MSMEs / New small entrepreneurial ventures / Khadi Enterprises/ Rural or Village Enterprises constitute an important segment of the Indian economy ;
In terms of their contribution to country’s industrial production, employment, exports and creation of entrepreneurial base.
However,this sector is plagued with different problems such as:
1. Problem of Raw Materials:
Availability of raw materials – of right quality – in right quantity – at right price – at favorable T & C .
2. Problem of Finance:
a) it is due to scarcity of capital in the country as a whole because of low rate of capital formation
b) due to weak creditworthiness of MSMEs.
3. Problem of Marketing:
- Faces huge competition from large-scale industries.
- Small units do not have their own marketing agencies and departments.
4. Problem of under-utilization of capacity:
Small and new ventures hardly use 50% to 60% of their capacity. It is caused by frequent power cuts and lack of facility to afford alternative power sources.
5. Problem of Technology:
Most small ventures use only obsolete and outdated technology and old machineries and equipment.
6. Problem of recovery:
Due to inability of marketing the products on their own- they are forced to sell their products to large industries on credit basis.
7. Deficient Managerial & Technical Skills:
Small industries do not afford appointing experts and competent professionals to manage their business. Hence, most small new industries become technologically backward and managerially inefficient.
8. Labour Problem:
Inability to pay higher wages- leads to employment of inefficient, unqualified and incompetent HR.
9. Less Competitiveness:
With less capital base- outdated technology- no marketing arrangements; they can’t face competition with large scale industries.
10. Other Problems:
- Lack of organized market channels
- Imperfect knowledge of market conditions
- Unorganized nature of operations
- Constraint of infrastructure
- Poor accounting system
- Ignorance of various laws (Labour Laws, Environment Protection, Consumer Protection Act, Sales Tax Act, Laws relating to exports etc.)