Introduction 

Manufacturing is one of the key sectors of the Indian economy, contributing about 16% to the GDP and employing over 120 million people. Micro and small scale manufacturing industries (MSMIs) are an important segment of this sector, as they provide employment, income, and export opportunities to millions of entrepreneurs, especially in rural and semi-urban areas. MSMIs are defined as those units that have investment in plant and machinery up to Rs. 25 lakhs. They can be classified into various categories, such as agro-based, forest-based, mineral-based, engineering, chemical, textile, leather, paper, etc. 

MSMIs have several advantages, such as low capital requirement, high labor intensity, flexibility, adaptability, and innovation. They can also cater to the local and niche markets, and respond to the changing consumer preferences and demands. However, they also face many challenges, such as lack of access to finance, technology, raw materials, skilled labor, infrastructure, and market information. They also have to compete with large and medium scale industries, as well as imports from other countries. Therefore, MSMIs need to adopt modern and efficient production methods, improve product quality and design, diversify product range, and explore new markets, both domestic and international. 

This guide aims to provide useful information and guidance to the entrepreneurs who are interested in setting up MSMIs in the range of 10 lakhs to 25 lakhs. It covers the following topics: market potential, government subsidies and incentives, marketing and sales, and investment estimates. It also provides some examples of common products that can be manufactured in this range, along with their production processes, raw materials, machinery, and profitability. However, this guide is not exhaustive, and the entrepreneurs are advised to conduct their own market research, feasibility study, and project appraisal before starting their venture. 

Market Potential 

Global Market 

The global market for manufacturing products is huge and diverse, offering ample opportunities for MSMIs to expand their business and increase their profitability. According to the World Bank, the global manufacturing value added (MVA) was $13.5 trillion in 2019, accounting for about 15% of the world GDP. The major manufacturing regions in the world are East Asia and Pacific, Europe and Central Asia, and North America, which together accounted for about 85% of the global MVA in 2019. The major manufacturing sub-sectors in the world are food and beverages, chemicals, machinery and equipment, electrical and electronics, and transport equipment, which together accounted for about 65% of the global MVA in 2019. 

MSMIs can tap into the global market by identifying the products that have high demand and low competition, and by meeting the quality standards and regulations of the importing countries. They can also leverage the benefits of various trade agreements and preferential schemes that India has with various countries and regions, such as the ASEAN, SAARC, EU, Africa, etc. Some of the potential products that MSMIs can export to the global market are spices, processed foods, herbal products, handicrafts, garments, leather goods, gems and jewelry, etc. 

According to the Ministry of Commerce and Industry, the total exports of MSMIs from India were $147.4 billion in 2019-20, accounting for about 48% of the total exports of India. The top five destinations for MSMIs exports from India were the USA, UAE, China, Singapore, and Hong Kong, which together accounted for about 40% of the total MSMIs exports from India. The top five products exported by MSMIs from India were petroleum products, drugs and pharmaceuticals, iron and steel, organic chemicals, and engineering goods, which together accounted for about 40% of the total MSMIs exports from India. 

Indian Market 

The Indian market for manufacturing products is also large and growing, driven by the increasing population, income, urbanization, and consumption. According to the Ministry of Statistics and Programme Implementation, the Indian MVA was $406 billion in 2019-20, accounting for about 14% of the Indian GDP. The major manufacturing sub-sectors in India are food and beverages, chemicals, basic metals, machinery and equipment, and textiles, which together accounted for about 60% of the Indian MVA in 2019-20. 

MSMIs can cater to the Indian market by understanding the consumer preferences and trends, and by offering products that are affordable, durable, and customized. They can also take advantage of the various government initiatives and policies that aim to boost the domestic manufacturing sector, such as the Make in India, Atmanirbhar Bharat, Production Linked Incentive (PLI), etc. Some of the potential products that MSMIs can sell to the Indian market are bakery products, snacks, beverages, cosmetics, detergents, candles, toys, stationery, etc. 

According to the Ministry of Micro, Small and Medium Enterprises, there were about 63.4 million MSMIs in India as of 2015-16, employing about 111 million people. The total output of MSMIs in India was about Rs. 38.5 trillion in 2018-19, accounting for about 30% of the Indian GDP. The share of MSMIs in the total manufacturing output of India was about 45% in 2018-19. The top five states with the highest number of MSMIs in India were Uttar Pradesh, Maharashtra, Tamil Nadu, West Bengal, and Gujarat, which together accounted for about 50% of the total MSMIs in India. 

Andhra Pradesh and Telangana Market 

Andhra Pradesh and Telangana are two neighboring states in South India, with a combined population of about 130 million and a combined GDP of about $240 billion in 2019-20. Both states have a strong manufacturing base, with a combined MVA of about $40 billion in 2019-20, accounting for about 10% of the Indian MVA. The major manufacturing sub-sectors in both states are food and beverages, chemicals, basic metals, machinery and equipment, and textiles, which together accounted for about 70% of the combined MVA in 2019-20. 

MSMIs can target the Andhra Pradesh and Telangana market by offering products that suit the local tastes, culture, and climate, and by establishing a strong distribution network and brand image. They can also benefit from the various government schemes and incentives that both states offer to the MSMIs, such as subsidies, tax exemptions, interest concessions, infrastructure support, etc. Some of the potential products that MSMIs can supply to the Andhra Pradesh and Telangana market are pickles, papads, dairy products, confectionery, pharmaceuticals, paints, fertilizers, steel, electrical appliances, etc. 

According to the Ministry of Micro, Small and Medium Enterprises, there were about 4.8 million MSMIs in Andhra Pradesh and Telangana as of 2015-16, employing about 8.7 million people. The total output of MSMIs in Andhra Pradesh and Telangana was about Rs. 3.9 trillion in 2018-19, accounting for about 10% of the total output of MSMIs in India. The share of MSMIs in the total manufacturing output of Andhra Pradesh and Telangana was about 40% in 2018-19. The top five districts with the highest number of MSMIs in Andhra Pradesh and Telangana were Hyderabad, Rangareddy, Krishna, Guntur, and Visakhapatnam, which together accounted for about 40% of the total MSMIs in Andhra Pradesh and Telangana. 

Government Subsidies and Incentives 

Government of India 

The Government of India provides various subsidies and incentives to the MSMIs, through various schemes and programs, such as: 

• The Micro and Small Enterprises Cluster Development Programme (MSE-CDP), which aims to enhance the productivity, competitiveness, and market access of the MSMIs, by supporting the development of common infrastructure, technology upgradation, skill development, marketing, etc. 
• The Credit Linked Capital Subsidy Scheme (CLCSS), which provides a 15% capital subsidy on the purchase of eligible plant and machinery, up to a maximum of Rs. 15 lakhs. 
• The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which provides collateral-free credit to the MSMIs, up to a maximum of Rs. 200 lakhs, through various banks and financial institutions. 
• The Interest Subvention Scheme for Incremental Credit to MSMEs, which provides a 2% interest subvention on the incremental loans taken by the MSMIs, up to a maximum of Rs. 100 lakhs. 
• The Prime Minister’s Employment Generation Programme (PMEGP), which provides a subsidy of 15-35% on the project cost, up to a maximum of Rs. 25 lakhs, for setting up new MSMIs in the manufacturing sector. 
• The Scheme of Fund for Regeneration of Traditional Industries (SFURTI), which aims to revitalize the traditional industries, such as khadi, coir, pottery, etc., by providing support for cluster development, technology upgradation, product development, marketing, etc. 
• The A Scheme for Promotion of Innovation, Rural Industry and Entrepreneurship (ASPIRE), which aims to promote innovation, rural industry and entrepreneurship, by providing support for setting up incubation centers, technology business incubators, livelihood business incubators, etc. 

For more details on these schemes and programs, the entrepreneurs can visit the websites of the Ministry of Micro, Small and Medium Enterprises (www.msme.gov.in), the Office of the Development Commissioner (MSME) (www.dcmsme.gov.in), and the Khadi and Village Industries Commission (www.kvic.org.in). 

Government of Andhra Pradesh 

The Government of Andhra Pradesh provides various subsidies and incentives to the MSMIs, through various schemes and programs, such as: 

• The Andhra Pradesh Industrial Development Policy 2020-23, which provides various incentives, such as power cost reimbursement, stamp duty reimbursement, land cost reimbursement, interest subsidy, GST reimbursement, etc., to the MSMIs, based on the location, investment, and employment criteria. 
• The Andhra Pradesh Food Processing Policy 2015-20, which provides various incentives, such as capital subsidy, interest subsidy, power subsidy, VAT/CST/GST reimbursement, etc., to the MSMIs in the food processing sector, based on the location, investment, and employment criteria. 
• The Andhra Pradesh Textile and Apparel Policy 2015-20, which provides various incentives, such as capital subsidy, interest subsidy, power subsidy, VAT/CST/GST reimbursement, etc., to the MSMIs in the textile and apparel sector, based on the location, investment, and employment criteria. 
• The Andhra Pradesh Leather Industries Development Policy 2015-20, which provides various incentives, such as capital subsidy, interest subsidy, power subsidy, VAT/CST/GST reimbursement, etc., to the MSMIs in the leather sector, based on the location, investment, and employment criteria. 
• The Andhra Pradesh MSME Development Corporation, which provides various services, such as credit facilitation, marketing assistance, raw material supply, skill development, etc., to the MSMIs in the state. 

For more details on these schemes and programs, the entrepreneurs can visit the websites of the Department of Industries and Commerce (www.apindustries.gov.in), the Andhra Pradesh Industrial Infrastructure Corporation (www.apiic.in), and the Andhra Pradesh MSME Development Corporation (www.apmsme.in). 

Government of Telangana 

The Government of Telangana provides various subsidies and incentives to the MSMIs, through various schemes and programs, such as: 

• The Telangana State Industrial Project Approval and Self-Certification System (TS-iPASS) Act 2014, which provides a single-window clearance system for the MSMIs, and ensures time-bound approvals and clearances, along with various incentives, such as stamp duty reimbursement, land conversion cost reimbursement, power cost reimbursement, interest subsidy, VAT/CST/GST reimbursement, etc., based on the location, investment, and employment criteria. 
• The Telangana Food Processing Policy 2017, which provides various incentives, such as capital subsidy, interest subsidy, power subsidy, VAT/CST/GST reimbursement, etc., to the MSMIs in the food processing sector, based on the location, investment, and employment criteria. 
• The Telangana Textile and Apparel Policy 2017, which provides various incentives, such as capital subsidy, interest subsidy, power subsidy, VAT/CST/GST reimbursement, etc., to the MSMIs in the textile and apparel sector, based on the location, investment, and employment criteria. 
• The Telangana State Leather Industries Policy 2017, which provides various incentives, such as capital subsidy, interest subsidy, power subsidy, VAT/CST/GST reimbursement, etc., to the MSMIs in the leather sector, based on the location, investment, and employment criteria. 
• The Telangana State Industrial Development Corporation (TSIDC), which provides various services, such as credit facilitation, marketing assistance, raw material supply, skill development, etc., to the MSMIs in the state. 

For more details on these schemes and programs, the entrepreneurs can visit the websites of the Department of Industries and Commerce (www.industries.telangana.gov.in), the Telangana State Industrial Infrastructure Corporation (www.tsiic.telangana.gov.in), and the Telangana State Industrial Development Corporation (www.tsidc.telangana.gov.in). 

Marketing and Sales 

Marketing and sales are essential functions for the success of any business, especially for the MSMIs, as they have to compete with the large and medium scale industries, as well as the imports from other countries. Marketing and sales involve identifying the target market, segmenting the customers, positioning the product, developing the marketing mix, promoting the product, and distributing the product. Some of the key aspects of marketing and sales for the MSMIs are: 

• Market research: MSMIs should conduct market research to understand the needs, preferences, and expectations of the customers, as well as the trends, opportunities, and threats in the market. Market research can be done through primary sources, such as surveys, interviews, focus groups, etc., or secondary sources, such as reports, publications, websites, etc. 
• Product development: MSMIs should develop products that meet the customer requirements, and that are unique, innovative, and competitive. Product development can be done through various methods, such as brainstorming, prototyping, testing, feedback, etc. 
• Pricing strategy: MSMIs should adopt a pricing strategy that reflects the value of the product, and that is affordable, attractive, and profitable. Pricing strategy can be based on various factors, such as cost, demand, competition, quality, etc. 
• Promotion strategy: MSMIs should adopt a promotion strategy that communicates the benefits and features of the product, and that creates awareness, interest, desire, and action among the customers. Promotion strategy can involve various tools, such as advertising, publicity, sales promotion, personal selling, etc. 
• Distribution strategy: MSMIs should adopt a distribution strategy that ensures the availability and accessibility of the product to the customers, and that minimizes the cost and time of delivery. Distribution strategy can involve various channels, such as wholesalers, retailers, agents, distributors, etc. 

The entrepreneurs can use various online and offline platforms to market and sell their products, such as websites, social media, e-commerce portals, trade fairs, exhibitions, etc. They can also join various associations and networks of MSMIs, such as the Federation of Indian Micro and Small and Medium Enterprises (www.fisme.org.in), the Confederation of Indian Industry (www.cii.in), the Associated Chambers of Commerce and Industry of India (www.assocham.org), etc., to get access to market information, business opportunities, and support services. 

Investment Estimates 

The investment required for setting up a micro or small scale manufacturing industry depends on various factors, such as the type of product, the scale of production, the location of the unit, the technology used, the raw material used, the machinery used, the labor employed, etc. Therefore, the investment estimates may vary from case to case, and should be verified with the actual market conditions and the project feasibility. However, as a general guideline, the following table provides some indicative investment estimates for different production scales, based on some common products and assumptions.