Gujarat Industrial Development Corporation (GIDC) has geared its efforts to build an industry ecosystem where both small and large companies can thrive together. It has concentrated mainly on chemical and engineering sectors and is developing special zones for them.

GIDC has reserved 1,000 hectares of land from its 4,000-hectare Dahej Special Economic Zone industrial estate. This reservation is for SMEs in chemical and engineering industries. SMEs in chemical zone will be given 350-400 hectares and in engineering units will be allotted 600-650 hectares. The idea is to make the zone self-sufficient whereby the wastes of smaller units become raw materials for larger companies and vise versa. Hence, the production of products and by-products can become a continuous process.

Arvind Agrawal, GIDC managing director, says “GIDC will give preference to those SMEs from chemical and engineering sectors which have forward and backward linkages with large enterprises already present in the estate in Dahej. The idea is to create an environment where hardly anything gets wasted, and everything gets utilised within the industrial fraternity at Dahej.”

Gujarat State Fertiliser Corporation (GSFC), Gujarat Alkalis and Chemicals Limited (GACL), and Gujarat Narmada Valley Fertiliser Corporation (GNFC) have been asked to work in tandem with GIDC. The idea is to promote the establishment of SMEs nearby plants of these three companies. This will help both small and large companies to reap the benefits of using each other’s by-products and raw materials for making their own products.

Tags: chemical and engineering sectors, Dahej Special Economic Zone, ecosystem, Gujarat Industrial Development Corporation, industry, larger companies, Narmada Valley Fertiliser, raw materials, small and large companies, smaller units
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For advanced economies SMBs are the engines of growth. It is more relevant with the adoption of IT services by SMBs. It is difficult to compete with Fortune 500 companies if the company is a small IT service provider. But SMBs make things happening and small companies can work with them to remain profitable.

Guidelines on how to successfully conduct IT service business with SMBs.

Look for Smaller projects

When working with SMBs look for smaller and longer projects rather than big projects and short engagements. There is no need to do a large fixed cost project with SMBs. Instead break up the big projects into smaller assignments. Take one project at a time, deploy it, finish it, get payment and then go for the next project.

Change Management

Changes are inevitable for any project and while working with SMBs you have to be comfortable with rapid changes. It is not possible to nickel-and-dime small change requests. But then it is possible to convince the customer of cost and time implications related to a change. The principle of ‘collaboration over contract’ can work good. It is also good practice to record small changes even if you are not charging the customer. What is important is to be flexible and not to raise hue-and-cry for every change request. But at the same it is vital to make the customer understand that changes cost money and time. So, working in short sprints and not making major changes during the sprint can be a good method to execute projects.

Provide solutions Iteratively

While executing a project maintain constant contacts with the client and develop software iteratively. The iteration or sprint should last for 2 to 3 weeks. At the end of an iteration spell deliver working software for the end user and get their feedback. Never impose solutions to clients as they are domain experts though you may be an IT expert.

Hiring developers

While working with SMBs you have to be very judgmental about hiring developers. Hiring developers from big organization may not work as they work in silo environments with analysts documenting requirements, architects designing solutions, and QA team validating results.

In SMBs developers have a greater role to play than just making codes. Direct customer interaction, being a solution architect, business analyst and usability experts are expected from developers.

Reduce Total Cost of Ownership

It is important to make short term sacrifices in order to make long term gains. Trust of clients deepens and it becomes possible to do continuous business by not becoming concerned about immediate cost to the company but concentrating on long term savings. For example, purchasing a commercial database may be more expensive for a company due to the license costs and other future costs involved as the system grows. So, clients need to be educated about the pros and cons of commercial database. Open source can be a good alternative.

Mobile Phone Access

Dependence on Application Programming Interfaces (APIs) is essential as most SMB owners and employers remain on a move and they make use of mobile phones and desktop browsers to receive alerts, realtime data and reports. This helps them to take quick decisions.

Cloud computing Dependence

Investing in capital items like servers and firewalls may not be all that fruitful for SMBs and startups. It is an expensive proposition as they have to employ people for running it effectively. Instead signing with cloud computing service providers may be much more beneficial as they offer a pay-as- you-go-model. There is zero upfront capital investment and there is the option to scale higher with the business development.

Open Systems

To build a subsystem can be necessary for making an integrated system. Software as a Service (SaaS) application that provide project management, document management, timesheets, expense tracking, accounting, and payroll services can be ideal. This will help speed up the system development process and help to create integrated system experience for your client.

Tags: APIs, Change Management, Cloud computing Dependence, collaboration over contract, constant contacts with client, engines of growth, Hiring developers, Mobile Phone Access, Open Systems, small companies, Smaller projects, SMBs
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HSBC’s Small Business Confidence monitor surveyed the economic growth parameter and has made it evident that 69 % of SMEs in India have a stable economic outlook. The HSBC gauges the confidence level on parameters like capital investment plans, economic growth and recruitment.

“Our research indicates confidence levels in the emerging markets are stable. SMEs in India are not changing their business strategy in the next six months, despite the global uncertainty. This bodes well for the Indian economy,” says Dheeraj Dikshit, SME Business Head, HSBC India.

The latest wave is a survey conducted on 6,300 SMEs whose annual sales turnover is US $10m. These SMEs are spread across 21 markets such as Middle East, Asia, North America, Latin America and Europe.

Confidence levels of Global markets

Confidence levels of developed markets increased 9 points from 106 to 115. Confidence level of the entire globe increased from 111 to 118. The emerging markets showed an index of 122 that is seven points higher in comparison to developed markets that showed 115.

Positive confidence levels in Asian Markets

Since the financial crisis, Asian markets have shown signs of positivity for the first time, according to the survey. The positive waves are in terms of their economic growth, recruitment and CAPEX plans. Among the most confident countries surveyed, Vietnam ranks first with 164 index mark, Singapore (136), mainland China (123) and India (121).

Tags: Asian Markets, CAPEX plans, capital investment plans, economic growth, Global markets, HSBC, recruitment, Small Business, SME, SME Business Head
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Seeing the capability of SME in executing projects, the Union ministry is considering reserving 10 percent of IT enabled projects for Small and Medium Enterprises (SMEs). The proposal is being circulated among the state governments to get a better response and to receive recommendations from stake holders. It is expected that the companies will get direct orders and even if the projects are given to big companies there will be provision for outsourcing 10 percent of the orders to SMEs.

The focus of the IT policy 2010-15 is on start up companies, IT products, SMEs and women entrepreneurs. Promoting women’s participation in the ICT sector is also its objective. More e-governance projects in local languages are also on its agenda.

At present there are 1,200-odd IT and IT-enabled Service (ITeS) companies. Out of these, 70-75 percent belongs to the SME category earning annual revenues not exceeding Rs 100 crores. A company is considered a start up if its annual return is between 50 lakh and 10 crore, with 50 employees and operating for less than five years.

The government has made provisions to grant incentives in the form of 25 per cent power subsidy to start-up companies, 25 percent reimbursement for premises rental expenses and recruitment assistance of 2.5 lakh per 50 persons recruited.

L Suresh, president IT and IT-enabled Service Industry Association of Andhra Pradesh (ITsAP) says, “Usually, SMEs are good at executing projects. But because of their size, they are disqualified from participating in large projects. Earmarking about 10 per cent of e-governance tenders for SMEs will ensure that companies will have a level playing field.”

To market intelligence, prepare research reports & analysis for SMEs, understand new trends in technology, the Andhra Pradesh government will create libraries with support from NASSCOM, IT Exporters Association, Software Technology Parks of India, ITsAP and Institute of Electronic Governance. For the libraries, Rs 10 lakh fund will be facilitated so that the SME sector can grow. In order to evaluate the strengths of SMEs, the government shall tie up with business analyst firms. This will enable smaller ICTs to establish linkages with bigger firms and help SMEs to find international markets.

Andhra Pradesh has set a target to raise its export value to Rs 70,000 crore by 2015. The current value is 32,000 crore. The state provided 2.51 lakh employment in 2009. New employment for 125,000 people is being targeted. IT sector’s export is 50 percent of the total exports from other sectors in the state.

Tags: e-governance, ITsAP, NASSCOM, SMEs, stake holders, start up companies, state governments, Union ministry, women entrepreneurs
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Small and medium enterprises (SME) fund is planned to be floated in next 1 ½ years with an initial corpus of Rs 100 crore by SBI Capital Markets Ltd. SBI has many SME clients who would be benefitted from this plan.

So far, SMEs of the country did not witness much support from private equity (PE) players because of a low capital base. Rajeev Krishnan, executive Vice President, SBI Capital Markets, says “The SME fund will be used to rope in private equity investment in SME, which otherwise is facing dearth of capital for furthering its business growth.”

FPOs (follow-on public offers) and financial services are also being guaranteed by SBI Capital Markets Ltd in this fiscal. This will definitely attract revenue growth as the PE funds are utilised to invest in the company’s growth phase. Krishnan says, “We expect to witness a 60 per cent rise in our revenue to Rs 1000 crore by end of this fiscal on the back of higher earnings from advisory services.”

Opportunity in the advisory space is further magnified by the central government’s disinvestment programme in public enterprises. $9 billion worth of proceeds is likely to be generated in the current financial year. A larger role is anticipated in ‘mergers and acquisitions’ from investment banks as it is going to leverage SBI’s banking relationship with other Indian corporates.

SBI caps in the last financial year had made loan arrangements of Rs 187,000 crore. In 2009, SBI caps concentrated in five major equity issues that generated Rs 136.5 billion. Mega issues like National Hydro Power Corporation (NHPC) Ltd raised $1.25 billion and Adani Power raised $630 million from the capital market.

Tags: financial services, investment banks, NHPC, SBI Capital, SBI Capital Markets Ltd, SBI’s banking relationship, SME
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Under the Prime Minister’s Employment Generation Programme (PMEGP), the government asked banks to disburse loans so as to meet its target of financing 59,714 projects in the current fiscal year. The margin money assistance is Rs 836 crore and this should help in generation of employment for 5.97 lakh persons.

Since the PMEGP launch in 2008, one lakh projects have been sanctioned and 10 lakh people employed. Out of the total loans sanctions, 15 percent is for SC, 7.5 per cent for ST, 27 per cent for OBCs, 5 percent for minorities and 30 percent for women. The general category entrepreneurs can find a subsidy of 15 percent and 25 percent on the project cost. The weaker sections of society can avail 25 per cent and 35 per cent subsidy.

Dinsha Patel, minister of state for MSME, has urged CMD of banks to issue policy circulars to all financing branches so as to fulfill the allocated targets. He said that the disbursements this year has been just 10 percent of the target. What is important now is that Khadi and Village Industries Commission (KVIC) should reach every village. The KVIC is the nodal agency for the implementation of PMEGP .

The Union Bank of India and KVIC signed an agreement for a ‘one bank, one nodal branch’ formula. This concept shall enable a single nodal branch to be used to coordinate with all other branches of the bank spread in the entire country.

Tags: Banks, financing branches, Khadi and Village Industries Commission (KVIC), MSMEs, MSMEs under PMEGP, one bank & one nodal branch formula, Union Bank of India
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The Intellectual Property Rights (IPR) of SMEs are not always fully understood and harnessed. Realizing this challenge the Punjab State Council for Science & Technology (PSCST) has taken the initiative to conduct training and sensitization programmes of industry clusters to understand various aspects of IPR and its potential.

The PSCST has already identified 18 MSME clusters to create awareness about IP rights. The council will also inform others about MSMEs that have been successful in leveraging their IPRs. The central Government has consented to the plan under the ‘Intellectual Property Facilitation Centre’ (IPFC) programme. The Chandigarh IPFC cell provides legal and technical assistance in patent application filing, registration of trademarks, design and copyrights.

With the objective to protect MSMEs rights and also avoid infringing others IPRs, the IPFC programme is slated to begin with three MSME clusters – farm equipments (at Moga), bathroom & sanitary fittings (at Mohali) and bicycle parts manufacturers (Ludhiana). The clusters identified in Punjab are hosiery (Amritsar and Ludhiana), switchboards (Phagwara), pipe fittings (Jalandhar) and sports goods (Jalandhar — Basti Nau). PSCST shall identify specific IPR needs of such clusters.

Neelima Jerath, PSCST executive director said “MSMEs are often the driving force behind innovations. Their innovative and creative capacity, however, is not always fully exploited, as many SMEs are not aware of the intellectual property system or the protection it can provide for their inventions, brands and designs. In order to protect their innovations from infringement, we have identified 18 clusters across the state for creating IPR-related awareness and sensitisation under the IPFC programme.”

Manufacturers should become aware of their IPRs and display their unique technologies in fairs and exhibitions so that they are noticed by big foreign manufacturers.

This article was submitted by Rohit Arora, co-founder of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to
info@biz2credit.com

Tags: awareness, exhibitions, Manufacturers, programmes, Property, PSCST, trademarks
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The scope of capital subsidy scheme under the MSME policy 2008, has been extended by the Tamil Nadu government. It proposes to disburse Rs 100 crores to micro, small and medium enterprises (MSMEs) along with services companies.

A cumulative capital of Rs 60 crore has been issued in last four years. Though there is demand for subsidies but availed amount is low. The reason is lack of awareness among MSMEs across the state. Awareness remains a big problem and it will be addressed soon through industry chambers & associations oriented ‘awareness programmes’.

P Selvam, additional chief secretary, MSME department Tamil Nadu, comments that the state government is encouraging MSME entrepreneurship in the state. He disclosed that subsidies disbursement is Rs. 35.16 lakhs (to 32 units) in 2006-07, Rs 4.16 crore (to 32 units) in 2007-08, 14.67 crore (to 476 units) in 2008-09 and Rs 40 crore (to 1,000 units) in 2009-10. He quoted  that “To encourage the sector, the government has proposed a target of Rs 100 crore as subsidies and decided to make services companies also eligible.”

Tamil Nadu has 4.4 million persons employed by 631,609 registered MSMEs. The MSMEs have a net investment of Rs. 26,136 crore and manufactures more than 8,000 products.

This article was submitted by Rohit Arora, co-founder of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to
info@biz2credit.com

Tags: associations, awareness programmes, cumulative, Entrepreneurship, manufactures, MSME policy, services companies, subsidies
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The credit policy announced by Reserve Bank of India (RBI) has direct and indirect effects on MSMEs. They are meant for stepping up credit flow to small and medium enterprises and all public sector banks need to implement them to help the credit become accessible.

• The RBI has decided to make it compulsory for banks not to ask for any collateral for loans amounting up-to Rs.10 lakh when the loan is borrowed by Micro and Small Enterprises. (MSMEs). This will help in the growth of entrepreneurship that would eventually result in the launch of cheaper and better products in the market.

• RBI is forming empowered committees at its regional offices with RBI’s regional director as Chairman. This committee will review the progress in MSME financing and rehabilitate SME and SSI that are in a poor state. The committee shall also coordinate with other banks, financial institutions and state governments to improve bottlenecks and mandate smooth flow of credit to MSME sector. The regional committees shall also be instrumental in forming similar committees in district levels.

• The policy ensures specialized SME entrepreneurs to have easy access to credit and also equips bank personnel to gain required expertise. Re-designation of the existing SSI branches to SME branches are also on the anvil. This will surely lead to rise in competition among banks to lend money to SMEs. This will also help them to be better  equipped and flexible to extend finance and other services to SMEs.

• According to the circular issued by RBI on lending to SSI, vide circular RPCD.PLNFS.BC.No.03/06.02.31/2005-06 dated July 1, 2005, makes it mandatory of banks to accept loan applications of SSI units and also states a limit up to which banks shall be obliged to offer collateral-free loans. Based on these guidelines, more liberal policies for granting of loans to MSMEs can be formulated in-comparison to the existing policies. Till the Board of Banks formulates such policies, the current instructions of Reserve Bank are applicable to granting of loans for the SME sector.

RBI credit policy for MSMEs has opened up the scope for SMEs to expand and grow. The policies also provide an opportunity to nation to harness its latent strength in the form of MSMEs. The new guidelines are a guarantee to see the birth of new entrepreneurs.

This article was submitted by Rohit Arora, co-founder of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to
info@biz2credit.com

Tags: accessible, credit, credit flow, Micro and Small Enterprises, MSMEs, Reserve Bank of India, small and medium enterprises, stepping up
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With economies of Europe and US are hard-hit by recession, SMEs in India has also witnessed decline in the last three quarters of 2008. The strong linkage with agricultural sector is one reason for micro, small and medium enterprises’’ (MSMEs) economic recession. But it would be wrong to conclude that this sector will not withstand the crisis as Indian SMEs are resilient lot.

There are sectors and business places in India that are hard-hit and are struggling in the aftermath of the recession.

1. Decline in IT and ITeS sectors (IT enabled services) have curved the graph of negative consequences on industries like Tourism and consumer durables.
2. Moradabad, famous in the entire world for its handicraft industry is now witnessing closing of its workshops due to price rise of raw materials like brass. The artisans are left unemployed.
3. Kanpur, the Manchester of India, is neglected, has a poor infrastructure and its industries are closing down.
4. The famous Tussar silk fabric of Bhagalpur, exported to places like US, Europe, West Asia and Japan, is jeopardized by competition from new silk manufacturing centres like Bangalore and Ahmedabad. Lack of credit and power shortage has added to the decline of this big trade centre of Eastern India.
5. Tirupur has serious infrastructural constraints, despite Union and State government’s support in the past. For past several months, the city is struggling with power cuts and poor transport system.

Neo Liberal policy

Neo liberal policies offer solutions to problems faced by SMEs. The policies offer reduction in taxes, credit guarantee and related measures.

The efficacy of such policies can be analyzed from the impacts on SMEs. The impact can be categorized as under:-

1. Shadow entrepreneurship where an individual is left with no other choice but to become an entrepreneur.
2. Pseudo entrepreneurship meaning the start up and sustenance of entrepreneurs who are lacking in the key elements of entrepreneurship like value creation and business ethics.

Recessionary Trend

The symptoms of recessionary trend spread from financial sector to real sector. Its effects on MSMEs follow this pattern. Recessionary trend shows up in the economy in terms of effects like ‘Sentiment’ and ‘Expenditure’. The sentiment effect results from signals received from financial system. It may be failure of stock markets and crisis in leading sectors. In such a case, financial institutions become more cautious about their lending policies. The expenditure effect is a curb on expenditure by MSMEs as business orders start reducing due to recession. Postponement of payments to creditors and workforce also become common due to the expenditure effect.

Less Protection

Initiative taken to improve labor laws is half-way inspite of efforts to liberalise labor laws. Paradigms like ‘flexible specialisation’ and ‘global value chains’ as found in international level are absent in MSME sector in India as it functions as ‘Sweat shops’. Then ‘blanket freedom’ in some sectors is another key problem that has hidden the policy advantages related to MSMEs.

The interests of MSME sector is jeopardized by distortions in public policy. However, attempts are being made to bring about improvements. For example, the ‘MSME cluster development programme,’ enhances individual firm’s competitiveness on a ‘collective efficiency’ mode. The advantage of the Indian manufacturing sector is its highly distributed character. So, because of its distinct economics and sociology, any recessionary shock does not straightway percolate in the sector. To provides resistance to economic downturns and toendure upon this situation, public policy needs to amplify from its current neo-liberal approach. When policies are broad-based, it will be possible to distribute the loads of a recession in the entire economy.

Tags: blanket freedom, business, economies, financial system, global value chains, industry, linkage with agricultural sector, MSMEs, Neo Liberal policy, raw materials, Recessionary Trend
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