K C Chakrabarty: Empowering the growth of emerging enterprises
Keynote address by Dr K C Chakrabarty, Deputy Governor of the Reserve Bank of India, at
the Economic Times Thought Leadership Conclave, Mumbai, 12 April 2012.
* * *
Assistance provided by Shri Anand Prakash in preparation of this address is gratefully acknowledged.
1. Shri Bodhisatva Ganguli, Deputy Executive Editor, The Economic Times,
Shri Pramit Jhaveri, CEO, Citibank India, Ms. Paromita Chatterjee, Senior Editor, ET Now,
Mr. Venu Srinivasan, Chairman, TVS Motor Company Ltd., Dr. Swati Piramal, Director -
Strategic Alliances and Communications, Piramal Healthcare Ltd., distinguished panelists,
other distinguished guests, members of the print and electronic media, ladies and gentlemen.
2. At the outset, I would like to congratulate Citibank for completing 200 years since its
formation in 1812. It is indeed a matter of great privilege for me to be present here today at
the Thought Leadership Conclave on "Empowering the Growth of Emerging Enterprises" and
share some of my thoughts on ways for enhancing the efficiency of emerging enterprises in
the country, which is indispensable for sustaining and even accelerating the high growth rate
witnessed by the Indian economy in the past decade. I firmly believe that the next level of
growth in the economy will have to come from the Micro, Small and Medium Enterprises
(MSMEs), which can propel India's growth rate from around 7-8 per cent at present to a
sustainable 9-10 plus per cent in the medium-to long-term, which is considered as India's
desirable growth rate. We need to nurture and strengthen the MSME sector in the country as
today's MSMEs will converge into large industrial houses tomorrow or even MNCs in the
times to come. In order to take the country on to a higher and sustainable growth trajectory, it
is necessary to significantly enhance our manufacturing capabilities. The manufacturing
SMEs are largely complemented by services sector SMEs that offer various services to the
manufacturing sector. Strengthening of the manufacturing sector in the country a la China is
imperative as manufacturing sector is essential for enhancing exports and creating trade
surplus, which will go a long way towards strengthening the country's situation on the
external (BoP) front. The need of the hour is to empower SMEs so that they can take their
rightful place as the growth engine of the economy.
3. It is against this backdrop that this Conclave on empowering the growth of emerging
enterprises assumes significance. The MSME sector is facing new challenges in the wake of
increasing globalization and there is a pressing need for the sector to reinvent itself by
enhancing its efficiency and productivity in order to remain competitive, both domestically as
well as internationally and take advantage of the new opportunities cropping up in an
increasingly globalized world. I congratulate the Economic Times, which has hitherto been at
the forefront of spreading financial literacy and awareness in the country, for organizing this
Conclave on such an important issue. The informed discussions at these kinds of forums
help in garnering and shaping public opinion, building consensus, crystallizing policy inputs
and giving us feedback on the required policy initiatives.
A. Importance of SME sector
4. SMEs are universally acknowledged as major contributors to Gross Domestic
Product (GDP) and even larger contributors to exports and employment. SMEs play a critical
role in the economic and social development of emerging markets by creating jobs and
generating income for low-income groups. This fosters economic growth and social stability,
and also contributes to the development of a dynamic private sector. Even in countries with
large corporations such as the United States, SMEs contribute a very substantial percentage
to the employment generated. Studies indicate that formal SMEs contribute up to 45 percent
of employment and up to 33 percent of GDP in developing economies. These numbers
would be significantly higher when taking into account the contributions of SMEs operating in
the informal sector.
5. According to a recent study by the IFC and McKinsey and Company (McKinsey),
there are almost 365 to 445 million MSMEs in emerging markets, of which 25 to 30 million
are formally classified as SMEs. In OECD economies, SMEs and micro enterprises account
for over 95 per cent of firms, 60-70 per cent of employment, 55 per cent of GDP and a lion's
share of new jobs. In the APEC region, SMEs account for around 90 percent of all
businesses and employ as much as 60 percent of the work force. At present, however, they
generate only around 30 percent of exports. In developing countries, more than 90 per cent
of all firms outside the agricultural sector are SMEs and micro enterprises, generating a
significant portion of GDP.
6. In the Indian context, the critical role and place of the MSME sector in the Indian
economy cannot be over-emphasized in employment generation, exports and economic
empowerment of a vast section of the population. As per data released by the Ministry of
MSME, there are about 26.1 million enterprises in this sector. The sector accounts for 45 per
cent of manufactured output and 8 per cent of the GDP. MSMEs contributed close to 40 per
cent of all exports from the country and employed nearly 59.7 million people, which is next
only to the agricultural sector. The performance of SMEs in India, though impressive, comes
next to China where this sector provides around 75 per cent of the total employment,
accounts for around 99 per cent of total enterprises and contributes around 60 per cent to
GDP. In the case of Japan, there are 4.69 million SMEs, constituting 99.7 per cent of all
enterprises, accounting for 70 per cent of all employment. The SME's share in Japan's GDP
is 56.8 per cent. In Korea, SMEs account for around 79 per cent of employment and 46 per
cent of GDP.
7. Part of the contribution of the SME sector, both to the overall total factor productivity
(TFP)1 (efficiency, as usually defined) of an economy and to employment generation and
distributional equality, comes by virtue of its pattern of technology choice. SME technology
tends to be intermediate between the highly labour intensive technologies of micro enterprise
which achieve only low average labour productivity, and the highly capital intensive
technologies of large firms which achieve high labour productivity, but use more capital per
worker than is available for the economy as a whole. Its intermediate technology
characteristic is what gives the SME sector a special role in the generation of adequate or
decent employment. In terms of efficiency, the price-lowering and quality-improving
competition is more likely to come from SMEs rather than large firms. The SME sector also
plays a key role in generating growth, especially pro-poor growth, i.e., more equitable and
inclusive growth. SMEs tend to dominate a country's new and fast growing industries. In this
respect, and in others, SMEs are associated with dynamism.
8. Globalization also increases the importance of keeping the SME sector strong since
its role in providing subcontractors for large exporters may be quite important in cases where
transportation costs are not low. Being able to rely on efficient low-cost subcontractors can
substantially increase the competitiveness of the large exporters and has been an important
factor underpinning the successes of Japan, Taiwan and Korea.
B. Challenges faced by SMEs
9. There are various challenges facing SMEs which, inter alia, include non-availability
of timely and adequate finance, availability of raw material, technological obsolescence, lack
of infrastructure facilities, marketing bottlenecks, deficient managerial and technical skills,
sub-optimal quality standards, sickness, competition from large enterprises, globalization,
non-competitive real exchange rate, etc. The opening up of the world economy in the
process of globalization and the rapid and extensive use of information technology have
thrown up challenges for the small producers and manufacturers who have to not only
survive competition but also keep pace with the rapidly changing technological scenario in
the world. Among several technologies that have been developed to aid SMEs,
IT & automation technologies are believed to be at the forefront in terms of increasing both
productivity and profitability for SMEs in manufacturing. To meet the challenges emanating
from increasing globalization, SMEs need to increase their efficiency as measured by total
factor productivity (TFP).
(a) Strengthening SME competitiveness in developing countries
10. Metcalf, Ramlogan and Uyarra (2003) state that competitive advantage, which must
be measured in relation to rivals in markets, is determined by how efficient and effective the
prevailing markets for products, labor and capital are. They further add that
entrepreneurship; the introduction of new productive combinations and innovation is the
driving force that continually creates new competitive advantages and opportunities for profit
and growth.
11. Meyer-Stamer (1995) concurs with the view that competitiveness is created at the
firm level, but that it is partly derived from a systemic context and emerges from complex
patterns of interactions between government, enterprises and other actors, and will therefore
exhibit different forms in each society.
12. SME development strategies will necessarily be country and context specific. Each
country will have its own challenges, opportunities and priorities for change. Resources
available will vary by country and therefore, results achieved will also be different.
Notwithstanding such specificity, some of the SME development lessons which are
applicable to most of the countries include:

Peace and stability is a key requirement for the development of SMEs and for
attracting foreign investment. Studies show that war and crime are main deterrents
of private investment, in particular, for foreign investors.

SME development requires a crosscutting strategy, i.e. its success depends on the
ability of governments to implement sound macroeconomic policies, the capability of
stakeholders to develop conducive microeconomic business environments and the
ability of SMEs to implement competitive operating practices and business
strategies.

Dialogue and partnerships between the stakeholders is essential (public sector,
private sector and civil society).
 Investments in physical infrastructure and business services and the implementation
capacity of policy makers, administrators and support structures determine success.
 Enhancing women's ability to participate in SME development should be taken into
account at every stage, as women account for an important share of private sector
activity and contribute most to poverty reduction.
(b) Modernization and diversification: risk mitigation
13. Modernizing and diversifying SMEs includes both the creation of new ventures in
order to revise the structure of the economy and transformation of existing businesses. In the
wake of increasing globalization leading to new opportunities and reduction in trade barriers,
there is a pressing need for SMEs to diversify into various geographies and markets. A
diversifying SME needs to gear up to the challenge of operating in a vastly different
environment and facing increased competition. They also need to mitigate various risks
which result from diversification into new markets and geographies. One of the major risks of
diversification is currency fluctuation risk. As currency fluctuations can adversely impact
SMEs, it is very important for them to protect their exposure in an efficient and effective
manner. The SME needs to determine whether it needs to hedge its exposure and what tools
it needs for hedging (swaps, options, forward contracts, currency diversification, etc.).
14. Despite the availability of new hedging avenues, a very small proportion of SMEs
enter into exchange traded currency futures transactions to hedge their risk. Besides, the
quotes offered to SMEs in OTC markets are often at a higher premium. Also, various
misconceptions and the lack of awareness amongst SME exporters about currency hedging
hold back SME exporters from the currency derivatives market. It is essential for small units
to evaluate their cash flow positions and assess the degree of influence exchange rate
fluctuations can have on their profitability. Also, before sealing an export deal with an
overseas client, SMEs should keep the option of entering into a price variance with their
customer, based on exchange rate fluctuations. Additionally, in order to minimize export
risks, the SME needs to procure credit rating report of the buyer, get credit insurance for
exports and consider professional assistance from debt collecting agencies.
(c) Challenges from globalization
15. Globalization and trade liberalization have ushered in new opportunities as well as
challenges for SMEs. Presently, a majority of SMEs in developing and emerging market
economies have been less able or unable to exploit the benefits of globalization and, to add
to the situation, frequently face pressures in the domestic markets from cheaper imports and
foreign competition.
16. Increasingly, SMEs are seeing participation in international markets as critical to
their survival, job creation and growth. But the development of a fast-changing and
increasingly complex global marketplace has also placed considerable pressures on firms,
particularly SMEs.
inter
17. Operating successfully in international markets requires, alia, learning to
remote- manage using a variety of informal and formal business relationships, gaining
familiarity with different business regulations, customs, cultures and languages, and
developing appropriate solutions for all the markets in which the firm operates. This poses
challenges for business managers and requires them to use, or develop a much larger range
of managerial competencies than if they operated solely in their domestic market. It also
poses challenges for governments (and business associations and others who assist SMEs)
in providing the right, targeted support programmes and other incentives to encourage SMEs
to internationalize and to help them overcome the internal and external barriers they face in
doing that.
(d) Barriers to SME trade
18. According to an OECD - APEC study, "the numerous benefits to SMEs engaged in
international trade are well documented, with a considerable body of evidence that
international trading activity stimulates increased productivity growth by strengthening
competition and innovation and increasing access to new ideas and technology. International
trading activity enables businesses to achieve growth and economies of scale which
domestic markets alone would not provide. Exporters are consistently found to outperform
non-exporters using a variety of measures of success including profitability, production,
wages and sales volumes". At the same time, the study finds that "... trade barriers can be
particularly damaging for SMEs since these barriers are generally outside of their control and
are difficult to overcome. And while trade barriers do not only affect SMEs ... it is SMEs who
are especially vulnerable and need an open and transparent environment in which to
operate." The major barriers to SME trade include:
a. Lack of access to finance
b. Lack of capacity to internationalize and difficulty in identifying foreign business
opportunities (SMEWG)
c. Need for open and transparent business
d. High transportation and related costs (SMEWG)
e. Customs clearance delays due to difficulties in navigating overly complex customs
requirements and documentation across jurisdictions
f. Difficulty with intellectual property acquisition, protection, and enforcement
g. Inadequate policy/ regulatory frameworks to support cross-border electronic
commerce
h. Difficulty in taking advantage of preferential tariffs and other aspects of trade
agreements
(e) Development of human and natural resources
19. Human resource development issues are fundamental to improving SME
competitiveness. Empirical studies show that human capital is a significant determinant of
growth. The ability of SMEs to adjust to the competitive pressures that come with trade
liberalization and globalization will depend on the level of skills available domestically.
Developing countries are investing significantly in their education (mainly basic) and training
systems. However, linkages between education and training strategies and SME/enterprise
development strategies are still weak, resulting in weak market signals for policymakers and
administrators.
20. The education and training systems can influence the level of entrepreneurial
activity in developing economies by developing an awareness and appreciation of the same
in the wider society. A major area of concern in the Indian context is the low productivity and
managerial ability of SMEs and the lower skill levels of the SME workers. The human
resource constraints have been affecting both the efficiency and productivity of SME sector
in India. A massive programme of skill and entrepreneurship development should form the
backbone of SME development. There should be training programmes by the industry
associations to upgrade the skills of the workers and to acquaint them with the skills
compatible with the new technology. Similarly, the labour laws should be simplified. There is
a need to incorporate entrepreneurship training in school curricula. Several studies have
cited lack of entrepreneurship skills as a major shortcoming for women entrepreneurs, which
can be addressed by incorporation of entrepreneurship training in secondary school
curricula. Investment needs to be made in a big way on skill and entrepreneurship
development if the goal of sustainable employment is to be achieved.
(f) Corporate governance
21. Weak corporate governance of small firms, burdened further with poor availability of
crucial inputs, has made these firms extremely vulnerable. Good governance practices in
SMEs will help them grow or attract additional investors. Raising capital has, for a long time,
been seen as the major challenge facing SMEs. The absence of good corporate governance
practices makes it difficult for them to access finance from banks or investors.
22. Adoption of corporate governance framework by SMEs in India is indispensable for
taking this sector to a higher growth trajectory. The lack of corporate governance is mainly
due to lack of awareness about corporate governance practices and its impact on corporate
performance. Thus, there is a need to educate SMEs about the benefits of adopting sound
corporate governance practices. There also is a need to implement SME's corporate
governance code.
(g) Local partnerships and clusters
23. The need to adjust to global competition and instances of prosperous economies
being built upon localised groups of firms, have caused governments to turn to policies
based on enterprise clusters (a cluster is an agglomeration of firms in a related line of
business with clusters, in some cases, being comprised principally of SMEs, such as in
Italy's industrial districts). Cluster development policies have proliferated in both developed
and developing economies. Membership of clusters and networks can enhance the
productivity, rate of innovation and competitive performance of firms. Clusters and networks
can allow small firms to combine advantages of small scale with various benefits of large
scale. Schemes and programmes encouraging clusters need to be promoted further. Instead
of distributing limited resources to all parts, it is better to apply them to areas which can
optimize the returns and maximize the growth.
(h) SMEs' access to finance
24. SMEs identify financing, especially medium to long-term finance, as their topmost
obstacle to growth and investment. According to the IFC-McKinsey study, close to 45 to
55 percent of the formal SMEs (11-17 million) in the emerging markets do not have access
to formal institutional loans or overdrafts despite a need for one. The finance gap is far bigger
when considering the micro and informal enterprises - 65-72 percent of all MSMEs
(240-315 million) in emerging markets lack access to credit. The proportional size of the
finance gap varies widely across regions and is particularly daunting in Asia and Africa.
Closing the credit gap for formal SMEs will be less challenging than for informal SMEs. Close
to 70-76 percent of the formal SMEs (18-22 million) in emerging markets already have a
banking relationship via deposit/checking accounts, while only about 30-35 percent of SMEs
(8-10 million) have access to credit. Hence, the key challenge is to support banks in
extending credit facilities to SMEs who have a deposit/checking account, but do not yet have
access to credit. Risk-sharing facilities, coupled with the introduction of best practice SME
lending approaches are key interventions that can help banks provide credit to SMEs. These
interventions need to accompany enhancements to the enabling environment for SME
lending such as credit bureaus, collaterals and insolvency regimes.
25. In addition to loan financing, SMEs have the option of collaborating with venture
capital investors. Other significant forms of SME financing include leasing, trade credit and
fiscal incentives in the form of tax breaks. Access to finance is essential for improving SME
competitiveness, as SMEs have to invest in new technologies, skills and innovation. Issues
pertaining to access to finance cannot be resolved by implementing financing schemes or
programs in a vacuum. It is also noteworthy that efforts to resolve access to finance issues
are not solely the responsibility of governments. SMEs also need to take initiative in this
direction by implementing sound business practices and continuously investing in good
internal management systems: in accounting, planning, financial, operations and human
resource management. In the Indian context, in spite of various measures taken by the RBI
and the Government, availability of credit to SMEs continues to remain a major issue in the
development of the SME sector in the country.
(i) Impact of the global financial crisis on SMEs
26. The problem of access to finance faced by SMEs has been strongly exacerbated by
the global financial crisis as SMEs and entrepreneurs have suffered a double shock: a
drastic drop in demand for goods and services and a tightening in credit terms, which have
severely affected their cash flows. Governments have responded generally by three types of
measures aimed at: i) supporting sales and preventing depletion of SMEs' working capital;
ii) enhancing SME's access to liquidity; iii) helping SMEs maintain their investment level. The
Euro zone debt crisis has also impacted SMEs adversely. However, in the Indian context, the
sharp depreciation of the rupee against the US dollar in recent months has made SME
exports more attractive, which should, to some extent, help in nullifying the adverse impact of
the sharp fall in external demand. In these difficult times on the export front, it is imperative
for SMEs to tap the huge demand in the local markets. MSMEs are the best vehicle to create
local demand and consumption and also to fight the global meltdown. At the international
level, the G20 is spearheading the work on SME Finance through SME Finance subgroup
under its Global Partnership for Financial Inclusion (GPFI) (Dec 2010).
C. Indian context
27. Keeping in view the importance of SME sector in fostering growth and promoting
employment, the Government of India enacted the Micro, Small and Medium Enterprises
Development Act, 2006. Public Policy in India has accorded high priority to this sector in
order to achieve balanced, sustainable, more equitable and inclusive growth in the country.
Some of the major constraints faced by the MSME sector and the important measures taken
by Government of India and Reserve Bank of India to address them have been set out
below.
28. As with the SMEs operating elsewhere, access to timely and adequate credit is
critical for MSME growth and development in India as well. To ensure enhanced credit flow
to the sector, and more so to the micro units, based on the recommendations of the Prime
Minister's Task Force on MSMEs (Chairman: Shri T.K.A.Nair, Principal Secretary,
Government of India), banks have been advised to achieve a 20 per cent year-on-year
growth in credit to micro and small enterprises. Advances extended to the MSE sector are
treated as priority sector advances and as per the extant Reserve Bank guidelines, banks
are required to extend at least 60 per cent of their advances to the MSE sector to Micro
Enterprises by 2012-13 and achieve a 10 per cent annual growth in number of micro
enterprise accounts. The Reserve Bank is closely monitoring the achievement of targets by
banks on a quarterly basis and banks have been advised to device strategies to step up their
lending to micro units. However, the MSME sector needs to be competitive and should not
expect subsidized interest rates as this may not help them much as the cost of credit forms a
relatively small proportion of their overall cost. provides outstanding credit to MSME
Table 1
sector by scheduled commercial banks.
29. The problem of access to finance for the MSME sector is intrinsically linked to the
problem of financial exclusion in the country. The ability of banks to rapidly increase their
coverage of MSMEs through credit facilities would depend on their ability to expand their
reach to the hitherto unbanked segments of the country. The problem of financial exclusion is
particularly severe in the MSME sector, which is revealed by the data provided by the
4th Census of the MSME Sector which indicated that only 5.18% of units had availed finance
through institutional sources with a further 2.05% relying on non-institutional sources for
finance. However, the remaining 92.77% of units had no access to finance or depended on
self finance. In this regard, the various initiatives taken by the Government of India and
Reserve Bank such as adoption of the Business Correspondent (BC) model, relaxation of
KYC norms, simplified branch authorization, preparation of board approved financial
inclusion plans, mandatory opening of 25% of new branches in unbanked rural centres,
preparation of financial inclusion plans by banks, etc. are expected to accelerate the process
of financial inclusion in the country and the MSME sector is expected to be among the
beneficiaries of the same through better access to bank credit.
Table 1
Outstanding credit to the MSE sector by SCBs
(No. of A/Cs in million) (Amount Rs. in billion)
- -
* change in definition of the sector as per the MSMED Act 2006 advised to banks in 2007.
# Retail trade included in service sector.
Source: Scheduled Commercial Banks.
Note: Figs. In parentheses indicates Y-o-Y % growth/decline.
30. Apart from bank credit, there is a growing need for venture/risk capital for financing
high-growth-potential and start-up SMEs. The Government of India, in the Union Budget
2012-13 has proposed to set up a Rs.5000 crore India Opportunities Venture Fund with
SIDBI in order to enhance availability of equity to the SME sector. Access to Equity capital
is another genuine problem. At present, there is almost negligible flow of equity capital into
this sector. SEBI has permitted BSE and NSE to set up an Exchange for MSMEs, which
would help Indian SMEs to raise funds from capital markets.
31. The SME sector often feels the constraint of non-availability of skilled labour. It is
indeed ironic that in a nation of more than a billion individuals, skilled labour is cited as
scarce. India needs to capitalize on its unique demographic dividend (it has a very large and
young workforce). The Government of India and various State governments have been
implementing a number of schemes and programs over the years. The Rural Self
Employment Training Institutes (RSETIs) are also working in this direction. In line with the
overall target set by the Prime Minister's National Council on Skill Development, the Ministry
of MSME and the agencies under it have targeted conducting skill development programmes
for 4.78 lakh persons during 2011-12. Further, the Ministry aims to train 5.72 lakh persons in
the year 2012-13 through its various programmes for development of self-employment
opportunities as well as wage employment opportunities in the country. In addition to the
initiatives taken by Government agencies, the industry, through a process of training and
handholding, has to contribute to building up a large base of appropriately skilled workforce
available for employment in MSMEs.
32. Apart from the above mentioned factors, efforts are on to promote
factoring
services to tackle delayed realization of receivables, which adversely affects the recycling of
funds and business operations of MSME units. To facilitate factoring services, the Parliament
has recently passed the Factoring Regulation Bill that would address delays in payment and
liquidity problems of micro and small enterprises. The Factoring Bill creates the legislative
environment for factoring and makes the process easier.
33. Growing incidence of sickness of SSIs is yet another area of concern. When the
sickness prolongs it leads to the closure of units and unemployment. The mortality of the SSI
units is high. This has wider implications including locking of funds of the lending institutions,
loss of scarce material resources and loss of employment. The data showing the position of
sick small and micro enterprises as at the end of March 2010 & 11 is given below:
(Amount in Rs. crore)
34. Timely detection of sickness is critical as any delays in this regard make the
possibility of revival of potentially viable sick units recede. In order to hasten the process of
identification of a unit as sick, a proposal for modifying the extant definition of sickness, in
line with the recommendations of the Working Group on Rehabilitation of sick SMEs, is under
consideration of the Government of India and Reserve Bank of India. As it is observed that
rehabilitation of sick MSMEs could not be taken up due to non-availability of promoters'
contribution in a large number of cases, RBI has recommended to the Government of India
to set up a Rehabilitation Fund for rehabilitation of sick MSMEs. All Scheduled Commercial
Banks have also been advised to review and put in place MSE Loan policy, Restructuring /
rehabilitation policy and Non-discretionary One Time settlement scheme for recovery of
nonperforming loans, duly approved by their Board of Directors.
35. An exit route for non-viable units is necessary to manage sickness. The present
mechanism available in India for MSMEs is archaic. Business failure in India is viewed as a
stigma, which adversely impacts individual creativity and development in the country. The
existing legislations may have to be toned up so as to provide for efficient liquidation of
nonviable businesses.
36. To ensure competitiveness of the MSEs, it is essential that the availability of
infrastructure, technology and skilled manpower are in tune with the global trends. The
state of infrastructure, including power, water, roads, etc. in areas where SMEs are located is
inadequate and unreliable. Further, the MSE sector in India, with some exceptions, is
characterized by low technology levels, which acts as a handicap in the emerging global
market. Prime Minister's Task Force on MSMEs recommended several measures having a
bearing on the functioning of MSMEs, viz., credit, marketing, labour, exit policy,
infrastructure/technology/skill development and taxation. The implementation of the
recommendations, in a time bound manner, is being monitored by Government of India at the
highest level.
37. The government has adopted the cluster approach as a key strategy for enhancing
the productivity and competitiveness as well as capacity building of MSEs in the country.
During the year 2011-12 (up to 31 January 2012), 8 new clusters were taken up for
diagnostic study, 5 for soft interventions, and 4 for setting up of common facility centres
(CFCs). With this, a total of 477 clusters have been taken up for diagnostic study, soft
interventions, and hard interventions. Apart from these clusters, 134 infrastructure
development projects have also been undertaken.
D. Concluding observations
38. SMEs play a critical role in the economic and social development of emerging
markets and their role needs