13 – Institutions Supporting Small Business Enterprises

Introduction

The government recognises the importance of entrepreneurs in the country’s industrial development, mainly through Small Scale Industries (SSIs). Regarding job creation, foreign exchange profits, percentage of industrial output, and contribution to national income, SSIs are critical to the Indian economy. The Indian and state governments offer a variety of unique facilities and incentives.

The incentives not only encourage entrepreneurs to start new businesses but also help to improve the economy’s entrepreneurial base. Due to insufficient infrastructure and other support services, young entrepreneurs confront several challenges.

The government provides a bundle of services through its specialised institutions, encouraging entrepreneurs to take advantage of the numerous facilities and to start and grow businesses. This package includes financial aid, marketing assistance, technical guidance, training, and technology upgrades, among other things. Institutional incentives, it is believed, would play a vital role in developing small businesses and ensuring their self-sustained growth.

13.1 Institutions at the National Level

The following are the numerous federal institutions that assist small businesses:

13.1.1 Small-Scale Industries Board

The SSI Board is the Government of India’s apex non-statutory advisory body, established to advise on all issues relating to the SSI sector. It provides a venue for its members to interact to foster collaboration and inter-institutional linkages and advises the government on different policy issues relevant to the sector’s development.

13.1.2 Organization for the Development of Small Businesses

The Small Industry Development Organization is another name for the Office of the Development Commissioner (Small Scale Industries) (SIDO). It is the apex body for aiding the Ministry in designing, coordinating, executing, and monitoring policies and programmes for promoting and developing small-scale industry. It was created in 1954. It is responsible for around 60 offices and 21 autonomous organisations, including Tool Rooms, Training Institutions, and Project-cum-Process Development Centres, among others. The following are the functions of such central bodies:

1. Each state has one or more Small Industries Service Institutes (SISIs). These institutes offer technical assistance and consulting, run entrepreneurial development programmes, and engage in export promotion and liaison operations. To the advantage of enterprises, emphasis is also placed on the execution of modernization, energy savings, quality control and upgrading, and pollution control programmes.
2. The Regional Testing Centre (RTC) offers testing services to improve product quality.
3. Tool Rooms/Tool Design Institutes (TRs/TDIs) aid SSIs with technical upgrades and supply high-quality tooling by developing and manufacturing tools, moulds, jigs & fixtures, components, and other items.
4. Product-Current-Process Development Centres (PPDCs) investigate their difficulties and provide technical assistance.
5. Central Footwear Training Institutes (CFTIs) encourage exports by developing footwear designs.

As a result, the DC SSI office’s principal functions include:

1. Advising the government on policy formulation for promoting and developing small-scale industries.
2. Providing small-scale units with techno-economic and managerial consulting and standard amenities.
3. Providing infrastructure and facilities for technology advancement, modernisation, and quality enhancement.
4. Human Resource Development through Training and Skill Upgrading
5. Providing economic data and analysis.
6. Maintaining close ties with the Central Ministries, Planning Commission, State Governments, Financial Institutions, and other organisations involved in developing small businesses.
7. Developing and coordinating strategies and programmes for developing small-scale enterprises as complements to large- and medium-scale businesses.
8. The Prime Minister Rozgar Yojna (PMRY) Scheme is being monitored.

13.1.3 National Small Industries Corporation (NSIC)

The National Small Industries Corporation Ltd. was established in 1955 to promote, assist, and support the establishment of small-scale industries in the country, focusing on commercial issues. NSIC continues to implement its many programmes and projects nationwide to support the SSI units. The Corporation has aided the industry with the following programmes and activities:

1. Composite Term Loan Scheme: To develop the small-scale sector, NSIC has launched a Composite Term Loan Scheme for existing and potential entrepreneurs to acquire land and buildings, machinery and equipment, and operating capital all under one roof.
2. Hire Purchase Scheme: Provision of indigenous and imported machinery and equipment on easy terms, specifically focusing on women entrepreneurs, marginalised groups, handicapped and ex-servicemen, and SC/ST entrepreneurs.
3. Equipment Leasing: This is done primarily to assist SMEs in expanding their capacity, diversifying their product lines, and/or upgrading their technology to meet market demands.
4. Working Capital Finance: This scheme intends to supplement the working capital of viable and well-managed units on a case-by-case basis in case of unforeseen needs, allowing them to pay for consumables, spares, and production-related overheads such as power bills and statutory dues.
5. Raw Material Assistance: It makes scarce raw materials more accessible through the domestic market or importation.
6. Marketing Support Program: NSIC has been attempting to act as a major agency in bringing SMEs closer to various Government purchasing agencies, instilling confidence in purchasing agencies in SMEs’ ability to supply goods and services of the required quality at reasonable prices and on agreed-upon delivery schedules.
7. Tender Marketing: On behalf of Small-Scale Industries/Enterprises, it engages in bulk local/global tenders. It is designed to help SSIs that have the potential to make high-quality products but lack brand equity, reputation, and financial resources.
8. Integrated Marketing Support: NSIC has been running an Integrated Marketing Support Program in which NSIC discounts bills for supplies made by small-scale units to eligible purchasers for up to a particular amount.
9. Government Stores Purchase Program: Units that register with the Corporation to participate in the government purchase programme are considered at or with individual purchase organisations and receive all of the benefits, such as free tender forms, no earnest money, no security deposits, and so on.
10. Technology Upgrading: Five NSIC-Technical Service Centers provide excellent technical support to SSIs/SMEs. The Council of Scientific and Industrial Research has recognised these centres for in-house R&D. NSIC has established a Technology Transfer Centre. The Technology Transfer Centre provides the most up-to-date information to online connections and computer networks on matching technology seekers and technology providers.
11. Software Technology Parks: Under the Software Technology Parks of India, NSIC has established an NSIC-STP Complex (STPI). Software Technology Parks help small businesses set up shop to export 100% of their software, and they also serve as a focal point for activating software exports directly through NSIC. NSIC-STP provides high-speed communication services via VSNL/SATCOM networks, built-up office space, uninterrupted power supply, backup power via DG sets, a contemporary business centre, and other administrative assistance.
12. Exports: NSIC offers a comprehensive package of export assistance, testing facilities, pre-shipment credit, export incentives, and other services. In addition, it offers exposure to SSE products at trade shows, buyer-seller meetings, and other events.

13.1.4 Khadi and Village Industries Commission (KVIC)

An Act of Parliament established the Khadi and Village Industries Commission (KVIC) in April 1957. The KVIC is responsible for designing, promoting, organising, and implementing programmes in rural regions to develop Khadi and other village industries in collaboration with other rural development organisations as needed.

13.1.5 Small Business Extension Training at the National Institute of Small Business (NISIET)

Hyderabad’s National Institute of Small Industry Extension Training (NISIET) provides training, consulting, research, teaching, extension, and information services.

The Institute, an autonomous part of the Ministry of Small-Scale Industries and Agro-Rural Industries (SSI & ARI), works to fulfil its stated goals through various activities, including training, consultation, research, education, and extension and information services.

A Research and Development Centre: In 1984, the United Nations Industrial Development Organization (UNIDO) recognised SIET as a respected performance institute in its Centres of Excellence Scheme for extending help. In the same year, it was also given national status, and SIET Institute became NISIET.

The government of India established the NISIET as an apex institute in 1960 with the mission of assisting in promoting, developing, and modernizing small and medium enterprises (SMEs) to achieve success and prosperity. The institute’s broad expertise in entrepreneurship, policy, technology, management, and information services has helped SMEs confidently tackle the challenges posed by globalisation and the impact of IT on their operations. NISIET’s spectacular role as a global organisation in putting SMEs on a growth path has benefited not just the Indian SME sector, but also emerging countries worldwide in fostering self-employment and enterprise development. The institute is constantly changing and adapting to meet the changing needs of SMEs, providing them with solutions in the form of consulting, training, research, and education to help them maintain their competitive edge in an ever-changing market.

13.1.6 The National Institute for Entrepreneurship and Small Business Development is a non-profit organisation dedicated to promoting entrepreneurship and small business development (NIESBUD)

New Delhi’s National Institute for Entrepreneurship and Small Business Development (NIESBUD) offers national and international training in various fields and disciplines.

The National Institute for Entrepreneurship and Small Business Development (NIESBUD), an autonomous institution under the Ministry of Micro, Small and Medium Enterprises of the Government of India, has partnered with the International Finance Corporation, a member of the World Bank Group, to work on various entrepreneurship-related projects in India.

The National Institute for Entrepreneurship and Small Business Development (NIESBUD) is a premier Institute under the Ministry of MSME that coordinates, trains and oversees the activities of various institutions and agencies involved in Entrepreneurship Development, particularly in the small industry and small business sectors. In the states of West Bengal, Uttarakhand, Uttar Pradesh, Madhya Pradesh, Haryana, Delhi, Rajasthan, Orissa, Bihar, Jharkhand, Chhattisgarh, Punjab, J&K, Gujarat, and the Union Territory of Chandigarh, NIESBUD has launched a significant project for the entrepreneurship and skill development of 35,000 youth by December 2011. The Ministry of MSME operates many institutions, including NIESBUD. Two other entrepreneurship development institutions, the National Institute for Micro, Small and Medium Enterprises (NI-MSME) in Hyderabad and the Indian Institute of Entrepreneurship in Guwahati, are assisting the Ministry in fostering entrepreneurial culture across the country.

Identifying Skills for the Best Job Opportunities

The skills have been determined based on market needs to achieve maximum employment. Within this fiscal year, the Institute hopes that at least 25% of the participants will be hired. Housekeeping and Hospitality, Retail Management, IT & ITES, Light Engineering, Fashion Design, Artificial Gems & Jewellery, and Cosmetology and Beautician are the top skills recognised. The Ministry of Education funds most of these training programmes through the ‘Assistance to Training Institutes’ scheme. The Ministry of MSME runs the Rajiv Gandhi Udyami Mitra Yojana (RGUMY), encouraging participants to seek self-employment and providing hand-holding support. To achieve the highest level of quality, the programmes are closely reviewed.

The programmes, for example, are closely supervised by the District Administration, Industry and Business Associations, Bankers, and Placement Agencies.

Forum for the Exchange of Ideas on a National and International Scale

Since 1983, NIESBUD has been offering training programmes for national and international participants and conducting research, assisting, and consulting new and current MSME businesses.

For example, NIESBUD has been collaborating with many ministries, such as the Ministry of Labour and Employment, Rural Development, Social Justice and Empowerment, and others, to help them achieve their goals.

Encouragement of Entrepreneurship

NIESBUD has assisted the federal and state governments and agencies in supporting entrepreneurship in their various regions by providing counselling, consulting, and other services. It has also assisted and advised several Asian and African countries.

NIESBUD recently held over 100 workshops at various Engineering Colleges, Management Institutions, and other locations to raise awareness of the power of entrepreneurship among students and staff. Thousands of students and hundreds of faculties understood that the country’s ultimate need is not to create another employee but to construct entrepreneurs who, in turn, will employ many people.

13.2 Institutions at the State Level

State-level institutions implement a variety of promotional and developmental projects/schemes, as well as a variety of supporting incentives, to promote and develop the small-scale sector in their respective states. These are carried out by the State Directorate of Industries, supported by District Industries Centres (DICs) that carry out Central/State level initiatives. The State Industrial Development Corporations also meet the demands of the small-scale sector.

13.2.1 State Industrial Development Corporations (SIDCs)

SIDCs were formed as totally owned corporations under the Companies Act of 1956 to promote industrial development in their respective states. The following are the key roles of SIDCs:

1. Providing term financing to all state-based small, middle, and large industrial firms.
2. Underwriting and directly subscribing to shares and debentures of debentures issued by state-owned industrial firms.
3. Conducting feasibility studies and market research and encouraging private entrepreneurs to establish industrial operations in the state.
4. Collaborating with private entrepreneurs to establish joint and aided industrial ventures.
5. Implementing the state’s ‘Industrial Development Bank of India’ seed capital scheme.

13.2.2 State Directorate of Industries (SDIs)

Under India’s constitution, small-scale industry development and promotion are state subjects. As a result, the Directorate of Industries in each State bears significant responsibility for executing policies and support programmes. It operates under the direction of SIDO and the relevant central entities. It has regulatory as well as developmental roles. At the district sub-division and block level, it operates through a network of District Industries offices, industries offices, and extension offices.

The following are the key functions of the Directorate of Industries:

1. Small-scale unit registration
2. financial assistance
3. distribution of scarce and Indigenous raw materials to industrial units
4. granting essentiality certificates for raw material imports
5. establishment of industrial estates and industrial cooperatives
6. development of industrial infrastructure
7. conducting industrial surveys and collecting information
8. arranging concessions and incentives for industries
9. Oversight of village and small-scale industries
10. Maintaining contact with other industrial development organisations

13.2.3 District Industries Centres (DICs)

The District Industries Centres initiative began in 1978 to promote cottage and small-scale industries throughout rural and small towns. These centres serve as hubs, bringing together all the services and support that small-scale and village entrepreneurs demand under one roof. These serve as an integrated administrative framework for industrial growth at the district level.

The following are the primary functions of DICs:

1. It surveys a district’s industrial potential, considering raw material availability, human capabilities, infrastructure, demand, and other factors.
2. It creates an industrial development action plan.
3. It evaluates the numerous investment offers that entrepreneurs submit.
4. It advises and aids enterprises in purchasing appropriate machinery, equipment, and raw materials.
5. It advises entrepreneurs on effective marketing techniques.
6. It maintains ties with research and development institutions to advance technology, improve quality, and provide industrial training, among other things.
7. It organises workshops for craftspeople.
8. It has been given operational responsibility for special programmes to give educated unemployed adolescents self-employment opportunities.

13.2.4 India’s Small Industries Development Bank (SIDBI)

Credit is possibly the most important of all the factors that go into running a business. The best-laid plans can be undone if sufficient funds are unavailable at the correct time. SSIs require finance not only to run the company and meet operating needs but also for diversification, facility modernization/upgrading, capacity development, and other purposes. When any episodic event occurs, such as a large order, rejection of a consignment, undue delay in payment, etc., the credit problem becomes even more critical for SSIs. SSIs typically operate on a tight budget, with the owner’s contributions, loans from friends and family, and some bank credit as supplements.

In the early days of SSI promotion, the Government of India recognised the need for a focused credit policy for SSIs, and RBI was instrumental in developing a multi-stage approach/financial system for credit dispensation to various sectors of the economy, such as agriculture, industry, exports, and SSIs. As the apex refinance bank, SIDBI was founded in 1990. The SIDBI has five Regional Offices and 33 Branch Offices that run various programmes and projects. SIDBI’s financial aid to the small-scale industry is delivered in two ways: directly and indirectly.

Indirect Assistance

1. SIDBI’s financial assistance to the small business sector is generally delivered through the current credit delivery system, which includes state-run institutions and rural and commercial banks.
2. SIDBI helps Primarily Lending Institutions refinance and lower their bills (PLI).
3. There is help available for:
   1. Marketing of SSI product
   2. Setting up of new ventures
   3. Availability of working capital
   4. Expansion
   5. Modernization
   6. Human resource development
   7. Diversification of existing units for all activities

Direct Assistance

1. Loans are provided for start-ups, diversification, technological upgrades, modernisation, and expansion of well-run small businesses. Private sector assistance is also accessible.
2. A maximum debt-to-equity ratio of 3:1 is allowed in the small-scale sector.
3. Export-oriented small-scale firms can also get a foreign currency loan to help them buy equipment.
4. SIDBI also assists entrepreneurs with venture financing for their creative businesses if they have a strong management team, a long-term competitive edge, and the potential for above-average profitability and a high return on investment.

SIDBI’s New Initiatives

• Technology Bureau for Small Enterprises was established to oversee Technology Transfer, Matchmaking Services, Finance Syndication, and facilitating joint Ventures.
• SIDBI Foundation for Micro Credit was established to provide financial assistance to the poor and meet the microfinance sector’s emerging needs, particularly in rural areas.

13.3 Other Organizations

The following are some more non-profit organisations that help small businesses:

13.3.1 National Bank for Agriculture and Rural Development

NABARD is an apex development bank with a mandate to promote and develop agriculture, small-scale enterprises, cottage and village industries, handicrafts, and other rural crafts by facilitating loan flow. Its role also includes supporting all other related economic activity in rural areas, promoting coordinated and sustainable rural development, and ensuring rural prosperity. NABARD is tasked with:

1. Providing refinance to lending institutions in rural areas to fulfil its position as a facilitator for rural prosperity.
2. Bringing about or encouraging institutional change.
3. Performing evaluations, monitoring, and inspections of client institutions.

Aside from this critical responsibility, NABARD also:

1. Serves as a coordinator for rural credit institution operations.
2. Provides aid in rural development to the government, the Reserve Bank of India, and other organisations.
3. Provides rural development banks, cooperatives, and organisations with training and research opportunities.
4. Assists state governments in meeting their goals of helping qualifying agricultural and rural development institutions.
5. Serves as a regulator for cooperative banks and regional reserve banks.

SSIs, artisans, cottage and village industries, handicrafts, and other linked enterprises can receive refinance help from State Cooperative Banks, Regional Rural Banks, and other approved institutions for all production and investment credit types. Aids SSI entrepreneurs in obtaining a loan to open SSIs in any part of the country.

13.3.2 Housing and Urban Development Corporation Ltd. (HUDCO)

A wholly owned subsidiary of the Government of India, HUDCO was founded in April 1970 as a private limited company and then transformed into a public limited corporation in 1986. The primary goal is to help with urban and social sector infrastructure, including the construction of housing facilities and, more recently, SSI infrastructure. HUDCO also supports the development of the building materials industry, as well as consulting, training, and technical help in this area.

13.3.3 Technical Consultancy Organizations (TCOs)

Founded in the 1970s and 1980s by all-India banking institutions to meet the consulting needs of SMEs and emerging entrepreneurs,. Preparing project profiles and feasibility studies, conducting industrial potential surveys, identifying potential entrepreneurs and providing technical and management assistance to them, conducting market research and surveys for specific products, conducting energy audits and energy conservation assignments, providing project supervision, taking on turnkey assignments, and providing export consultancy are some of the services provided.