1. Notes Module 3Bangalore UniversitySemester IIISmall and Medium Enterprises (SME) (Module 3)Q. Explain the Concept of Small and Medium Enterprises (SME) (2 marks)Small and Medium Enterprises (SME) or Small and Medium Businesses (SMBs), are companies whoseheadcount or turnover falls below certain limits. The abbreviation SME occurs commonly in theEuropean Union and in international organizations, such as the World Bank, the United Nations, and theWTO. The term small and medium businesses or SMBs is predominantly used in the U.S.A.EU Member States traditionally have their own definition of what constitutes an SME, for example, thetraditional definition in Germany had a limit of 250 employees, while in Belgium it could have been 100.But now the EU has started to standardize the concept. Its current definition categorizes companies withfewer than 10 employees as "micro", those with fewer than 50 employees as "small", and those withfewer than 250 as "medium". By contrast, in the United States, when small business is defined by thenumber of employees, it often refers to those with fewer than 100 employees, while medium-sizedbusiness often refers to those with fewer than 500 employees.Q. How did the Ministry of MSMED come into existence?(8 marks)In India, the SME is generally referred to as small Scale industry including the tiny sector and the SmallScale Services and Business Enterprises (SSSBE). SMEs have always represented the model of socio economic policies of the Government of India, whichemphasized judicious use of foreign exchange for import of capital goods and inputs; labor intensivemode of production, employment generation; non-concentration and diffusion of economic power inthe hands of a few (as in the case of the big business houses); discouraging monopolies practices ofproduction and marketing; and finally effective contribution to foreign exchange earnings of the nationwith low import-intensive operations.Recognizing the importance and contribution of small scale industry, the government under notificationdated 9th May 2007 has amended the Government of India (Allocation of Business) Rules, 1961.Pursuant to this amendment, Ministry of Agro and Rural Industries (Krishi Evam Gramin UdyogMantralaya) and Ministry of Small Scale Industries (Laghu Udyog Mantralaya) have been merged into asingle Ministry, namely, Ministry of Micro, Small and Medium Enterprises (Sukshma Laghu AurMadhyam Udyam Mantralaya).

2. Now all the activity related to small scale industry, are directed by this Ministry.Q. Explain the differentiations in SMBs (8 marks) In accordance with the provision of Micro, Small, and Medium Enterprises Development (MSMED) Act,2006 the Micro, Small, and Medium Enterprises (MSME) are classified in two classes, which are asfollows:Manufacturing Enterprises: The enterprises engaged in the manufacture or production of goodspertaining to any industry specified in the first schedule to the industries (Development and RegulationAct, 1951).The manufacturing enterprises are defined in terms of investment in plant and machinery.i) A micro enterprise is where the turnover/investment in plant and machinery does not exceed 25 lakh.ii) A medium enterprise is where the investment/turnover in plant and machinery is more than 5 crorebut does not exceed 10 crore.iii) A small enterprise is where the investment/turnover in plant and machinery is more than 25 lakhbut does not exceed 5 crore.2) Service Enterprises: The enterprises engaged in providing or rendering of services and are defined interms of investment/turnover especially in terms of equipment used.i) A micro enterprise is where theinvestment/turnover does not exceed 10 lakh.ii) A small enterprise is, where investment/turnover is more than 10 lakh but does not exceed 2 crore. iii) A medium enterprise is, where the investment/turnover is more than 2 crore but does not exceed 5crore.Q. Explain the different types of SSIs (8 marks)A small scale industry is an industry that is privately owned and. operated, with a small number ofemployees and relatively low volume of sales. Small businesses are normally privately owned corporations, partnerships, or sole Proprietorships. InIndia small business is categorized into following groups:1) Small Scale Industries: A unit in which turnover/investment in plant and machinery does not exceed5 crore.2) Ancillary Units: An undertaking which sells not less than fifty per cent of its output to other industrialundertakings and in which turnover/ investment in plant and machinery does not exceed 5 crores.

3. 3) Export-Oriented Units: A unit which exports not less than thirty per cent of its output and in whichinvestment in plant and machinery does not exceed 5 crore.4)Tiny Units: A unit with an turnover/investment in plant and machinery of not more than 25 lakhs.5)Small Scale Industries Owned and Managed by Women Entrepreneurs: An enterprise promoted bywomen entrepreneurs is a small scale industrial unit in which, individually or jointly have share capital ofnot less than 51 per cent. Such units can avail the special concessions offered by the government, likelow interest rates on loan, etc.6) Micro Business Enterprises: Within the tiny and small business sector, micro enterprises are thosewhose turnover/ investment in plant and machinery does not exceed 25 lakhs.7) Small Scale Service and Business (Industry Related) Enterprises: A small scale service and businessenterprise is one whose turnover/ investment in fixed assets of plant and machinery excluding land andbuilding does not exceed 10 lakhs.A few examples of such enterprises include advertising agencies, marketing, consultancy, equipmentrental and leasing, photocopying centers, desktop publishing, industrial testing labs,6) laundry and dry-cleaning, X-ray clinics, tailoring, beauty parlors, and so on.8) Village Industries: Village Industries means industry located in rural area which produces any goods ortenders any service with or without the use of power in which the fix capital investment (on building andmachinery) does not exceed 50,000 per capita.9) Cottage Industries: These are also known as rural industries or traditional industries. These are notdefined by capital investment criteria as in the case of other small scale industries. The features ofcottage industries) are as under:i) These are organized by individuals, with private resources.ii) Normally use family labor and locally available talent.iii) The equipment used is simple.iv) Capital investment is small.v) Produce simple products normally in their own premisesQ Explain the Role of Small and Medium Enterprises (12 marks)India is largely an agricultural country and major part of the population lives in villages.SME are small in size, but play a big role in economic development of a developing country like India.India has adopted the ideal of socialistic pattern of society with full employment, balanced regionaldevelopment and self-reliance as the major objectives.

4. Small scale firms are helpful in the achievement of these goals in the following ways: I) Employment: Small-scale firms use labor intensive techniques and, therefore they have high potentialto provide employment to a larger number of people per unit of capital. For every worker employed inlarge scale industries about three workers are engaged in small scale and cottage industries. Next toagriculture small business constitutes the most popular occupation of people in India.Small firms promote self-employment particularly among the educated and professional class. They alsoprovide employment t agriculturists who remain idle during a part of the year. In fact, the healthygrowth of small-scale industries . Government Policies and SME in India can be an effective approach tothe pressing problem of unemployment in the country. Several empirical India has built up perhaps oneof the most elaborate development policy framework and program for the small studies have revealedthat the employment generating capacity of small-scale industries in about in times scale sector.The main objectives of such policy framework are more than that of the large-scale industries.a) To encourage and facilitate the entry of new entrepreneurs in small sector.b) To support the growth of small-scale units.2) Balanced Regional Development: Small scale industries promote decentralized development and helpto remove regional disparities in industrialization. Decentralized development contributes to the processofuseful means of rural re-construction and development. Development of decentralized sector alsoimprove the standard of living of people in backward regions.3) To protect small firms from acute competition from large sector. self-sustained growth and avoidsconcentration of industries in particular areas. By providing employment4) To solve the problems faced by the small-scale industries in rural areas they help to check migrationand overcrowding in urban areas. Small-scale firms can be to encourage technology up gradation,productivity improvement and export production in the small-scale require less capital per unit ofoutput and, therefore, greater31 output can be obtained with small investment. The Annual Survey ofIndustries revealed that fixed capital per employee in case of small scale industry was 3,706 ascompared to 27,757 in case of large scale, industry. Small firms also provide% (Kick returns after theirestablishment on account of short gestation period. In India, where the rate of capital formation is low,small scale industries are very suitable.4)Mobilization of Local Resources: Small scale industries facilitate mobilization and utilization of localresources and skills which might otherwise remain latent or unutilized. Small business promotes a newcadre of small entrepreneurs, self-employed and encourages local talent. The growth of smallenterprises helps in tapping latent resources like entrepreneurial skills and small savings especially inrural areas. Small scale industries account for ninety five per cent of the industrial units in India andcontribute almost fortyper cent of the gross industrial value added.

5. 5) Exchange Earnings: Small scale industries help in reducing pressure on the countrys balance ofpayments in two ways:i) They do not require imports of sophisticated machinery and equipment. ii) They earn valuable foreign exchange through exports of non-traditional items and substitutions ofimports through domestic production. Small scale industries account for forty five per cent of totalexports from India.6) Feeder to Large Industries: Small scale sector is complementary to the large scale industries. Smallscale industries manufacture various types of components, spare parts, tools and accessories which arerequired by the large scale sector. Small firms also distribute the goods produced by large scale firms.7)Opportunity for Artisan: In villages, artisan/specialist/artist having expertise in different fields arefound. Because of lack of opportunities their skills do not come into limelight. Small businesses provideopportunities to such people. This provides an impetus to their talent.8)Increase Standard of Living: With the establishment of small businesses in rural or nearby regions,villages get many types of facilities, for example, employment, electricity, water, roads, education,banks, modes of transportation, etc. In such a situation, promotion of standard of living is inevitable.9)Less Pressure of Population on Agriculture: As more population depends upon land for survival theland is further divided into small pieces. It no longer remains beneficial to do farming on such smallfields. Every year there is a further increase of approximately. Thirty lakh people who depend onagriculture. So, this has become necessary to reduce this burden on land. This is possible only whenpeople will establish small businesses.10)Equitable Distribution of Income: With the establishment of these businesses the income of thecountry is not just concentrated with some handful of city industrialists but is also distributed amongmany small rural industrialists. This helps to reduce the gap between the rich and the poor in thecountry.11)Social Advantage: Small-scale units offer opportunity for an independent way of life to people withsmall means. They offer savings in social overheads like education, housing, and medical facilities bytaking industry nearer to the people. They help to raise per capita income and standard of living in thecountry. A system of widely diffused ownership permits wider participation of people in the process ofeconomic development. Small-scale sector provides a base for democracy, socialism, and self-government.Q. Explain the Problems of SMEs(12 marks)The micro, small and medium enterprises face problems at every stage of their operation, whether it isbuying of raw materials, manufacture of products, marketing of goods or raising of finance.

6. These industries are therefore not in a position to secure the internal and external economies of scale.The major problems confronting the sector are as follows: 1) Technology Obsolescence: Majority of the small scale units use old techniques of production andoutdated machinery and equipment. Up-gradation of the technology and achieving economies of scaleis one of the major problems facing the sector. They cannot afford new machines and equipment andare therefore not in a position to use the latest techniques of production. They do not find it possible toconduct research and development on a continuing basis. Therefore, productivity and quality in smallscale firms tends to be low while unit cost of production is generally high. But with liberalization of theeconomy, the MSMEs are facing stiff competition from imports and need technological up-gradation inorder to produce better quality products at cheap rate.. As far as sourcing technology is concerned,small businesses face the following three essential problems: i) Lack of Technological Knowledge: Obtaining information about technology is the first important issue.For most of them, information about available technology options is through word-of-mouth or from avisit to an advanced unit. Few have access to technical literature, professional journals or informationabout new product launches. But with the advent of internet, new vistas are opening up throughelectronic journals, catalogue downloads and advanced search facilities. ii) Barriers in Implementation: Actual procurement of the technology is the next important issuebecause even if information is obtained, there are barriers to import of technology and other problemsrelating to technology transfer, vendor capability, after sales support, import procedures, etc., whichimpede procurementiii) Funding Problem: Acquiring finance for technology up-gradation is also a problem. Small enterprisesgenerally look to external sources of funding for upgrading technology as withdrawing money frombusiness entails its own costs.2) Managerial Inadequacies: The managerial skills required for the management of small/medium firmsare not very much different from those necessary in large scale business. The managerial functions ofplanning, organizing, staffing, directing and controlling are common to both. But, the scale on whichvarious functions are performed by owner and manager are different and in small scale, the degree ofcomplexity is lower. The organizational structure of latter firms is simple due to presence of fewemployees. The owner himself acts as the manager and can exercise personal control. However as thebusiness grows, owner/manager finds it difficult to manage even small business effectively. For this, itbecomes necessary to increase the amount of manpower in the enterprise. 3) Credit and Finance: All kinds of business enterprises require sufficient funds in order to meet theirfixed as well as working capital requirements. Finance is one of the critical inputs for growth anddevelopment of the micro, small and medium enterprises. They need credit support not only for runningthe enterprise and operational requirements but also for diversification, modernization/up-gradation offacilities, capacity expansion, etc. Inadequate access to credit is a major problem facing micro, small andmedium enterprises. Generally, such enterprises operate on tight budgets, often financed throughowners own contribution, loans from friends and relatives and some bank credit They are often unable

7. to procure adequate financial resources for the purchase of machinery, equipment and raw materials aswell as for meeting day-to-day expenses. This is because, on account of their low goodwill and little fixedinvestment, they find it difficult to borrow at reasonable interest rates. As a result, they have to dependlargely on internal resources. In respect of MSMEs, the problem of credit becomes all the more seriouswhenever any difficult situation occurs such as a large order, rejection of consignment, inordinate delay,in payment, etc. Sometimes they have to close down their operations due to shortage of funds. Also,there is little or no scope for expansion and growth due to dearth of capital. Hence, economies of scaleare not available. 4) Managerial and Organizational: Small scale firms are generally managed by the owners who veryoften do not possess the skills required for the efficient management of the enterprise. There is lack ofproper division of work and benefits of specialization are not available. Some owner7manageit arereluctant to adopt modern methods of organization and management. There instability in businessbecause the sickness and dearth of the owner manager directly affects the survival and growth of thesmall firm.5) Raw Materials and Products: Non-availability of quality raw materials on a timely basis in an adequatequantity is one of the main problems faced by micro, small and medium enterprises. There is acuteshortage of even the basic raw materials required by small scale units. These units are under a handicapin obtaining raw materials of requisite quality at reasonable prices. They do not get the benefits of bulkbuying. For example, the handloom industry is facing shortage of yarn. Small scale industries also faceshortage of power due to which they are unable to make full utilization of plant capacity. Majority ofthem cannot afford to install their own power generating plants to ensure uninterrupted operations.6) Marketing and Export: Out of several problems faced by small and medium scale entrepreneurs, theabsence of adequate marketing and export facilities is one of their main concerns. Almost all types ofbusiness enterprises face marketing problems, but the small and medium scale enterprises face greaterdifficulty in the marketing and distribution of their products.Some of these are: i) Competition from Large Firms: Small and medium entrepreneurs tend to face tough competition fromthe products and sales/marketing strategies of large scale firms entrepreneurs. They, at times, find itvery difficult to cope with large scale entrepreneurs in terms of cost, quality, standards, popularity,meeting ever-changing demands/preferences of consumers, etc.ii) Lack of Marketing Networks: Most of them do not have their own marketing network. So, theyultimately have to rely on outside sources for distributing their products. This also tends to raise the costof their products and services. iii) Lack of Marketing Concepts: Most of them do not have good knowledge and/or experience ofvarious marketing concepts and strategies. As a result, they are unable to understand quickly andaccurately the prevailing as well as constantly changing market trends. Furthermore, in spite of having

8. huge potentialities of extensive market for their products, they are mainly unwilling to opt for efficientmarketing techniques.iv) Lack of Resources: They also lack the resources and funds needed for effective sales promotion.Many of such enterprises cannot afford to spend much on advertising, sales promotion, marketresearch, etc.v) High Cost of Production: They find it difficult to sell their output at remunerative prices because ofhigher cost of production and non-standardized quality of products.vi) Low Negotiating Power: They also have to sell their products at throwaway prices due to their weakbargaining power (especially in dealing with big buyers) and urgent needs of funds.Thus, it is right to say that most of small and medium entrepreneurs do not correctly understand as towhat kind of products are actually needed by the market, how big/small is the market, when theproducts are needed and how to deliver such products. All these problems keep them mainly isolatedfrom the market trends and conditions and, thus, tend to restrict their operations. 7) Infrastructure: Infrastructure needed by entrepreneurs include all types of transportation facilitieslike railways, waterways, roadways and airways (depending on the type of small and medium scale firmrunning by these entrepreneurs) as per the suitability of the business, as well as proper establishedchannels of telecommunication and adequate supply of power. Lack of any of these facility can causeserious damages to the firms value chain process, i.e., to the production, consumption and distributionof the products of small and medium entrepreneurs, who already face problems of lack of finance,inadequate marketing facilities, technological obsolescence, etc.Some of the major problems faced by small scale entrepreneurs with respect to infrastructure are:i) Inadequate infrastructural facilities creates the problem of acute shortage of basic raw materials,especially those which are scarce and need to be imported from distant places, needed by small andmedium scale enterprises. ii) Small and medium scale entrepreneurs find it difficult to distribute their products to the marketswhich are located at far-off places because of incomplete construction or non-existence of basicroads/highways.iii) Lack of proper airways and waterways facilities also restricts the growth prospects of thosemedium/small scale firms whose target market is located abroad.iv) Small and Medium scale enterprises face shortage of power supply, due to which they are unable tomake full utilization of plant capacity. Most of them find it difficult to install their own power generatingplants, so as to ensure their uninterrupted operations, due to lack of required funds.

9. v) Most of them are located in rural areas or remote areas of the country, due to which they find itdifficult to communicate with people outside the region. This is because of non-existence of propertelecom network.Q. What are Prospects of SME (12 marks)The small-scale industries occupy a very important position in any economy. Traditionally, they producecertain specialized items over which they enjoy virtual monopoly because of the skill and expertisedeveloped over the years. Many items produced in the small-scale sector are also used as raw materialsin the large-scale industry. Thus, small-scale industries contribute to large-scale production in no smallmeasure. They will have to take effective measures in the following areas: I) Quality Control: The products of large-scale industries are of high quality and precision. In a freeeconomy, the products of the small-scale industry can compete with those of the large-scale sector onlyif the high quality is maintained. To meet the competition from the large-scale sector, small-scaleindustries should get a good share of the export market where high-quality products are essential. 2) Marketing Arrangements: Many small-scale units have perished because of their inability to sell whatthey produced. This happened because of lack of proper marketing arrangements. In a free economy,inadequate marketing arrangements would only accelerate the downfall of small-scale units, as theywould have to counter competition from the large-scale sector, which enjoys a ready market for itsproducts. The small-scale units need to conduct systematic and continuous market research and arrangeto tie-up with prospective buyers in order that their products may be readily sold. Advertisement: Theproducts of the large-scale sector are widely advertised on TV, radio, and newspapers and are well-known. Since, small-scale industrial units suffer from resource inadequacy; most of them cannotadvertise their products on the mass media. As a result, the products of the small-scale units remainlargely unfamiliar to the public and the units find it very difficult to attain their sales goals.3)Increasing Competition: An entrepreneur faces several managerial problems in relation to production,marketing, infrastructure, financing, etc. The basic cause for many of such issues is the existence ofintense competition in the market scenario. Large scale firms/industries that have huge production anddistribution network, or enterprises that have goodwill in the market or have intellectual propertyrights/standardization for their products or produces large range of products, etc., are more likely todominate the business environment in the country. In contrast, small and medium scale enterprisesmainly deal in one specialized line of products, have very small production and distribution network, andgenerally have no protection for their products. As a result, in spite of having useful and good qualityproducts or having products similar to those produced by large scale firms, they are largely not able tocreate/hold demand for their products and tend to lose customers to large scale enterprises owing tocut-throat competition.4)Recovery of Receivables: The funds of many small-scale industrial units are blocked in receivables. As aresult, recycling of funds is affected and production suffers. In a competitive environment, it must beensured that receivable dues are realized without delay. The small-scale units will have to make specialeffort to collect their dues for their growth. They may have to utilize the services of factoring companies

10. for the purpose. Professionalism in Management: Many small-scale industrial units have suffered anaccount of proprietary management. Barring very tiny and small units, management of small-scaleindustries has become complex. Hence, small-scale industrial units must be managed by professionalmanagers in order to compete successfully with the large-scale sector, which is professionally managed.5)Inventory Control: Proper inventory control is an essential prerequisite for optimum production of anindustrial unit. Yet, a large number of small-scale units remain unaware of this requirement. As a result,they have to remain content with a sub-optimal level of production that affects their profitabilityadversely. It is, therefore, imperative that small-scale units familiarize themselves with inventory controltechniques and introduce them at work, particularly in the context of competition in a free economy.6) Opportunities: By its less capital intensive and high labor absorption nature, the SSI sector has madesignificant contributions to employment generation and also to rural industrialization. This sector isideally suited to build on the strengths of Indias traditional skills and knowledge, by an infusion oftechnology, capital, and innovative marketing practices. This is the opportune time to set-up projects inthe small-scale sector. It may be said that the outlook is positive, indeed promising, given somesafeguards. This expectation is based on an essential feature of the Indian industry and demandSICKNESS IN SMEIntroduction.Sickness is a universal phenomenon. It is a major problem of SME (SSI) in all countries of the world, may it be developed or developingcountries. SME sickness is a matter of serious concern because besides affecting the owners, employees,creditors, and suppliers, it causes wastage of national resources and social unrest.Growing incidence of sickness has been one of the major problems faced by the industrial sector of thecountry. Substantial amount of loan able funds of financial institutions is blocked-up in sick industrialunits causing not only wastage of resources but also affecting the healthy growth of the Indianeconomy. Not only some of the traditional industries like cotton textiles, jute, and sugar have been of afflictedwith sickness, but even some other modern industries like engineering, chemicals, rubber, cement,electrical, and paper have been affected. Therefore, it has been considered very essential to detectindustrial sickness at an early stage and taking measures to prevent sickness.Q. Explain Meaning of Sick Unit (2 marks)The prevalence of sickness in SSI sector is a cause of concern. The definition of sickness in SSI sector hasbeen undergoing changes. The Reserve Bank of India (RBI) was instrumental in appointing committeesfrom time-to-time to look into the issue of the sickness affecting the Sector.

11. The latest definition of sickness given by the Working Group on Rehabilitation of Sick Units set-up bythe RBI (Kohli Committee) is given below: A small-scale industrial unit is considered sick when:1) If any of the borrowable accounts of the unit remains sub-standard for more than six months, i.e.,principal or interest, in respect of any of its borrowable accounts has remained overdue for a periodexceeding one year will remain unchanged even if the present period for classification of - account assub-standard is reduced in due course;or 2) There is erosion in the net worth due to accumulated losses to the extent of 50 per cent of its networth during the previous accounting year; and3) The unit has been in commercial production for at least two years.Q. Explain the Criteria to Identify Sickness (2 marks)The necessary information on sickness and incipient sickness among the Units in the Sector wascollected the All India Third Census of Small Scale Industry 2001-2002. In order to measure incipientsickness, measuring sickness, the latest definition given by the Kohli Committee was adopted. Thus, thefollowing a were adapted to identify sick/incipient sick units in the Third Census1) Continuous decline in gross output compared to the previous 4 financial years;2)Delay by more than 12 months in repayment of loan taken from institutional sources; and3) Erosion in the net worth to the extent of 50 per cent of the net worth during the previous accountingyear.Q. Explain Symptoms for Sickness (8 marks)Symptoms for SicknessTiwari Committee identified certain symptoms which would be quite helpful in the detection ofindustrial sickness at the beginning or incipient stage. These symptoms are:1. Continuous irregularity in cash credit accounts;2. Continuous decline in gross output for three consecutive years was identified as a suitable indicator,whereas as small-scale sector is concerned, small-scale industrial unit is considered to be sick that hasincurred a cash loss in the previous accounting year and is likely to incur cash losses in the rentaccounting account of cumulative cash losses to the extent of 50 per cent or more of its peak net worthduring the last five yearscontinuously defaulted in meeting four consecutive half-yearly installments ofinterest or two half-yearly installments of principal on term loan.3.poor capacity utilization;

12. 4.profit fluctuations,5. downward trends in sales and stagnation, or fall in profits followed by contraction in the hare of themarket;6.higher rate of rejection of goods manufactured; education in credit summations whenever thecompanies are in financial difficulty;7.they open a separate mount with another bank and deposit all collections therein; Failure to paystatutory liabilities;8.interest on loan on due dates.9.financing capital expenditure out of funds provided for working capital purposesAccording to State Bank of India, "A sick unit is that unit which fails to generate an internal surplus on aLarger and longer outstanding in the bill accounts; continuous basis and depends for its survival uponfrequent infusion of external funds". Longer period of credit allowed on sale documents negotiatedthrough the bank and frequent returns by There are different perceptions of the symptoms andcharacteristics of SSI sickness To an investor, it is one which skips dividends, an industrialist, it is a unit which is making losses. To abanker, its a unit which is not repaying its loan or -submission of periodical financial data/stockstatement, etc., in time;According to the Sick Industrial Companies Act, 1985,A sick industrial company indicates an industrial ,unit increase in working capital on account of ,(registered for not less than seven years) which is showing accumulated losses equal to or exceeding itspresent Increase in debtors and particularly dues from selling agents, net worth at the end of anyfinancial year, and has also suffered cash losses during that financial year and in the increase increditors, and immediate preceding year. Thus an industrial unit was defined as sick if:a)general decline in that particular industry combined with many failuresb)rapid turnover of key personnel;c)existence of a large number of law suits against the company; .d)rapid expansion and too much diversification within a short time;- Initially, only private sector companies were covered under the Sick units, Industrial Companies Act. In December 1991, public sector companies were also brought under the purview of version of fundsfor purposes other than running the unit; this Act.

13. The 1992 amendment (introduced in February 1994) has altered the criterion somewhat; firms onlyneed to be registered for five years, instead of earlier seven years, while other criterion will remainsame in spite of major changes in the shareholdings.1) It was registered for at least seven years,2) It incurred cash losses for the current and the preceding year, and3) Its net worth has eroded.Q. Suggest some remedial measures for SICK units (8 marks)1) Effective Planning: SSIs are required to conduct detailed survey of the existing situations prevailing insmall sector and draw productive programs2) Improvement in Techniques of production and proper technology: SSIs should improve theirtechniques of product and adopt modern technology.3) Training and Development: SSIs should make concerted efforts in imparting proper education trainingto workers engaged in this sector as they are valuable asset of industry. Expenditure on trainingdevelopment activities should be treated as an investment. Small Industries Associations should involvethemselves in providing knowledge and skills required tothem in the changing e.g. Workers should beencouraged to innovate themselves in the production process as it would enable to compete with theirmedium and large-scale counterparts. For this purpose, effective motivation reward system is highlydesirable.4) Provision of Infrastructural Facilities: Development-finance, power arrangement, water supply, etc.,necessary for the smooth functioning of SSIs. State Development Corporation, small industriescorporations, state technical consultancy organizations are engaged in provision of these facilities buttheir system needs further improvement5) Regular Supply of Raw Materials: Small Industries Development Corporations and other canalizingagencies responsible for the supply of raw materials to small-scale sector should take necessary,maintain a continuous but proper supply of raw materials to SSIs. They should also ensure that bogusare to be excluded from this type of support. 6) Adequate Credit Arrangement: For SSIs, traditional sources of financing offer little scope forexpansion and alternative means like venture capital are yet to be developed for them. SEBI hasformulated guide for venture capital and there is hope for better finance facility for this sector. Besides,prioritys lending scheme should be made more broad-based and credit limit is to be enhanced. The SSI*depend on their own funds and loaned fund from non-banking sector as they are unable to get propersupport banks and other funding agencies. The SIDBI is trying to provide these facilities but internedinvolved in the system are creating problems for them. So, SIDBI should try to bring transparency,effectiveness in its functioning.

14. 7) Effective Marketing Arrangements: SSIs should focus on brand, product, and market development.should try to remain in the market and special thrust should be given on quality improvement proProducts at low costs and passing on the benefits to consumers would go in long way to improvemarketing performance. The large companies earn handsome profits from marketing the products ofunits by charging a much higher price from the customers. The reason is they have brands. So, SSIs s tryto popularize their products in the market which will provide them separate product and brand identity.This strategy will benefit them in the long-run. However, efforts should be made to maintain standardquality of the output then they will get positive support from their potential customers. 8) Development of Suitable Machinery: SSIs have different typical problems and that are handled bytaking offensive strategies. SSIs Association should be offensive and objectively clear in their g pleadingtheir cases with the government. Associations like FICCI, Assocham, and CH are more maintaining theirrelations with the government They should also involve themselves in , the problems being faced bytheir members through seminar, conferences, etc.Q. Explain the term institutional support to SME (2 marks)The term institutional support system generally refers to the economic environment of industry andbusiness comprising authorities and institutions whose decisions and operational framework affect thelevel of business.These institutions include government owned agencies, statutory corporations and semi-autonomousorganizations. In our country, these authorities and agencies are government organizations andentrusted with sufficient powers to regulate and promote SSIs in specific areas of activities.Basically, institutional support system is necessary at three stages of enterprise development. These are1) Inception or promotion of a business or industrial unit2) Day to day management or routine management3) Expansion and diversificationQ. Explain the term institutional support to SME in Indian context (2 marks)In Indian context, institutional support systems include two dimensions:1) Support system developed by Central Government2) Support system developed by State Governments,3) Support system developed by Other Agency

15. Q. Elaborate on Support System Developed by the Central Government (12 marks)The Department of small scale industries was developed in 1991 under the Ministry of Industry. Thisdepartment has been responsible for the development and monitoring of the following support system: 1) SSI Board (Small Scale Industries Board): It was established in 1954 to provide effective coordinationand inter-institutional linkages for the benefits of small scale sector. The Board being an apex body hasbeen entrusted to play its advisory role in solving the problems of small scale sector. The Board has beenconstituted with the following members:2) SIDO (Small Industries Development Organization): This organization as the name suggest is mainlycreated for development of various small-scale units in different areas. SIDO is a nodal agency foridentifying the needs of SSI units, coordinating and monitoring the policies and programs for promotionof the small industries. It undertakes various programs of training, consultancy, evaluation for needs ofSSI and development of industrial estates. All these functions are taken care with the OrganizationStructure of 27 offices, 31 SISI (Small Industries Service Institutes). 31 Extension Centers of SISI and 7Centers related to Production and Process Development. The main functions performed by the SIDO ineach of its three categories of functions are as follows:i) Functions Relating to Co-ordinationa) To evolve a national policy for the development of small scale industries,b) To co-ordinate the policies and programs of various State Governments, .ii) Functions Relating to Industrial Developmenta) To reserve items for production by small-scale industries,b) To collect data on consumer items imported and then, encourage the setting of industrial units toproduce these items by giving coordinated assistance,c) To render required support for the development of ancillary units, andd) To encourage small scale industries to actively participate in Government Stores Purchase Program bygiving them necessary guidance, market advice and assistance.iii) Functions Relating to Extension a) To make provision of technical services for improving technical process, production planning,selecting appropriate machinery, preparing factory lay-out and design,b) To provide consultancy and training services to strengthen the competitive ability of small-scaleindustries,c) To render marketing assistance to small-scale industries to effectively sell their products, and

16. d) To provide assistance in economic investigation and information to small-scale industries.3) NSIC (National Small Industries Corporation Ltd.): It was started by the Central Government in 1955with the objective of promoting and developing SSI units throughout the country.It started with multiple objectives of helping SSI units for:i) Providing machinery on hire purchase,ii) Assisting, marketing and exports,iii) Enlisting SSI units for tender participation in Government purchases,iv) Organizing supply of raw-materials,v) Training of personnel, andvi) Assistance inmodernization of the units. In India, NSIC has 5 technical centers, 9 zonal offices, 33branches, 14 sub-branches, 10 business development offices, and 2 tech-parks.The corporations Head Office is at Delhi. The company employs, over 500 professionals and it also hasan office in Johannesburg from where it handles its operations pertaining to South African nations. Inthe 54 years of its existence, the National Small Industrial Corporation Limited has gone from strength tostrength and has successfully managed to modernize small- scale industries in India by making themtechnology-oriented and by emphasizing quality. NSIC has also reinforced the small-scale industry byfortifying its ties with the large and medium-scale industries.Functions of NSICi) Financial assistance by way of hire purchase scheme for purchase of local and imported machinery.ii) Provision of various equipment on lease basis.iii) Assistance for marketing the produce in the country and also to help in exporting the products of SSunits.iv) Enlisting quality conscious good SSI units for sending enquiries of government stores and purchasedepartments. v) Training of workers in various trades required for SSI units.vi) Assistance in up-gradation of technology, processes, and modernization of plant and machinery.vii) To make bulk purchases of important raw-materials and distribute to SSI units at reasonable rates.avoids speculation and exploitation by the traders.viii) To develop industrial estates and testing facilities in the industrial areas.

17. 4) SIDBI (Small Industries Development Bank of India): Small Industries Development Bank of India was,established in 1990 as a development bank exclusively for the small-scale industries. It is a Centra1government undertaking. The prime aim of SIDBI is to promote and develop small industries byproviding them the valuable factor of production, finance. Many institutions and commercial bankssupply finance both long-term and short-term, to small entrepreneurs. SlDBI coordinates the work of allof them.Financial Assistance Scheme of SIDBIThe main obstacles and problems in the growth of industrial units are the paucity of primaryinfrastructure, unavailability of suitable market for selling the products, working capital requirement anddifficulties arising out of the delays in receiving the bills.Considering these problems, the following provisions are included in the various schemes of SIDBI: i) Loan assistance to the institutions providing market or marketing avenues to the small entrepreneurs.ii) Loan assistance to ancillary units and also for modernization and upgrading technology.iii) Loan assistance to institutions providing primary services and infrastructure and developing thegrowth centers.iv) Loan assistance to NSIC.v) Loan assistance to private companies which function on rental basis or contract basis.SISI (Small Industries Service Institute):Small Industries Service Institute is a national level organization established by the Central government.At the state level, SISI functions under the Director assisted by Deputy Directors. There are 28 SISIs and30 branch of SISIs set-up in State capitals and other industrial cities all over the country.Functions of SISI i) Technical Information: SISI provides information about the supply and the availability of rawmaterials. It gives technical information about the machines and equipment. Technical know-how aboutthe process of production, quality testing and standardization of products, modernization and preparingproduct design are other services provided by SISI. ii) Workshop: SISI is a well-equipped workshop which provides services to entrepreneurs at reasonablerates. Jobs related with machine shops, heat treatment, hardness testing are carried out in theseworkshops. The main motive of the workshop facility is to improve the quality of the products. iii) Technical Training: SISI provides technical training to the workers employed in the various industrialunite as well as the entrepreneurs in order to improve standards of quality and labor. In the extensioncenters of SISI, training is provided for machine shop practice, milling, heat treatment, blueprint reading,etc. Economic Investigation Division: SISI collects and compiles statistical information regarding various

18. aspects concerned with the establishment and development of small industries. Important aspects aredemand and supply scenarios for different products, investment, raw material, etc. This divisionprepares review reports on the items reserved for the small-scale industry. The study of sick industries isalso undertaken by this division. In such studies, SISI tries to identify the causes of the sickness of thesmooth working of these units.v) Export Promotion: SISI plays a significant role in the efforts regarding export promotion. A specialarrangement is made to provide information about exporting the products. On behalf of the smallentrepreneurs, SISI participates in international exhibitions and promotes the products in the foreignmarkets.vi) Modernization: SISI guides the entrepreneurs in the quality up gradation, modernization andimprovement of productivity.vii) Development of the Market: SISI acts as a link between the tiny and the small industries and themedium and the large-scale industries. It provides information about the products and the services ofthe small entrepreneurs to the requirements of the large industries. Thus, it bridges the small industrieswith the large industries and tries to develop the market. Many of the products manufactured by thesmall industries are purchased by the large industries. viii)Library: SISI has a huge collection of books, journals, magazines, newspaper clippings etc. It providesvaluable services to small entrepreneurs through its well-equipped library. It has a collection ofhundreds of project reports. Entrepreneurs can use these readymade project reports at reasonablerates. ix) Exhibition: A permanent exhibition is arranged by SISI in its office premises. SISI exhibits productsmanufactured by small entrepreneurs. The exhibition is free of cost. Thus, SISI provides multifariousservices to the small entrepreneurs.Activities of SISI The main activities of this institution are as follows:i) Assistance/Consultancy to prospective entrepreneurs,ii) Assistance/Consultancy rendered to existing units,iii) Preparation of state industrial profiles,iv)Preparation/Updating of district industrial potential surveys,v) Project profiles,vi) Entrepreneurship development programvii) Motivational campaigns,viii) Production index,

19. ix) Management development program,x) Skill development.6) KVIC (Khadi and Village Industries Commission):The Khaki and Village Industries Commission (KVIC) is a statutory body formed by the Government ofIndia, under the Act of Parliament, `Khaki and Village Industries Commission Act, 1956. It is an apex organization under Ministry of Micro, Small and Medium Enterprises Govt. of India, withregard to khadi and village industries within India, which seeks to "plan, promote, facilitate, organizeand assist in the establishment and development of khadi and village industries in the rural areas incoordination with other agencies engaged in rural development wherever necessary." In April 1957, ittook over the work of former All India Khadi and Village Industries Board. Its head office is based in Mumbai, with its six zonal offices in Delhi, Bhopal, Bangalore, Kolkata,Mumbai an Guwahati. Other than its zonal offices, it has offices in 29 states for the implementation ofits various. I functions also comprise building up of a reserve of raw materials and implements for supplyto producers Objectives of KVIC The KVIC has three main objectives which guide its functioning.These are as follows:i) The Social Objective: Providing employment in rural areas.ii) The Economic Objective: Providing salable articles. iii) The Wider Objective: Creating self-reliance amongst people and building-up a strong ruralcommunity spin The commission seeks to achieve these objectives by implementing and monitoringvarious schemes and program too achieve these objectives, the following schemes are provided by KVIC:i) Financial assistance for purchase of land, building, workshop, shed, machinery, and equipment at rateof interest;ii) Working capital provision;iii) Prime Ministers Employment Generation Program (PMEGP);iv) Rebate Scheme;v) Equity capital;vi) Loan provision for purchase of raw materials;vii) Marketing avenues and selling centers for the products of artisans and craftsmen;viii) Subsidies for the registered societies of artisans and craftsmen belonging to scheduled castscheduled tribes, ex-servicemen, women, etc

20. 7) Specialized Institutions: In addition to the above institutions, the Government has also set-up following specialized institutionsto boost the growth of all types of small-scale industries in the country: i) Central Institute of Tool Design, Hyderabad: The Central Government set-up this Institute in 19 withthe help of UNDP and ILO to help small-scale industries by imparting specialized training to personnelworking in the design and manufacture of tools, jigs, fixtures, dies and molds. The other functionsperformed by it are:a) To offer consultancy and advisory services and assistance in the design and development of tools. b) To suggest proper measures to improve the standard of tools, tooling elements, jig componentfixtures, dies, etc.c) To offer the needed tool room facility. A governing council which consists of representatives of theGovernment and industry is constituted to look at the management of the Institute. The governingcouncil is headed by the Development Commissionerii) Central Tool Room Training Centers: In order to provide tool room services and facilities inmanufacture and training, the Government has set-up four tool room training centers located IBangalore, Calcutta, Ludhiana and New Delhi.iii) Central Institute of Hand Tool, Jalandhar: This institute has been set-up with a view to provideimproved technology, raw materials, design and testing for handloom industry. This is the only instituteof its kind in the country located at Jalandhar.iv)Institute for Design of Electrical Measuring Instruments (IDEM), Mumbai:This institute was set-up in 1969 with the assistance from UNDP. It was set-up to provide technicalconsultancy services in the matters relating to design and development of electrical and electronicinstruments, tool designing and fabrication and training.v) National Institute of Entrepreneurship and Small Business Development (NISEBUD), New Delhi: It is anapex national level institute of its kind set-up at New Delhi in 1983. Its main functions are to coordinateresearch and training in entrepreneurship development and to impart specialized training to variouscategories of entrepreneurs. Besides, it also serves as a forum for interaction and exchange of viewsbetween various agencies engaged in activities relating to entrepreneurial development.vi) National Institute of Small Industries Extension Training (NISIET), Hyderabad: This institute was set-upin 1956 to develop the required manpower for running small-scale industries in the country.Accordingly, its main functions are:a) To impart training to the persons engaged in small-scale industries.b) To undertake research studies relating to development of small-scale industries.

21. c) To enter into agreements relating to consultancy services both with national and internationalorganizations to provide consultancy services to small industries in the country. The institute conductscourses in business management for the benefit of the entrepreneurs and semi-managerial personnelof small industries. It is located at Hyderabad.vii) Other Institutes: Following are some of the important institutes set-up by the Government fordevelopment of small-scale industries:a) Electronic Training and Service Institute, Nainital.b) Central Machine Toots Limited.c) Sports Goods and Leisure Timed) Central Institute of Plastics Engineering and Tools, Madras.e) National Institute of Foundry and Forging Technology, Ranchi.Q. Explain Support System Developed by the State Government (12 marks)Director of Industries is the highest authority at kite level to execute the policies and programs withregard to SSIs, medium and large scale enterprises.Director/commissioner is responsible for the overall supervision of support system developed for theSSIs in the state. These support systems are as follows:1) DIC (District Industries Centers): Governments in the past taken a number of measures for thedevelopment of small and village industries, but the actual achievements have been far below theexpectations. Also the focus of attention for industrial development was mainly on large cities and Statecapitals to the neglect of district areas. In addition, multiplicity of institutions involved in small industriesdevelopment and complicated systems and procedures made the job of promoting the industrial unitsan uphill task for small entrepreneurs. It was felt necessary to establish a development agency, whichcould provide all services and facilities to village and small industries under one roof. Accordingly, theDICs were established in May 1978 in order to cater to the needs of small units. 2) SFC (State Financial Corporations): The State Financial Corporation Act was passed by theGovernment of India in 1951 with a view to provide financial assistance to small and medium scaleindustries which were beyond the scope of IFCI. According to this Act, a State Government isempowered to establish a financial corporation to operate within the State.Functions of SFCMain function of the SFCs is to provide loans to small and medium scale industries engaged in themanufacture, preservation or processing of goods, mining, hotel industry, generation or distribution ofpower, transportation, fishing, assembling, repairing or package articles with the aid of power, etc. StateFinancial Corporation is authorized to grant financial assistance in the following forms:

22. i) Granting of bans or advances to industrial concerns repayable within a period not exceeding twentyyears. ii) Subscribing to the debentures of industrial concerns repayable within a period not exceeding twentyyears.iii) Guaranteeing loans raised by industrial concerns repayable within a period not exceeding twentyyears iv) Underwriting the issue of stock, shires, bonds or debentures by the industrial concerns subject totheir being disposed off within seven years.v) Guaranteeing deferred payments due from any industrial concern in connection with purchase ofcapital goods in India. vi) Acting as an agent of the Central Government or State Government or the Industrial FinanceCorporation of India in respect of any business with an industrial concern in respect in respect of loanssanctioned to them.3) SSIDC (State Small Industries Development Corporations): Under the Companies Act, SSIDC werestarted in 1956 in all the states under the Companies Act. These Slate Government undertakings takecare of the growth and development needs of village industries, tiny industries and small industries.Different states give focus and importance to different industries based on the raw-material and skillavailability in their states.Functions of SSIDCi) Assist for procurement of machineries on hire purchase scheme.ii) Assist in marketing of the products.iii) Keep stock of vital and scares raw-materials and distribute to small industries.iv) Develop industrial sheds, estates and godowns for use of small industries.4) SIDC (State Industrial Development Corporations): The State Industrial Development Corporations(SIDCs) act as catalyst for promotion and development of medium and large enterprises in theirrespective states. In tandem with changing business environment, SIDCs are making efforts to diversifytheir activities to cover a range of services and schemes and have entered into the areas of equipmentleasing, merchant banking, venture capital and mutual funds.The State Industrial Development Corporations (SIDCs) Incorporated under the Companies Act aswholly-owned undertakings of State Governments for promotion and development of medium and largeindustries in respective states, provide financial assistance in the form of rupee loans,underwriting/direct subscriptions to shares/debentures, guarantees, inter-corporate deposits, and alsoopens letters of credit on behalf of its borrowers.

23. They are also involved in setting up of medium and large industrial projects in the Joint sector/assistedsector in collaboration with private entrepreneurs or wholly-owned subsidiaries. In order to accelerateindustrial development various states have set up Industrial Development Corporations. Andhra Pradeshand Bihar were the first states to set up such corporations in 1960.Most of the states have set upinstitution at present.Functions of SIDCi) Grant of financial assistance.ii) Provision of industrial sheds or plots.iii) Promotion and management of industrial concerns.iv) Promotional activities such as identification of project idea, selection and training of entrepreneur,provision of technical assistance during project implementation.v) Providing risk capital to entrepreneur by way of equity participation and seed capital assistance. 5)TCO (Technical Consultancy Organization): Technical Consultancy Organization plays a crucial role in theindustrialization process of the state. The TCOs are organizations established by the state governments.The primary objective of the TCO is to furnish industrial and technical consultancy to the entrepreneurs.The TCO is sponsored by national and state level financial institutions and banks like ICICI, IDBI IFCI, SFC,SIDC, SSIDC, commercial banks, etc.Functions of TCOi) Identification of potential entrepreneurs among different target groups as rural poor, women,minorities, SCs, STs, etc.ii) Identification of area specific viable manufacturing and servicing activities. iii) Extending candidate specific hand-holding support right from project identification, securingfinancial assistance, accessing market through guidance and monitoring during project implementationand commercial operation.iv) Capacity building of other support providers. 6) Industrial Estates: Developing countries require institutional arrangements for their rapidindustrialization and balanced growth. One such institutional measure is industrial estates. The termindustrial estate is called by different names, e.g., industrial park, industrial zone, industrial region,industrial city, industrial area, and industrial township, etc.An industrial estate has been defined as a method of "organizing, housing and servicing industry, aplanned clustering of industrial enterprises offering standard factory buildings erected in advance of

24. demand and a variety of services and facilities to the occupants". The main features of an industrialestate are as follows:i) It is a tract of land sub-divided and developed into factory plots or sheds. ii) It provides several common facilities or infrastructural amenities such as water, power, transport,tool room, training, bank, post-office, repairs and maintenance, etc., to the occupants.iii) It is a planned clustering of industrial units.iv) It is designed as a tool of industrialization and balanced regional development.v) It may be developed in urban, semi-urban or rural areas.vi) It may be large, medium and small.vii) It may be set-up by the Government or by cooperatives or by private agencies.Types of Industrial Estates Industrial estates may be classified into the following categories: i) General Purpose or Composite Industrial Estates: Such an industrial estate provides accommodationto all types of small-scale industries. It consists of a wide variety and range of industrial units. Most ofthe industrial estates in India are of this type. ii) Special Purpose Industrial Estates: This type of industrial estate is particularly constructed forspecified groups of entrepreneurs, e.g., technically qualified persons, craftsmen or artisans, etc. Forexample, industrial estates for artisans and technical personnel have been set-up at Hyderabad.iii) Ancillary Industrial Estates: Such as industrial estate houses manufacturing units, which produce,parts and components for a large industrial unit. It is generally set-up near the parent unit. iv) Functional Industrial Estates: This type of industrial estate consists of industrial units manufacturingthe same product. Such estates have been set-up for leather goods, electronics, sports-goods, foodpreservation, ceramics, etc. v) Flatted Factory Estates: These are multi-storey buildings constructed in big cities, to provide space toindustrial units manufacturing light weight goods with the help of simple machine tools. They help toconserve spaceQ. Explain the Support System Developed by Other Agency (12 marks) Besides, Central Government and State(Government agencies, there are some Non-Governmentalagencies who are also supporting the cause of small scale industries in the country. These agenciesinclude Non-Government organizations and industry associations.They provide a common platform to voice SSI needs and initiate cooperative efforts.

25. Government policies have stressed the increasing role of these associations and NGOs in setting upcommon facilities and other cooperative ventures in technology, marketing and other support systems.Some of these major associations are as follows: 1) ICSI (Indian Council of Small Industries): It was established in 1979 to help tiny, cottage and smallindustries and artisans of rural areas. Membership of ICSI constitutes about 1500 associations of thedecentralized sector. Its main functions are as follows:i) Information disseminationii) Entrepreneurship developmentaliii) Consultancy and managerial supportiv) Training & Research2) LUB (Laghudyog Bharti): It was founded in 1995 to promote and safeguard the interest of tiny andsmall scale industries. It has been given representation on the national and state level governmentbodies responsible for the development of SSIs. It is responsible to undertakei) Entrepreneurial trainingii) Support for technology upgradationiii) Marketing services.However, it would be better for LUB to take necessary steps in channelizing resources from its members.Sufficient fund is necessary to meet out growing needs of the above functions.3) FASH (Federation of Associations of Small Industries of India):It was promoted in 1959 to represent the problems of SSIs with the government and liaising with otheragencies involved in promotion of SSI sector. Its objectives are as follows:i)To promote the development of small scale tiny and cottage industries ii) To cooperate with industrial business, educational institutions in collecting and exchanging:information pertaining to the small scale sector,iii) To undertake professional, technical and management consultation services;iv) To undertake studies, surveys and research assignments,(v) to further the cause of small industries by interacting with Union and State Governments and otherbodies( vi) To establish and operate trade centers display centers, sub-contract exchanges and otherpromotional institutions for the benefit of the small scale sector and

26. vii) To establish test centers, laboratories and common facility centers for the SSI sector. 4) WASME (World Association for Small and Medium Enterprises): It was established in 1981 to ensurebusiness, cooperation among its members. Its membership represents chamber of commerce, smallindustries development corporations, financial institutions and commercial banks and other StateGovernment agencies of developing countries. It facilitates technology transfer, manpower trainingaregister of experts/consultants, organizing seminars and conferences and acting as a clearingfinformation and marketing services etc.5) FICCI (Federation of Indian Chambers of Commerce and Industry): The FICCI was established in 1927as the national agency through which the chambers of commerce and trade association in India couldcrystallize their views on current economic problems. It serves as the coordinating agency for thecommercial and industrial Interests as represented by various chambers of commerce and tradeassociations. The representative functions occupy the foremost place in the activities of the federation.The Federation maintains very close relations with the Union Government.6) ACCH/ASSOCHAM(Associated Chambers of Commerce & Industry of India): ASSOCHAM is anotherapex organization like -FICCI to which some of the older chambers of commerce are affiliated. It wasfounded in December 1920. It seeks to make the businessmens voice heard and to ensure that theirviews are taken into account in the molding of the nations economic life. It also undertakes persuasiveactivities directed to the administrative departments and to the law makers with a view-to acquaintthem with the viewpoint of the member.7) PHDCCI (PHI) Chambers of Commerce and Industry): It was promoted in 1905 to represent theinterest of trade and industry in northern India. It provides a meeting ground for representatives ofcommerce and industry with the government. It also constitutes various expert committees and taskforces through which members representing various interest, pool knowledge and experience arerequired to work in the interest of business community. The association has also launched a new systemin 1995, Small Industries and Business (SIB) Help Line to assist and support the SSIs. It is responsible forthe coordination between SSI units and commercial banks and financial institutions.8) CII (Confederation of Indian Industry): It was created in 1992 by changing the name of Confederationof Engineering Industry (ECI). The CEI itself was a creation of two merging associations like IndianEngineering Association (1912) and Engineering Association of India (1942) in 1974. It is responsible foradvisory, consultative and representative services to industry and the government. It has been givenrepresentation on major policy formulating ,bodies, related with the industry. It is also expected to workas a nodal agency for international.9) FIEO (Federation of Indian Exporters Organization): This is an apex organization set up in October1965 by the Ministry of Commerce. It represents Indian entrepreneurs spirit of enterprise in the globalmarket. The Federation performs activity of common nature such as sending trade delegationsabroadand inviting trade delegations from foreign countries, sponsoring commodity and market surveysC011eOtill-and dissemination of commercial intelligence