Executive Summary:

Role of Medium Scale Industries in the

Industrial development of Tumkur-A Study

Submitted by

Dr.Padmini S.V.
Assistant Professor
University College of Arts
Tumkur university
Tumkur 572 103.
Submitted to:
University Grants Commission
South Western Regional Office
Bangalore
August 2015

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Introduction:

Small and Medium Scale industries in the World:

Small and medium-sized enterprises (SMEs; sometimes also small and medium

enterprises) or small and medium-sized businesses (SMBs) are businesses whose

personnel numbers fall below certain limits. The abbreviation "SME" is used in the

European Union and by international organizations such as the World Bank, the

United Nations and the World Trade Organization (WTO). Small enterprises

outnumber large companies by a wide margin and also employ many more people.

SMEs are also said to be responsible for driving innovation and competition in

many economic sectors.

Petrakis and Kostis (2012) explore the role of interpersonal trust and knowledge in

the number of small and medium enterprises. They conclude that knowledge

positively affects the number of SMEs, which in turn, positively affects

interpersonal trust. Note that the empirical results indicate that interpersonal trust

does not affect the number of SMEs. Therefore, although knowledge development

can reinforce SMEs, trust becomes widespread in a society when the number of

SMEs is greater.

Definition around the world

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European Union

The criteria for defining the size of a business differs from country to country, with

many countries having programs of business rate reduction and financial subsidy

for SMEs. According to European Commission, the SME are the enterprises that

follow this definition:

Table 1:

Company Employees Turnover Balance Sheet

category Total

Medium-sized < 250 ≤ €50 m ≤ €43 m

Small < 50 ≤ €10 m ≤ €10 m

Micro < 10 ≤ €2 m ≤ €2 m

The above table gives the details of Company category,employees,turnover,

balance sheet total.

Table: 2

Business Size definitions

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 AUS US EU

Minute/Micro 1-2 1-6 <10

Small <15 <250 <50

Medium <200 <500 <250

Large <500 <1000 <1000

Enterprise >500 >1000 >1000

The above table gives the information about definition of

inute/micro,small,medium,large and enterprise in Australia,USA and EU.

Egypt:

The data is part of Egypt's 2012/13 economic census on establishments ranging

from small stalls to big enterprises. Economic activity outside the establishments –

like street vendors and farmers, for example – were excluded from the census.

The results show that Egypt is greatly lacking in medium-sized businesses.

Seventy percent of the country's 2.4 million businesses have only one or two

employees. But less than 0.1 percent – only 784 businesses – employ between 45

to 49 people.

Kenya

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In Kenya, the term is MSME stands for "micro, small and medium enterprises".

Maximum number of employees = 10000.

Micro Enterprises = up to 10 employees Small = 10 to 50 Medium = 150 to 1000

Nigeria

The Central Bank of Nigeria defines small and medium enterprises in Nigeria

according to asset base and number of staff employed. The criteria are an asset

base between N5 million and N500 million, and a staff strength between 10 and

100 employees.

Somalia

In Somalia, the term is SME (for "small, medium and micro enterprises");

elsewhere in Africa, MSME stands for "micro, small and medium enterprises".

Maximum number of employees and maximum revenue it generates.

South Africa

In the National Small Business Amendment Act 26 of 2003, micro-businesses in

the different sectors, varying from the manufacturing to the retail sectors, are

defined as businesses with five or fewer employees and a turnover of up to R100

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000 ZAR. Very small businesses employ between 20 and 50 employees, small

businesses employ between 21 and 50 employees. The upper limit for turnover in a

small business varies from R1 million in the Agricultural sector to R13 million in

the Catering, Accommodation and other Trade sector as well as in the

Manufacturing sector, with a maximum of R32 million in the Wholesale Trade

sector.

Medium-sized businesses usually employ up to 200 people (100 in the Agricultural

sector), and the maximum turnover varies from R5 million in the Agricultural

sector to R51 million in the Manufacturing sector and R64 million in the

Wholesale Trade, Commercial Agents and Allied Services sector.

A comprehensive definition of an SME in South Africa is therefore any enterprise

with one or more of the following characteristics:

 Fewer than 200 employees

 Annual turnover of less than R64 million

 Capital assets of less than R10 million

 Direct managerial involvement by owners

Small and Medium Scale Industries in India:

Asia

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India

Under section 7 of the Micro, Small and Medium Enterprises Development

(MSMED) Act, 2006, the Indian government defined the size of micro, small, and

medium enterprises as:

(a) In the case of the enterprises engaged in the manufacture or production of

goods pertaining to any industry specified in the First Schedule to the

Industries (Development and Regulation)Act,1951,as---

(i) A micro enterprise,where the investment in plant and machinery does not

exceed twenty-five lakh rupees:

(ii) A small enterprise,where the investment in plant and machinery is more

than twenty-five lakh rupees but does not exceed five crore rupees; or

(iii) A medium enterprise,where the investment in plant and machinery is

more than five crore rupees but does not exceed ten crore rupees.

b) In the case of enterprises engaged in providing or rendering of

services, as----

Businesses that are declared as MSMEs and within specific sectors and criteria can

then apply for "priority sector" lending to help with business expenses; banks have

annual targets set by the Prime Minister’s Task Force on MSMEs for year-on-year

increases of lending to various categories of MSMEs.

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European Union

In July 2011, the European Commission said it would open a consultation on the

definition of SMEs in 2012. In Europe, there are three broad parameters which

define SMEs:

 Micro-enterprises have up to 10 employees

 Small enterprises have up to 50 employees

 Medium-sized enterprises have up to 250 employees.[7]

The European definition of SME follows: "The category of micro, small and

medium-sized enterprises (SMEs) is made up of enterprises which employ fewer

than 250 persons and which have an annual turnover not exceeding 50 million

euro, and/or an annual balance sheet total not exceeding 43 million euro."

EU member states have had individual definitions of what constitutes an SME. For

example, the definition in Germany had a limit of 255 employees, while in

Belgiumit could have been 100. The result is that while a Belgian business of 249

employees would be taxed at full rate in Belgium, it would nevertheless be eligible

for SME subsidy under a European-labelled programme.

According to German economist Hans-Heinrich Bass, "empirical research on SME

as well as policies to promote SME have a long tradition in [West] Germany,

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dating back into the 19th century. Until the mid-20th century most researchers

considered SME as an impediment to further economic development and SME

policies were thus designed in the framework of social policies. Only the ordo-

liberal school, the founding fathers of Germany's social market economy,

discovered their strengths, considered SME as a solution to mid-20th century

economic problems (mass unemployment, abuse of economic power), and laid the

foundations for non-selective (functional) industrial policies to promote SMEs."

Review of literature:

1) The study focused on Small and Medium Scale Enterprises and Nigeria’s

economic growth from 1970 – 2012. The benefits of SMEs to any economy

are easily noticeable. These includes: creation of jobs, provide a vehicle for

reducing income disparities, increase the output of goods and services produced

in the economy etc. The main objective of this project is to examine the impact

of SMEs on economic growth in Nigeria.

In order to achieve this objective, the study polled 84 SMEs for primary data

collection as well as statistical records for years 1975-2012 as secondary data.

The ordinary least square, co-integration and error correction model was used to

estimate the data collected during the period of this study. The variables used

include Gross Domestic Product as the dependent variable and Finance Available

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to Small and Medium Enterprises, Interest rate and Inflation rate as the

independent variables. Our result showed that Finance Available to SMEs showed

a positive relationship with economic growth while Interest rate and Inflation rate

showed a negative and positive influence on economic growth respectively. Thus,

we concluded that the independent variables play an important

role in determining the impact of Small and Medium Scale Enterprises on

economic growth in Nigeria. Based on this, it was recommended that the Nigerian

Government should organize a national enterprise forum, which would focus on

the contributions of SMEs in national development objectives; the Federal/State

Ministries of Industry in collaboration with the National Association of SMEs

should work out strategies for an annual report of SMEs operating in Nigeria and

the Government should adopt policy measures to maintain a favorably low

commercial banking lending rate as this will accelerate high investment in Small,

Medium and large-scale businesses and subsequently in the long-run contribute

significantly to economic growth(Small and Medium Scale Enterprises and

Economic Growth in Nigeria 1975-2012:Imoisi Anthony Ilegbinosa1 & Ephraim

Jumbo:: College of Social & Management Sciences, McPherson University, Ogun

State, Nigeria).

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2) The Ministry of SSI accounts for almost twenty million jobs in India and

contributes up to 40% of the total exports providing the highest value addition

in the manufacturing sector. Problems with lack of credit, raw materials,

marketing, and keeping up with technological developments are areas which

have continued to confront this sector. In addition, the impact of the WTO

(World Trade Organization) which led to the opening -up of the Indian

economy, removal of tariff barriers and access to the Indian market by

international manufacturer.(Small Scale Industry decision making and value

system,An Indian civil service perspective,leadership challenges in government

departments are unique in nature and civil services prepare the officers to come

true to these challenges.( Ashok Pradhan, Small Scale Industry, decision -

making, and value system:An Indian Civil Servant’s perspective Leadership

challenges in government departments are unique in nature and Civil Services

prepare the officers to come true to these challenges).

3) Sickness in the industrial units is not a new phenomenon as is evident in the

developing countries.Indeed, even in the industrially propelled nations of the

world, fluctuating degrees of ailment are found to happen. Occurrence of

industrial sickness is a persistent procedure and at a specific time a few units in

a specific industry will be running sick regardless of the fact that the industrial

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 atmosphere is ideal from all perspectives. But sickness assuming an epidemic

shape creates concerns to the policy makers and stakeholders. Factual

information proposes that small scale businesses are more inclined to sickness

when contrasted with medium and large scale commercial ventures.

The major thrust of the present paper is to explore the reasons of sickness in small

and medium scale industries in India (Kuldeep Singh,Research Scholar,University

Business School,Panjab University,University Business,Chandigarh,Industrial

Sickness in small and Medium Scale Indusrial Sector in India: Reasons and

Remedies).

4) CII hails the Government of India for the launch of the MUDRA bank with a

corpus of Rs.20,000 crore to extend credit of up to Rs.10 lakh to small

businesses and regulate micro-finance institutions, to promote their growth, add

to the country’s output and create jobs is the step in the right director to

leverage Indian MSME Sector especially in the Semi Urban and Rural

Indiaa(CII Media Releases April 8th,2015,,Step in the right direction to leverage

Indian MSME Sector:CII Welcomes the launch of MUDRA Bank).

5) In the study titled,Issues, Challenges and Prospects of Small and Medium Scale

Enterprises (SMEs) in Port-Harcourt City, Nigeria By Dr. Mba Okechukwu

Agwu and Dr. Cletus Izunwanne Emeti was informed by the high rate of

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 unemployment in the society and the poor performance of SMEs in

employment generation. While the research questions addressed the extent to

which poor financing, inadequate social infrastructures, lack of managerial

skills and multiple taxation constitute major challenges in the performance of

SMEs between October 2012 and November 2013, it assumes that government

intervention through the provision of financial assistance, social infrastructures

and favorable taxation policies will reverse the trend. The study adopted a

descriptive research design using 120 randomly selected registered operators of

SMEs in Port-Harcourt City. Data collected were analyzed using descriptive

statistics while formulated hypotheses were tested using z-test. Results from the

data analysis indicated that poor financing, inadequate social infrastructures,

lack of managerial skills and multiple taxation were major challenges

confronting SMEs in Port-Harcourt City, thus recommended: provision of soft

loans to SMEs operators, government guaranteeing of long term loans to SMEs

operators, establishment of SMEs funding agency, public/private sector

partnership in infrastructural provision,capacity building for SMEs operators

and provision of tax incentives for SMEs operators.

6) In the study titled Small and Medium Scale Enterprises as A Survival Strategy

for Employment Generation in Nigeria Dr. Aremu, Mukaila Ayanda

(Corresponding author), Department of Business Administration, Faculty of

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 Business and Social Sciences, University of Ilorin, Ilorin, Kwara State, Nigeria

& Dr. (Mrs.) Adeyemi, Sidikat Laraba,Department of Business Administration,

Faculty of Business and Social Sciences, University of Ilorin, P. M. B. 1515

Ilorin, Kwara State, Nigeria mentioned that Small and medium enterprises have

been considered as the engine of economic growth and for promoting equitable

development. The major advantage of the sector is its employment potential at

low capital cost. The labour intensity of the SME sector is much higher than

that of the large enterprises. The role of small and medium enterprises in the

economic and social development of the country is well established. The sector

is a nursery of entrepreneurship, often driven by individual creativity and

innovation.

The Research Methodology:

Objectives of the study:

1) To study public sector and private sector enterprises in India.

2) To examine small scale, medium scale and large enterprises in India.

3) To examine role of medium scale industries and their contribution to

economic development in Tumkur district.

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 Nature and Source of data:

The study relay upon Primary as well as Secondary data. Secondary data obtained

from Office of Joint Director, District Industries Centre,Tumkur,Economic survey,

Census data, Directorate of Economics and Statistics, RBI Bulletin, Government of

India and Government of Karnataka Reports, Indian and foreign journals and

internet.

Primary data obtained through pretested Interview Schedule. Total number of

Registered Medium Scale Industries are Fourteen in Tumkur District. In the

Month of July,August and September 2015 all the Medium Scale Industries in

Tumkur District visited and made personal Interview to the officials of

Companies.

Need of the study:

Role of Medium scale industries played pivotal in achieveing economic

development and economic growth of all types of the economy. In Indian

economy also role of Medium scale industries really enormous in achieveing

faster economic development and growth. Though the number of Medium

Scale Industries are relatively less in comparison with small and large

industries in Indian economy the contribution of Medium Scale Industries

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really enormous in enhancing industrial development of India, Karnataka

and Tumkur District in specific, because the products manufactured by these

Medium Scale Industries are much useful for domestic consumers and even

foreign consumers. Majority of the studies made on small scale industries

and large scale industries in different areas.But none of the studies focused

on Medium scale industries. Hence the study on Role of Medium Scale

Industries in Tumkur District made.

Plan of the Study:

Preparations: March 2014 to May 2014

Review of Literature: June 2014 to August 2014.

Field work: September 2014 to December 2014.

Analysis of the results: January 2015 to April 2015

Report writing and submission: May 2015 to December 2015.

Chapter Scheme:

Chapter1: Introduction,

Chapter 2: Review of literature

Chapter 3:The Research Methodology

Chapter 4: Results

Chapter 5: Discussion of the Results

Chapter 6: Summary,Conclusions and Suggestions.

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 Implications of the Study:

With the help of this study, it is possible to know much about the all

fourteen registered Medium Scale industries in working condition in Tumkur

district. Apart from this it is possible to know much about the location of

these Medium Scale Industries, products of these Medium Scale industries

and conditions of employees, different departments such as manufacturing

industries, marketing, Human Resource, Research and Quality Control. In

addition, it is possible to know about the annual turnover of these industries,

problems of these industries ,opinions from officials of medium scale

industries about Government policies.

Limitation of the Study:

The Study conducted only in Tumkur district in Karnataka. Hence the results are

more applicable to those areas where similar conditions prevail.

SUMMARY, CONCLUSIONS AND SUGGESTIONS

Summary:

The study made on these following registered medium scale enterprises in

Tumkur district.

M/s Indo Spanish Testy Foods Limited, KIADB Industrial Area,Kunigal,M/s

Triveni Aeronautics Private Limited, Antharasanahalli, II Phase,KIADB

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Industrial Area,Tumkur,Vectus Industries Limited, Vasanthanarasapura

Industrial Area,Tumkur district, M/s Neo Foods Private Limited,KIADB

Industrial Area,Antharasanahalli Industrial Area,Tumkur,M/s Karmobiles

Limited,Hirehalli Industrial Area,Tumkur,M/s Gem properties Private Limited,

Sathyamangala Industrial Area, Tumkur, M/s Gem properties Private Limited,

Sathyamangala Industrial Area, Tumkur, M/s Beloorbyir Biotech Limited,

Sathyamangala Industrial Area, Tumkur, M/s Godrej Agrovet Limited, A.K.

Kaval Village,Gulur Hobli, Tumkur district, Sri Sapthagiri Agro Industry,KIADB

Industrial Area, Antharasanahalli,Tumkur, M/s System Consultant Private

Limited, AvaragereGrama, B.M.Road, Yadiyur hobli, Kunigal Taluk, Tumkur,M/s

Siddaganga Oil Extraction Private Limited, B.H. Road, Tumkur.

Among registered medium scale industries of Tumkur district,except Nethravathi

Distilleries Private Limited all the remaining thirteen industries are getting

profits.

Conclusion:

Infrastructure of all the registered medium scale industries are having good

infrastructure facilities and good number of staff and workers.

In the industrial development of Tumkur all the Registered medium scale

industries are playing pivotal role.

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Suggestion:

The Central and State Governments should provide additional financial

facility in the form of subsidy and grants-in-aid. Then only it is possible to

expect progress of registered medium scale industries in Tumkur district.

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