Competition from sister concerns, poor quality and poor holding capacity etc., are identified as marketing problems.

The Karve Committee Report (1955) was one of the earliest of the exercises, which recommended a protective environment for the growth of small industries in India. Reservation of items for exclusive manufacture in SSI sector statutorily provided for in the Industries Development and Regulation) Act, 1951, has been one of the important policy measures for promoting this sector. After the liberalization of the economy, governments attitude towards the MSME sector changed and many of the products exclusively manufactured by these units earlier got de-reserved. No more the MSME sector continued to be treated as infant industry. Presently, only 21 items are reserved for exclusive manufacturing in MSE sector. These include bread, pickles, wooden furniture, wax candles, exercise books and registers, safety matches, incense sticks, fireworks and stainless steel and aluminum utensils. The phased deletion of products from the list of items reserved for the exclusive manufacture by micro and enterprises is being continued. In October 2008, the government deleted 14 items from this list. The MSME sector today faces competitive environment owing to: 1. Liberalization of the investment regime during the 1990s, favoring FDI. 2. The formation of the World Trade Organization (WTO) in 1995, forcing its member-countries (including India) to drastically scale down quantitative and non-quantitative restrictions on imports, and 3. Domestic economic reforms.

.Out of several problems faced by small and medium scale entrepreneurs, the absence of adequate marketing and
export facilities is one of their main concerns. Almost all types of business enterprises face marketing problems, but the small and medium scale enterprises face greater difficulty in the marketing and distribution of their products. Some of these are: Small and medium entrepreneurs tend to face tough competition from the products and sales/ marketing strategies of large scale firm's entrepreneurs. They, at times, find it very difficult to cope with large scale entrepreneurs in terms of cost, quality, standards, popularity, meeting ever-changing demands/ preferences of consumers, etc. Most of them do not have their own marketing network. So, they ultimately have to rely on outside sources for distributing their products. This also tends to raise the cost of their products and services.

Most of them do not have good knowledge and/ or experience of various marketing concepts and strategies. As a result, they are unable to understand quickly and accurately the prevailing as well as constantly changing market trends. Furthermore, inspite of having huge potentialities of extensive market for their products, they are mainly unwilling to opt for efficient marketing techniques. They also lack the resources and funds needed for effective sales promotion. Many of such enterprises cannot afford to spend much on advertising, sales promotion, market research, etc. They find it difficult to sell their output at remunerative prices because of higher cost of production and nonstandardised quality of products. They also have to sell their products at throwaway prices due to their weak bargaining power (especially in dealing with big buyers) and urgent needs of funds.

Thus, it is right to say that most of small and medium entrepreneurs do not correctly understand as to what kind of products are actually needed by the market, how big/small is the market, when the products are needed and how to deliver such products. All these problems keeps them mainly isolated from the market trends and conditions and, thus, tend to restrict their operations. Besides, small and medium scale enterprises are the most significant contributor in the field of India's exports. There has been a prominent increase in the exports from this sector of both traditional and non-traditional goods including jewellery, garments, leather, hand tools, engineering goods, software, etc. Also, the enterprises with good export performance have greater stability in the economy. But, there is still lot of problems in exporting the products by small and medium entrepreneurs to other regions/ countries/ areas. They are not very familiar with the steps and formalities involved in exporting goods from India. They need to be made aware of all the steps involved in the process, such as, registration of exporters; selection of export market and buyers; receipt of enquiries, letter of intent, letter of credit, bill of lading, etc; insurance coverage; obtaining shipping order; certificate of origin; sending documents to importers; etc. 3. Irregular supply of raw material: Small units face severe problems in procuring the raw materials whether they use locally available raw materials or imported raw materials. The problems arise due to faulty and irregular supply of raw materials. Non-availability of sufficient quantity of raw materials, sometimes poor quality of raw materials, increased cost of raw materials, foreign exchange crisis and above all lack of knowledge of entrepreneurs regarding government policy are other few hindrances for small-scale sector. 4. Absence of organised marketing: Another important problem faced by small-scale units is the absence of organised marketing system. In the absence

of organised marketing, their products compare unfavourably with the quality of the product of large- scale units. They also fail to get adequate information about consumer's choice, taste and preferences of the type of product. The above problems do not allow them to stay in the market. 7. Competition from large-scale units and imported articles: Small-scale units find it very difficult to compete with the product of large-scale units and imported articles which are comparatively very cheap and of better quality than small units product. . In India as well, the sector is the second largest employer, after agriculture, and accounts for nearly 6 percent of the country's GDP. 6% of GDP, 35% of exports, 30 million employed and so on, hide, is a sector rife with bureaucracy, overregulated and over protected, and facing an uncertain future though there are firms which are growing rapidly, there also exist 1, 38,000 sick units within the sector (c)Credit Market There are primarily two market imperfections the small scale sector faces regarding the credit market: 1. Capital costs faced by SSEs (Small Scale Enterprises) are typically higher because of market imperfections in the availability of information for investors and lenders. 2. Transaction costs in bank lending exhibit pronounced economies of scale with respect to loan size. Thus, the unit transaction costs for SSEs are higher than those for large firms. Moreover, provision of collateral or other risk-reducing securities is often difficult for SSEs. In the credit market, small scale units face a disadvantage due to the greater behavioral risk of default as well as the higher cost of lending. To solve this, the aim of the government should have been to aid the credit market in developing techniques and practices specific to the sector which would have reduced risk and cost of lending. The government attempted to counter the problem by enforcing mandatory credit allocation to the sector. It did this, in an already protected environment, by offering the sector lower interest rates and through the requirement that at least 15 percent of all bank credit was to be allocated to the small scale sector. This ensured that the sector not only got used to easy money and very often remained economically unviable, but also that those units which most deserve credit did not necessarily get it as banks were only looking to fill their quotas. The government also set up specialized lending institutions for the small scale sector at the state level. These however were rife with bureaucracy and irresponsible in their lending, as visible in their recovery record: an average of 37 percent over the past thirty to forty years! What the protectionist stance of government policy has ensured is that productivity is not really a concern for small units selling in the local market. Their concern is not so much with labor productivity as with utilizing the various concessions given to small enterprises reservation of production lines, excise duty and interest concessions, or even evading excise duty altogether. The profits of small-scale units are more related to what is nowadays called rentseeking than to productivity. This distorts the market mechanism in the small scale sector and ensures that numerous small

units are set up instead of growth of units vertically, into larger units. Undoubtedly the small sector is poised for change and a big leap; but this will not happen without a forward-looking policy which will push the sector, against its own will perhaps, out of its state-designed protective rut. 5. Other Issues facing the Small Scale Sector in India (a)Lack of Institutional Credit For most small enterprises access to timely and cheap finance is possibly the biggest problem. If one looks at enterprises in the segment of Rs.1-5 crore turnover, it is estimated that only 35-40 percent of them get adequate credit. Traditionally small and medium enterprises have been seen as risky investments for banks as they did not record very high growth rates. Added to this, the sectors informal business practices and poor information flow has ensured that banks have stayed away. Even the best of small scale units get loans at rates 175-200 basis points higher than large corporates. Despite several initiatives to speed up credit-flow, such as setting up of the Credit Guarantee Corporation, tiny sector credit norms, intervention of specialised institution such as NABARD and SIDBI, the purview of institutional credit is still limited only to 14.91 per cent of SSI units in the country. A study by CRISIL showed that small enterprises have lower access to bank credit, with a significantly lower median gearing (i.e. debt as a percentage of shareholders equity) of .34 times compared to .73 for large corporate. Adequate information in the form of surveys, credit ratings etc. are also not available, further decreasing available finance for the sector. These factors have ensured that the small entrepreneur has no avenue for finance other than expensive loans, or finance from informal but expensive sources like moneylenders. This premium at which funds are obtained, again affect the units ability to perform competitively and efficiently, further accentuating the vicious cycle of small size and inadequate finance. The government, realizing the importance of the small scale sector has tried boosting credit flows to the sector, targeting a doubling of credit flow from Rs. 67,000 crore in 2004-05 to Rs. 1, 35,000 crore by 2009-10. Things on the ground are however changing as along with an added thrust by the government, private players too are waking up to this large captive market. Small entrepreneurs too, realizing that the onus of getting cheap finance lies with them as well, have begun to improve their business practices. (b)Quality Standards and Lack of R&D One effect of the policy of reservation has been production of a sub standard quality, with little emphasis on Research and Development. This, though not always true, is the general trend in the sector, especially if one does not look at new service oriented units like those working in IT. This has meant that the quality of products available to the Indian consumer is of low grade quality, with little effort to improve. What this also means in the light of the changing globalised scenario

(b)Quality Standards and Lack of R&D

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