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PRESENTATIONPRESENTATION

ONON

DEVELOPMENT OFDEVELOPMENT OFSMEs IN INDIASMEs IN INDIA

&&

RETAIL INDUSTRYRETAIL INDUSTRY 1

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CONTRIBUTION OF SMEs TO THE ECONOMY -

REGIONAL DEVELOPMENT

COMPLEMENTARY ROLE TO SUPPORT THE LARGE

SECTOR

BASIS FOR INNOVATIONS AND ADAPTATIONS

EMPLOYMENT GENERATION

DIRECT MULTIPLIER EFFECT OF THEPERFORMANCE ON THE GROWTH OF THE NATIONALECONOMY

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PREDOMINANT ROLE OF SMEs IN THE ECONOMYDUE TO

ITS NUMBER

VARIETY

INVOLVEMENT IN ALL ASPECTS OF THE ECONOMY

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INDIAN DEFINITION OF SMALL SCALE INDUSTRY (SSI)

INVESTMENT IN PLANT AND MACHINERY DOES NOT

EXCEED Rs. 10 MILLION (US$1-Rs.49)

WHETHER HELD ON OWNERSHIP/LEASE/HIRE PURCHASE

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THE THIRD ALLTHE THIRD ALL--INDIA CENSUS OF SMALL SCALEINDIA CENSUS OF SMALL SCALEINDUSTRIES (AUGUST 2004)INDUSTRIES (AUGUST 2004)

SizeSize approx.10.52 million units compared to 80,000 units inapprox.10.52 million units compared to 80,000 units inthe late 1940sthe late 1940s

Total employment contributionTotal employment contribution 24.93 million with a per unit24.93 million with a per unit

contribution of 2.37contribution of 2.37

Export contributionExport contribution Rs.14,199 croresRs.14,199 crores

Number of exporting unitsNumber of exporting units 50,60650,606

Contribution to GDPContribution to GDP 7%7% Approx. 7,500 different products produced by SSIs in IndiaApprox. 7,500 different products produced by SSIs in India

Out of 878 items reserved for the sector, only 672 are actuallyOut of 878 items reserved for the sector, only 672 are actuallyproduced by SSIsproduced by SSIs

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Based on products, SMEs in India can be broadlyBased on products, SMEs in India can be broadlyclassified into the following groups:classified into the following groups:

Food productsFood products

Chemicals and chemical productsChemicals and chemical products

Basic metal industryBasic metal industry

Electrical machinery and partsElectrical machinery and parts

Rubber and plastic productsRubber and plastic products

Machinery and parts excludingMachinery and parts excludingelectrical goodselectrical goods

Hosiery and garmentsHosiery and garments

Wood productsWood products

Nonmetallic mineral productsNonmetallic mineral products

Paper products and PrintingPaper products and Printing

Transport equipment and partsTransport equipment and parts

Leather and leather productsLeather and leather products

Miscellaneous manufacturing industriesMiscellaneous manufacturing industries

Other services and productsOther services and products

Beverages, tobacco / tobacco productsBeverages, tobacco / tobacco products

Repair servicesRepair services

Cotton textilesCotton textiles

Wool, silk and synthetic fibre textilesWool, silk and synthetic fibre textiles

Jute, hemp and mesta textilesJute, hemp and mesta textiles

Other servicesOther services6

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Contributions of Indian SSIs to total exports by sectorContributions of Indian SSIs to total exports by sector(%)(%)

ProductProduct SSI share in totalSSI share in total

exportsexports

Sporting goodsSporting goods 100100

ReadyReady--made garmentsmade garments 9090

Woollen garments, knitwearWoollen garments, knitwear 3535

Processed foodsProcessed foods 6565

Marine ProductsMarine Products 2929

Leather productsLeather products 8080

Plastic productsPlastic products 4545

Cosmetics, basic chemicals &Cosmetics, basic chemicals &

pharmaceuticalspharmaceuticals

5555

Engineering goodsEngineering goods 3030 7

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Indian Governments development strategy

Protective discrimination e.g. reservation, priority-sector lending

Integration between large and small e.g. subcontracting,ancillarization and vendor development

Institutional support through a network of testing centres, tool

rooms, entrepreneurship development institutes

The setting up of a separate Ministry of Small Scale Industries in1999 marked a major step towards providing a policy platform forthe SME sector.

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CHALLENGES FACED BY SME SECTOR IN INDIA

The term economic globalization implies an evolvingpattern of cross-border enterprise activities. It implies achange, broadly on the following lines :

Pre-Globalisation Post-Globalisation

Local/National Investment Collaborations

Single-firm activity Strategic alliances

Manufacturing for self-identified market

Outsourcing-local/international

Local market World market

Rigid production system Flexible productionsystem

Limited economic interest Focus on growth

Protective policies Survival of the fittest 9

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NEED FOR NEW APPROACHNEED FOR NEW APPROACH

New policy for development of SMEs in regional setting byNew policy for development of SMEs in regional setting by

encouraging Foreign Direct Investmentencouraging Foreign Direct Investment

Innovative bottomInnovative bottom--up development policies endowingup development policies endowingindividuals, firms and territories with factors to place theirindividuals, firms and territories with factors to place theirskills, products or services in the global competitive marketskills, products or services in the global competitive market

Encouraging PrivateEncouraging Private--public partnerships which will generatepublic partnerships which will generate

employment and stimulate economic activityemployment and stimulate economic activityModernizing the exportModernizing the export--oriented clusters for enhancing globaloriented clusters for enhancing globalcompetitivenesscompetitiveness

Consortia approach for enhancing exports from SMEsConsortia approach for enhancing exports from SMEs

Fostering linkages between Indian SME clusters and similarFostering linkages between Indian SME clusters and similarproduct cluster overseas for mutual benefitproduct cluster overseas for mutual benefit

Organizing product specific trade fairs with internationalOrganizing product specific trade fairs with internationalparticipationparticipationConcentrate on developing and promoting service sectorConcentrate on developing and promoting service sector

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RETAIL INDUSTRY IN INDIARETAIL INDUSTRY IN INDIA

Some countries include retailing in its definition of SMEs alongwithSome countries include retailing in its definition of SMEs alongwithmanufacturing and servicesmanufacturing and services

Indian retailingIndian retailing largest industrylargest industry 14% of GDP14% of GDP

Second largest source of employment next to agricultureSecond largest source of employment next to agriculture

Organized retailing accounts for just 3% of the total retail market;Organized retailing accounts for just 3% of the total retail market;

projected to grow at 25projected to grow at 25--30 per cent a year30 per cent a year

Annual growth rate of 8.5% and amounting to Rs. 200 billion in 2003

Annual growth rate of 8.5% and amounting to Rs. 200 billion in 2003--0404

Untapped segment amounts to a whopping Rs. 9,800 billionUntapped segment amounts to a whopping Rs. 9,800 billion(approx.$222 billion)(approx.$222 billion)

Indias estimated total retail market to be around $202.6 billion which isIndias estimated total retail market to be around $202.6 billion which isexpected to grow at a compounded 30% over the next five yearsexpected to grow at a compounded 30% over the next five years

Government unlikely to announce any decision on allowing FDI in retail.Government unlikely to announce any decision on allowing FDI in retail.Revised safeguards for ensuring livelihood protection to mom & pop storesRevised safeguards for ensuring livelihood protection to mom & pop storesare yet to be finalizedare yet to be finalized

FDI regime would provide opportunity for joint ventures, ease financialFDI regime would provide opportunity for joint ventures, ease financialcrunch, bring in technical knowcrunch, bring in technical know--how and best management practiceshow and best management practices

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ALL INDIA ASSOCIATION OF INDUSTRIES

Building bridges of prosperity through Industry

Serving industry since 1956

Indias premier business networking organisation and a centre forexcellence for international trade

Membership - open to all sectors of the industry including agriculture,

service, entertainment, finance and also to professionals

Representation -- AIAI has representations on various national and regionalgovernmental bodies and financial institutions to address the issues ofits members.

Agreements for co-operationThe All India Association of Industries (AIAI) has signed agreements forco-operation with 70 international Trade Promotion Organizations andChambers of Commerce across the globe to promote bilateral trade,exchange of trade-related information, trade delegations, joint venturesand technology transfers

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OVERSEAS MEMBERSHIPofAll India Association of Industries

Our Overseas Membership scheme allows non-Indian based companies with noIndian registered office to :

Make new contacts by being part of one of Indias biggest business organisations

Use AIAIs Members Lounge as your base and meeting place and enjoy a range ofmember benefits when visiting India. Located in the heart of the business capital, theMembers lounge offers a space from where you can work, connect your laptop, use theinternet or invite your Indian clients for meetings. Refreshments available.

Raise your company profile by association with the recognised and respected AIAIbrand

Receive the AIAI Newsletter

AIAIs team can help you identify organisations in India which can help you with yourbusiness

Make new business contacts and gain information by participating in AIAIs programmeof networking events and seminars

How much does it cost ? OurOverseas Membership costs US$ 225/- per annum. Payment must be made on-line

by credit card

Terms and conditions Only non-Indian companies with no office in India may apply for overseas membership

AIAI reserves the right to refuse an application from any overseas company at ourdiscretion

AIAI reserves the right to revoke membership at any point without refund

AIAI is not responsible for the conduct or actions of its members13

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ECONOMIC INDICATORS (2004ECONOMIC INDICATORS (2004--2005)2005)

PopulationPopulation 1 billion+1 billion+

GDP (in $ billion)GDP (in $ billion) 520520

GDP growth rate (%)GDP growth rate (%) 7.07.0

Foreign Exchange Reserves (US$ billion)Foreign Exchange Reserves (US$ billion) 143.5143.5 Inflation (%)Inflation (%) 4.04.0

Agriculture (% of GDP)Agriculture (% of GDP) 2222

Industry (% of GDP)Industry (% of GDP) 2828

Services, etc. (% of GDP)Services, etc. (% of GDP) 4848

Source : Tata ServicesSource : Tata Services

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MARKET OPPORTUNITIESMARKET OPPORTUNITIES

Womens wearWomens wear -- 37.5% of the clothing market37.5% of the clothing market US$3.93bnUS$3.93bn

Womens western wearWomens western wear -- $ 157 million$ 157 million

Organized apparel retailingOrganized apparel retailing to grow 5 times over next 5to grow 5 times over next 5yearsyears

Fire fighting equipment estimated at about $34Fire fighting equipment estimated at about $34--40 million40 million

EE--commercecommerce

PC penetrationPC penetration 14 million users (March 2005)14 million users (March 2005)

EE--commerce activity in 2004commerce activity in 2004 US$ 350 million (NASSCOM)US$ 350 million (NASSCOM)

B2C EB2C E--commerce to grow to $489 million by end of 2006commerce to grow to $489 million by end of 2006

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I N D I AI N D I A O F F E R SO F F E R S

Good command on English languageGood command on English language Large, wellLarge, well--trained, lowtrained, low--cost workforcecost workforce

Very good pool of engineers, accountants, techniciansVery good pool of engineers, accountants, technicians

Well developed R & D InfrastructureWell developed R & D Infrastructure

Well established legal system/courtsWell established legal system/courts

Mature, nationMature, nation--wide distribution systemwide distribution system

Foreign Investment regulations that provide freedom of entry,Foreign Investment regulations that provide freedom of entry,investment, location, choice of technology for import & exportinvestment, location, choice of technology for import & export

Current account convertibility, capital account convertibilityCurrent account convertibility, capital account convertibilityfor foreign investorsfor foreign investors

Investment & tax incentives for exportsInvestment & tax incentives for exports

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Why you cant ignore India

A bridge between East and West

Vast market: a fast-growing consumer market

Growing economy: from agriculture to industry and now toservices, the Indian economy is acquiring depth and maturity

Legal System: Well laid out legal procedures & systems

Systems in place : India is one of those rare third worldcountries where democratic systems are all in place, and thoughit takes some time, the rule of law prevails

Market-friendly approach : Successive governments from acrossthe political spectrum have committed themselves to a market-friendly economic approach

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