Wednesday, October 31, 2012

Micro Enterprises in India – their Characteristics and Concerns

Micro enterprises drive local economies of the country. They provide wide range of vital products and services for their local communities. Thereby micro enterprises help reduce costs and add business convenience. Micro enterprises, many of which are craft enterprises comprise the vast majority of the small business sector of the country. Micro enterprises create jobs at local level, enhance income and strengthen purchasing power. In the context of India with its large rural population, micro enterprises help arrest migration to cities. They create employment opportunities as well as help them diversify their income. Micro enterprises thereby help instill self-reliance, positivity and self-confidence.

Majority of the micro enterprises in the country are founded on the rich heritage of Indian crafts that so beautifully integrate local resources and skills to create utilitarian products for the local needs and markets. "It was found that Shola craft is the key engine driving the economy of Mandirbazar block. A remarkable feature of this economy is the existence of a healthy balance between everyday work, environment and way of living of the local people. The Sholapith craft plays a valuable role in building a local economic sustainability and a contemporary local society in Mandirbazar area." writes Saurav Kumar the Strategic Design Management graduate, in his need assessment survey, NAS report as part of the Design Awareness Programme carried out under the Design Clinic Scheme for the micro enterprises engaged in Sholapith craft products at Mandir bazaar, West Bengal.

Micro enterprises normally would be self-initiated and self-managed. The owner of such enterprises would be fully involved in all aspects of business. He/she may be assisted by family members and some times few workers would be employed for manual support. Micro enterprises require relatively simpler technology and management methods. They would be based around labour intensive and traditional methods of production. These enterprises normally operate from their home or utilise the space available in or around their home. They thus operate with minimum of capital investment. These enterprises may be  involved in producing products - tailor-made or single size - in smaller quantities, component/s of the product/s or specific process/es. They may be service based enterprises or involved in trading.

According to Wikipedia, micro-enterprise is a type of small business, often registered, having five or fewer employees and requiring seed capital of not more than $35,000. And according to the MSME Development Act of 2006 (India), a micro enterprise is where the investment in plant and machinery does not exceed twenty five lakh rupees (for the enterprise involved in manufacturing).

The economic importance of this sector also lies in its high employment potential. Over 50,000 people, majority of them women are involved in agarbatti rolling industries in Baruipur, West Bengal. And over 60,000 people are engaged directly and indirectly with the scissors manufacturing industries at Meerut. The Meerut Scissors industry is over 360 years old. The Indian footwear manufacturing industries engage around 1.10 million people, with over 2000 artisans involved in ladies footwear industries in Lucknow itself. Channapatna, also called as the city of toys, is a hub of micro and small scale units involved in making lacquered toys. Situated at about 65 Kms from Bangalore towards Mysore, the sector engages around 6000 people directly and indirectly. The 150 years old brass and bronze utensil cluster at Pareo, 40 Kms. from Patna, Bihar, employs nearly 3000 people from the village.

These enterprises, as majority of them were established to serve local markets, are today struggling for their survival. The immediate markets catered earlier by these enterprises are now flooded with cheaper, mass produced products. Their products, majorly the handicrafts have lost their utilitarian values and the importance that they once held in societal functions, ceremonies, rituals, festivals etc. They are now sold mostly for their decorative and heritage value as gift items. The products and the skills that once commanded value have now been reduced to another labor / a manual work. Though considered as source of innovations, these industries today find themselves vulnerable and at a loss  to compete with the fast paced, better equipped industries. And their markets are now distanced. Most micro enterprises  are today completely cut off from their markets, for getting their raw materials as well as to sell their produces.

Micro enterprises  are thus dependent on local suppliers, dealers, middleman and/or the exporters, for their raw materials, for their work / order and also to sell their products. The markets and the business would be controlled by these dealers, the middlemen or by the exporters with strong power of negotiation. These expose the micro enterprises to exploitations. Most work gets done either at a very low labor charges or with minimum profit margins for the artisans/ enterprises. In spite of putting in long hours, high volume of production and involvement of family members, these units / artisans normally end up getting daily wages as their earnings. Irregular and limited orders create constant sense of insecurity and competition within the cluster. Being completely cut off from the markets, these units do not get any feedback on their work or their products, making them further dependent on the exporters / traders for their orders. Without the exposure to contemporary market demands and trends, the artisans feel handicapped to either improve / refine their existing products or innovate new products. These has caused stagnation and saturation of the markets as no new designs have been developed for many years and the traders/exporters normally do not posses these skills. "The current mode of design & product development is copying from the magazines & from the samples sent by the wholesalers." writes Mr.  Mansur Lari in his NAS report of the Ladies Footwear Manufacturing Cluster, Lucknow.

Most artisans / workers involved in this sector of industry come from economically and socially weaker strata of the society. Many of them fall below poverty line. Some of them even if have agriculture land, due to lack of resources would not be in a position to generate yearly income through the same. The young generation, educated and the ones with even minimum of skill and capability would prefer to move out to cities or take up a job. Micro enterprises and micro businesses are unattractive to the young generation.    Thus creating severe shortage of skilled labours for these enterprises . The ones thus left, majority of them with lower education and exposure thus prefer to work with traditional, many times primitive methods and processes of production, management and business. Though many of these artisans are talented and skilled workers and open to innovation, lack of fund deters them from taking any further development work or any risks. Coupled with this, inconsistent and irregular work / orders make them further dependent on traders and/ or established enterprises of the cluster. And in spite of producing same and/or similar products, and selling them mostly to the same dealers/ markets the micro enterprises prefer to work as individual unit rather than as a group / cluster. One would see  income disparity among the enterprises, among the owner/entrepreneur and his/it's workers. Even though the products, craft and/ or the cluster is well known and well established in the markets, financial conditions of its artisans /workers remain weak.

"Given the very expensive raw material, limited electricity, the need to buy many inputs, inadequate telecommunications and road infrastructure, and a labour force that does not always understand the efficiency demands of the market, the micro enterprises  fight an uphill battle against the efficient, low-cost alternate products and their manufacturers." writes Saurabh Kumar in his NAS report for the Sholapith Craft Products Cluster. Traditional methods of production, labour intensive processes, unergonomic and unhygienic work environment, old and improper tools and techniques, they all result in low productivity, lower quality of products and inconsistent outputs. "The process  usually practiced to roll Agarbatti here is unergonomic. The uncomfortable sitting posture can affect the spinal cord resulting in critical health problems. Providing proper sitting arrangements and tools will help the workers increase  their productivity." mentions Piyali Baruah in her NAS report of Agarbatti Cluster, Baruipur, West Bengal. Lack of proper storage space for both, the raw materials as well as for the finished products, results in increased rejection and wastage.

Micro enterprises demand  holistic, multi-pronged interventions to be initiated simultaneously at the individual unit level as well as at the cluster level to improve and upgrade overall quality and productivity of the products produced. Though each of them operate as individual units, these enterprises form a cluster of similar units. A cluster based interventions in the form of Common Facility Centre, Material Bank, micro-finance facility, primary health care facility/hospital and similar other interventions and initiatives, the ones that encourage and enhance community and cooperative participation would form some of the important initial initiatives at the cluster level.  This should result into a formation of an appropriate platform that helps connect the strengths of the cluster as well as the individual units to the demands of the contemporary markets. The interventions would also include trainings and exposure into various areas of business, management, technology and production.

Specific design interventions would include new design and redesign of products as per the demands of the markets catered, development of new range of products, improvement of processes, joineries, finishes and product quality etc., design of appropriate support systems including appropriate low cost material handling equipments/aids for internal transport, storage etc., packaging, branding, marketing and communication materials and strategy etc. The design interventions here should focus on improvement of work environments, workstations, development of appropriate tools, techniques and machines,

The objective of these initiatives, while to create the much needed value addition in the existing range of products for these enterprises, so as to compete and survive in today's contemporary and highly competitive markets, these interventions should help improve the quality of life of the people involved. "An ideal cluster should be a centre of better eco-friendly environment, quality production, with user friendly workstations and tools, with sustainable practices and processes in place."  writes Piyali Baruah in her NAS report of Agarbatti Cluster, Baruipur, West Bengal.  These initiatives will help country’s micro enterprises and the artisans /workers involved, move up the value chain in their life.

Some of the important characteristics and concerns of micro-enterprises emerging from the Need Assessment Survey carried out as part of the Design Awareness programmes under the Design Clinic Scheme for MSMEs for few of the micro-enterprises clusters, have been compiled and listed as under:


Uses all/ majority manual processes.
Labor intensive processes
Traditional (many times primitive) methods of production.
Inconsistent quality, low volume production
Reliance on dealers, traders, middleman, suppliers, exporters
No market exposure and/or marketing arrangements to sell their products
Similar looking, cheaper, mass produced products available in markets
Unhealthy competition with similar clusters /industries
Units / enterprises established nearby, forming a cluster of similar industries
Most units produce same or similar products, sells in the same markets/dealers
Lack of unity among the units, prefer to work as a single/individual entity rather than a collective one.
Majorly unorganised industry / time management an issue
Appropriate process of costing not followed, sudden changes in prices
No one sticks to prices, in a way no standard price for products
No product standardisation
Suitable for batch production, low production capacity
Work environment, workstation, safety some of the major issues
Lack of basic hygiene and health measures
Logistic issue to cater to market demands on time
Unavailability of workers, skilled workers
Young generation negligence towards this job

Workers / Artisans
Family members involved
Family members carry out each and every stage of production process.
Artisans / workers / people involved in this trade mostly from lower income group and many of them from below  poverty line.
From lower strata of society , many of them from minority / schedule cast
Old, traditional methods and processes still in use.
No work for artisans during monsoons.
Lower wages, laborious work,  irregular job forces artisans to  migrate to cities and/or other regular jobs, like  construction sites etc.
Diversification towards other jobs due to better pay & less labor.
High income disparity between the worker/s and the unit owner.
Raw material normally provided by local supplier & middle man.
Increased raw material price.
Irregular/ inconsistent supply of goods / orders
Do not get regular work for the whole month, sit idle for few days every month.
Labour charges provided to the workers  or the profit margin very low.
Dependent on traders, middleman, exporter for marketing or selling their products.
Doing only order work, decreased market orders
No or limited excess and exposure to market/s, buyers, users
Don't get any feedback on their work.
Unable to innovate, improve, refine their work as per market needs and demands.
Sense of insecurity and competition within cluster.
No medical facilities near by.
Low education level effect their growth
Technical qualifications absent
Illiteracy, lack of awareness hindrance to communicate, to avail  benefits of government policies.
Understanding of business, costing, management low or nil. Sometimes end up selling their products at minimum margin or at the cost rate.
Lack of awareness about education, technology, work environment and health consciousness.
Low / no motivation for further development.
Casual approach
Unremunerative/ low returns deter next generation taking the cluster forward. No system/ plan for future growth /interventions.
Young generations not very interested to continue the same profession/business, seeking different occupation /  new job opportunities.

Technology / Tools / Processes / Equipment

Very few units / enterprises equipped with machines.
Still use the same old techniques and machinery for production.
Old machines and manual processes affect the quality of products
Not much technological up-gradation visible
Unorganized work environment, working pattern, time management.
Haphazard layout of the working area / unit
Poor work conditions
Poor production quality results in wastage and rejection, especially for exports. Reduces market.
Laborious and time-consuming processes make it difficult to complete orders on time.
No system in place to regulate breakage, defects, quality standards
No quality check/ inspection of products and processes in place.
Difficult to standardize products / production. Variations in work / output.
Critical aspects of finishing ignored.
Do not have finishing machine/s
Restructuring of production process required
Process improvement required through basic systems, tools & technology up gradation for optimum design & quality delivery
Appropriate technology interventions to increase productivity, safety and health standards
Unergonomic and uncomfortable processes practiced
Uncomfortable work postures (coupled with long hours of work) results in critical health issues; decreased productivity
Traditional, mostly outdated tools & equipment used
Need to develop appropriate hand tools, equipment, logistic aids
Proper sitting arrangements through appropriate workstations to aid correct body postures
Work environment considering lighting, air circulation / ventilation required
Appropriate safety kits, masks, gloves etc. to enhance safety, overall health and hygiene condition.

Resources / Raw-materials / Infrastructure

Raw materials shortage, insufficient supply, unavailability
Raw material quality varies considerably
Poor quality of raw materials hamper quality, productivity and production resulting in loosing of markets, exports.
Improper storage affects quality, property, composition of raw materials
Lack of proper storage system, infrastructure for storage of raw materials, semi finished and finished products; spaces undefined
Appropriate storage space , staking facility
Appropriate technology / aids to reduce raw material wastage
Raw material testing facility required.
Common Facility Centre , Material Bank to provide standard quality  of raw materials

Training / Skill Up-gradation

Lack of / low awareness of new  designs and techniques developed in other parts of the country/world
Awareness and exposure of modern techniques and processes required
Technical training, skill up gradation and skill refinement trainings from time to time
Training and skill up gradation programme to improve quality, productivity packaging.
Awareness and training of comfortable work postures to reduce physical strain.
Handholding and technical support for implementation of best practices.
Training and awareness of best business, management practices, standard rates of the products (both purchase rate & selling rate)
Many of them  unaware about their buyers, name of the company under which their products are sold.
Exposure to contemporary market trends, customer demands, emerging life style
Exposure to creativity, design thinking to improve and develop new products to cater to current market demands.
Vocational training to make accessories, jewellery and/or small utility products to create and provide employment during monsoon.
Workshop / training to design and develop new products / accessories to utilise wastage.
Need for a platform for regular interaction, collaboration among  cluster members to develop ownership, positivity.
Co-creating strategy for future growth, cluster identity
Regular participation in exhibitions, industry expo.

Product / Design and Development

Present mode of design & product development is copying from magazines & from samples     sent by wholesalers.
Monotony in design and products
Lack of contemporary designs make cluster unattractive to buyers
Market penetration difficult without product variety and range
Need for diverse range of products as per contemporary market demands
Product range, specific to the end user needs, usage and purpose.
Contemporary aesthetics and  improved finishes required to attract new markets
Target new market areas not only nationally but also internationally.
Need for design interventions in the area of processes, material composition, assembly etc.
Devise modern packaging techniques as opposed to the current manual process.
Need for attractive, stylish and usable packaging to cater to global market.
Visual identity, branding, marketing support required
Development of a common (cluster) brand instead of multiple brands
Better displays and retail outlets required to showcase products.


Majorly a labor based industry, cluster gets formed due to cheap and ample labor around.
Though good demand and sizeable markets, very little development visible.
Constraints of processes used, economic imbalance, traditional social structure, some of the    issues stagnating the growth of the cluster/s
Lack of funding major concern and hindrance to the growth of individual units as well as the cluster
Absence of better, modern infrastructure inhibits international buyers to purchase despite good product potential & demands.
Established enterprises, larger units work as competitors; micro units do not get guidance, support from them
Cluster based, government interventions much required.
Unorganized industries, cluster; no cluster association
Unavailability / shortage of skilled labor, technicians
Competition within the cluster
Undercutting amongst the units
Competition from mass/machine producers
Over production of low quality goods
Limited product range
Dependence on regional market
Seasonal work only 6-8 months
Overall level of education within cluster poor
Transportation and connectivity important issue
Supply chain issues; common vehicle for the cluster
Better hospital, health facility, health security
Better Connectivity with internal roads to reduce demages, save time
Cluster and its units dependent for their work and raw materials on local dealers, middle men; exposed to negotiations, exploitations
Very few fixed clients, dealers; fluctuated orders
Need to move/ expand markets, dealers,
No brand & market identity makes units depend on wholesalers
Establish cluster as brand
Marketing & branding absent
Not a single website of any unit
Very less advertisement in markets
Usage of internet, emails absent
Change of Government policies such as imposition of duty & taxes
Need for common facility center / community store / material bank,
Micro finance / bank credit facility required
A localized quality testing lab, research and technical suggestions
Training Center, Product Development Center
Explore collaborative, joint venture to increase production & marketing
Need to develop cluster based professional system, approach and business model
Attract younger generation to take up responsibility
Awareness and exposure of the benefits of cluster based approach


My very own Training manual micro-‐‑enterprise development for project officers and field workers,
Micro-‐‑enterprise -‐‑ Wikipedia, the free encyclopedia,
Micro and small enterprise (MSE) development,
Flower of the Wood, Need Assessment Survey of Sholapith cluster, Mandirbazar block, South 24 Parganas, W.B.; Saurabh Kumar
Interactive Design & Technology Study & Need Assessment Survey of Lucknow Handmade Ladies Footwear Cluster, Mansoor Lari
Need Assessment Survey report-2011, Agarbatti Cluster, Baruipur, West Bengal; Piyali Barua

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