either situated
in industrial properties that were developed long time ago, or run in metropolitan centres, or
in small towns in an undisciplined fashion. In such regions, the quality of utilities, including
electricity, water and highways, is inadequate and inefficient.

4. Unavailability of qualified production equipment, services, branding etc.

Internal marketplace inadequacies are a significant cause of MSME problems and are
focused on administrative capabilities, financial acquisitions and minimal experience in
23
brand management and talent management (Yolande and Watkins, 2012). Even though India
has the advantage of a wide reservoir of human capital, it continues to suffer a labour
deficiency of the expertise needed to produce, promote, operate, etc.

5. National tax system and ease of doing business index: The Indian tax structure
has, in many ways, been opposed as unfavourable to the corporate climate due to the portion
of payments and payment processes and variability in taxation system across Indian states.
MSMEs had already been subject to comply with Excise, Service Tax and VAT (Value
Added Tax). Each state had various VAT legislation and, in some states, compliance with
different regulations on VAT, enforcement through multiple channels and involved
responding to different authorities. It has all been merged into a rigorously integrated online
framework since GoI has launched One Indian-One Tax GST (Goods and Service Tax) in
India.

(https://www.doingbusiness.org/, 2020) From 131st place among 190 nations, the

ease of doing business rating for India increased to 130th place in 2018. In this ranking,
world economies are ranked from 1–190. A standard rating of companies ensures that the
business climate encourages the start-up and growth of a local enterprise. The rankings are
calculated by splitting the overall scores into ten categories, each comprised of multiple
measures, assigning the same weight to each category.

Rankings on doing business topics (1-190) – India 2020

Fig. 1.2. Ease of doing business scores for India (https://www.doingbusiness.org, 2020)

India was 77th out of 190 nations in the subsequent standings in 2019 but rose by 14
points to 63rd rank out of 190 countries, thereby achieving a total improvement of 23 points.
The increase in this rating can be interpreted as a positive predictor for Indian MSME's

24
favourable results. India and the other big enhancers introduced a total of 59 structural
changes in 2018/2020 in doing business 2020, reflecting one-fifth of the improvements
reported worldwide.

25
2. MEASURES OF GOVERNMENT SUPPORT TO MSMEs IN INDIA
2.1. Organizational Framework
There is hardly any need to provide explanation on how important it is to focus our
attention on broad structures and processes for the appropriate streamlining and
encouragement of the MSME market. Where the regulatory systems are being transformed
from state-driven economic advancement to market-driven growth-oriented vast institutional
framework to support this market is a crucial factor. The administration, civic and corporate
organizations thus have a critical profile to support in successful policy development,
regulation, assistance, and education. The framework of SSI's was constructed in 1950 when
the SSI Industries Panel was formed in 1954. Government agencies were the Ministry of
small industry and SIDO (Small Industries Development Organization). The chairperson /
president of Industries at the state level was chief administrative regulator for SSIs.

The central as well as state ministries of MSME have played a significant role and
have established a Citizen's code of conduct as a supportive service for MSME allocations.
Programs are organized through governmental departments and NGOs. Major banks and
business organizations have also been asked to endorse this sector's funding. Analysts that
have extensively observed the operation of these entities have questioned this segment
regarding their effectiveness / financial convenience / validation. These organizations need
a comprehensive analysis in accordance with this sector 's growing expectations.

(Msme.gov.in, 2020) lists the initiatives and diverse programs offered by the below
Ministry bodies for MSME community. Figure 2.1. shows the structure in brief and the main
bodies have been further listed below:

Fig. 2.1. Institutional structure of MSME

26
 1. Office of Development Commissioner (MSME)

2. Khadi &Village Industries Commission (KVIC)

3. Mahatma Gandhi Institute for Rural Industrialisation (MGIRI)

4. Coir Board

5. National Small Industries Corporation (NSIC) Ltd

6. National Entrepreneurship Development Institutes

7. National Board for Micro, Small and Medium Enterprises (NBMSME)

Office of Development Commissioner (MSME)

The Office of Development Commissioner (MSME) is an administrative institution

to devise and monitor the execution of the country 's initiatives for the growth of MSMEs.
It is governed by Special secretary and Development Commissioner (MSME). The office
has played a very productive and substantive role in the development of this critical sector.
It operates across a channel of MSME-DI, provincial research hubs, institutes for footwear
development, manufacturing centres, on-field research centres and other professional
institutes.

It provides solutions such as advisory for the design of national policies for
advancement and growth of MSMEs offering techno-economic and administrative advise,
urban resources and extended facilities to MSME segments; provides resources for updating
technologies, modernisation, quality assurance including infrastructure; generate human
capital through the utilization of specialist institutes.

Khadi &Village Industries Commission (KVIC)

The Khadi & Village Industries Commission (KVIC), formed in conjunction with
the 1956 Khadi and Village Industries Board Act, is a legislative body that works to
encourage and improve khadi and village industry's rural job prospects and therefore boost
the rural economy. The KVIC is also listed as one of the principal institutions for
commercially viable rural non-farming jobs inside this fragmented industry with low
operating costs per capita. this also serves to verify rural movement of people to urban
locations for job prospects.

27
 Table. 2.1. Schemes under KVIC

Mahatma Gandhi Institute for Rural Industrialisation (MGIRI)

MGIRI was founded at Wardha, Maharashtra, as a company under the companies act
of 1860 to reinforce R&D efforts in the KVI industry. The institute's key responsibilities are
to enhance R&D projects within the rural manufacturing industry through the promotion of
science, expansion of R&D, quality management, education, and knowledge relevant to
technologies.

Coir Board

The Coir Board is a regulatory agency formed first under the Coir Industry Act of
1953 to facilitate the sustainable overall growth of the coir sector and improve the quality of
life of the workforce involved in this sophisticated industry. The operations of this board
include technical, economical and societal study and implementation; designing innovative
technologies and styles; and selling coir merchandise in India and overseas. It also advocates
cooperative organizations among husk vendors, coir yarns and coir materials manufacturers;
ensures the return payment of income to rural people and farmers, etc. Two academic
institutions, namely the Central Coir Research Institute (CCRI), Kalavoor and the Central
Institute of Coir Technology (CICT), Bengaluru have been funded by the coir board in order
to complete research and innovation in the various dimensions of the coir industries, which
is one of the country's main agricultural business sectors.

National Small Industries Corporation (NSIC) Ltd

In 1955, the GoI founded the National Small Industries Corporation (NSIC) Ltd. to
encourage, assist and nurture the development of small industry in India. Through numerous

28
schemes and initiatives to help MSMEs all over the region, NSIC appears to be at the centre
of business growth around the country. The Corporation's principal roles are to assist and
encourage the development of the country's micro and small businesses, primarily on a
commercial level. It offers micro and small businesses a range of supportive solutions by
fulfilling their diverse criteria in the fields of raw materials sourcing, commodity promotion,
credit ranking, acquisition of new and developing technologies, etc. NSIC runs a committed
network of specialists at all levels directly throughout its numerous services and functions
from 142 offices throughout India and a South African branch.

Table. 2.2. Schemes under NSIC

National Entrepreneurship Development Institutes

Entrepreneurial growth and skills development is one of the core components for the
growth of MSMEs, specifically for start-ups. The Ministry has founded three leading
innovation and entrepreneurship management Institutes, namely The National Institute for
Entrepreneurship and Small Business Development (NIESBUD) in Noida (Uttar Pradesh)
and the National Institute for Micro-Small and Medium Enterprises (NI-MSME) in
Hyderabad (Andhra Pradesh) to instil corporate entrepreneurship philosophy in a systematic
way amongst the young entrepreneurs. These educational institutions establish educational
modules; undertake training and development; and offer expert advice for the growth and
enhancement of MSMEs, including improving sustainable competitive advantage.

National Board for Micro, Small and Medium Enterprises (NBMSME)

The spectrum of developmental activity in MSMEs comprises many ministries and

numerous central / state governance bodies. The MSME Development Act 2006 created a
29
national Board of Micro, Small & Medium Enterprises with a total of 47 elected members
and 20 non - governmental Representatives to promote cooperation and inter-institutional
relations and to provide advice to the authorities on all MSME-related matters. The minister
in charge of MSME of the GoI shall be the president and the board comprises of ministers
of state, several Representatives of the Indian parliament, secretaries of the state government
entities, banking agencies, public sector firms, industry groups and prominent analysts on
the subject. The board continues to work on a frequent schedule to make an assessment of
development policies.

2.2. Schemes provided by the Indian government in initiating the

MSMEs
In consultation with departments and organizations as mentioned in section 2.1.,
different actors and monitors, the ministry of MSME establishes strategies, initiatives,
ventures, and programmes. Implementing them in order to facilitate MSMEs' promotion and
development. The ministry also exercises the political lobbying work with many other
ministries / departments of the national government and the states and provinces of the union
on behalf of these corporations.

In order to accomplish sustainable development of MSMEs, the particular plans /

programmes conducted by the ministry's departments, aim at facilitating / providing one or
more MSMEs with the following:

o Optimal credit from commercial banks / corporations.

o Technology enhancement and modernisation resources

o Sufficient resources for infrastructure.

o Best in class research centres and labs for performance accreditation

o Modern business management practices and development of skills by

professional training institutions

o Branding support; and

o Business environment at par with large industries sector for healthy

competition and market share

The MSME ministry in India promotes the following policies:

Initiatives for the advancement and growth of MSMEs in the country as listed below:

Directly incorporated through the Ministry:

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  Standards and procedures for international cooperation

 Standards and procedures for market development assistance

 Standards and procedures for cooperation with training establishments

 Scheme of survey studies and policy research

 Scheme of Fund for Regeneration of Traditional Industries (SFURTI)

Incorporated through NSIC:

 Marketing Assistance Scheme

Incorporated through KVIC

 Guidelines of the Market Development Assistance (MDA) on production

scheme

 Prime Minister's Employment Generation Programme (PMEGP)

 Interest Subsidy Eligibility Certification (ISEC)

 Scheme for enhancing productivity and competitiveness of khadi industry

and artisans

Incorporated through the Coir Board

 Rejuvenation, modernization, and technology upgradation of the coir

industry

The execution of initiatives and different plans, initiatives and procedures for the
provision of facilities and assistance programs to small businesses is conducted through the
associated organization, namely the SIDO and the ministry's NSIC.

National Manufacturing Competitiveness Programme (NMCP) Scheme

The government has proposed in 2005 the establishment of the national Productivity
policy to help small and medium-sized businesses to succeed and adapt the competitive
intensity arising from the modernization and regulation of tariffs. The project, which aims
to improve their activities and boost productivity, focuses on reinvigorating the
manufacturing industry, particularly small and medium-sized businesses. The scheme
focuses on building global competition amongst Indian micro-enterprises through improved
procedures, designs, technologies and economic integration. The policy allows for major
expenditures to enhance the MSME industry's whole business model. All the NMCP
elements are now functional and are necessary to stimulate creativity and development in
the MSME market.
31
  Setting up of new mini tool room

 Corporate entrepreneurship and management growth assistance,

 Help for branding / guidance to MSMEs,

 Lean manufacturing competitiveness scheme

 Design clinic scheme

 Quality management systems and quality technology tools

MSME Cluster Development Program (MSE-CDP)

DC-MSME (Development Commissioner) introduced an MSE-CDP for the

comprehensive growth of identified MSEs through collaboration based on business process
planning and distribution network management. The technique has been embraced as a core
policy to enhance efficiency and competition and infrastructure development for Micro and
Small Enterprises (MSEs) and their nationwide cooperatives; the segmentation of entities
often allows suppliers of different resources, particularly banks and other financial
companies, to deliver their resources more financially and to decrease costs and enhance
their accessibility.

Credit Linked Subsidy Scheme for Technological Upgradation

In October 2000, the proposal was introduced and updated w.e.f. 09.2005. The
updated policy intends to encourage technological improvements for micro- and small
enterprises with a 15 percent (12 percent before 2005) capital rebate on corporate financing
they have used to incorporate quite well-established and enhanced technology in supported
subsector / product categories. The permitted capital allocation under the amended policy is
determined on the basis of plant and equipment purchasing value. The threshold of approved
loans under the updated structure for the computation of subsidies has been increased from
INR 4 million to INR 10 million w.e.f. 09.2005.

The policy has remained extremely effective as we the scheme allowed for financing
that was 20 times the cumulative and was therefore able to encourage entrepreneurship
practices throughout the region. This scheme was immensely effective. It is also the only
assurance program of its type that in the past 19 years has supported over 3.5 million
recipients. In the times after receiving the MSE financing, the recipients observed an
improvement in their revenue generation as well as job-generation had a favourable effect
32
on six main areas of MSE industry like technology upgradation, upgrading skills, business
growth, scheme stability, economic as well as social impact.

Credit Guarantee Scheme

Lending of up to INR 1 million to individual MSEs without any collateral. Credit

Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) was officially
spearheaded by the GoI in August 2000 to establish collateral-free financing for the micro
and small business sectors. Present and developing businesses are entitled within the
framework to be covered. The MSME ministry and SIDBI jointly set up a trust named the
Credit Guarantee Fund Trust. To enforce the Policy, the assurance exposure provided under
the Policy is within the limits of Credit Guarantee Fund Trust for Micro and Small
Enterprises (CGTMSE). 75 percent of the available credit limit (80 percent in particular
categories) up to INR 10 million secured loans are entitled for the scheme services shall be
widened without guarantees or assurances from external parties. The scheme has succeeded
in growing regionally all over the country with an emphasis on the north- east India. More
than 100 manufacturing segments have also gained from the scheme. The recipients are
scattered throughout all cities, including even Tier 3 cities and not restricted to major
industrial clusters.

ISO 9000/14001/HACCP Reimbursement Scheme

In order to improve the production and quality efficiency of the MSMEs, the GoI
implemented an globally accepted technology enhancement program to boost effectiveness
and for better regulation of the environmental laws by the MSMEs. The scheme rewards
75% of registration fees for Quality Management System (QMS) ISO 9000 / HACCP
certification subject to a limit of Rs.75,000/certification and/or Environment Management
System (EMS) ISO 14001 by MSMEs. Enterprises with Entrepreneurial Memorandum (EM)
number will be liable for reimbursement only after ISO-9000/14001/HACCP qualifying
document is issued by the agency under this scheme. The program offers compensation only
once/enterprise.

MSME Market Development Assistance (MDA) Scheme

The policy provides up to 75% financing on air fares for MSME entrepreneurs
engagement in international trade fair. The policy also offers funds to generate promotional
content (up to 2.5% expenses) sector - based studies (up to INR 0.2 million) and for anti-

33
dumping situations (50% up to 0.1 million INR) – for individual MSMEs as well as for
partnership firms.

Overseas Exhibitions / Fairs attendance

The program is now only applicable to MSME entities with an existing permanent
affiliation with the industry secretariat / district office.

Monetary assistance for using global standards in bar coding

Under the policy, the monetary support is given by reimbursing a one-time

registration cost up-to 75% of GSI India (solution provider) for usage of bar coding and a
yearly recurring charge of 75% for the subsequent 3 years.

Exclusive policy on purchase and price preference

The NSIC Single Point Registration Policy administers this benefit to MSMEs.
According to this policy, an exclusive 358 products/items are designated to be reserved for
purchase by central government from MSME. Additional services include providing free of
cost tender documents, exemption from security deposit, and 15% price preference in central
government transactions for MSMEs.

Mini Tool Rooms

The policy offers monetary compensation given by central government in the form
of one-time grant equivalent to 90% of the valuation of equipment and infrastructure or INR
90 million, whichever is less for establishing a Mini Tool Room (MTR) in each state to the
state governments. The support is limited to 75%, or 75 million INR, of the value of
machinery / equipment towards upgrading / restructuring of already established tool rooms
across the country. The balance amount must also be provided by the state governments of
the member states. It aims to satisfy the increasing requirement for tools and dies to the
MSMEs of the region.

Financial aid to Entrepreneurship Development Institutes (EDIs)

National government funding through DC-MSME is given to improve educational

facilities within EDIs up to 50% or INR 10 million, whichever is less. EDI initiatives must
be forwarded by the State Governments of the member states to the DC-MSME, that are
appropriately proposed for evaluation.

Scheme of micro finance through MFI/NGOs

34
 The development of self-employment is one way to combat impoverishment and
address unemployment concerns in the country. More than 240 million people in the country
today are beneath the poverty line. The SIDBI Microfinance Project is in effect under this
scheme. The NGOs / MFls (Micro Finance Institutions) are obligated to support by providing
equity assistance of up to 2.5% of the loan volume, which they find challenging because of
their poor position financially. The central government would support the SIDBI through
'Portfolio Risk Fund' (PRF) under this scheme. The PRF will be used in order to fulfil the
security deposit conditions for NGO / MFI lending’s and interest loss charges.

Mahatma Gandhi Institute for Rural Industrialisation (MGIRI)

The Institution at National Level 'Mahatma Gandhi Institute for Rural

Industrialization' (MGIRI) has been set up as an organization in compliance with the
Societies Registration Act of 1860 in Wardha, Maharashtra to enhance research and
development initiatives in the KVI field. The key roles of the research centre is to enhance
research and development practices in the industrial rural sector via supporting innovation,
expanding research and development, quality improvement, training and facilitation of
knowledge relevant to technology.

National Award Scheme

MSMEs have experienced considerable growth as well as improvement in terms of

quality output, exports, creativity, brand creation and import replacement, well beyond the
planned targets of developing MSMEs. Due to the aspirations and the pioneering spirit of
entrepreneurs, MSMEs have made it possible to manufacture diverse goods like by reducing
imports. The ministry of MSME presents regular national awards to recognise the
contributions and achievements to MSMEs entities and listed founders under this national
award program.

2.3. Training institutes, educational institutions, and other agencies

In order to directly help MSMEs and other businesses in trying to incorporate the
skills of their R&D employees, GoI has established several training institutes and other
agencies.

MSME Testing Centre, New Delhi

The MSME-Testing Centre in New Delhi provides different kinds of training into
chemical, electrical, metallurgical, and mechanical testing fields. This training courses build
35
human capital that all companies gain since they are specialized graduate / diploma holder
engineers and graduate research scientists who will help to determine and execute quality
management practices in their corresponding workplaces.

National Institute of Micro, Smalt & Medium Enterprises (NIMSME)

After its establishment by the GoI in 1960, NIMSME (formerly NISIET) has made
tremendous progress towards being the leading institution for the promotion, growth, and
globalization of the MSME industry. The ministry of Micro, Small and Medium Enterprises
(MSME) is an independent arm. The Institute seeks to achieve its specified goals through a
broad variety of activities, from teaching, advising, study and research, to expansion of
information resources.

In 1984, UNIDO acknowledged SIET as a worthy performing organization under its

scheme of centres of Excellence to expand assistance. Subsequently, national recognition
was also given and in the same year the SIET Institute became a NISIET. The GoI has
introduced MSME bill in order to deal with the pre-cut of globalization in parliament on 2
October 2006. As a consequence, the institute has also emerged as the biggest institution by
modifying its layout and name as NIMSME after 11 April 2007.

Indian Institute of Entrepreneurship, Guwahati

In order to conduct preparation, study, and advisory practices in MSMEs based on

entrepreneurial growth, the Indian Institute Entrepreneurship (IIE) was founded in Guwahati
in 1993 by the former Ministry of Industry and, as an autonomous national institute, by the
Government of India (now the Ministry of Micro, Small, and Medium Enterprises). The
Institution first started to work from April 1994 with its other stakeholders: North East
Council (NEC), the administrations of member states like Assam, Arunachal Pradesh,
Nagaland, and other government body like SIDBI.

The institution's policy making, and advice is given by its management committee,
whose President is the Secretary to GoI, the MSME Ministry. The board shall be chaired by
the President, the NEC, and the executive board shall be led by the Secretary, the Ministry
of MSME, and the GoI. The Institute 's operations involve training requirements assessment,
selection and coordination of programmers between both development team and
entrepreneurs; implementing successful training plans and methods for specific target
audiences and sites; organizing of lectures, networking events offering platforms for contact

36
with and dialogue between relevant organizations, promoting the development of young
entrepreneurs and facilitation of market training and awareness.

National Institute for Entrepreneurship & Small Business Development (NIESBUD)

NIESBUD is one of the main institutes established by the ministry of MSME, GoI,
fostering and developing micro, small- and medium-sized enterprises, including improving
their competitiveness through various activities; the primary objectives over which the
institute was created. More than 0.73 million apprentices have been educated by the
institution, including 3800 individuals from even more than 135 nations.

NIESBUD operational tasks include: -

 Developing appropriate curriculum and learning methods

 Syllabus standardization for teaching different audiences

 Formalizing new methods for scientific evaluation

 Training design and development, Manual Tools

 Facilitate and assist central / state / other organizations in industry growth

initiatives.

Scheme of Fund for Regeneration of Traditional Industries (SFURTI)

For traditional and village enterprises, the ministry has greatly enhanced the existing
Scheme of SFURTI with a view to enhancing and intensifying expert coverage. At the
expense of INR 760 million, a special programme to offer assistance to 100 Khadi
enterprises in the areas impacted by terrorism at the international borders, in hilly areas and
areas affected by left wing extremism has been decided. Furthermore, several other
initiatives for efficiency-building and MSME coaching, and mentoring are under
finalisation.

2.4. Sources of finance available to MSMEs

Acknowledging MSMEs pivotal position in industrial and social growth, their
substantial impact in jobs creation and GDP and acknowledging that accessibility to
financial services is fundamental to the progress and development of MSMEs. In endorsing
measures that boost access to finance, the GoI and the Reserve Bank of India (RBI) have
taken the lead in rolling out below initiatives.

37
 1. With the aim of enhancing standardized improvement in the availability of
banking facilities throughout the nation, financial institutions were urged to
devise a blueprint to provide financial services to any un - banked rural areas with
a population of more than 2,000. The RBI has instructed banks that these
financial services should not always be expanded from a physical branch; they
could still be given through other numerous ICT (Information and
Communication Technology) channels and business models or through Business
Correspondents (BCs), respectively.

2. Enhancing funding access to the industry, in accordance with the guidelines the
Prime Minister (PM) has created a task force for MSMEs under principal
secretary, GoI. Financial institutions have been directed to raise financing to
micro and small enterprises by 20 per cent annually; also, the allocation of 60 per
cent of MSE loans to micro-enterprises should be achieved.

3. Furthermore, on the basis of the review panel suggestions (Executive Director)

of the RBI to evaluate the Credit Guarantee Scheme (CGS) of the Micro and
Small Enterprises Credit Guarantee Fund, the MSE collateral free loan threshold
has been raised by INR 0,5 million to INR 1 million. The review panel has also
provided suggestions on expanded guarantee coverage, elimination of collateral
fee for loan payments by CGTMSE with respect to some limitations,
simplification of the mechanism for submitting applications with CGTMSE and
enhanced program awareness. Further, CGTMSE, the credit guarantee policy
regulatory organization has advised that these guidelines be adopted
immediately.

To speed up sanctions and disbursements of loans to microenterprises, in particular

to smaller entities, claim micro firms, these can be penalized at branch level. Most financial
institutions across the country have developed a Centralized Credit Processing Cell (CPC)
for MSMEs. CPCs are used for single-point evaluation, approval, renewal and assessment
of paperwork. The framework aims to minimize processing delays and to maximize the
usage of existing resources as well as to create a stable (Management Information System)
MIS. implement fair policies and facilitate tracking. Banking institutions have recognized
late that financing to MSMEs is a lucrative venture. It is evident that much of the expected
banking institutions loans to MSMEs have grown by more than 20 percent. For micro and
small enterprises, governmental guidelines include relatively simple loan application /

38
sanction process, score-based financing up to INR 2 million. Request must be handled of in
a time-bound manner within the total duration specified by RBI. Both banks and MSME
entities now use the accessible technology through which a central loan application
registration has been set up.

The MSME unions and industry associations also serve an essential role in promoting
financing for this sector. Data discrepancy and lack of accountability and data consistency
have become a big problem for MSME organisations worldwide. Consequently, they will
have to participate efficiently and effectively in the coordination of conferences and
educational initiatives to instruct their representatives on working capital, diverse financial
services, financial reporting, etc.

GoI’s Framework for Financial Assistance to MSMEs

The Reserve Bank of India has been instrumental in developing the systemic
framework required to fulfil the MSMEs' credit requirements. The same is as under:

1. Reserve Bank of India:

The Reserve Bank of India outlines the lending, monitors and control policies of
MSE developments that are regarded as a key priority. The RBI directives given to different
banking and financial agencies and discusses issues related to the timely and appropriate
sanction of capital limits, the refusal and preparation of proposals, the disclosure of
information on loan assistance to MSMEs and to the boards of banks / institutions. RBI also
established the high-level advisory committee in December 1991 to examine the movement
of institutional credit into a constrained sector known as the 'Nayak Committee,' under the
directorship of the director general Reserve Bank of India. RBI has also formed a top-level
commission to recommend steps to strengthen the lending mechanism and simplify lending
practices in this field. The committee's suggestions are forwarded from time to time to the
branches of banking institutions along with future actions and guidelines.

2. All India Lending Institutions:

a. Small Industries Development Bank of India (SIDBI):

SIDBI is a wholly owned IDBI affiliate founded in April 1990 to directly address
small sector lending demands as well as to provide banking agencies with refinancing
capabilities.

b. Export Import Bank of India (EXIM)

39
 c. National Bank for Agriculture and Rural Development (NABARD)

d. National Co-operative Development Corporation (NCDC)

3. Other Financial Institutions:

e. Private sector banks

f. State Financial Corporations (SFCs)

g. Co-operative banks

h. Regional Rural Banks (RRBs)

4. Credit Guarantee Schemes:

The following entities shall extend credit protection programs to guarantee advances
provided to small and medium size borrowers and MSEs by financial institutions and other
commercial banks:

i. Deposit Insurance and Credit Guarantee Corporation (DICGC)

ii. Export Credit Guarantee Corporation (ECGC)
iii. Credit Guarantee Fund Trust for Micro & Small Enterprises (CGTMSE)
5. Others:
i. National Small Industries Corporation (NSIC)
j. State Small Industries Development Corporation (SSIDC)
k. Khadi & Village Industries Commission (KVIC)
l. Handloom Board
m. Coir Board
Important Banks and Institutions (From the List Above)

Regional Rural Banks (RRB)

To support agricultural practices, rural trade and manufacturing. RRBs were set up.
RREs focus solely on rural farmers and business owners. The newly reorganized function of
RRBs by the Government of India has also transformed with acquisitions and
reorganisations.

National Bank for Agriculture & Rural Development (NABARD)

NABARD has a responsibility to promote cash flows for supporting and expanding
agriculture, small-scale manufacturing, cottage industry and allied sectors, artisanal products
and other rural crafts. It also has a mission to help all other relevant rural business practices,
foster organized and sustainable rural growth and stable rural productivity.
40
Export Import (EXIM) Bank

The EXIM Bank of India, founded under parliamentary act to finance, encourage and
promote India's international trade, offers large-scale financing to MSMEs. EXIM Bank
schemes have several facilities that are applicable to pre and post-shipment, international
trade, consultancy services, import funding, production of export goods, export management
and export advertising schemes.

Small Industries Development Bank of India (SIDBI)

The Small Industries Development Bank of India (SIDBI) was founded in April 1990
as a major financing agency under the Legislation of the Indian Parliament to fund, promote
and expand the SSI industry, and to coordinate and promote the operations of establishments
conducting related operations. Although refinancing assistance is given to a large network
of qualified primary credit institutions for MSMEs, direct funding is channelled through the
64 branches of SIDBI. SIDBI is also expanding Micro Finance funding to approved Micro
Finance entities through subsidized loans. Self-help groups to loan and provide other
assistance for lower income sectors of society so that they can conduct income-generating
operations on a permanent basis.

The Bank's approved capital is INR 10,000 million and its paid-up capital is INR
4500 million, managed by 36 institutions / commercial banks / insurance firms in the public
sector, controlled or managed by the GoI. After its launch, SIDBI has tried to address the
numerous demands of MSMEs through means of various custom-tailored schemes and by
March 2014 aggregate payments made had exceeded INR 3261 trillion (Euro 40.8 trillion),
providing benefit to more than 31 million workers in the MSMEs, with a gross outstanding
of INR 612.7 trillion as of March 2014 (Euro 7.7 billion).

Status of MSME Financing in India

In India, the cumulative demand for bank borrowings is expected to cross INR 37
billion, whereas the total availability of funding from institutional businesses is expected to
be INR 14.5 trillion.

At an aggregate basis, MSMEs secured roughly INR 17.4 trillion in financing from
the financial services sector as of 31st March 2019. Scheduled Commercial Banks (SCBs)
account 90% of it, while in recent years, Non-Banking Financial Companies (NBFCs) have
also progressed at a consistent rate.

41
 Table. 2.3. Financing to MSME Sector (https://www.rbi.org.in, 2019)

Since MSMEs are such a diverse category of businesses, it is essential to analyse

financial trends by category.

Table 2.4. Category Wise Credit Exposure (https://www.rbi.org.in, 2019)

INR in Millions
SME MID INR
Large >
Micro < INR 10 25 Mn -
INR
INR 10 Mn - INR Overall
1000
Mn INR 250 1000
Mn
Mn Mn
Sep’16 3 7.5 4.8 34.1 49.4
Dec’16 2.9 7.5 4.9 34.3 49.6
Mar’17 3.1 7.8 4.9 34.1 50
Jun’17 3.3 8.1 5 34.4 50.8
Sep’17 3.5 8.5 5.2 34.7 51.8
Dec’17 3.7 8.9 5.4 36.4 54.5
Mar’18 4 9.6 5.5 37.8 57
Jun’18 4.2 10 5.5 38.3 58.1
Sep’18 4.3 10 5.5 38.9 58.7

Y-o-Y growth (From Sep’17-

22.30% 18.40% 7.20% 12.00% 13.50%
Sep’18)

42
 The data pattern extracted from the above information indicate that the micro sector
(< INR 10 million), which accelerated at 22% a year in 2018, was the fastest growing sector.

Table 2.5. Loan Application Processing Time (https://www.rbi.org.in, 2019)

(in days)
Lenders 2016 2017 2018
NBFCs 24 19 18
PSBs 41 35 31
Private Sector Banks 32 29 29

To reduce the turn-around time/processing time of loan applications GoI has also
introduced PSBLoansIn59Minutes through PSB (Public Sector Banks), which is an internet-
based platform that allows MSME loans in particular to be approved in 59 minutes from
banking institutions of the public sector for loans up to INR 10 million. MSME applicant
needs no physical documents to apply loan on this site for acceptance in principle.

The approach uses analytics for evaluating collected data from different sources like
IT returns, GST data, financial records, etc. The recipient is required to notify the branch
involved after obtaining the confirmation letter approving the loan.

Table 2.6. LoansIn59Minutes scheme by PSB (https://www.rbi.org.in, 2019)

INR in Millions
As on November As on June 7,
Particulars % increase
2, 2018 2019
New Loans
Preliminary approvals (No.) 4,964 62,680 1163

Final sanctions (No.) 748 45,265 5951

Amount sanctioned (INR

2090 126,630 59590
Millions)
Renewals
Preliminary approvals (No.) 67,077 1,02,731 53

Final sanctions (No.) 1,239 82,619 6568

Amount sanctioned (INR

4280 274,930 63240
Millions)
Total
Preliminary approvals (No.) 72,041 1,65,411 130

Final sanctions (No.) 1,987 1,27,884 6336

Amount sanctioned (INR

6370 401,560 62040
Millions)

43
 However, input obtained from businesses indicated that the process is not smooth to
secure standard approvals from bankers after acceptance and rejection rates for such
applications are high.

2.5. Comparison of MSME policy in India and European Union

Thorough evaluation of the latest GoI's concept of MSMEs with the existing
definition used by the International Finance Corporation (IFC) and the European
Commission (EC) it can be inferred that the new updated definition is undoubtedly a move
forward in implementing metrics that are more broadly used worldwide for describing
annual turnover of MSMEs.

MSME Definition India Vs European Union Vs World Bank:

Table 2.7. MSME definition India Vs EU (https://www.greeneconomycoalition.org, 2018)

MSMEs Micro Small Medium
Less/equal to INR Does not
INR 50 million- INR
Annual Turnover (GoI) 50 exceed INR
500 million
million 2.5 billion
INR 195
Less/equal to INR INR 65 million -
million - INR
Annual Turnover (World Bank) 65 INR 195
975
million million
million
Less/equal to INR INR 800
Annual Turnover (European INR 160 million-
160 million- INR 4
Commission) INR 800 million
million billion

Organizational Structure of MSMEs – India Vs EU

Indian MSME Organizational Framework:

The Indian MSME organizational framework is as per the Fig. 2.1. shared in section
2.1. and explains in detail the departments and offices of GoI that handle MSMEs.

1. Office of Development 5. National Small Industries

Commissioner (MSME) Corporation (NSIC) Ltd

2. Khadi &Village Industries 6. National Entrepreneurship

Commission (KVIC) Development Institutes

3. Mahatma Gandhi Institute for 7. National Board for Micro, Small

Rural Industrialisation (MGIRI) and Medium Enterprises (NBMSME)

4. Coir Board

44
European Union MSME Organizational Framework:
Table. 2.8. Organizational structure EU

Due to their variety, both nature and relevance, MSMEs have a critical need for help
and support from government and non-government as well as from financial institutions.
Many of their activities evolved through a certain time and are driven primarily by MSME
45
requirements, while certain government departments appear to be supply-driven. Some of
these developments have been structurally tailored to the changing needs of the industry
such as NIMMSME, NIESBUD, NSIC etc. The GoI and RBI are leading the reforms to
promote easy access to finance in the present as well as in near future.

46
3. PROBLEMS AND PROSPECTS OF MSMEs IN INDIAN TEXTILE
INDUSTRY: A CASE STUDY WITH IMAGE INDUSTRIES INDIA
PRIVATE LIMITED
3.1. Company Background
On October 1, 2015, Image Industries India Private Limited (IIIPL) was established
by D.S Exports Inc and Image Food Industries. as a joint venture. D.S Exports Inc developed
and committed the textile business to the joint venture. Image Food Industries bought a 60%
share in this newly established business group, and D.S Exports Inc continues to own this
business as a 40% shareholder.
This strategic partnership puts together two vibrant 30-year-old ideologies and
backgrounds, providing companies collective clients with a truly dynamic textile products.
IIIPL is currently a regional leader in the production, manufacturing and distribution of
textile products and services. It provides a wide variety of products in the textile industry
serving combined customers.

The group company is now headquartered in Ahmedabad, Gujarat and hires a total
of 46 employees and operates at 3 locations across India (as of October 2020). The group
follows its vision of creating a safe, comfortable and a sustainable world. Further, the group
values integrity by promising honesty and transparency, its belief in working as a team, being
customer driven, future focused and led by a commitment to protect people and environment.
The business group has varied presence throughout India. Although the company started
with its 1st location in Kolhapur, Maharashtra but gradually increased its presence through
regional small branch offices. In this thesis, we will limit the scope of study to 1 of the 5
locations of the company in India which is situated in western India i.e Ahmedabad, Gujarat.

The firm has decided to widen its global reach of export market in recent years. The
group has started exploring the options to export its products over the last couple of years to
Indonesia, Bangladesh, Sri Lanka, the UAE and Nepal and soon will be exploring countries
like Bhutan, Oman, Maldives, Myanmar, Bahrain, Saudi Arabia, Iraq, Qatar and a few
countries in Africa. The firm reported substantial growth over the past year with strong
emphasis and enhanced product portfolio for exports. With this year's market success in
mind, it is optimistic about sustained growth of the export sector in the years to come.

47
 Fig. 3.1. IIIPL FY19 business revenue (Author)
The group aims to deliver consumers the state-of-the-art products and offers strong
value for effective customer support. In addition, IIIPL will build variety of capabilities
related to user interface, product design, modelling, automation, design efficiency, project
management and information systems. These initiatives will help the company to earn an
additional revenue CAGR of 9% over FY21-22.
IIIPL plans to become a leader in the state textile sector with effective strategies and
continued innovation in emerging technologies. With new product launch, the expansion of
the platform, the repositioning of their brand, it is predicted that company CAGR volumes
will hit 18% in the next three years, helping to boost their market share from 12% to 17% in
FY2024.

3.2. Research Strategy

Scholars have always considered taking diverse methodologies into account when
carrying out a research. (Saunders; Lewis & Thornhill 2007) listed three types of widely
accepted case study approaches: exploratory, interpretive, and explanatory. An exploratory
research strategy is to try to identify "what tends to happen, to explore fresh perspectives,
and to pose inquiries to test new findings" (Robson 2002). The approach for this study calls
for expertise and due diligence to improve the capacity to track, collect knowledge, and
postulating the results. Saunders et al 2007 maintained that the key activities for the
execution of exploratory study involves the analysis of literature; an interaction with the
appropriate stakeholders; and consultations with the target population.

On the other hand, an interpretive research usually includes precise and reliable
description of incidents, individuals, or circumstances. This approach structures the problem
which is dependent on the previous study problem and which includes many parameters. An
exploratory approach relates to the research technique in which two or more parameters are
linked. The study strategy is generally followed by interpretive or exploratory analysis with
a focus on the research problem to demonstrate the correlations between the variables (Gall,

48
Gall and Borg, 2007). The author has preferred exploratory method to be used in this thesis.
This research strategy helps clarify the existing features and challenges of small and
medium-sized businesses in India. This usage of exploratory approach discusses multiple
variables that contribute to the problems and challenges.

3.3. Research Design

Experts recommend utilizing numerous techniques of analysis, including qualitative,
empirical and hybrid approaches. A qualitative analysis includes the gathering of
information by evaluation for the researcher to comprehend a peculiar condition. The
approach is descriptive in design, which implies that instances, individuals, relationships,
and incidents are presented after detailed analysis. (Hancock, Ockleford and Windridge,
2007) noted that a qualitative methodology needs direct and careful evaluation where the
subjects involved should be questioned, the focus group conversations and research reports
further need to be analysed by the researcher. Effectiveness of this research approach relies
on factors where details on the preconditions and opinions of the study should also be
provided to the researcher in order to prevent any type of prejudice. The benefit of qualitative
analysis is that it gives a greater perspective into topics of research (Hancock, Ockleford and
Windridge, 2007). The usage of a limited sample often implies reducing the analysis costs
on one hand and supplying a larger sample knowledge against the question involved in the
analysis. However, a main problem is that due to its contextual existence it may yield
inaccurate results. It also might create problems in data processing including sorting,
filtering, and data management.

A quantitative analysis method includes data collection from respondents via

surveys, evaluations, and quasi-experiments. The approach uses statistical methods to
evaluate results. The quantitative testing method (Brannen, 2005) provides accurate
information because it requires the use of a broad sample which improves the accuracy of
the findings obtained. The mixed experimental design is the third approach in this list. This
research process also known as triangulation includes the application of both quantitative
and qualitative analysis. (Alvessen & Deetz 2001) claimed that this approach is the most
successful because it seeks to remove qualitative or quantitative vulnerabilities. Researchers
such as (Amaratunga et al., 2002) have shown that the triangulation model uses more than
one approach for validation of the results.

This study used the qualitative approach to data collection, and it was planned to
carry out face-to-face interviews, but the same was not feasible because of the continued
pandemic. The approach was chosen as a possibility for the researchers to obtain full insight
49
into the perspective of the people involved. The author believes in the idea of (Zou and
Trueba, 2002) that face-to-face engagement strengthens reality of the situation. The data
collection report carried out a semi-structured interview to answer the current study
problems.

3.4. Data Collection Methods

The author performed a detailed interview with various stakeholders of the company.
The topics were based on four core aspects: the dynamics of MSMEs in the Indian textile
industry; the problems connected with MSMEs; and the measures taken by
company/government to facilitate the sustainability of MSMEs in India. The dialect used for
the conversation was Hindi because it is the national language of India. The session with the
interviewees lasted 20 to 40 mins. The conversations were then transcribed to English for
research paper. The list of questions for the interview are set out in Appendix I. In order to
maintain transparency, the author had to receive consent from the interview participants to
use the details obtained for research study. Respondents were advised that transcriptions
of comments for interpretation would be needed in the process. The author clarified the
purpose of the analysis and the knowledge gathered presentation procedure as though this
had been addressed well before interview. The researcher informed the participants that
anonymity will be taken into consideration in the process.

IIIPL Demographic Information

The table below identifies the essential characteristics of the respondents and how
they contribute to IIIPL. This variable is gender, standard of education, and years of
professional experience. Among the staff members in IIIPL, the significant proportion are
males.

Table 3.1. IIIPL participants demographic information

Total Participants 15
Gender
Male 12
Female 3
Position in IIIPL
Owner 2
Manager 3
Assistant Manager 3
Others 7
Experience
Freshers 1
2+ 4
5+ 3
10+ 7

50
 3.5. Analysis and Findings on Problems Faced by MSMEs in Textile
Industry
This is the most critical aspect of the study as it includes the data compilation,
evaluation, and assessment in attempt to achieve the definitive conclusions. The chapter
describes the findings of the research and assessment with respect to the collected data. The
results are summarized in conjunction with the study's goals and research questions,
including:

1. To analyse objectively the problems/challenges of the sustainable growth and

development of IIIPLs in India and other MSMEs in the 21st century
2. To explore how technology can impact the future potential of MSMEs in India

The research outlines how a small company faces different challenges and barriers
in India. Some of which typically involve insufficient financing resources, inadequate data
processing and records management, lack of awareness in company capital and human
resource management, underdeveloped technology, and management skills.

Insufficient Financing Resources

The biggest challenge is the lack of support in financing. The effects of small
enterprises on economic growth, innovation, and enhanced local technology have been
generally known.

Analysts in India have already shown significant underperformance as a result

of financial constraints. The condition has restricted the contributions of the sector
notwithstanding capacity advancement, economic expansion and growth potential. The
participants related this example of inadequate funding to the government's insufficiency in
terms of accountability and urged the authorities to enact steps to bolster industry. The
problem of underfunding in the field of research refers to the lack of financial support for
new companies, and lack of resources for established medium sized firms. The respondents
clarified about the situations they face in financing the company. One of the participants
described business initiation in India as being very troublesome.

“One has to do a lot in order to get started in industry, but financing is typically the
most daunting part, since it may be difficult to acquire. As a new business owner, I had to
sell a number of my assets and borrow funds from family members and acquaintances. It is
challenging to acquire a loan, but also to interact with the authorities or to have a structured
workplace.”

51
 Participants agreed that there are few, if any, establishments that one can rely on in
the region. The organizations are requiring comparable collateral to the loans, or
alternatively more than the necessary loan. The study participants observed that the capital
available to prospective borrowers does not sufficiently address the requirements of many
entrepreneurs. In the event that one wants a loan, they are expected to offer assets to secure
the loan. The biggest challenge most small businesses face is because of this regulation and
their need to sell their assets to set up a business. Also, respondents described that they are
compelled to borrow money from friends and associates before the company starts to pick
up. Most of them have therefore decided to postpone embarking on a business project until
they have saved enough to continue.

According to the previous research conducted by (Klein 2014), the venture capitalists
start off their businesses using their savings and loans from family and colleagues. In light
of the research background, the loan process is the toughest challenge to achieve. Another
interviewee:

“Since graduation from university, I had been unable to obtain a job. Since I made
the decision to open my small company, I began looking for ways to launch my own
enterprise. Since I didn't have adequate funds, I approached one of the national
banking institutions for a loan, but I was refused credit based on the fact that I did not have
financing asset or guarantees. I asked financial institutions and other private entities for the
same. However, no one offered me a chance to make my positive business plan prosperous.”

The aforementioned statements indicate that company financing in India is a highly

complicated activity. Small companies are not allowed the chance of securing loans from
banks as they are required to have leverage before being granted the loans. The study echoes
the opinion that financial problems currently faced by MSMEs in India and other developing
countries. The researchers (Gupta, Saini and Chaddha, 2018) indicated that many company
projects are prematurely closed because of lack of money. In addition, other scholars have
reported that insufficient funding of industry is correlated with the restrictive financial
regulation that focuses on collateral as a primary condition for obtaining loans from banks
(Das, 2017). Therefore, many companies are suffering from financial uncertainty. According
to the bank, individuals are expected to bid for loans collateral as a foundation to accept
loans. Many respondents during the interview argued that many government initiatives and
private organizations have failed to solve the problems facing small and medium-sized

52
enterprises, particularly in India. Therefore, it is apparent that insufficient financing and
restrictive lending procedures are threatening small business start-ups in India.

Poor File Keeping and Information Management

Ineffective records maintenance and an inadequacy in good handling of records is

challenging small and medium enterprises in India. Particularly, these two conditions have
an effect on MSMEs in the marketplace. Most of the company employees interviewed
expressed a lack of interest in documentation and records management and agreed that
only few companies kept records in a qualified manner. It was noteworthy to discover that
many of the MSMEs do not consider the value of good record keeping. One of the interview
subjects asserted the unavailability of documentation would not have a negative impact on
the IIIPL profitability. The interviewee said that the owner has experience in many of the
industries, even without going to college. He believed that collecting data would be a labour-
intensive responsibility that would negatively influence firm's ability to run the business.

The above analysis was also endorsed by another respondent.

“I might well insist on doing that, but I just don't have the time. The company is
small, so its working capital is not sufficient. If I have to keep records, shouldn't I start
small? I can accurately estimate the daily total of my cashflows even without using a book.”

These remarks demonstrate how smaller companies perceive recordkeeping less

important than bigger industries, which is a relatively common trait among small companies.
It has been argued however, that in order for MSMEs to operate successfully, there is a need
for prudent management, accurate records, and a proper record of business affairs, including
documents, finances, and store data. The role of recordkeeping in facilitating success among
small businesses is supported by the research of (Khadim and Choudhury, 2019) which
found that many businesses fail due to data inefficiency or absence. In the analysis done
during the research, documentation was lacking or non-existent. (Choudhury and Khadim,
2019) managed to assess the sufficiency of record keeping in small and medium enterprises
in India. Most of the business owners who failed kept terrible financial records. The study
explores the importance of maintaining documentation in MSME operations.

Lack of Sound Infrastructure

The research revealed that the MSMEs are hampered by the quality of facilities in
their area. Boter and Lundstrom (2005) say that process of establishing facilities for business
can either help or harm their development. The accessibility of various resources influences
53
the results or performance of the small companies. India suffers from unexamined
infrastructure challenges owing to historical negligence. The critical facilities which
supports business is reliable transportation networks, adequate power and water supply,
appropriate waste management. Participants identified the negative impacts of inadequate
infrastructure in the business sector. One of several participants clarified that there are not
as many small enterprises in India because of the weak infrastructure. Water and energy for
enterprise are major concerns; they are costly and are limited, yet most small- and medium-
sized businesses cannot manage.

Small firms need infrastructure for launching and operating a company. These
services may be given by either the company owners or government. One challenge to the
reliability of the power supply is that it is intermittent and epileptic. Many participants
claimed that they are not earning profits because the electricity supply is unsatisfactory. One
of several respondents said that.

“We rely on the power supply from the local power grid to perform tasks, but its
transmission is inconsistent. The problem is bigger when the company is based in the
countryside. We continue to use alternative forms of electricity that are otherwise costly. If
IIIPL looks at other sources of power output like solar energy, one must use a hefty initial
investment for this reason.”

Underdeveloped roads and highways have had negative impacts on industry in India.
The situation affects entire region's productivity in the manufacturing process of products
and services. Clients and prospective investors have trouble accessing companies during
monsoon season because they are often situated in inaccessible places. As such, customers
would prefer to purchase their products and services from other well established
MNC's rather than from businesses where connectivity is limited. One of the participants
offered:

“Road quality, particularly during and after rains, force customers to stay away from
business premises. Conditions on the roads and highways are often sloppy when it rains
which restricts the capacity of transportation and production capacity due to the flooding
and traffic jams. This condition causes serious losses as it affects one or several projects".

The comments from the interview subjects reinforce the assertions of Gill & Biger
(2012) that infrastructure development is a stimulus multiplier in a nation as it constitutes
the foundation on which socioeconomic development is guaranteed. MSMEs prosper when

54
a nation has appropriate facilities such as consistent electrical supply, and well-
developed highways.

Insufficient Organizational and Entrepreneurial Skills

Formal schooling is one way for people to learn industry or leadership skills.
However, one of the two owners of IIIPL were unable to complete schooling, and also could
not complete graduation. According to Carlson & Gilmore (2000), expert managers and
trained executives are critical of inspiring development and business success. Professional
workforce can help organizations achieve more creative and strategic benefits. During the
analysis, several participants clarified how their firms suffered due to inexperienced
employees.

One of several employees clarified:

"I acquired the appropriate skill set and experience through internship in this
company. Even though I attended school, I could not complete higher secondary school,
which stopped me from having a successful employment. I now assume that schooling is
really necessary for companies and jobs. If I had advanced to a diploma level, I could have
managed starting my own business."

The research showed that MSME owners lack the expertise required for
organizational governance. (Karami, Analoui and Korak Kakabadse, 2006) believed that
creative and trained employees are very critical for small and medium-sized businesses,
since they communicate closely with consumers. Skills needed include public speaking,
confident behaviour, persuasion, solution to conflicts and grievance redressal. Owners and
managers will eventually lose clients without such abilities. One respondent acknowledged
that suitable managerial qualifications are necessary:

"A few of our clients are rather arrogant and restless. Even when you deal with rude
clients you will end up losing your patience. I also found that consumers in my company
became practically hostile due to modifications in competitive prices. Today, the Indian
economy is unpredictable due to the Covid-19 scenario and rates vary every day. If you do
not persuade them of rising costs, the consumer may never come back to the market."

Many MSMEs still face the task of avoiding attrition involving staff with the
experience and expertise required by management. MSME shareholders never hire highly
qualified administrators as (Walker et al., 2007) claim. Small company managers make all
choices irrespective of existing managerial competencies; they utilize the essential
55
competencies to operate their businesses (Carson & Gilmore 2000). However, it is clear that
MSME employees with managerial expertise are often effective in their attempts. (Didonet
et al., 2012) further asserted that growth can be accomplished in organizations where
shareholders have the requisite business planning skills. The necessity for effective
organisational skills correlated with consumer loyalty was acknowledged by one of the
stakeholders. Excellence in an organization is shown by the owner's ability to attract
consumers by satisfying their expectations and maintaining sustainable relationships. This
can, though, only be accomplished with sound business management techniques.

It is necessary to remember, however, that small business owners with correct

managerial skills, technological competence and self will achieve success in their companies
(Didonet et al 2012). Yukl (2010) said that managerial expertise relates to the additional
skills required to ensure growth by the leadership team and employees of the company.
These capabilities include management, organizational abilities, determination, persuasion,
innovation and thinking skills. Yukl (2010) insists that management skills allow MSMEs to
clarify the discrepancy in business development and future strategy. Skills and
understanding can be acquired by training suggested one of the individuals who mentioned
that they have learned how to handle their company through their experience thereby
increasing sales for the company.

Increasing Competition for Indian Textile Industry in Global Market

Even though consumer goods chain has incorporated a segment of Indian clothing
suppliers into the international marketplace, the abolition of the old policy framework faced
massive challenges when it came to exploiting or boosting their fraction in the international
market. The Indian textile industry is committed to growing its global position in the face of
heavy competitiveness from Bangladesh, Sri Lanka, China, Indonesia and Vietnam with
greater efficiency, productivity improvements, modern technologies, and an effective
distribution network.

To fulfil increasing growth, both in output and efficiency, the necessity for greater
expenditure in technology and skills training has been identified throughout the sector. This
suggested that a substantial portion of the market would ultimately be controlled by rather
large (mostly medium) entities and the cash-strapped micro and small size units would not
be able to manage so. In this sense the government strategy of using clothing as a reserved
commodity has been seriously criticized (for the small sector, exclusively) (for the small
sector, exclusively).
56
 Although the potential for large scale job opportunity in the textile sector has been
commended by business owners, these initiatives have been confronted with substantial
criticism by labour and community institutions. In the post-MFA (Multi Fibre Agreement)
framework, with international buyers searching for affordable alternatives, cost cutting of
labour wages will be more commonly and quickly implemented in India. There are over 3.5
million employees in this industry who are working under adjustable and secluded service
agreement. There exists evidence that show that the basic income for many is not enough to
sustain themselves. The availability of these workers is largely unrestricted, and their casual
existence leaves their jobs ‘hidden' and makes them ineligible for socioeconomic
entitlements. The labour organizing activities must involve members of trade union leaders
as integral stakeholders. This improvement would not just bring another degree of efficiency,
but it would update the whole manufacturing chain.

Also, the influence of external bias in this field has contributed to many problems
finding a variety of bottlenecks in the export policies defined by the country. Most
manufacturer-exporters have termed the nitty-gritty of complicated procedural processes
involved in exporting a huge headache; there is increasing urgency upon moving to
simplified more flexible exporting guidelines, including advocating for a ‘single-window'
agency. There is also an issue with prolonged shipping times in Indian ports, which is at
variance with what consumers want, more importantly by clients in the United States and
Europe. The introduction of special economic zones (SEZs) by GoI in general is not yet a
streamlined operation, as it includes the complicated problem of reallocation of farmland
from the underprivileged and vulnerable at unfair terms of trade.

Application of New and Innovative Technologies

Being a rapidly growing industry, India's small and medium-sized enterprises are
exposed to some restrictions. The most prominent problems facing India are lack of adequate
financing, procuring raw goods at reasonable rate, insufficient infrastructural facilities like
electricity, water, and expressways, and scarcity of qualified personnel for production,
logistics, branding, and other aspects of industry. The most pressing challenges they're
experiencing are technology limitations.

The Indian small and medium sized companies neglect up-to-date technology and
are sometimes ignorant of the new technological services that are accessible in the sector.
Often, they neglect management ability, creative abilities, and expertise in technology-
related fields to operate their MSME. These issues are more common in remote locations. It
57
is hypothesized that Information Communication and Technology (ICT) can have a larger
impact on MSMEs because of intercontinental rivalry (China, Philippines and Indonesia).
Hence, the most urgent need is to update infrastructure. Indian MSMEs need to follow the
best global standards and consistently update their technologies to sustain sustainable
advantage. Small to medium sized companies are also confronted with the task of developing
the best expertise and strategic methodologies to combine information generated by external
actors within approaches and growth mechanisms (Kumar and Vashisht, 2009).

Reasons for initiating infrastructure enhancement.

(i) The MSMEs in developed countries tend to manufacture mediocre goods with
limited efficiency that cost less money. They appeal to lower retail outlets. As a consequence
of rapid technological development, MSMEs have trouble developing a strategic edge in the
growing international sector.

(ii) Imperfect multinational technology implementation markets are challenging to

work through as well as discovering the necessary innovation in a timely fashion is very
complicated. Procuring modern technologies includes gaining new skills, resources, and
procedures, rendering it complicated and pricey. Adopting modern innovations and selling
globally are vital to MSMEs in their modernization activities. Small and medium scale
companies need to continue utilizing the new technology in addition to high quality
performance and competitiveness in the national and international marketplace. The modern
principles of cloud computing would make smaller businesses use modern technology,
primarily leveraging on cloud computing. Such agreements free up vital capital of micro-
enterprises, which contribute to further capitalizing on the most important operations.

(iii) Owing to a lack of accessibility and funding in future technologies, MSMEs are
unable to perform nationally and globally. New technologies are central to the sustainability
in the MSME market. The Indian MSMEs face problems surrounding technological
implementation and level of services.

(iv) IT reforms: The government offers standards and guidelines which are developed
to regulate industry. Firms adapt to respond to different initiatives to best meet the needs.
Business reforms and company laws are driven by the sustainability of a sector. This
collected set of regulatory requirements should be approved by the stakeholders. The
exponential advancement of technology allows companies to innovate. Technology issues
for small companies can be managed effectively by IT experts. They can introduce modern

58
innovations such as cloud infrastructure to boost software production and digital
technologies other.

(v) Reliance on modern technology: Ensuring that workers will perform efficiently
and effectively, and the reliability of the IT system infrastructure are major problems for
small and medium businesses. Technologies and IT devices can provide and encourage
successful measures to help workers be productive. Cloud infrastructure and IT Controlled
Applications have become immensely beneficial to businesses. Few companies often
consider outsourcing technology services.

(vi) Not continuing to keep up with technical advancements: Since technology is

quickly evolving, companies must keep track with its pace. Procuring a new mobile,
computer, server, and a few other gadgets for the company might cost the businesses a bit.
It is also quite costly to sign up to Software-as-a-Service services that can be necessary for
many features like bookkeeping, client experience management, billing etc. Because of
funding limitations, MSMEs can't update technologies regularly, thus infrastructure
financial planning is one of the main issues for MSME.

The opportunity to update technologies is really critical because it allows

organizations to remain successful because it enables workers to function more and more
effectively. Budgeting for infrastructure is necessary to ensure the technologies are
constantly updated. Nevertheless, MSMEs may struggle to take benefit of modernization if
any external obstacles remain such as lack of technological connectivity, inefficient
infrastructure, or expertise to develop the product performance, incapability to change the
tariff rates, or relatively higher manufacturing costs.

Globalization contributes to free flow through boundaries in products and goods.

Exorbitant protective tariffs levied by purchasing countries can render these local companies
unable to maintain a competitive advantage. While some MSMEs manufacturing textile
items face intense rivalry with the competitors manufacturing various fabrics, many
continued to produce textile goods. The competitive firm can secure a bigger market position
by better technologies and greater numbers of qualified employees. Indian micro-enterprises
hence lose to foreign micro-firms in such competitive settings.

To encourage the implementation of technologies by small and medium enterprises,

it is necessary for the government, corporate companies, and research institutes to
collaborate collectively to build the small and medium enterprise's an innovative information

59
exchange framework. Various cost-reducing initiatives are being applied for MSMEs. All
organisations should therefore recognize that technology is no longer a privilege but a
requirement.

60
 CONCLUSIONS

This section summarizes the conclusions of the report, which is supported by material
developed for particular audiences. It summarizes the study and specifies what needs to be
reformed in Indian MSMEs. The section deconstructs ways in which MSMEs in India can
boost their competitiveness and development as well as reconfirms the achievement of set
goals and objectives of the thesis.

Thesis objectives

Based on the research done it was possible to achieve all the set objectives,
conclusions for each of the objectives that were set are as below:

Factors affecting the efficiency of MSMEs

1. It was assessed that the companies remained disorganized and unprofessional in their
management activities, with poor levels of knowledge regarding legislative, legal,
and governmental procedures.
2. The results of the research endorse the claims of (Ishak et al., 2012) who asserted
that financial planning is still one of the key challenges facing business owners. It
was found that inadequate infrastructure hampers business expansion.

3. Indian MSMEs are informal with hierarchical operations and are quite labour
intensive. The research also identified that MSMEs do not properly capture vital
information and have poor organizational skills. Most micro-enterprise owners do
not plan for data collection and are often not able to do it as per standards. Up-to-
date datasets are crucial to the decision-making process in a successful enterprise.

4. Though great merit can be seen in identifying the relative upsides and downsides of
participation in a steadfast global economy, it is equitably necessary to take account
of the ground requirements that signals a weak and insufficient technology
framework for MSMEs; this condition is especially much bad in remote areas as also
in smaller cities, where a large fraction of MSMEs work.

5. Among the most important problems for small companies, the shortage of sufficient
and adequately charged electricity remains problematic for the growth and
sustainability of MSMEs. Moreover, a reluctance to extend transport systems has
hampered the growth of MSMEs in a complex manner.

61
 6. With complacency regarding the problem in jobs generation and ignorance of small
- sized enterprises, the capacity of the industry might well be hampered.

7. The fact that lack of marketing and strategic expertise is prevalent in India was also
noticed. Many of the MSMEs do not possess the expertise required to operate a
profitable company, which significantly leads to business deterioration. (Didonet et
al, 2012) had also observed that many MSMEs are formed on their owners'
knowledge of technical and business skills.

Role of MSMEs to Indian economy

1. MSMEs as main economic engines, have fostered a relationship between public and
corporate sectors. And hence the development and enhancement of MSMEs is crucial
to countries like India which seeks to develop a self – reliant economy.

2. MSMEs have overall contributed to a significant proportion of the consumer size,

overall revenue, jobs, and income per capita.

3. The traditional function of MSMEs in generating sufficient prospects of work for the
teeming millions has come to hold crucial role as a form of business excellence and
emerging prominent global firms.

4. Interviews with IIIPL have shown how MSMEs lead to improved quality of life,
creating jobs, and eliminating poverty by building national and international equity.

Growth trends of MSME

1. Based on the research, admittedly, the industry has not contributed as much as it
should in spurring the economic growth; nor has it played a large part in promoting
growth in the recent years as compared to the industry’s performance in the past.

2. The results indicate that most of the small and medium sized businesses in India have
ethnic disparity. In our research, most of the employees in the MSME sector
including our case company IIIPL were males.

3. Companies around the globe are experiencing a major transformation due to the
many pressures of internationalisation and the challenges of a changing global
market setting amid this COVID-19 pandemic.

4. Indian MSMEs are aiming forward to a modern and wider business domain, with its
various different strengths of knowledge and experience, raw materials and domestic

62
 market, collaborating with prospective players both inside and around India would
be a rewarding opportunity.

Tracing out the sources of finance

1. Government authorized financial institutions have launched numerous national and

private agencies in order to reinforce the growth direction of small and medium-sized
enterprises.

2. Primary financing is still a crucial challenge for starting and stabilizing an

organization. Banks and other financial organizations necessitate leverage in order
to provide credit, even on a limited scale.

3. It has been observed that proactive finance platforms that are suitable for small and
medium enterprises are not accessible on large scale; this makes borrowing funds for
smaller businesses increasingly difficult.

Achieving the main goal of thesis

The main aim of the paper was to examine the problems of MSMEs particularly in
Indian textile industry and trace out the factors that influence the performance of small and
medium scale enterprises in India, this was successfully achieved by completing all the
research tasks and answering all the research questions and further listing out the key
problems as below:

Research question 1: What are the main challenges faced by MSMEs?

1. Despite common perception, it was not inaccessibility to funding or financing that
was the most important challenge confronting small-medium enterprises in India.
The most important challenge in India is the shortage of appropriate management
skills and failure to implement new technologies.

2. Access to funding is still an essential consideration for business growth, but it is not
the only essential aspect. The most pressing problems confronting MSMEs in India
are the reasons linked to the economy, corruption, weak legislation, shortage of
finances, lack of technology, uneven competition, and scarcity of quality raw
materials.

3. MSMEs suffer elevated levels of mortality in India during the first 5 years of its
inception. The explanation behind the condition is attributed to founding members
missing the direction and main objective what has to be done. They prefer to imitate

63
 the strategies and offerings of established companies but neglect meticulous
planning.

4. Other weaknesses include lack of leadership experience, lack of team-playing

capacity, ineffective coordination, below standard accounting practices, lousy client
management, poor decision making, and the failure to make on time assessments.
Lot of small and medium-sized companies do not have growth strategies that enable
them to leverage their current resources and abilities.

5. India as a country has faced stiff competition from other developing countries,
despite the liberalization of trade barriers. Small and medium sized businesses in
Europe, and the U.S. have ready access to reliable energy, electricity, transportation
systems, modern communications and IT services, and good governance. If Indian
policymakers struggle to reform existing initiatives, MSMEs might collapse due to
fierce competition with other countries.

Research question 2: How is Indian government supporting the MSMEs to enhance their
sustainable performance?

1. GoI through financial institutions like SIDBI, EXIM, NCDC, RRBs, SFCs and
NABARD has launched numerous national and private agencies in order to reinforce
the sustainable growth direction of small and medium-sized enterprises.

2. GoI has been promoting training institutes, educational institutions, and other
agencies and seeks to achieve its specified goals through a broad variety of activities,
from teaching, advising, study and research, to expansion of information resources.
By doing this, it plans to address the most important challenge faced by MSMEs
which is the shortage of appropriate management skills and failure to implement new
technologies.
3. On supporting MSMEs on financial front, one of the important initiatives rolled out
by GoI for MSMEs with loan applications is PSBLoansIn59Minutes initiative. It is
an internet-based platform that allows MSME loans in particular to be approved in
59 minutes from banking institutions.

64
Research question 3: How emerging technologies can help to maintain sustainable
performance of MSMEs in future?
1. Adopting modern innovations and selling globally are vital to MSMEs in their
modernization activities. Small and medium scale companies need to continue
utilizing the new technology that can enhance growth on an international level.
2. Technologies and IT devices can provide and encourage successful measures to help
workers be productive. Cloud infrastructure and IT Controlled Applications have
become immensely beneficial to businesses. Few companies often consider
outsourcing technology services.
3. Procuring a new mobile, computer, server, and a few other gadgets for the company
might cost the businesses a bit but can help companies keep track with its pace.
Although costly, Software-as-a-Service services can be necessary for many features
like bookkeeping, client experience management, billing etc.

RECOMMENDATIONS

One of the primary tasks of the thesis was to provide detailed recommendations and
based on the empirical research, the author has divided recommendations into two parts, the
first set of recommendations have been given to the GoI and the second set of
recommendations are exclusively for the MSMEs in the textile industry. As the business
owners claim, this industry provides prospects for huge opportunities in suburban and semi-
urban parts of the country that can not only boost the economy but also increase employment
prospects in the near future despite the ongoing pandemic.

Recommendations for Government of India

Based on the results of the research, it is evident that small and medium-sized
enterprises in India would be able to develop and be profitable if they concentrate on the
following points.

1. Various challenges affecting MSMEs in India can be deemed hydra-headed,

therefore, this research proposes a multi-dimensional methodology to design policies
which will also involve various stakeholders, such as government sector financial
institutions, financial regulators, policy makers, business owners, officials of
MSMEs, investors, and intergovernmental institutions.

2. The government must be in charge of fostering an ecosystem that makes the

expenditure on even a very large scale. A two-pronged strategy should be introduced

65
 where both the GoI and MSMEs micro-businesses continue making attempts to
change the business atmosphere. An innovation-friendly climate is required to
provide young graduates with new concepts, who can then elect to be self-employed.

3. The research recommends both the GoI and the MSMEs to boost both market
development and productivity.

4. GoI should allow amendments in the education sector to ensure it best serves the
interests of learners and better corresponds to the needs of society. The government
must prioritize realistic technologies and new infrastructure in order to promote the
entrepreneurial potential in the population.

5. A policy reform in the schooling system can progressively be introduced from

elementary studies through to university that should concentrate on the effect of
digital transformation in the MSME sector. Topics on Innovative business and
technical studies must be translated in their native language, with the intention of
increasing their comprehension of the principles by the students and pupils. This
mechanism offers the possibility for citizens to truly reconcile the new principles up
with their own ideas.

6. The Indian government must also adjust its conceptual model to consider a wider set
of attributes including integrity, business acumen, dedication and innovation aimed
at generating job prospects and enhancing managerial skills. Incorporating political
science and anti-corruption studies into higher secondary education together with
technical and social entrepreneurship studies will offer a more beneficial result.

7. The Government should provide knowledge and resources about how to obtain
required resources, new technologies, industry prospects, good quality raw materials,
plant and equipment, services, and products and services. The establishment of the
Business Networking Centres (BNCs) and Market Intelligence Centres (MICs) will
provide required consulting services for the micro, small/medium-sized enterprises
(MSMEs).

8. To promote further financing in the small and medium-sized businesses, commercial

banks need to step up with innovative funding models that function for these firms.
By becoming business partners of selected MSMEs, such firms will have more
chances to get loans and grants, which are usually less costly than bank loans.

66
Recommendation for MSMEs in Textile Industry:
The suggestions made were:

1. They must identify alternatives to support people overcome their problems such as
shortage of technical expertise and awareness. They need to hire a diverse staff of
varying skills to increase overall performance. The business owners should aim to
develop new approaches to deliver a competitive offering. The method will include
leveraging the local resources at competitive costs and converting them into good
quality goods.

2. Indian apparel market must strive towards elevated levels of innovation and increase
the potential of established specialist organizations for education on textile design,
which have been outlined during active discussions.

3. MSMEs can work together to build credit lines and round-table discussions that
minimize the lending rates offered to younger borrowers.

4. Management teams of small and midsize companies must consider their position in
market setting. The managers should be able to productively consider cost effectiveness,
cost-cutting benefits, and the possibility of targeting potential customers.

5. Effective teamwork is a tool that can encourage business the MSME owners
marketing comparable goods can work as a team to deter some sort of market
discrimination that arises by their customers. It is important that company leaders are
equipped to resolve urgent problems and look for innovative solutions to enhance
business processes.

6. It is important to formulate plans that help facilitate globally recognised MSME

goods and services. The managers can use the advertising outlets to promote goods and
create publicity for a campaign. In addition, timing and buying of products may be
accelerated and enhanced by the usage of skilled personnel and in-house coaching of
employees. The small and medium-sized enterprises must be motivated to keep archives
and analyse consumer behaviour on a daily basis.

7. Strong focus should be put on supplier distinction focused on specific design works,
handicrafts, and manufacturing for specialty customers both at home and
internationally. Increased presence on the foreign market has also shown the value of

67
bringing overall prices down, reliable product consistency, periodic seasonal
adjustments in designs and timeliness in customer orders.

8. MSMEs should decide on inclusion of cash sales strategies as this will increase
revenue; MSMEs could train to sell products and services on a cash basis rather than on
credit. This strategy increases cash flow and enables higher wholesale mark-ups more
favourable.

68
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 Appendix I
Interview Questions

A. Profile of Interviewee

1. Name: ………………………………………………………………………………..
2. Gender: ………………………………………………………………………………
3. Job position: …………………………………………………………………………
4. Experience within IIIPL: …………………………………………………………….
5. Total industry experience: …………………………………………………………

B. Challenges faced within IIIPL and textile industry in general

6. What big issues are impacting the SMEs in India?

7. Does the government facilitate small enterprises in your region?
8. How does small entrepreneurs access financing? Is your enterprise financially stable?
9. What does the rise of small business enterprises in India mean? What effects do these
developments will have?
10. How do you personally believe the government should deal with the expansion of
small-medium businesses in the 21st century?
11. What measures can SMEs like IIIPL take as a private company to make
themselves more globally competitive?

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