Government Assistance to Small Industries and Small Business Units

Given the contribution of small business to employment generation, balanced regional development and the promotion of exports, the Government of India's policy has consistently been to establish, promote and develop the small business sector — especially rural, cottage and village industries in backward areas. Both the Central and State Governments actively promote self-employment in rural areas by helping with infrastructure, finance, technology, training, raw materials and marketing, and their schemes insist on the use of local resources, local raw materials and local manpower. This assistance can be grouped into institutional support and incentives.

A. Institutional Support

1. National Bank for Agriculture and Rural Development (NABARD). Set up in 1982 to promote integrated rural development, NABARD supports small industries, cottage and village industries and rural artisans through both credit and non-credit approaches, and offers counselling, consultancy, training and development programmes for rural entrepreneurs.

2. The Rural Small Business Development Centre (RSBDC). The first of its kind, set up by the World Association for Small and Medium Enterprises and sponsored by NABARD, the RSBDC works for socially and economically disadvantaged individuals and groups, providing management and technical support to current and prospective micro and small entrepreneurs in rural areas. It has run many programmes on rural entrepreneurship, skill-upgradation workshops, mobile clinics, trainers' training, and awareness and counselling camps, covering a large number of rural unemployed youth and women in trades such as food processing, soft-toy making, readymade garments, candle making, incense-stick making, two-wheeler repair and servicing, vermicomposting and non-conventional building materials.

3. National Small Industries Corporation (NSIC). Set up in 1955 to promote, aid and foster the growth of small business units, focusing on their commercial aspects, the NSIC:

• supplies indigenous and imported machines on easy hire-purchase terms;
• procures, supplies and distributes indigenous and imported raw materials;
• exports the products of small units and helps develop their export-worthiness;
• provides mentoring and advisory services;
• serves as a technology business incubator;
• creates awareness about technological upgradation; and
• develops software technology parks and technology-transfer centres.

A scheme of 'performance and credit rating' of small businesses is implemented through the NSIC with the twin objectives of (i) making small industries aware of the need for credit rating and (ii) encouraging them to maintain a good financial track record, so that they score higher ratings when they approach financial institutions for working-capital and investment needs.

Marketing Assistance Scheme. Because marketing is critical to the growth and survival of micro, small and medium enterprises, the Ministry of MSME — through the NSIC — provides marketing support to Micro and Small Enterprises under this scheme. Its broad objectives are to enhance the marketing capability and competitiveness of MSMEs; to showcase their competencies; to update them about the prevailing market scenario; to help form consortia of MSMEs for marketing; to give them a platform to interact with large institutional buyers; to spread awareness of government programmes; and to enrich their marketing skills. The marketing support under the scheme includes organising international technology exhibitions abroad and facilitating MSME participation in international exhibitions and trade fairs; organising domestic exhibitions and theme-based technology fairs; co-sponsoring exhibitions organised by other organisations and industry associations; arranging buyer-seller meets with bulk buyers such as the Railways, Defence and communication departments; running intensive campaigns and marketing-promotion events; and other support such as display centres, printed literature and catalogues, a marketing website/portal, publicity material, a suppliers/exporters directory, documentation of MSME success stories, market studies and the hosting of international delegations.

4. Small Industries Development Bank of India (SIDBI). Set up as an apex bank, SIDBI provides direct and indirect financial assistance under different schemes to meet the credit needs of small business organisations, and coordinates the functions of other institutions engaged in similar activities.

5. The National Commission for Enterprises in the Unorganised Sector (NCEUS). Constituted in September 2004, the NCEUS aims to recommend measures to improve the productivity of small enterprises in the informal sector, generate more sustainable employment (particularly in rural areas), enhance the sector's competitiveness in the global environment, and develop the sector's linkages with institutions for credit, raw materials, infrastructure, technology upgradation, marketing and skill development. Among the issues it has taken up are growth poles (clusters/hubs) for the informal sector, public-private partnerships for skilling, micro-finance, and social security for informal-sector workers.

6. Rural and Women Entrepreneurship Development (RWED). This programme promotes a conducive business environment and builds the institutional and human capacities needed to support the entrepreneurial initiatives of rural people and women. It creates a business environment that encourages such initiatives, enhances human and institutional capacities to foster entrepreneurial dynamism and productivity, provides training manuals for and trains women entrepreneurs, and renders other advisory services.

7. World Association for Small and Medium Enterprises (WASME). The only international non-governmental organisation of micro, small and medium enterprises based in India, WASME set up an International Committee for Rural Industrialisation to develop an action-plan model for the sustained growth of rural enterprises.

Besides these, several schemes promote the non-farm sector: subsidised-loan schemes for entrepreneurship such as the Integrated Rural Development Programme (IRDP) and the Prime Minister Rojgar Yojana (PMRY); skilling schemes such as Training of Rural Youth for Self Employment (TRYSEM); gender-focused schemes such as the Development of Women and Children in Rural Areas (DWCRA); and wage-employment schemes such as the Jawahar Rojgar Yojana (JRY) and food-for-work programmes, which create rural infrastructure and provide additional income to the rural poor, especially in the lean agricultural season. There are also schemes for specific industry groups such as khadi, handlooms and handicrafts.

8. Scheme of Fund for Regeneration of Traditional Industries (SFURTI). To make traditional industries more productive and competitive and to support their sustainable development, the Central Government set up this fund (with a ₹100 crore allocation) in 2005, to be implemented by the Ministry of Agro and Rural Industries with the State Governments. Its objectives are to develop clusters of traditional industries across the country, to build innovative and traditional skills, improve technologies, encourage public-private partnerships and develop market intelligence so as to make these industries competitive and sustainable, and to create sustained employment in traditional industries.

9. The District Industries Centres (DICs). Launched on 1 May 1978 to provide an integrated administrative framework at the district level, a DIC is the institution that provides all the services and support facilities an entrepreneur needs to set up small and village industries. Its main activities are identifying suitable schemes, preparing feasibility reports, arranging credit, machinery and equipment, providing raw materials and offering other extension services. Paying attention even to neglected groups such as rural artisans, skilled craftsmen and handloom operators, the DIC has emerged as the focal point for economic and industrial growth at the district level.

B. Incentives

The Government of India has always placed special emphasis on the industrial development of backward, tribal and hilly areas. Recognising that developing backward areas is a long-term process, several committees were appointed to identify backward areas and to suggest schemes for balanced regional development. Though the backward-area development programmes varied from state to state, together they added up to a significant package of incentives to attract industries to backward areas. The common incentives are:

• Land — every state offers developed plots for setting up industries (terms vary; some states charge no rent in the initial years, some allow payment in instalments).
• Power — supplied at a concessional rate of 50 per cent, and some states exempt such units from payment in the initial years. …