Micro, Small and Medium

Enterprises (MSME) in India

Small-Scale Industries: DefinitionRole-Policy-Issues and Performance.

Topics for discussion

Meaning
SME-Rationale
Contribution of SME in Indian economy; role
of SME
Policy towards SME
Enabling SME towards competitiveness

Pertinent questions
How do small firms behave?
Role of small firms in economic development
Have they fulfilled their role?

What is Small?

Number of employees,
Capital investment,
Value of output,
Level of organization,
Technology,
Source of power,
Type and quality of products.....

Industrialization process
Artisan and household industry
Small industry
Large industry

Definition of SSI

More than 5 but less than 50 workers......

20 without power....10 with power....
100 w/o power....50 with power...
Turnover limits
Investment limit...

Changed definition
In India, the enterprises have been classified broadly into
two categories:
(i) Manufacturing; and
(ii) Those engaged in providing/rendering of services.
Both categories of enterprises have been further
classified into micro, small and medium enterprises
based on their investment in plant and machinery (for
manufacturing enterprises) or on equipments (in case
of enterprises providing or rendering services).

Changed definition
Manufacturing Sector Enterprises: Investment in plant & machinery

Micro Enterprises Does not exceed twenty five lakh rupees

Small Enterprises More than twenty five lakh rupees but does not
exceed five crore rupees
Medium Enterprises: More than five crore rupees but does not
exceed ten crore rupees
Service Sector Enterprises: Investment in equipments

Micro Enterprises Does not exceed ten lakh rupees:

Small Enterprises: More than ten lakh rupees but does not exceed
two crore rupees
Medium Enterprises: More than two crore rupees but does not
exceed five crore rupees
Source: Micro, Small, and Medium Enterprises Development Act, 2006.

SME in India-Importance

40 percent of production
95 percent of units
6000 products
34 percent exports
Growth rate 12 percent
6.41 percent contribution to GDP
10 lakh of investment on an average generates
46.2 lakhs worth goods or services (very high
output capital ratio)
Employment generation of around 650 lakhs

 SME has always grown on an average faster

than industries at 8-13 percent
Contribution to industrial production around
39-45 percent
Contribution to GDP 6-8 percent

Number of MSMEs

26.1 million

Number of Manufacturing Enterprises

18.8 million

Number of Service Enterprises

7.3 million

Number of Women Enterprises

2.1 million (8%)

Number of Rural Enterprises

14.2 million (54.4%)

Per unit employment

6.24

Per unit fixed investment

Rs.33.78 lakh

Per unit original value of Plant &

Machinery

Rs.9.66 lakh

Per unit gross output

Rs.46.13 lakh

Employment per one lakh fixed

investment

0.19

 Engines of Growth: Micro, Small and Medium

Enterprises (MSME) sector has emerged as a
highly vibrant and dynamic sector of the Indian
economy over the last five decades
Policy support required for Imparting greater
vitality and growth impetus to the Micro, Small
and Medium Enterprises (MSME) in terms of
output, employment and exports and instilling a
competitive culture based on heightened
technology awareness."

Global scenario of SME

In Brazil, MSEs represent 20% of the total GDP. Of the
countrys 4.7 million registered businesses, 96.8% are
MSEs andalong with the other 9.5 million informal
enterprisesthey employ 59% of the economically
active population.
Similarly, informal and micro enterprises account for
39% of labour force and contribute to 24% of the GDP
in South Africa; SMEs employ 27% of the labour force
and contribute 32% to the GDP; while large enterprises
employ 34% people and account for 44% of GDP. (Stats
SA 2000 and Abedian 2001).

Global scenario
SMEs comprise over 90% of all industrial units in
Bangladesh contributing between 80% and 85% of the
industrial employment and 23% of the total civilian
employment (SEDF, 2003). They contribute three-quarters
of the household income in both the urban and the rural
areas.
In Japan, SMEs employ more than 70% of the wage
earners, contributing over 55% of value added in the
manufacturing sector.
In Thailand in 2003, there were 2006528 enterprises of
which 99.5% were SMEs. These SMEs generated products
worth 38.1% of GDP and in 2003 they employed 60.7% of
Thailands working population.

Global scenario
The real importance of the SMEs, however,
can be seen in China where over 68% of the
exports come from the SMEs
China has created more SMEs in the last 20
years than the total number of SMEs in
Europe and the US combined.

Arguments for SME (SSI)

Desirable Characteristics

Labour intensity (employment generation, women employment)

Positive income distribution effects
Balanced regional development (industrial dispersion)
Entrepreneurship and managerial base
Flexibility in operations
Ability to Export
Innovation
Eco-friendly growth,
Technology adaptation
Utilization of local raw material
Complementary/ancillary to LSI
Small order quantities

 Survival difficult under normal market

conditions
Market inhibits growth
Frame policies to attack market
imperfections(capital, labour, land)-direct
interventions-supportive policy

Common Problems of a
heterogeneous industry
as identified by PM task group

Lack of availability of adequate and timely credit;

High cost of credit;
Collateral requirements;
Limited access to equity capital;
Problems in supply to government departments
and agencies;
Procurement of raw materials at a competitive
cost;

Problems.
Problems of storage, designing, packaging
and product display;
Lack of access to global markets;
Inadequate infrastructure facilities, including
power, water, roads, etc.;
Low technology levels and lack of access to
modern technology;

Problems
Lack of skilled manpower for manufacturing,
services, marketing, etc.;
Multiplicity of labour laws and complicated
procedures associated with compliance of such
laws;
Absence of a suitable mechanism which enables
the quick revival of viable sick enterprises and
allows unviable entities to close down speedily;
and
Issues relating to taxation, both direct and
indirect, and procedures thereof.

SME through the policies

One of the first countries to show special concern
towards SME

1948-1991: In all the Policy Resolutions from

1948 to 1991, recognition was given to the
micro and small enterprises, termed as an
effective tool to expand employment
opportunities, help ensure equitable
distribution of the national income and
facilitate effective mobilization of private
sector resources of capital and skills.

SSI Policy Support

47 items in 1967 to 873 items in 1984
Promotional and protective measure
Exclusive production whatever can be produced
on a small scale must be so produced
Technical and marketing support
Fiscal concessions (excise exemption)
Credit at subsidised rates (Priority Sector Lending
Programme of commercial banks)
Extension of business services by government
(infrastructure development and establishment of
institutes for entrepreneurial and skill development)

 Criteria

Technical feasibility
Manufacturing process simple (Labour intensive)
Meet demand
Semi-urban and rural environment
Improving competitiveness vis-a-vis LSI which has better
economies of scale, mass production, wider marketing
network, credit availability, promotional techniques

Ineffectiveness of these policies due to its thin spread,

discouraged growth of SSI into large ones and had a stunting
effect
These policies are now obsolete and inadequate

 In 1997
28 percent was the share of production in reserved
category by SSI
47-48 percent capacity utilzation
Less than half of the 6 lakh units were engaged in
production of reserved items
90 products produced by one company each, Quantity
produced was negligible
Value of product of 692 items as low as 100 million
Removal of QR...reserved items could be produced by MNC
and imported into country, but Indian LSI could not produce
it due to reservation.

Aim of policy support

Policies must be growth oriented,
Promote entrepreneurial entry,
Growth of enterprise
Technology upgradation and
Labour productivity

1991-1999
The new Policy for Small, Tiny and Village
Enterprises of August, 1991 laid the framework
for government support in the context of
liberalisation,
which sought to replace protection with
competitiveness to infuse more vitality and
growth to MSEs in the face of foreign
competition and open market.
Supportive measures concentrated on improving
infrastructure , technology and quality.

 1999 onwards: The Ministry of MSME [earlier

known as Ministry of Small Scale Industries
and Agro & Rural Industries (SSI & ARI) came
into being from 1999 to provide focused
attention to the development and promotion
of the sector.

MSMED Act, 2006

The Act also provides for a statutory consultative mechanism at
the national level with a balanced representation of all the sections
of stakeholders and with a wide range of advisory functions.
Establishment of specific funds for promotion, development, and
enhancement of the competitiveness of these enterprises;
notification of schemes/programmes, progressive credit policies
and practices;
preference to products and services of MSEs in the government
procurement;
more effective mechanisms for mitigating the problems of delayed
payments;
and a scheme for easing the closure of business by these
enterprises

Performance Evaluation
Productive efficiency
Cost
Productivity

Allocative efficiency
Labour intensity,
Employment,
Product mix

Performance of SSI
Year

Total MSMEs
(in lakhs)

Fixed
Investment
(in crores)

Production (`
crore)

Employment
(in Lakhs)

2008-09

285.16

6,21,753

8,80,805

659.35

2009-10*

298.08

6,93,835

9,82,919

695.38

2010-11#

311.52

7,73,487

10,95,758

732.17

Need for Greater Engagement with

MSEs
To Generate Large-scale Employment:
Across globe 70 percent of new jobs created
by SME
The employment intensity of the registered
units
investment of Rs 0.72 lakh is required for creating
one employment in MSME sector as against Rs
5.56 lakh in the large organized sector.

Checks migration

Status of Employment Generation

Among the MSEs in India, the dispersed food products
sector generates maximum employment (13.7% of
total employment in the MSE sector), followed by nonmetallic mineral products (10.9%) and metal products
(10.2%).
Per unit employment is highest (20) in units engaged
in beverages, tobacco, and tobacco products. Next
come cotton textile products (17)
The presence of MSEs across States is not uniform.
Tamil Nadu (14.5%) makes the maximum contribution
to employment followed by Maharashtra (9.7%), Uttar
Pradesh (9.5%), and West Bengal (8.5%).

To Sustain Economic Growth And

Increase Exports
GDP Growth target of 10 percent; MSE must grow at 12
percent
Non-traditional products account for more than 95%
of the SSI exports.
The performance of garments, leather, and gems and
jewellery units has been remarkable in the last decade.
The SSI sector dominates in export of sports goods,
readymade garments, woollen garments and knitwear,
plastic products, processed food, and leather products.
The US, Europe, and West Asia are the major export
destinations

For Making Growth Inclusive

The MSE sector is a microcosm of all
vulnerabilitiesit touches upon the lives of
women, children, minorities, SCs, and STs in
the villages, in the urban slums, and in the
deprived pockets of flourishing towns and
cities.
Empowers people to break the cycle of
poverty and deprivation

Challenges
Heterogeneous
Traditional crafts to high-tech industries

Dispersed
accessing government schemes
little bargaining power
exploited by the middlemen, unit owners, and big business houses

Mostly Unorganized
Not able to take up aggressive marketing
Market access
quality, bulk production, and inability of meeting big orders,
packaging

Inadequate access to credit and working capital

14.2% of the registered and 3.09% of the unregistered MSEs
availed of bank finance.
The percentage share of the MSEs (erstwhile SSI) in non-food Bank
Credit declined from 15.1% in 199091 to 8.0% in March 2007

Challenges.....
Non-availability of quality raw materials and
packaging facilities on a timely basis:
dyes, yarn, power, etc..along with lack of credit
puts the SME into shark middlemen and money
lenders and pushes them into low
competitiveness

Challenges.......
Insufficient market research, linkages, and
design inputs
Pushes them to rely on petty traders, middlemen
or big business for marketing their products
Example: Most people are unaware of Chamba Chugh,
natural fibre purses and cushion covers, passion fruit
pickles, Bhuvastra (garment of the Earthmade in coir),
Chamba Chappals, Camel Hair Carpets (which do not burn)
of Jodhpur, and the intricately carved tables of Ladakh.

Technical improvements to meet the market

demand; advertising

GLOBALIZATION: challenges and

opportunities
MNC, LSI: Aggressive marketing-traditional sector
fails to compete
Tool for development: manufacturing of
engineering and automobile products have
shown excellent growth in the past decade due to
their expertise in supplying OEM assemblies and
sub-assemblies, components, etc
Big global market for handcrafted products
GI, TK and patents to prevent cheap imitations

Technology Upgradation And

Achieving Economies Of Scale
Investment limit
Loss of fiscal benefits when they move
upwards towards ME
Competition from cheap imports
Access to information across globe imperative
Technology, literature, suppliers etc

Rehabilitation of Sick SSI Units

Reasons: lack of demand, shortage of working
capital, non-availability of raw material, power
shortage, marketing problems, etc.
Three yardsticks used to measure sickness, viz.,
(i) delay in repayment of loan over one year,
(ii) decline in net worth by 50%, and
(iii) decline in output in last three years,

7.82% were sick

Kerala, Tamil Nadu, Andhra Pradesh, Karnataka,
and Maharashtra together accounted for 54.28%

Eleventh plan approach

SSI: Sustained engine for growth and inclusive growth and
employment
CAGR target 15.4 percent; employment 4 percent
Move from welfare approach to empowerment
livelihood and social security
Relationship between LSE and SME should be that of
complementarities and not that of adversity
Organize the SME into clusters
Cluster financing;
Collateral free financing
Aggressive marketing
GI mapping and registration

12th Plan approach paper

Create enabling environment

Reduce subsidies, level playing field
Cluster approach
Innovation and creativity
Mitigate business risks for start ups
Infrastructure
Access to national and international markets...
Tool rooms, marketing support, design clinics,
IPR, IT etc..

Twelfth Plan Approach

Credit: Timely, adequate and affordable credit
Branches near clusters;
Credit rating,
Equity support, venture capital and angel funds;
SME exchange;
Credit Linked Capital Subsidy Scheme

Technology
Technology and Quality Upgradation Support to MSMEs
substantial reduction in cost of manufacturing by
enhancing labour productivity, reducing material
wastage and minimising energy consumption.
R&D; cluster development
Design Clinics Scheme for MSMEs
Acquisition and up gradation
Multi-layered support provision of technology
PPP
modular industrial estates with plug and play facilities
Lean Manufacturing Competitiveness Programme for
MSMEs(Transport, inventory, motion, waiting,
overproduction, over processing, defects)
Promotion of Information & Communication Tools
(ICT) in Indian MSME Sector

Competitiveness
The programmes include:
setting up of design clinics,
application of lean manufacturing technologies
for increasing competitiveness of firms by
systematically identifying and eliminating waste
throughout the business cycle.
These programmes will be demand driven and
will be implemented in the PPP mode in selected
industrial clusters.

 Technology upgradation: testing centres, and

autonomous organizations such as the Tool
Room, Product and Process Development centres
promote new and emerging technologies, assess
present levels of technology and their
upgradation, set up technology information
centres/data banks and an IT portal for
information dissemination to carry out detailed
technology audits.

Infrastructure Development
Cluster based intervention: soft interventions (viz.
technology, marketing, exports & skill
development) and hard interventions (viz. setting
up of Common Facility Centre (CFC), etc.).
Marketing infrastructure
Modular industrial estate
Quality assurance
Tool rooms, testing centres etc..
Infrastructure deficiency: power supply, quantity
and quality, tariff differences to be looked into

Marketing and Procurement

Marketing Assistance and Technology
Upgradation Scheme for MSMEs;
Most important tool of business development
Gamut of aspects: packaging, labeling, trade mark, bar
coding, brand building, advertisement, domestic &
international exhibitions, buyer-seller meet,
marketing intelligence, e-marketing and customer
service
Relative advantages by LSE
widening and deepening of international markets
Global competitiveness
Export potential/Export Promotion
Global foot print-offshoring

Skill Development & Training

Large pool of human resource
upscale the training capacities
Spreading facilities in backward areas
Certified trainers
Web based MIS
Scientific development of training programs
Self-sustaining in long run
Enabling first generation entrepreneurs
Support facility for start ups

National Manufacturing
Competitiveness Programme
Building Awareness on Intellectual Property
Rights for the Micro, Small & Medium Enterprises
(MSMEs)
Scheme for Providing Support for Entrepreneurial
and Managerial Development of SMEs through
Incubators
Enabling Manufacturing Sector be Competitive
through Quality Management Standards (QMS)
and Quality Technology Tools (QTT):

Procurement policy
MSE- Cluster Development Programme
Credit Guarantee Scheme
Credit Linked Capital Subsidy Scheme for
Micro and Small Enterprises (CLCSS) for MSEs
Fiscal Concessions
Strengthening of Database
Inclusiveness

Policy Environment
Union Budget 2012-13
Targeted Tax-free bonds for financing infrastructure
projects were raised to `60,000 crore in 2012-13. This
includes `5,000 crore earmarked for SIDBI.
To enhance availability of equity to MSME sector,
`5,000 crore India Opportunities Venture Fund would
be set up with SIDBI.
With the objective of promoting market access of
MSEs, the Government has approved a policy which
requires ministries and Central Public Sector
Enterprises to make a minimum of 20% of their annual
purchases from MSEs. Of this, 4% will be earmarked
for procurement from MSEs owned by Schedule
Caste/Schedule Tribe entrepreneurs.

 The turnover limit for compulsory tax audit of accounts as

well as for presumptive taxation would be raised from `60
lakh to `1 crore for Small & Medium Enterprises.
In order to augment funds for SMEs, capital gains tax on
sale of a residential property would be exempt, if the sale
consideration is used for subscription in the equity of a
manufacturing SME company for purchase of new plant
and machinery.
Considering the shortage of skilled manpower in the
manufacturing sector and to generate employment,
weighted deduction at the rate of 150% of expenditure
incurred on skill development in manufacturing sector in
accordance with specified guidelines would be provided.

 In order to improve the flow of institutional

credit for skill development, a Credit
Guarantee Fund would be set up. This will
benefit youth in acquiring market oriented
skills.
EPCG scheme, lower interest rate, zero tax
rates, promotion of SME in NE states, duty
free import etc remain

Clusters
Related firms and industries have tended to locate in close
geographical proximity for a number of reasons.
In his 1916 economic text, Alfred Marshall was one of the first to
see the benefits of spatial clustering: the existence of a pooled
market for specialized workers; the provision of specialized inputs
from suppliers and service providers; and the rapid flow of
business-related knowledge among firms, which results in
technological spillovers.
It may be difficult to predict where clusters will emerge beforehand,
but their growth is easier to predict due to the benefits gained from
the strategy.
A variety of terms are synonymous to a cluster; these include colocation, industrial districts, and innovative milieus.

Improving competitiveness of SME

through Clusters-

Clusters are geographic concentrations of interconnected companies

or institutions that manufacture products or deliver services to a
particular field or industry.
Clusters typically include companies in the same industry or
technology area that share infrastructure, suppliers, and distribution
networks.
Supporting firms that provide components, support services, and
raw materials come together with like minded firms in related
industries to develop joint solutions and combine resources to take
advantage of market opportunities.
These are groups of related businesses and organizations
sometimes direct competitors, but more often operating in a
complementary manner.
They may comprise more than just one industry classification, and a
true cluster is more than just a supplier-producer-buyer model.

 Pioneering contribution for Cluster Development Approach

(CDA) were made by Porter (1990, 1998), Harrison (1992),
Humphrey and Schmitz (1995), Nomisma (1996) and Tewari
(1997).
International experiences show that micro, small and medium
enterprises are unable to face competitive pressure because
of their isolation and ineffective linkages with relevant
support organizations and commercial service providers.
In developed countries like Italy, USA, France and Germany,
clusters of SMEs bound together in strong and dynamic
networks and relying upon strong linkages with relevant local
/ national support institutions have proved competitive in the
global context.
Cluster exists in developing countries too like India, Brazil,
Peru & Mexico.

 Competitiveness of firms and location-Micheal

Porter diamond model (see the material
emailed earlier)

 three important activities:

increased productivity (through specialized
inputs, access to information, synergies, and
access to public goods),
more
rapid
innovation
through
cooperative
research
and competitive striving, and
new business formation filling in niches and
expanding the boundaries of the cluster map

Why Clusters are Important to Regions

Clusters generate wealth, exports, jobs, sources of
information
Firms are attracted to clusters because of:
economies of scale
productivity advantages
marketing and other competitive advantages

Globally, clusters are driving regional growth

Sparks innovation

Clusters offer special opportunities to better

provide assistance by:

reaching and educating all competitive

companies in a sector
accelerating the learning curve and
confidence with opportunities for firms to
learn from firms
offering a format for delivering wellcoordinated services

 SME in India were vulnerable because it had

neither the size nor the technology advantage
to be able to withstand the competitive
pressure on it.
Strong protectionist regime, reduced
competitiveness.
SME marginalized due to severe competition
SME sector has been outperforming the larger
firms by a wide margin since the turn of the
century

Firms Cluster in One Place for Bottom

Line Reasons

Reduce transaction costs

Specialize
Exploit one anothers specialties
Increase rates of innovation
Pursue joint solutions to common problems
Build a common labor pool, technology, infrastructure
Learn collectively what it takes to be competitive

 A cluster is a sector targeted geographical

concentration of micro and/ or small & medium
enterprises (MSMEs/MSMEs), service providers and
institutions faced with common opportunities and
threats.
In other words, a cluster of MSMEs is a concentration
of economic enterprises, producing a typical
product/service or a complementary range of
products/services within a geographical area.
The location of such enterprises can span over a few
villages, a town or a city and its surrounding areas.

 A cluster in a district consists of 100 or more registered

MSME units which are engaged in manufacturing the
same product as per ASICC 2000 (at 5 digit-level).
There were 2443 clusters covering 321 products in
registered MSME sector.
These clusters had a share of 45.92% in total number
of units, 34.58% in total employment, 36.12% in
Original Value of Plant and Machinery, 33.64% in total
Market Value of Fixed Assets and 19.01% in total Gross
Output of registered MSME sectors

 There exists an Automotive Industrial Cluster in

Chennai where before and after intervention it is found
that there is increase in Infrastructure
Interrelationships, Technology Interrelationships,
Procurement Interrelationships, Production
Interrelationships and Marketing Interrelationships
and Lean Manufacturing techniques also implemented
in this cluster.
Gujarat reported the highest number of clusters with
369 clusters. States of Uttar Pradesh and Tamil Nadu
reported 359 and 350 clusters, respectively.

 According UNIDO (2005), there are around 400

industrial clusters and more than 3,000 rural and
artisan clusters in India.
The clusters are based on important industry groups:
machinery and parts manufacture (15 per cent);
textile (11 per cent) and chemical industry (10 per
cent).
regional spread of clusters, the highest concentration is
in Western India (42 per cent), followed by northern
India (38 per cent), Southern India (11 per cent) and
eastern India (9 per cent).
The concentration of clusters in western and northern
India can be attributed to the fact that these areas are
rich in entrepreneurial talent and are industrially well
developed.
Moreover, they are agriculturally developed; and they
provide a rich market base for the consumption of
goods produced in the SSI sector.

 Location-wise distribution of clusters produces

four categories:
Metropolitan city- based clusters; city-based
clusters; town-based clusters and small
town/rural area-based clusters.
80 per cent of the clusters are located either
in cities or towns.
Only 9.4 per cent (or 13 out of the 138
clusters) are based in rural or small towns.

 The SMEs emerged as competitive global players. Indian

auto component manufacturers have been successfully
supplying components to many domestic customers as well
as OEMs (original equipment manufacturers) such as Ford,
General Motors (GM), Daimler Chrysler and Fiat.
Auto component manufacturers (ACMs) such as Delphi,
Visteon, Caterpillar and Cummins have started procuring
components from many SMEs in India, which they find
capable of meeting high quality standards at competitive
prices.
Many small and medium size organisations are on the way
to becoming medium and larger ones.
Many SMEs are also trying the initial public offer (IPO)
channel to raise funds, but the capital market is still not
SME-friendly.
Financial support forthcoming in recent times

 In a recent study of SMEs, Sridharan (2006) noted that

the top 20 percent of the registered SMEs could be
comfortably plugged into the supply chain systems of
large organisations.
the future of the bottom 20 per cent of the registered
SMEs is uncertain due to the erosion of their market
share, and
the middle 60 per cent are not able align themselves
with the supply chain systems, though there is strong
demand from customers.
The top 20 per cent of SMEs are mainly from auto,
Pharma, engineering, power and apparel industries,
and these are facing different problems such as
funding, product quality and labour problems.
A major difficulty of the SME sector is that it is highly
differentiated with slender local power base

 According to ACMA (2007) reports, India occupies

second position in two-wheeler manufacturing in
the world (with 6.52 million units),
fourth place in passenger car segment in Asia
(with 1,209,654 units),
the largest three-wheeler manufacturer in the
world (with 374,414 units),
the fifth largest commercial vehicle manufacturer
in the world (with 350,033 units) and
the second largest tractor manufacturer in the
world (with 248,976 units) next to China.

 The National Manufacturing Competitiveness

Council (NMCC) was formed for providing the
infrastructure that would facilitate
implementation of industrial clusters.

 The creation of special economic zones (SEZs),

export-processing zones/cluster initiatives for
exporters and special concessions, facilities
like offshore banking units, enables exporters
to minimise their transaction costs and to
work in a hassle-free environment.

Chennai Auto Cluster

The Tamil Nadu State has a B to B environment,
producing everything from bicycles to battle tanks.
Tamil Nadu accounts for 21 per cent of passenger cars,
33 per cent of commercial vehicles and 35 per cent of
automobile components produced in India.
Indeed, Chennai is known as the Detroit of India.
Over 100 large companies in the auto and ancillary
industry are based in the State, maintaining highest
production norms by implementing internationally
recognised quality standards such as TPM and TQM.

 Chennai has been the destination of choice for

international automotive giants such as Ford, Mitsubishi
motors, Hyundai, Visteon, etc. and home to the
internationally acclaimed TVS Group, Rane Group, Ashok
Leyland, India Pistons and Amalgamations Group which
started their businesses in Chennai, before going on to
become world leaders in their own fields.
The success of these industries is hardly surprising,
considering that Tamil Nadu stands first in India in terms of
supply of manpower with skills in areas such as automobile
and production, electrical engineering, CAD/CAM etc.
The vision of Chennai auto cluster is to become a global
source for auto component supplies

 Chennai provides an excellent manufacturing

base for the auto component Industry.
Presently, it hosts more than 100 key players in
the auto component industry.
It is found that most of the firms in the Chennai
Cluster are small suppliers;
Tier 2 or Tier 3 suppliers; and replacement and
small job-shops.
Moreover, the local industry has a very strong
links with local technical and business schools in
the State.