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A PROJECT REPORT

ON
SMALL SCALE INDUSTRIES IN INDIA
Submitted in partial fulfillment of the
requirements for BBA(general) programme of
Guru Gobind Singh Indraprastha University

Under the guidance of:


Mrs. Shitika
Submitted by:
GOURAV BHATIA
Course: BBA SEMESTER-III
ENROLL NO. 40219201715
LINGAYA'S LALITA DEVI INSTITUTE OF
MANAGEMENT & SCIENCES
MANDI ROAD, DELHI - 110047

ACKNOWLEDGEMENT
The present work is an effort to throw some light on Small Scale Industries in
India. The work would not have been possible to come to the present shape
without the able guidance, supervision and help to me by number of people.
With deep sense of gratitude I acknowledged the encouragement and guidance
received by Mrs. Shitika (Faculty of LLDIMS). I also convey my heartfelt affection
to Mr. Divyansh Sharma (IIT, Delhi) who helped and supported me during the
course, for completion of my thesis.

GOURAV BHATIA

EXECUTIVE SUMMARY
Agro based industry is regarded as the sunrise sector of the Indian economy in view
of its large potential for growth and likely socio economic impact specifically on
employment and income generation. Some estimates suggest that in developed
countries, approximately 14 per cent of the total work force is engaged in agroprocessing sector directly or indirectly. However, in India, only about 3 per cent of the
work force finds employment in this sector revealing its underdeveloped state and
vast untapped potential for employment. There is no denying that India has to live
with the problem of unemployment for many years to come. Therefore need arises to
make all over development among all sections of the society especially in rural agro
based industrial units. The present paper is an attempt to find out the status of agro
based units such as rice mill industry in the Patiala district of Punjab and to analyze
the various problems being faced by them. It has been found that Rice mill industry in
Patiala district is in the crisis and facing the various problems regarding lack of
financial assistance, improper marketing channel, high degree of breakdown of
finished products and non availability of research lab for quality control. However, if
this sector will be properly developed, it can make state Punjab a major player at the
global level for marketing and supply of processed food for billion plus mouths to
feed. All over the world, the unorganized manufacturing sector is known as Small and
Medium Enterprises (SMEs) while in India this is known as SSI defined in terms of
investment in plant and machinery. During last 50 years, the limit of investment has
changed from Rs. 5 lacs in the sixties to Rs. 100 lacs in 2008. Within the SSI sector,
two sub segments have been created. : one for Tiny Units having investment in plant
and machinery up to Rs. 25 lacs and the other for industry Related Service and
Business Enterprise (SS and BE) sector defined as having investment in fixed assets
excluding land and building not exceeding Rs. 10 lacs. The SP Gupta Study Group on
Small Enterprises (2008), in its interim report, has recommended that the time is ripe
to move from Industry to Enterprise and also to include Medium Enterprises within
the SSI sector. This is essential in order to bring Indian SSI sector at par with the
global Small Medium Enterprises (SMEs) sector.
KEYWORDS: Agro based industries, challenges ahead.

TABLE OF CONTENTS
CHAPTER-1: INTRODUCTION
Background
The promotional measures cover
Literature Review
Statistics on SSIs
Small-Scale Industry Policy
Small Industries Development Organization (SIDO)
Directorate of Industries
Small Industries Service Institutes (SISIs)
National Small Industries Corporation (NSIC)

1-12

OBJECTIVES OF THE STUDY


Scope of the study
Importance of industrialization in India

13-15

RESEARCH METHODOLOGY
Research sampling and design
Type of research design
Nature of data
Tools and techniques
Research variables and measurement

16-19

CHAPTER 2: LITERATURE REVIEW


20-36
Problem contexts industry/ organization/ perspectives/ implications
Small industry development organization (SIDO)
National small industries corporation (NSIC) Ltd.
Small scale industries board
National commission for enterprises in the unorganized sector
National institutes for entrepreneurship development
SSI in Indian economy

CHAPTER - 3: DATA ANALYSIS


Data collection
Data analysis.
Limitation of the research
Discussion and analysis
Introduction to small scale sector

37-61

Meaning of small-scale sector:


Need of small-scale sector:
Importance of small sector:
Problems of small sector in India:
Overview of small-scale sector in India
New policy for small sector, 2000: major thrust areas
Role of small scale sector in the economic development of India
Challenges for the SSI sector
SWOT analysis of the small scale industry

CHAPTER-4: CONCLUSION & IMPLICATIONS

RECOMMENDATIONS
Recent modernization efforts
Adoption of new definitions
Dereservation
Promoting clusters
Institutional credit

62-68
69-74

EXPORT PROMOTION
Rationale Behind Export Promotion
International Exposure to SSI Products

75

BIBLIOGRAPHY/REFERENCES

76-78

CHAPTER-1
INTRODUCTION

INTRODUCTION
BACKGROUND
Since the time of the independence in 1947, a significant feature of the Indian
economy has been the rapid growth of the small industry sector. The small industry
sector is considered to have a major role in the Indian economy due to its 40 percent
share in the national industrial output along with an 80 percent share in industrial
employment and nearly 35 percent share in exports. The small scale industries sector
has been assigned an important role in the industrialization of the country by the
previous and current governments of India.
There are no clear official definitions of small. Small scale industries are usually
distinguished from the large-scale and medium-scale industries on the basis of size,
capital resources and labor force in the units. At one time the government of India had
grouped small-scale industrial undertakings into two categories - those using power
but employing less than 50 persons and those not using power and employing less
than 100 persons. However, capital investment on plant and machinery by units is
considered as a main criteria for distinguishing between the large and small industries.
An industrial unit can be classified as a small-scale unit only if it meets the capital
investment limits set by the government of India (GoI). These limits have been
steadily increased over the years. In 2005, the investment limit for small-scale
industry (SSI) was raised from $6 million to $30 million. Production units that are
ancillary to large-scale units are also considered as small if they sell not less than 50
percent of their manufactured products to one or more industrial units.
However, there is a clear distinction between the traditional and modern small
industries. The traditional small industries include khadi and handloom, village
industries, handicrafts, sericulture, coir, etc. Modern small industries manufacture a
wide variety of goods from simple items to sophisticated items such as television sets,
electronics control system, various engineering products, particularly as ancillaries to
large industries. The traditional small industries are highly labor-intensive, while the
modern small industries use highly sophisticated machinery and equipment. The term
small-scale industries is mostly used to represent modern small industries. The SSIs
manufacture many items which include rubber products, plastic products, chemical
2

products, glass and ceramics, mechanical engineering items, hardware, electrical


items, transport equipment, electronic components and equipments, automobile parts,
bicycle parts, instruments, sports goods, stationery items and clocks and watches. The
small scale industry sector output contributes almost 40% of the gross Industrial
value-added 45% of the total exports from India (direct as well as indirect exports)
and is the second largest employer of human resources after agriculture. The
development of Small Scale Sector has therefore been assigned an important role in
India's national plans.
In order to protect, support and promote small enterprises as also to help them become
self-supporting, a number of protective and promotional measures have been
undertaken by the Government.

The promotional measures cover


Industrial extension services institutional support in respect of credit facilities,
provision of developed sites for construction of sheds, provision of training facilities,
supply of machinery on hire-purchase terms,
3 Assistance for domestic marketing as well as exports, special incentive for setting
up enterprises in backward areas etc. technical consultancy & financial assistance for
technological up gradation.
While most of the institutional support services and some incentives are provided by
the Central Government, others are offered by the state governments in varying
degrees to attract investments and promote small industries in varying degrees to
attract investments and promote small industries with a view to enhance industrial
production and to generate employment in their respective States.
The small-scale industries (SSI) constitute one of the vibrant sectors of the Indian
economy in terms of employment generation, the strong entrepreneurial base it helps
to create and its share in industrial production and exports. The Government created
the Ministry of Small Scale Industries and Agro and Rural Industries (SSI&ARI) in
October, 2008 as the nodal Ministry for formulation of policy and co-ordination of
Central assistance relating to promotion and development of the small scale industries
in India. The Ministry of Small Scale Industries and Agro and Rural Industries
3

(SSI&ARI) was bifurcated into two separate Ministries, namely, Ministry of Small
Scale Industries and Ministry of Agro and Rural Industries in September, 2010.
Taking into account the high potential for growth in the SSI sector in terms of output,
employment and exports, the role of the Ministry of Small Scale Industries is to
strengthen the SSI sector, to enable it to remain competitive in market-led economy
and generate additional employment opportunities. For achieving these objectives, the
endeavor of the Ministry is to provide the SSI sector proper and timely inputs like:
1

Adequate credit from financial institutions/banks;

funds for technology up gradation and modernization;

adequate infrastructure facilities;

Modern testing facilities and quality certification laboratories;

Modern management practices and skill up gradation through advanced training


facilities; marketing assistance; and level playing field at par with the large
industries sector;

LITERATURE REVIEW
A leading, industrially advanced developing country, India has large, medium and
small industrial units of production in almost all branches of the industry.
Since Independence, the growth and development of the small-scale sector has been
favored by the GoI on the following grounds: (1) generation of employment
opportunities by SSIs, (2) mobilization of capital and entrepreneurship skills, (3)
regional dispersal of industries and (4) equitable distribution of national income. The
policies pursued by the GoI over the years have helped in the growth of the SSIs to a
considerable extent.
Statistics on SSIs
The total number of SSI units increased from 2.082 million units in 2000-01 to 2.724
million units in 2004-05. During the same period, at constant prices, the production
increased from nearly $1.6 billion to approximately $2.2 billion. The total number of
persons employed in SSIs increased from 12.9 million to 15.2 million. According to
4

Second All-India Census of Registered SSI units, 42 percent of the units were
functioning in rural areas, 48 percent in urban areas and 10 percent in metropolitan
areas. 62.2 percent of the units were located in backward areas. The rate of growth of
this sector has been higher as compared to the whole industrial sector.
In terms of the above mentioned development, the progress of the SSI sector is
considered impressive by experts. But the SSIs are mostly effected by a number of
problems that have hampered its absolute gwoth. According to the Seventh Five Year
Plan (1985-90) the growth of the SSIs has been constrained by various factors
``including technological obsolescence, inadequate and irregular supply of raw
materials, lack of organized market channels, imperfect knowledge of market
conditions, unorganized nature of operations, inadequate availability of credit,
constraint of infrastructure facilities including power etc. and deficient managerial
and technical skills.''

Small-Scale Industry Policy


The government of India (GoI) has taken many measures for the growth and
development of the SSI sector. It has followed a policy of reservation of items for
exclusive manufacturing by the small-scale sector. Over the years, the number of
items on the reserved list have increased reaching 836 items in 2005. However, 14 of
these items have been dereserved by the 2006-07 Union Budget. For the past several
years the GoI has recognized the need for the modernization of the SSI and has
initiated measures towards this end. It has put in place an infrastructure consisting of
many institutions both at the national as well as state and district levels to work for the
modernization of the SSIs. Some of these institutions will now be discussed in brief.

Small Industries Development Organization (SIDO)


One of the most important initiative undertaken by GoI is the establishment of the
SIDO in 1954. This organization is headed by a Small Industries Development
Commissioner (DCSSI). SIDO is placed under the jurisdiction of the Ministry of
Industrial Development and has its headquarters in New Delhi, India. The branch
offices of the DCSSI that are spread all over the country take care of the
establishment, operation and growth of the SSIs. The organizations under the control
DCSSI, at central and state level, organize various types of activities including
training, seminar, plant visits, and group discussions. Some of the major programs of
the SIDO are technology development, energy conservation, pollution control, ISO9000 etc. They help the SSIs by providing them with raw materials that are not readily
available in the market when needed. (Earlier, the small industries were mostly
depedent on local raw materials. However the modern small-scale industries
manufacturing more sophisticated and new products are using imported raw materials.
Sometimes problems arise in procuring the right quality of raw materials in time, for
operating their production plans and delivery schedules, due to foreign exchange
crisis or other reasons such as working capital problems.) The DCSSI branch offices
also assist the SSIs in collecting outstanding dues from their customers. The SIDO is
an umbrella organization under which a number of institutions operate. These are the
service institutes, the district industries centers and the information banks.

Small Industries Service Institutes (SISIs)


As of 2000, there were 26 SISIs, 32 branch institutes and 39 extension centers under
the DCSSI. These institutions are fully devoted to provide assistance to the SSIs in all
phases of their operation. These organizations help the SSIs in identifying items for
manufacturing, provide information on technologies, feasibility studies, training,
organization of workshops and seminars and other such programs. SISIs have a
program for stocking up spare parts and other supply items not readily available in the
market but necessary for the small-scale industries. The SISIs also have `reasonably
well-equipped' workshops and labs that offer testing services to small-scale industrial
units which are not equipped or have no proper personnel.

Directorate of Industries
The Directorate of Industries is an apex body for promoting industrial development in
the states. The Development Commissioner (Industries) heads the institution which is
supported by 6 regional and 30 district level establishments. The regional offices in
each state are headed by the Joint Director of District Industries Centers. The
important functions of this agency is the implementation of the small-scale industry
promotional schemes.

District Industries Centers (DIC)


The idea of District Industries Centers (DIC) was introduced by the Industrial Policy
Statement of December 1977. These DICs were established in each district to `provide
and arrange a package of assistance and facilities for credit guidance, raw materials,
training, marketing, etc. This program began in May 1979. As of 2005, there are 422
DICs operating in 431 districts in the country.

National Small Industries Corporation (NSIC)


The National Small Industries Corporation (NSIC) was formed to assist the small
industrial units by providing equipment on hire-purchase basis. The supplied
machines are used in various industries such as plastics, leather, printing and
stationery, automobile componenets and spares, electronic equipment etc. NSIC
projects to promote SSIs include finanacial services, technology upgradation,
technical training and marketing assistance. NSIC has prototype development and
testing centers at three places in the country to make available improved machine
designs and to give advanced technical training to personnel from the small industry.
Most states in the country have an industrial infrastructure corporation that provides
buildings, sheds and developed plots to small industrial units and small industries
marketing boards to assist in marketing. These corporations in some state are separate
for certain industries such as the electronics, leather, and ceramics.

National Institute of Small Industry Extension Training (NISIET)


The National Institute of Small Industry Extension Training (NISIET) was established
as an autonomous society by the Government of India, at Hyderabad in 1962. The
principal activities of the Institute are the training, research and consultancy in the
7

four related fields of small industry development, management, extension and


information for development. In 1970, the Small Enterprises National Documentation
Center (SENDOC) was set up at NISIET to assist the small industry in its information
needs.

Small Industries Development Bank of India (SIDBI)


The Small Industries Development Bank of India (SIDBI) was set up by GoI under a
special act of the Parliament in April 1999. It is a wholly owned subsidiary of the
IDBI. SIDBI has a network of 33 offices (5 regional and 28 branch offices). The Bank
was instituted to ensure the increased flow of financial assistance to SSIs. It assists the
SSIs through direct assistance schemes as well as indirect assistance such as
refinancing.

Role and Problems of Small Units in India


As industrialization gathered momentum so did the increase in small-scale industries.
Small units play an important role in the Indian economy, as they are labour intensive
and create job opportunities. Small companies are defined as those with less than US
$180,000 in capital equipment (US-AEP, 2005). They offer a higher productivity of
capital than capital intensive enterprises, as they have low investment per worker.
They help in dispersal of industries, rural development, and the decentralisation of
economic power. All this is required to increase and disperse economic growth.
In addition, small companies support entrepreneurial talent and skills, stimulate
personal savings, and help in developing innovative and appropriate indigenous
technology, providing dynamism and contributing to competition (Rajendran, 1989).
Therefore these industries are supported by the government and have been actively
encouraged; no public or private enterprise with more than 100 employees has been
allowed to go out of business (US-AEP, 2005). The government to support this sector,
not only for employment generation but also to enhance their competitive strength has
undertaken several policy initiatives and procedural simplifications. The government
has also provided measures such as greater infra-structural support, more and easier
availability of credit, lower rates of duty, technology up-gradation, assistance to build
entrepreneurial talent, facilities for quality improvement, and export incentives
(Parthasarathy, 2005).
8

Contributions of small-scale industries (SSIs) to India's industrial production, exports,


and employment are significant. About 3 million SSI units employing nearly 16.7
million persons account for 35% of India's total exports and about 40% of industrial
manufacture (SIDBI report on small scale industries sector, 2008, 2008, p. 6). In real
terms, the small-scale sector recorded a growth rate of 10.1% in 2003-04 as against
7.1% in 2002-03 and 5.6% in 2001-02. By the year 2025, if not controlled, this sector
will grow even more rapidly (Parthasarathy, 2005).

The governments prime role has been to encourage growth of these industries,
often neglecting environmental considerations. Industrial effluent largely comes
from the 3 million small- and medium-sized units that are scattered throughout the
country, particularly in the production of paper, sugar, leather, and chemicals.
Unfortunately, only about half the medium- to large-scale industries have partial
or complete effluent treatment. Fourfold industrial growth from 1963 to 2000
resulted in sixfold growth in toxic releases. Heavy industries like iron and steel
producers contribute nearly 70% of the toxic wastes released but only 20% of
industrial output. Industrial disposal of polluted effluent occurs via open drains
into streams and reservoirs or through underground injection. Most industrial
estates lack wastewater treatment systems (US-AEP, 2005).

Besides pollution problems, small-scale industries also have other kinds of


problems. One is internal, that is, the techno-managerial and financial problems
that they encounter, and the other is the external problems that they confront due
to non-compliance with regulatory and legislative measures.

Techno-Managerial and Financial Problems


Small industries by comparison with large industries lack environmental commitment,
technical expertise in environmental management, and the financial capabilities to
address environmental problems. Nor do they have standards or effective treatment
opportunities and services (Nyati, 1988). Interestingly, one would imagine that
because small industries are heavily supported by the government, availability of
finance and obtaining finance for pollution control measures should not be a problem.
Small industries also lack additional space for pollution control facilities. There are
difficulties in obtaining the technical assistance of knowledgeable consultants. Since
9

most of the units are dispersed, they find it difficult to come together for a joint or
common treatment plant. The concern of depressed profit margins and decline in
competitiveness prevents these units from using pollution control measures. More
emphasis is laid on new investments, production, and other return oriented
opportunities. Soft loans for pollution control measures are not lucrative. There are
subsidies offered for investments in pollution control as incentives, but the impact of
these incentives on these units is little or nothing, for they do not alter the cost-benefit
analysis in favour of pollution control investments (Nyati, 1988).
Regulatory Problems
Research done by Pargal, Mani, and Huq (2006) on industrial plants in India,
indicated that high levels of pollution elicit a formal regulatory response in the form
of inspections, but these inspections appear to have no impact on the emissions.
Inspections are probably ineffective in bringing about desired changes in behaviour
because of bureaucratic or other problems, including the probability that enforcement
is low and that the penalty for non-compliance is not stringent enough to act as a
deterrent. They suggest that Indian policy makers and regulators thus need to
explicitly recognize the trade-off in environmental quality of the existing regulatory
bias towards the small- and medium-scale sector.
Regulatory compliance has been a major issue for these units. Environmental
legislation in India, although seemingly as tough as that in major developed nations, is
not well enforced. Though multinationals and the large domestic companies are
monitored, poorly funded regulatory bodies find it nearly impossible to police the
millions of small- and medium-scale units. Bribing poorly paid inspectors is reported
to be common (Roberts, 2004).
Environmentalists have viewed enforcement as lax, despite the regulatory framework
and oversight authority of the Central and State Boards. There have been no
incentives to invest in the pollution control effort because of weak monitoring and
enforcement of environmental regulations. It is mainly small industries that continue
to lack incentives to set up treatment equipment or to operate equipment, if it already
is installed, because operating that equipment has been more expensive than noncompliance (Dasgupta, Laplante, & Mamingi, 2007). Obviously, in India, scarcity of
natural resources is less a concern than misuse of them. The pressure for profits
10

predominates. Porter and Lindes (2004) suggestion that environmental regulations


can spur innovations that increase product value and a decrease total cost seems
appropriate. The trade-off between economy and environment for production
processes, customer needs, and technology is dynamic and complex. Porter and
Linde suggest that innovation-friendly regulations can improve resource productivity
and competitiveness, but the problem is getting small industries to co-operate and to
view it as a long-term solution rather than a short-term goal.

Environmental Pollution Laws


India began to develop distinctive forms of environmental laws and regulations in the
1970s. The first of Indias modern environmental laws was the Water (Prevention and
Control of Pollution) Act of 1974, which established the Central and State Water
Pollution Control Boards; the Water Cess Act of 1977; the Air (Prevention and
Control of Pollution) Act of 1981; and the Environment (Protection) Act of 1986. The
latter is umbrella legislation designed to provide a framework for central government.
The problem envisaged here is not insufficient laws or pollution control boards that
can control pollution but, as the World Bank has stated, that these boards have been
plagued by poor enforcement due to political interference . . . whereas as with other
enforcement activities in India, corruption is pervasive" (US-AEP, 2005).
Another point worth noting is that the mandate of the Central Pollution Control Board
(CPCB) is to set environmental standards for all plants in India, lay down ambient
standards, and coordinate the activities of the State Pollution Control Boards
(SPCBs). Unfortunately, the implementation of environmental laws and their
enforcement are decentralized and so is the responsibility of the SPCBs (Mani, Pargal,
& Huq, 2005). This is another haphazard method of addressing the issue.
In addition, pollution laws have achieved little success. The courts have been slow to
respond to enforcement actions sought by state pollution boards. The boards
themselves have been poorly funded and charges of corruption have been regular and
widespread. Large industries have achieved pollution compliance more easily than
small industries (US-AEP, 2005). The reason is that they are afraid of taking risks.
Lau and Srinivasans (2006) research on identifying the driving force for better
environmental performance found results that implied the current effort in
11

environmental management is driven largely by a fear of the penalty that can be


imposed by the government when environmental laws are violated. However, Cornell
and Shapiro (1987) explained that a firm's value depended on the cost of explicit and
implicit environmental claims. Explicit claims of the shareholders can be recognized,
but the implicit claims of the firm cannot be ignored. If the firm refuses to comply
with its social responsibility and quality service, parties to implicit contracts, like
consumers or regulatory agencies, can force burdensome explicit contracts on the
firm. Cornell and Shapiros explanation applies widely to large industries, but in the
case of small firms it is apparent from the literature above that this can be totally
dismissed by resorting to other means.

12

OBJECTIVES OF THE STUDY

13

OBJECTIVES OF THE STUDY


This project is an attempt to do a conclusive research and analysis, which could lead
to charting out better future prospects for Small Scale Industries in India. In order to
achieve this primary objective we propose to move ahead in two-fold process. In the
first step we would analyze the problems and growth till date, which would serve as a
medium to bring out the realities of SSI in Indian economy and in the next step we
would go about analyzing the data collected and formulate future strategies for SSI.
In brief our research objectives can be broadly defined as:
To bring out the average market review towards SSI
To analyze the responses and find out the Govt and Individuals perception of
SSI.
D To understand the concept of Entrepreneurship
To understand its applicability to the small scale sector in India.
To study the crtical role of entrepreneurship in Small Scale Industry in India
To study the present status and future prospects of Small Scale Industry in
India
To study the evolution of Special Economic Zones in India, with particular
reference to Small Scale Industry in India

SCOPE OF THE STUDY


Importance of industrialization in India
Industrialization is the central dynamic force for most countries. It has been a key
growth objective of India's planned economy, with heavy investments being made in
this sector. Labour productivity is highest in manufacturing industries; this has
assisted in raising national income at a faster pace. It is a precondition for agricultural
development and it induces development in other sectors (Tiwary & Singh, 1999).
The importance of industrialization in economic development is crucial for a growing
economy with a large population like India, so prosperity through industrialization has
been a long-term strategy for the Indian government. Communities, businesses, and
governments have debated the results of industrialization, a debate that has continued
to grow unabated. Being reliant on agriculture and having a large population base has
14

made India impoverished, and hence industrialization is roughly a synonym for


economic development as a means to conquer poverty and provide employment.
Indias increasing population crossed the 1 billion mark in May 2009 (Vedantam,
2009) placing an additional burden on the Indian environment. The contrast between
Indias successful economic development and rapidly deteriorating environments,
particularly urban-industrial environments, makes this country a test for the
sustainable vision.
India's focus on growth witnessed two problems. One is population and the other
industrialisation. India realised that in order to become more self-reliant and increase
economic growth some changes had to be made. During the 1980s India moved away
from its planned market, emphasizing industry growth. Its economy grew at about
5.5% annually. Prior to those years there was a 3.5% growth and recently it has been
about 6%, although 89% growth is required for the 10 million new jobs needed each
year (United States-Asia Environmental Partnership [US-AEP], 2005).
Industrialization enables India to utilize its resources optimally, diversify the
economic base, raise the living standard of people, and attain balanced regional
development through fiscal incentives and concessional finance for backward
regions. At the same time industries contribute significantly to pollution. Small
industries have contributed significantly in the area of urban as well as rural
establishments. Raising concerns on environmental grounds are seen not so much as a
problem with large industries, as they are more supportive of environmentally
protective issues, but more so in the case of small industries. These small industries
seem to have acute environmental problems.
The scope of the study will be limited to undersatnd, what does the term Small
Scale Sector means in the broader sense in India.

To critically analyze the Financial Incentives available to the Small scale


sector in India .

15

RESEARCH METHODOLOGY

16

RESEARCH METHODOLOGY
RESEARCH SAMPLING AND DESIGN
RESEARCH DESIGN
A research design is a framework or blueprint for conducting any marketing research
project. It details the procedures necessary for obtaining the information needed to
structure or solve marketing research problems.
Research Methodology defines the purpose of the research, how it proceeds, how to
measure progress and what constitute success with respect to the objectives
determined for carrying out the research study.
The appropriate research design formulated is detailed below.
Exploratory research: this kind of research has the primary objective of
development of insights into the problem. It studies the main area where the problem
lies and also tries to evaluate some appropriate courses of action.
The research methodology for the present study has been adopted to reflect these
realties and help reach the logical conclusion in an objective and scientific manner.
The present study contemplated an exploratory research.

TYPE OF RESEARCH DESIGN


The research design is of two types:
1

Exploratory Research

Conclusive Research

As the objective of this research is to derive a conclusion about problems and


prospects of SSI, the group will use the Conclusive Research Design for the desired
analysis.
Further, Conclusive Research is of two types:
17

Descriptive Research

Casual Research

As the mode of research for this project is a survey to analyze the Indian Market
rather than an experiment, the group will use Descriptive research for the analysis.

NATURE OF DATA
Secondary data:- Data which is already available through various books, journals ,
magazines, internet etc.

TOOLS AND TECHNIQES


Analysis of data has been done with help of various statistical tools like the tables and
graphs.

RESEARCH VARIABLES AND MEASUREMENT


The different variables for research to be undertaken is listed below:

Bio-tech Industry

Common Effluent Treatment Plant

Corrugated Boxes

Drugs and Pharmaceuticals

Dyes and Intermediates

Industry

based

on

Medicinal

and

Aromatic

Plastic Moulded/ Extruded Products and Parts/ Components

Rubber Processing including Cycle/ Rickshaw Tyres

Food Processing (including Ice Cream manufacturing)

Poultry Hatchery & Cattle Feed Industry

Dimensional Stone Industry (excluding Quarrying and Mining)

Glass and Ceramic Items including Tiles

Leather and Leather Products including Footwear and Garments

18

plants

Electronic equipment viz test, measuring and assembly/ manufacturing, Industrial


process control; Analytical, Medical, Electronic Consumer & Communication
equipment etc.

Fans & Motors Industry

General Light Service(GLS) Lamps

Information Technology (Hardware)

Mineral Filled Sheathed Heating Elements

Transformer/ Electrical Stampings/ Laminations /Coils/Chokes including Solenoid


coils Wires & Cable Industry Auto Parts and Components Bicycle Parts
Combustion Devices/ Appliances Forging & Hand Tools

Foundries Steel and Cast Iron General Engineering Works Gold Plating and
Jewellery Locks Steel Furniture

Toys
Non-Ferrous Foundry

Sport Goods

Cosmetics
Readymade Garments

Wooden Furniture

Mineral Water Bottle

Paints, Varnishes, Alkyds and Alkyd products

Agricultural Implements and Post Harvest Equipment

Beneficiation of Graphite and Phosphate

Khadi and Village Industries

Coir and Coir Products

Steel Re-rolling and /or Pencil Ingot making Industries

Zinc Sulphate

Welding Electrodes

Sewing Machine Industry

19

CHAPTER 2
LITERATURE REVIEW

20

LITERATURE REVIEW
Due to rapid pace of technological developments and intensified competition, small
and medium enterprises in India have started realising the significance of improving
their productivity levels more than ever before. In this context, the present chapter
reviews the literature relating to the study so as to formulate the problem precisely
and develop a rationale for its undertaking. The basic objective is to indicate in a
general way the type of work done in this direction rather than to give exhaustive
review of all the research work done on the problem. The review of various studies
done in this chapter provides a broad spectrum about the productivity and efficiency
analysis of small scale industrial sector which would be helpful to design the
appropriate methodology for the present study.
Various empirical studies have been conducted from time to time to examine the
different aspects of growth pattern and performance of small scale industrial sectors in
India and in this context, important studies are reviewed below in a chronological
order. For this purpose, the chapter has been divided into three sections, Section -I
highlights the review of studies relating to the performance evaluation of small scale
industrial sector at All India level, whereas, Section-II focuses on the studies
pertaining to the performance evaluation of the small scale industrial sector at
regional level. However, the last section is concluding in nature and pinpoints the
rationale of undertaking the present study.
Habib (1972) through his study came to the conclusion that small scale industries play
an important role in the economic development by providing numerous chances of
income generation and improving the standard of living of the masses. Habib
emphasized that it is only the small scale sector through which economic prosperity
can reach the remotest sections of the society. From the very beginning since the
process of economic development started, the small scale sector has been providing
handsome employment opportunities to millions of job seekers in the country. Further,
small scale industries use local raw materials, employ local people and thus help in
generating employment opportunities for the community.
National Council of Applied Economic Research (1972) conducted a study to
examine the economies of selected number of small industrial units operating in
21

different parts of the country. A sample of 159 units spread over 22 industrial groups
was selected, of the selected units, 48 were manufacturing consumer products, 76
capital goods and 35 intermediate products. The study showed that besides other
problems, the under-utilisation of capacity among most of the units was due to the
problems of production as well as marketing. The problems of production were
closely associated with scarcity of raw material and inadequate finance. The problems
of marketing are by and large attributed to such factors as limited size of operation,
practically little or no control over quality, price and weak financial base, restricting
the scope for engaging in sustained sales promotion. The problem of sales is more
acute where the area of operation is large particularly in case of consumer products or
capital goods, where after-sale service is essential. In most of the cases the
entrepreneurs are found to be dependent on middlemen for the marketing of their
products.
Banerjee (1975) examined the relationship between capital intensity and productivity
in the context of Indian manufacturing industry. The analysis has been carried out for
manufacturing sector as a whole and five individual industries (viz. cotton textiles,
Jute textiles, sugar, paper and bicycle) by using ASI data for the period 1946-64. The
study highlighted that the performance of the manufacturing sector was sluggish over
the period 1946-64. While labour productivity showed a significant upward trend
during this period, but this sector did not indicate the presence of any technical
progress. The hypothesis of constant returns to scale was not rejected. It has been
found that elasticity of substitution between capital and labour is near unity in almost
all the industries.
The Vidarbha Industries Association (1976) made an empirical survey of sick units in
the region and dealt specifically with the major problem of finance, policies and
procedures of credit agencies as well as the difficulties that were being faced in
marketing. The study asserted that most of the difficulties of small scale sector arise
from financial, administrative control, frequent interest changes and recession in
demand these tends to make the units sick. Further, the requirements of credit of small
scale industries located in far away places are greater than those located at an
industrial centre because the former has to maintain higher inventories. The study
made specific observations on the low and weak equity base of the units, the
unrealistic gestation period allowed by state financial corporations, inadequate loans
22

by commercial banks and these factors emerged as the major causes of sickness in the
small scale sector. The study suggested that the moment a danger of sickness appears,
action should be initiated and dues of a sick unit should be converted into a long term
loan. The study also revealed that financial agencies have not been able to play their
role in the development of small scale sector in the under developed regions. It has,
therefore, been recommended to set up a regional development corporation which
may finance sick units and help them in marketing their products.
Jain (1980) discussed the increasing role of small scale industries in industrial
structure of the country along with export potential of small scale industries. The
various measures undertaken by the government agencies such as guidance formation,
financial support, export house scheme etc. to develop the formation of the consortia
for the benefit of the small industries have also been expressed. It has been observed
that the operational results of existing consortia may not be very substantial but
encouraging. Therefore, a potential of growth of such consortia look immensely
favourable.
Mehta (1980) attempted to analyse productivity trends for 27 Indian industries by
using ASI data for the period 1953-65. The results revealed that there was a
considerable diversity in the experience of different industries regarding trends of
labour and capital productivity. Labour productivity was found to have increased
significantly in industries like vegetable oil, chemical, glass and glassware and
insignificantly in matches, iron and steel and cement industries. However, capital
productivity has not increased appreciably, rather the reverse was true in most
industries. The total factor productivity of Indian manufacturing sector have declined
over a period of time. The study noticed that most industries exhibited the presence of
constant returns to scale and diseconomies of scale had not set in. The study
demonstrated that there were inter industry differences with respect to ease of capitallabour substitution which primarily explained the inter industry growth differentials.
The elasticity of substitution was found to be significantly different from zero in
many industries.
Papola (1981) studied the impact of concessional finance on industrial development
and emphasised that in order to make concessional finance effective, it will be
necessary to plan and develop a minimum threshold level of industrial activity
23

preferably with strong inter-relationship between the financial institutions,


promotional institutions, state and district administration and potential industrial
entrepreneurs, especially for more backward districts. He further emphasised that
almost one half of the fixed and working capital requirements of the units studied
have been met by institutional financing and most of the fixed capital financing has
been met through concessional finance especially in the backward districts. Units
availing concessional finance have experienced a higher rate of growth in output than
those without it.
Goldar (1983) examined productivity trends in Indian manufacturing sector and
estimated Total Factor Productivity (TFP) by applying Solow index and Translog
index using firstly 1951-65 data covering all Census of Indian manufacturing
industries except general engineering and electrical engineering industry for 195158 and Annual Survey of Industries (ASI) data for 1959-65 and secondly, during the
period of 1959-78 based on ASI data. This analysis shows a rising trend in labour
productivity and capital intensity and a falling trend in capital productivity during this
period. Growth in TFP seems to have been rather sluggish and its contribution to
output growth is quite small. The observed rise in labour productivity and fall in
capital productivity may accordingly be attributed to increasing capital intensity.
Substitution of labour by capital seems to be the main feature of industrial growth.
The result of Cobb-Douglas function estimation favours the assumption of constant
returns to scale implicit in the TFP indices which is in broad agreement with the
results of TFP indices especially in terms of the direction of TFP growth. The study
has pointed out that the general industrial situation was not conducive to productivity
growth. Under-utilisation of capacity, shortage of fuels, power and transport facilities
and deteriorating industrial relations had a significant depressing effect on
productivity growth. Moreover, gestation lags in the basic and capital goods
industries, which accounted for a dominant part of investment in post 1956 period,
must have had a depressing effect on productivity growth. A pronounced rising trend
in capital intensity was found, which implied that the growth in industrial
employment has seriously lagged behind the growth in industrial investment and
output. To some extent this is a result of the changing industrial structure in favour of
basic and capital goods industries. It has been observed that metals, chemicals, rubber,
petroleum and machinery industries are among the lowest ranked in terms of TFP
24

growth, since these are the industries in which import substitution has been attempted
on a considerable scale. Though the policy of import substitution contributed much to
the objective of self reliance, yet it has been inimical to productivity growth.
Ethiopia (1984) evaluated the importance of small scale industries for providing
employment and income generation in the African countries. The focus of the study is
on the analysis of efficiency of production and employment and results showed that
the artisan and small scale industrial sector are important component of the Ethiopian
economy in terms of generation of income and employment. The empirical evidence
of factor intensity and production also indicates that many small enterprises are
efficient in utilizing scarce resources such as capital and foreign exchange. Small
scale industries have also reasonable demand for their products, but strengthening of
the linkage between small scale industry and the agriculture sector appears to be
necessary. The study revealed that institutional, social and economic constraints
impede the development of this sector.
Qommen (1972) conducted a survey of randomly selected 45 small scale units in
Kerala to investigate the marketing assistance provided by the government to this
sector along with assistance of finance and services. The study undertook to examine
the modernisation, industrial estates programmes and rural industries project with
regard to small scale industries in Kerala. It has been observed that 44 percent of the
units sell their products throughout India, 28 percent at state level and remaining 28
percent sell their goods in the local market. Most of the units sell their products
through retailers, wholesalers, commission agents, government, ancillaries, subcontracting etc. The study also revealed that there are various marketing assistance
schemes such as marketing research, quality marketing, ancillary development, export
promotion and direct government purchase programme, but small units could not take
desired advantage of these programmes due to ignorance and lack of communication.
It has been observed that the state of Kerala faces a peculiar marketing problem of
'distant cost' in the purchase of inputs as well as sale of output and so special strategy
is desirable in this regard.
Brahma and Subas (1979) examined the development of small scale industries in
India with special reference to its development in Pune region. In this regard the data
was collected from 276 modern units and 98 traditional units. The main focus of the
25

study was to find out the problems of development of small scale industrial units,
along with other problems, the study indicated that the problems of raw material and
marketing by small scale units are the major problems. The irregular supply and low
quality of raw material are very common, with regard to marketing, delay in payment
and exploitation at the hands of middlemen are the other noteworthy problems
mentioned in the study.
Kaur (1982) conducted a study of Haryana during the period 1966-78 and found that
there was overwhelming concentration of industrial units and employment
opportunities in Gurgaon, Ambala and Sonepat districts and the relative change in the
number of units, output and employment observed during the study period. further,
author indicated that inter district disparities in the growth of industries had widened
and with the help of location quotient and coefficient of localisation, a high degree of
spatial concentrations was observed in wool, silk and synthetic fiber, wood and
wooden products, food manufacturing, beverages and cotton textile industry group.
Mohanty (1983) examined the marketing structure of small scale industrial products
by taking a sample of 178 small units of Cuttack. The study revealed that 64 percent
of the units sell their products directly to the consumers, while 36 percent sell their
products through distributive agencies. It has been further observed that if marketing
cost is taken into consideration, it constitutes only a small percentage of the total
value of production of small units which indicates that small units do not take pains to
develop market for their products, further, it was found that Director General Supplies
and Disposal and other Government stores do not purchase items from small units.
Amin (1999) focused on the regional spread and structural set up of small scale
industries in Gujarat and examine the regional share of small scale industries in the
industrial sector of the state. Further, the author attempt to make an overall assessment
of the performance of the industries among three homogenous regions of the state
during the period 1965-1985: the study found that the spread of small scale industrial
sector across the industrially homogenous regions is positively influenced by basic
economic characteristics of the concerned region. The pattern of regional distribution
of the SSI sector suggests the growth prospects of SSI sector over a period of time.

26

PROBLEM

CONTEXTS

INDUSTRY/

ORGANIZATION/

PERSPECTIVES/ IMPLICATIONS
The Ministry of SSI designs policies, programmes, projects and schemes in
consultation with its organizations and various stakeholders and monitors their
implementation with a view to assisting

the promotion and growth of small scale

industries. The Ministry also performs the function of policy advocacy on behalf of
the SSI sector with other Ministries/Departments of the Central Government and the
State and Union Territories.
The implementation of policies and various programmes/projects/schemes for
providing infrastructure and support services to small enterprises is undertaken
through its attached office, namely the Small Industry Development Organization
(SIDO) and the National Small Industries Corporation (NSIC) Ltd., a public sector
undertaking under the Ministry.

SMALL

INDUSTRY

DEVELOPMENT

ORGANIZATION

(SIDO)
The Office of the Development Commissioner (Small Scale Industries) is also known
as the Small Industry Development Organization (SIDO). It is an apex body for
assisting the Ministry in formulating, coordinating, implementing and monitoring
policies and programmes for the promotion and development of small scale industries
in the country and is headed by the Development Commissioner (SSI).
In addition, the SIDO provides a comprehensive range of common facilities,
technology support services, marketing assistance, etc., through its network of 30
Small Industries Service Institutes (SISIs), 28 Branch SISIs, 7 Field Testing Stations
(FTS), 4 Regional Testing Centres, 2 Small Entrepreneur Promotion and Training
Institutes (SEPTI) and 1 Hand Tool Design Development and Training Centre. The
SIDO also has a network of Tool Rooms, Process-cum-Product Development Centres
(PPDCs) and technology and training support institutes which are run as autonomous
bodies registered as societies under the Societies Act.

NATIONAL SMALL INDUSTRIES CORPORATION (NSIC) LTD.

27

The National Small Industries Corporation Ltd. was set up with a view to promoting,
aiding and fostering the growth of small scale industries in the country with focus on
commercial aspects of these functions. NSIC continues to implement its various
programmes and projects throughout the country to assist the SSI units. The
Corporation has been assisting the sector through the following schemes and
activities:

Supply of both indigenous and imported machines on easy hire-purchase terms


Composite term loan scheme Procurement, supply and distribution, of indigenous
and imported raw- materials Marketing of small industries products

Export of small industries products and developing export-worthiness of small


scale units

Enlisting competent units and facilitating their participation in Government Stores


Purchase Programme

Training in several technical trades

Sensitizing SSI units on technological up gradation through Software Technology


Parks and Technology Transfer Centres

Mentoring & advisory services

Technology business incubators. Setting up small scale industries in other developing


countries on turnkey basis Other areas & international co-operation Over the years,
the Corporation has made significant contribution to the growth of the SSI sector in
India. The Corporation has also set up a large number of turnkey projects in a number
of developing countries. The Corporation is an ISO: 9001-2009 Company.

SMALL SCALE INDUSTRIES BOARD


SSI Board is the apex non-statutory advisory body constituted by the Government of
India to render advice on all issues pertaining to the SSI sector. The Minister incharge
of the SSI Ministry is the Chairman of the Board. Members of the Board, include inter
alia State Industries Ministers, selected Members of Parliament, Secretaries of various
Departments of the Central Government, Heads of Financial Institutions,
Representatives of Industry Associations and Eminent Experts.

28

The SSI Board provides to its members a forum for interaction to facilitate cooperation and inter-institutional linkages and to render advice to the
Government on various policy matters, for the development of the sector.

The Board was first constituted in 1954. Its term is for two years. The Board
was last constituted on 18th January 2012, with 101 members and held its 48 th
meeting on 17 January, 2014.

NATIONAL

INSTITUTES

FOR

ENTREPRENEURSHIP

DEVELOPMENT
As entrepreneurship development and training is one of the key elements for the
promotion of small scale industries, the Ministry has established three National
Institutes, viz. the National Institute of Small Industry Extension Training (NISIET) at
Hyderabad, the National Institute of Entrepreneurship and Small Business
Development (NIESBUD) at NOIDA and the Indian Institute of Entrepreneurship
(IIE) at Guwahati as autonomous bodies. These Institutes are responsible for
development of training models and undertaking of research and training for
entrepreneurship development in the SSI sector.

NATIONAL

COMMISSION

FOR

ENTERPRISES

IN

THE

UNORGANIZED SECTOR
The National Commission for Enterprises in the Unorganized Sector was constituted
in September, 2014 under the chairmanship of Dr. Arjun K. Sengupta, an eminent
economist. It has three full-time Members and two part-time Members and an
Advisory Board consisting of 11 eminent experts from different fields relating to the
unorganized/informal sector. The Commission will recommend measures considered
necessary for bringing about improvement in the productivity of the informal sector
enterprises, generation of large scale employment opportunities on a sustainable basis,
particularly in the rural areas, enhancing the competitiveness of the sector in the
emerging global environment, linkage of the sector with institutional framework in
areas such as credit, raw material, infrastructure, technology upgradation, marketing
and formulation of suitable arrangements for skill development.
In accordance with its terms of reference, the Commission and its Advisory Board
have held several rounds of deliberations on a host of issues relating to the
unorganized/informal sector enterprises. In the light of these deliberations, the
29

following issues have been identified so far by the Commission for detailed
consideration and recommendations: notion of growth poles for the informal sector in
the form of clusters/hubs, where external economies need to be provided to spur
employment generation and productivity enhancement and the feasibility of
integrating the initiatives and programmes of various Ministries in this domain; skill
formation in the informal sector and potential for public private partnership in
providing the required skills; provision of micro finance and related services to the
informal sector enterprises and strengthening of the institutional framework in this
area; and issues concerning social security for the workers in the informal sector and
instrumentalities for achieving this objective.

SSI IN INDIAN ECONOMY


Performance
Year

Target

Achievement

2000-01

3.0

3.1

2001-02

5.0

5.6

2002-03

7.0

7.1

2003-04

9.1

10.1

2004-05

9.1

11.4

2005-06

9.1

11.3

2006-07

2.1

8.43

2007-08

3.2

7.7

2008-09

1.2

8.16

2009-10 (P)

1.0

8.90

i P-Projected (April-December)
ii Target not fixed at constant prices

30

11.4

12

11.3

10.1
9.1

10

9.1

8.43

8.9

8.16

7.7

7 7.1

9.1

5.6
3.2

3 3.1
2.1

1.2

2
0

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 (P)
Target

Achievement

31

Employment
SSI Sector in India creates largest employment opportunities for the Indian populace,
next only to Agriculture. It has been estimated that 100,000 rupees of investment in
fixed assets in the small-scale sector generates employment for four persons.
Generation of Employment - Industry Group-wise
Food products industry has ranked first in generating employment, providing
employment to 0.48 million persons (13.1%). The next two industry groups were
Non-metallic mineral products with employment of 0.45 million persons (12.2%) and
Metal products with 0.37 million persons (10.2%).
In Chemicals & chemical products, Machinery parts except Electrical parts, Wood
products, Basic Metal Industries, Paper products & printing, Hosiery & garments,
Repair services and Rubber & plastic products, the contribution ranged from 9% to
5%, the total contribution by these eight industry groups being 49%.

In all other industries the contribution was less than 5%.


Per unit employment
Per unit employment was the highest (20) in units engaged in beverages, tobacco &
tobacco products mainly due to the high employment potential of this industry
particularly in Maharashtra, Andhra Pradesh, Rajasthan, Assam and Tamil Nadu. Next
came Cotton textile products (17), Non-metallic mineral products (14.1), Basic metal
industries (13.6) and Electrical machinery and parts (11.2.) The lowest figure of 2.4
was in Repair services line.
Per unit employment was the highest (10) in metropolitan areas and lowest (5) in rural
areas. However, in Chemicals & chemical products, Non-metallic mineral products
and Basic metal industries per unit employment was higher in rural areas as compared
to metropolitan areas/urban areas. In urban areas highest employment per unit was in
Beverages, tobacco products (31 persons) followed by Cotton textile products (18),
Basic metal industries (13) and Non-metallic mineral products (12).

32

Location-wise Employment Distribution - Rural


Non-metallic products contributed 22.7% to employment generated in rural areas.
Food Products accounted for 21.1%, Wood Products and Chemicals and chemical
products shared between them 17.5%.

Urban
As for urban areas, Food Products and Metal Products almost equally shared 22.8% of
employment. Machinery parts except electrical, Non-metallic mineral products, and
Chemicals & chemical products between them accounted for 26.2% of employment.
In metropolitan areas the leading industries were Metal products, Machinery and parts
except electrical and Paper products & printing (total share being 33.6%). State-wise
Employment Distribution.

Tamil Nadu (14.5%) made the maximum contribution to employment.

This was followed by Maharashtra (9.7%), Uttar Pradesh (9.5%) and West
Bengal (8.5%) the total share being 27.7%. Gujarat (7.6%), Andhra Pradesh
(7.5%), Karnataka (6.7%) and Punjab (5.6%) together accounted for another
27.4%. Per unit employment was high - 17, 16 and 14 respectively - in
Nagaland, Sikkim and Dadra & Nagar Haveli. It was 12 in Maharashtra,
Tripura and Delhi. Madhya Pradesh had the lowest figure of 2. In all other
cases it was around the average of 6.
Year

Target
(lakh nos.)

Achievement
(lakh nos.)

Growth rate

2001-02

128.0

134.06

3.28

2002-03

133.0

139.38

3.28

2003-04

138.6

146.56

5.15

2004-05

144.4

152.61

4.13

2005-06

150.5

160.00

4.88

2006-07

165

167.20

4.50

2007-08

170.1

171.58

2.61

2008-09

175.4

177.3

3.33

33

P-Provisional
180
160
140
120
100
80
60
40
20
0

2001-02

2002-03

2003-04

2004-05

Target (lakh nos.)

2005-06

2006-07

2007-08

2008-09

Achievement (lakh nos.)

Export
SSI Sector plays a major role in India's present export performance. 45%-50% of the
Indian Exports is contributed by SSI Sector. Direct exports from the SSI Sector
account for nearly 35% of total exports. Besides direct exports, it is estimated that
small-scale industrial units contribute around 15% to exports indirectly. This takes
place through merchant exporters, trading houses and export houses. They may also
be in the form of export orders from large units or the production of parts and
components for use for finished exportable goods.
1

It would surprise many to know that non-traditional products account for more
than 95% of the SSI exports.

The exports from SSI sector have been clocking excellent growth rates in this
decade. It has been mostly fuelled by the performance of garments, leather and
gems and jewellery units from this sector.

The product groups where the SSI sector dominates in exports, are sports goods,
readymade garments, woollen garments and knitwear, plastic products, processed
food and leather products.

34

The SSI sector is reorienting its export strategy towards the new trade regime
being ushered in by the WTO.
Year

Exports

2003-04
2004-05
2005-06
2006-07
2007-08
2008-09 (P)

(Rs.Crores)
29,068
36,470
39,249
43946
48979
53975

(at current prices)


(14.86)
(25.50)
(7.61)
(11.97)
(10.2)
(10.2)

P-Provisional

Exports (Rs.Crores)
60,000
50,000
40,000

Exports (Rs.Crores)

30,000
20,000
10,000
0
2003-04

2004-05

2005-06

2006-07

2007-08 2008-09 (P)

Major Export Markets

An evaluation study has been done by M/s A.C. Nielsen on behalf of Ministry of
SSI. As per the findings and recommendations of the said study the major export
markets identified having potential to enhance SSIs exports are US, EU and Japan.
The potential items of SSIs have been categorised into three broad categories.

Export Destinations

The Export Destinations of SSI products have been identified for 16 product
groups.

35

Opportunity
The opportunities in the small-scale sector are enormous due to the following factors:

Less Capital Intensive

Extensive Promotion & Support by Government

Reservation for Exclusive Manufacture by small scale sector

Project Profiles

Funding - Finance & Subsidies

Machinery Procurement

Raw Material Procurement

Manpower Training

Technical & Managerial skills

Tooling & Testing support

Reservation for Exclusive Purchase by Government

Export Promotion

Growth in demand in the domestic market size due to overall economic growth

INCREASING

EXPORT

POTENTIAL

FOR

INDIAN

PRODUCTS
Growth in Requirements for ancillary units due to the increase in number of
greenfield units coming up in the large scale sector. Small industry sector has
performed exceedingly well and enabled our country to achieve a wide measure of
industrial growth and diversification.
By its less capital intensive and high labour absorption nature, SSI sector has made
significant contributions to employment generation and also to rural industrialisation.
This sector is ideally suited to build on the strengths of our traditional skills and
knowledge, by infusion of technologies, capital and innovative marketing practices.
This is the opportune time to set up projects in the small-scale sector. It may be said
that the outlook is positive, indeed promising, given some safeguards. This
expectation is based on an essential feature of the Indian industry and the demand
structures. The diversity in production systems and demand structures will ensure
long term co-existence of many layers of demand for consumer products /
36

technologies / processes. There will be flourishing and well grounded markets for the
same product/process, differentiated by quality, value added and sophistication. This
characteristic of the Indian economy will allow complementary existence for various
diverse types of units. The promotional and protective policies of the Govt. have
ensured the presence of this sector in an astonishing range of products, particularly in
consumer goods. However, the bugbear of the sector has been the inadequacies in
capital, technology and marketing. The process of liberalisation coupled with
Government support will therefore, attract the infusion of just these things in the
sector. Small industry sector has performed exceedingly well and enabled our country
to achieve a wide measure of industrial growth and diversification.
By its less capital intensive and high labour absorbtion nature, SSI sector has made
significant contributions to employment generation and also to rural industrialisation.
This sector is ideally suited to build on the strengths of our traditional skills and
knowledge, by infusion of technologies, capital and innovative marketing practices.
So this is the opportune time to set up projects in the small scale sector. It may be said
that the outlook is positive, indeed promising, given some safeguards. This
expectation is based on an essential feature of the Indian industry and the demand
structures. The diversity in production systems and demand structures will ensure
long term co-existence of many layers of demand for consumer products /
technologies / processes. There will be flourishing and well grounded markets for the
same product/process, differentiated by quality, value added and sophistication. This
characteristic of the Indian economy will allow complementary existence for various
diverse types of units. The promotional and protective policies of the Govt. have
ensured the presence of this sector in an astonishing range of products, particularly in
consumer goods. However, the bug bear of the sector has been the inadequacies in
capital, technology and marketing. The process of liberalisation will therefore, attract
the infusion of just these things in the sector.

37

CHAPTER- 3
DATA ANALYSIS

38

DATA PRESENTATIONS AND FINDINGS


DATA COLLECTION

The present study contemplated an exploratory research. Secondary data has


been used which is collected through articles, reports, journals, magazines,
newspapers reports prepared by research scholars, universities and internet.

DATA ANALYSIS.

Analysis of data has been done with help of various statistical tools. There are
graph, tables and the percentages to get the current report.

LIMITATION OF THE RESEARCH

As far as limitation are concerned present research work has been


completed in the face of following major constraints.

The date used in my research study is secondary data.

Latest data and information about the problem and prospects of


the small scale industries in India. The data is available of
almost a decade.

PRESENTATION OF DATA
Statement showing All India cumulative number of SSI Units (SIDO) granted
Permanent Registration by the State/UT Directorates of Industries upto the Financial
Year

39

Position as on:02.07.2010
S

Name of

Cumulative Number of SSI Units granted Permanent

l.

State/Uni
the
State

200
200 upto:
2006-07
Registration

ANDHRA
112
on
4-

2007 2008

2009-10(Pj)

117
5-

121039

1249
1283
-08
-2k

135738

01. ASSAM
PRADES

192
916

207
132

21954

2313
2410
50
21

25503

02. BIHAR

101
42

108
21

114296

1191
1239
P
6
9

130903

03. GUJARA

129
221

141
148

153497

1647
1748
07
33

185008

04. HARYAN
T

944
455

984
951

63623

5332
5437
85
99

88271

05. HIMACH
A

140
62

145
55

15232

1594
1660
1
5

17562

06. JAMMU
AL

251
15

263
93

28471

2938
3066
P
1
2

32040

07. KARNAT
&

115
65

124
63

143073

1506
1599
7
7

169189

08. KERALA
AKA

133
353

148
504

166484

1841
2023
75
44

214019

19. MADHYA 233


114

243
275

256849

2687
2778
P
66
25

289042

10. MAHAR
PRADES

981
225

111
481

123856

1350
1434
41
04

151749

11. MANIPU
ASHTRA

492
44

515
129

5314

5439
5588
16
57

5911

12. MEGHAL
201
R
8

216
7

2323

2514 2711

2868

13. NAGALA
AYA

741
5

757
6

782

813

1120

14. ORISSA
ND

166

171

17931

1873 1951

20641

15. PUNJAB

145
23

147
73

149405

1511
1527
2
3

161598

16. RAJASTH 714


471

744
563

77047

8022
8365
80
68

88486

17. TAMIL
AN

202
79

228
50

257079

2849
3138
9
1

332011

18. TRIPURA
583
NADU
210

590
936

5946

6001
6058
43
61

6406

29. UTTAR

302
3

323
1

341788

3610 3820 P

402606

20. WEST
PRADES

145
557

147
475

149148

1503
1513
33
27

160087

21. SIKKIM
BENGAL

275
713

296
462

305

312
27

22. ANDAM

103

107

1116

1151 1180

1248

23. ARUNAC
A&

766
8

926
1

945

959

1027

24. CHANDI
HAL

288

295

2965

3007 3042

3218

25. DADRA
GARH

409
0

454
2

618

870

1035

26. DELHI
&

251

252

25303

2530 2534

26807

27. GOA

511
74

527
84

5488

5761
5921
6
2

6263

28. LAKSHA

47
8

51
8

58

63

76

9. DWEEP
40

1059

330
40
971
978

72

349

MIZORA

301

351

3702

4028 4413

4668

30. PONDIC
M

420
8

425
5

4484

4722 4873

5155

31. DAMAN
HERRY

693
9

920
5

1135

1455 1507

1594

ALL-INDIA
2. & DIU

201

215

2261256

2378 2503

267

NOTE: (P) - Provisional,


some 641
of the quarters/districts
have yet not
TOTAL:
749 279since figures for070
218
been received & (Pj) - Projected, since figures for the quarters ending 31.03.2010
have yet not been received from the State/UT EMPLOYMENT
SSIs IN INDIA
Estimated No. of Units

3.57 Million

Employment

19.96 Million

Share in Industrial Value Added

39%

Share in Total Exports


Direct

45%

Overall

34%

Total Number of Items Produced

Over 8000

Number of Reserved Items

675
(Figures for 2011-2012)

TRENDS IN GROWTH SSI & INDUSTRIAL SECTOR (in %)


Year
SSI Sector
Industrial Sector
2000-01
3.1
0.6
2001-02
5.6
2.3
2002-03
7.1
6.0
2003-04
10.1
9.4
2004-05
11.4
12.1
2005-06
11.3
7.1
2006-07
8.43
5.8
2007-08
7.7
4.0
2008-2009
8.16
6.5
TRENDS IN GROWTH OF EMPLOYMENT IN
SSI & INDUSTRIAL SECTOR (in %)
Period
GDP Growth per
Increase in jobs per annum
annum
Organised Sector
SSI sector

1980-1999
2000-2006

including
Government
1.59%
0.86%

5.7%
5.7%
41

6.7%
3.5%

1980 2006
Organised Sector

53.66 lakh new jobs

SSI Sector

80.00 lakh new jobs

GROWTH IN INDUSTRIAL SCTOR


SSIs IN INDIA
Estimated No. of Units

3.57 Million

Employment

19.96 Million

Share in Industrial Value Added

39%

Share in Total Exports


Direct

45%

Overall

34%

Total Number of Items Produced

Over 8000

Number of Reserved Items

675
(Figures for 2011-2012)

TRENDS IN GROWTH SSI & INDUSTRIAL SECTOR (in %)


Year

SSI Sector

Industrial Sector

2000-01

3.1

0.6

2001-02

5.6

2.3

2002-03

7.1

6.0

2003-04

10.1

9.4

2004-05

11.4

12.1

2005-06

11.3

7.1
42

2006-07

8.43

5.8

2007-08

7.7

4.0

2008-2009

8.16

6.5

TRENDS
IN
GROWTH
SSI & INDUSTRIAL SECTOR (in %)

OF

Period

Increase in jobs per annum

GDP Growth
annum

per

EMPLOYMENT

1980-1999

5.7%

Organised Sector
including
Government
1.59%

2000-2006

5.7%

0.86%

1980 2006
Organised Sector

53.66 lakh new jobs

SSI Sector

80.00 lakh new jobs

IN

SSI sector

3.5%

6.7%

EXPORTS/GROWTH OF SSI EXPORTS


Cooperative Statement of Export Performance
Year
Total exports
Exports
from
(Rs. Crores)
SSI
sector
(Rs. Crores)
1951-52
716
Negligible
1961-62
660
Negligible
1971-72
1608
155
1976-77
5142
766
1981-82
7809
2071
1986-87
12567
3644
2000-01
44040
13883
2001-02
53688
17785
2002-03
69547
25307
2003-04
82674
29068
2004-05
106353
36470
2005-06
118817
39249
2006-07
126286.00
44442.18
43

Percentage share
9.6
14.9
26.5
29.0
31.5
33.1
36.4
35.1
34.2
33.4
35.19

2007-08
2008-09
2009-10
2010-11
2011-12

141603.53
159561.00
202509.7
207745.56
252789.97

48979.23
54200.47
69796.5
71243.99
86012.52

34.59
33.97
34.47
34.29
34.03

Subject to change based on final figures emerging from Export


Promotion Councils.

E - Estimated

Sources: Total Exports - Economic Surveys - Various Issues

SSI Exports O/o DC(SSI)

SICKNESS

Sickness in SSI Sector

Year

Total sick units

Potentially Viable

No. *

No. *

Amount O/S
(Rs. Crores)

Amount O/S
(Rs. Crores)

March 2002

2,23,176

3,443

21,649

799

March 2003

2,56,452

3,680

16,580

686

March 2004

2,68,815

3,547

15,539

597

March 2005

2,62,376

3,722

16,424

636

March 2006

2,35,032

3,609

16,220

479

March 2007

2,21,536

3,857

18,686

456

March 2008

3,06,221

4,313

18,692

377

March 2009

3,04,235

4,608

14,373

369

Source: RBI
* These units include village industries as well.

44

45

STATUS CLASSIFICATION OF SSI


According to Sample Survey of 2003-04 of registered small scale industries (for the
base year 2001-02), the status classification of SSI units is given below. The status has
been compared with the findings of Second All India Census (base year 1987-88).

1
)

2
)

3
)

4
)

5
)

6
)

SAMPLE
SURVEY
2003-04

SECOND
CENSUS
1987-88

Rural Areas

42.20%

42.20%

Urban Areas

48.50%

48.00%

Metropolitan Areas

9.30%

9.90%

Backward Areas

48.30%

62.20%

Proprietory Units

80.48%

78.00%

Partnership Units

16.84%

16.03%

Limited Companies

2.01%

3.78%

Small scale Industries

96.24%

87.28%

Ancillary Industries

0.52%

1.57%

Small Service Establishments

3.24%

11.15%

Engaged in manufacturing activity only

50.19%

51.01%

Engaged in processing activity only

15.23%

10.37%

By scheduled caste entrepreneur

6.84%

4.57%

By scheduled tribe entrepreneur

1.70%

1.41%

By women entrepreneur

7.69%

5.15%

Locational Status

Organisational Status

Distribution By Categories of Industries

Activity Status

Ownership Status

Important Parameters
46

7
)

Per unit fixed investment (book value)


(Rs. lakhs)
Per unit fixed investment in P&M
(original value) (Rs. lakhs)
Per unit working capital (Rs. lakhs)

3.08

1.60

4.0

0.93

6.98

1.23

Per unit production (Rs. in lakhs)

30.93

7.38

Per unit employment (numbers)

8.54

6.29

Capacity utilisation (percentage)

79.7%

50.6%

10.00

4.62

6.75

1.10

2.73

3.94

12.50

8.00

Important Ratio
Production/investments in fixed assets
(Rs. lakhs)
Net value added/Investment in fixed
assets (Rs. lakhs)
Employment/Investment in fixed assets
(Rs. lakhs)
Wages paid/Employemnt excluding self
employment (Rs. 000)

47

DATA ANALYSIS
Problems in modernization of SSIs
The existence of a huge number of small industrial units manufacturing a variety of
products makes technological modernization a difficult task in India. Small industrial
units in India are mostly managed by entrepreneurs who are caught up in the day-today matters of production and management of their units and find it difficult to keep
themselves abreast of the various technological developments. In addition, the GoI
has provided protection to the SSIs from competition from local large enterprises and
imports through many policy measures. Therefore there is no threat to their markets.
The government also gives capital subsidies, excise concessions and backward
technology subsidies to the SSIs. All of these reduce any incentive for the small
industrial units to constantly upgrade their technology or for technological innovation.

In a business outlook survey conducted by the Confederation of Indian Industry (CII)


in 2005, 26 percent of those surveryed highlighted the lack of modernization. The
same survey found an encouraging feature that there is a increasing awareness of
quality control among the SSIs. 49 percent of the those respondents in the survey had
initiated steps for obtaining ISO 9000 certification

48

Time Series data for SSIs in India


Year

1973-74
1974-75
1975-76
1976-77
1977-78
1978-79
1979-80
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
19992000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12

No.
of
units
(millions)

Productio
n

Employme
nt

Export

(at current
prices)
(Rs. Bn.)

Nos.
million

(Rs.
billion
)

0.416
0.498
0.546
0.592
0.67
0. 734
0.805
0.874
0.962
1.059
1.155
1.24
1.353
1.462
1.583
1.712
1.823
1.948

Fixed
investmen
t
(at current
prices)
(Rs.
billion)
22.96
26.97
32.04
35.53
39.59
44.31
55.40
58.50
62.80
68.00
73.60
83.80
95.85
108.81
126.10
152.79
N.A.
N.A.

72.0
92.0
110.0
124.0
143.0
157.0
216.35
280.6
326.0
350.0
416.2
505.2
612.28
722.5
873.0
1064.0
1323.2
1553.4

3.97
4.04
4.59
4.98
5.40
6.38
6.70
7.10
7.50
7.90
8.42
9.00
9.60
10.14
10.70
11.0
11.96
12.53

3.93
5.41
5.32
7.66
8.45
10.69
12.26
16.43
20.71
20.45
21.64
25.41
27.69
36.43
43.72
54.89
76.25
96.64

2.082
2.246
2.388
2.571
2.658
2.803
2.944
3.08
3.212
3.312
3.442
3.572

N.A.
N.A
35.376
40.799
49.620
54.698
60.549
86.106
72.633
79.703
84.329
90.450

1786.99
2093.0
2416.48
2988.86
3626.56
4118.58
4626.41
5206.5
5728.87
6390.24
6903.16
7420.21

12.98
13.406
13.938
14.656
15.261
16.0
16.72
17.158
17.85
18.564
19.223
19.965

138.83
177.84
253.07
290.68
364.7
392.48
444.42
489.79
542.00
697.97
712.44
860.12

in

Source: Development Commissioner (SSI), Ministry of Small Scale Industries,


Government of India

49

DISCUSSION AND ANALYSIS


INTRODUCTION

TO

SMALL

SCALE

SECTOR
MEANING OF SMALL-SCALE SECTOR:
In the official industrial policy formulation, a small industry is defined as a unit
having investment up to Rs.1 crore in plant and machinery. In 2014-15 investment
limit has been raised from Rs.1crore to Rs. 5 crore in respect of 69 items reserved for
manufacture in small scale sector. Small scale Sector are mainly located in urban
centres as separate establishments and produce goods with partially or wholly
mechanized equipment employing hired labor. Small Sector operate as full time
occupation and meet the demand of large area. It depends on the conditions of
expanded market and the nature of business here is permanent.

NEED OF SMALL-SCALE SECTOR:


The need for the small-scale Sector has acquired more relevance today on account of
the following grounds:

Growing population pressures in the rural areas;

Rapid expansion of the labour forces, especially among the marginal farmers
and landless agricultural labours;

Inadequate opportunities for non-agricultural work;

Limitation of the organized sector in absorbing the labour force;

Existence of considerable under-employment in the economy;

To avoid the problems created by urbanization;

To ensure self-reliance.

IMPORTANCE OF SMALL SECTOR:


The promotion of small Sector has been regarded as an important element of the
development strategy underlying our five year plans. The rationale behind such an
approach is that small Sector provide substantial scope for increasing employment as

50

they are labour-intensive, and they require comparatively less capital. These sector
have a special place in the economic development.
The main roles played by this sector in the Indian economy are as under:

Encourage the philosophy of self-sufficiency, self-reliance and coordination;

Removal of economic backwardness of the rural and under developed


segments by developing industrial activities in the rural India;

Create greater employment opportunities and raise levels of output, income


and standard of living;

Contribution of these Sector in the promotion of exports;

Reduction in regional imbalances;

Integrate large-scale industrial sector with agriculture and allied sectors


leading to harmonious growth of the total industrial sector;

Creation of effective demand;

Meet substantial part of the economys requirement of consumer goods and


producer goods;

Facilitate the development of economically weaker sections i.e. povertystricken population;

Upgrade not only the skill of traditional artisans but also induce the
unemployed youths to undertake entrepreneurship with special emphasis on
the women;

Check the migration of rural mass from the villages to the urban
conglomerations;

Entail equitable distribution of national income;

Facilitate mobilization of resources, capital and skills and their optimum


utilization;

Exercise a stabilizing influence on the vagaries and uncertainties of rural


economy;

Ensure a harmoniously balanced, integrated and egalitarian socio-economic


order in the country.

51

PROBLEMS OF SMALL SECTOR IN INDIA:


The growth and development of small sector units has been constrained by several
factors. Undoubtedly, the smooth development of cottage and small Sector is a
prerequisite for economic growth of our country. But they can play their vital role
only under their sound conditions.
The major problems faced by these Sector in India are:
I. FINANCIAL PROBLEMS
Finance is as crucial to an enterprise as is blood to the human body. The requirement
of finance is inevitable for setting up a new enterprise almost everywhere in the
world. Easy availability of credit both in terms of need and cost is the prerequisite of
all enterprises. In India despite of the government having taken several measures to
expand availability of credit to small enterprises through commercial banks for
working capital and through term lending institutions (SIDBI, SFC), the problems of
SSIs are far over.
The sector has been facing the following major problems in financial area:
a) Long term capital
b) Working capital
c) Recovery
d) Taxation
e) Inadequate finance
SSIs cannot resort to capital market, nor float CPs or tap GDR/Euro-route, they have
poor capital base and are compelled to sell their products and services on credit basis
to their clients which in turn impairs their resource availability.
II. ADMINISTRATIVE PROBLEMS
In this environment of competitiveness, it is essential that all the resources are put to
optimal use. In this context, the Human Resources are assuming importance as
optimal usage of other resources would largely depend on them. SSIs have
experience both quantitative and qualitative skill shortages. Most of the small
enterprises in India are one man show of the human resources. Also the industry
associations will have to work in close collaboration and liaison with the vocational
training institutions to ensure that job-oriented training skills are imparted to the
youth not only to ensure availability of right type of skills but also from the point of
52

view of the employability of trained manpower for the new and modernizing SSIs.
The following are the major problems in administrative area:

Faulty planning.

Poor project implementation.

Poor management.

Labor problems.

Capacity utilization.

Lack of vertical and horizontal integration.

Inadequate training skills.

Lack of strategies.

Infrastructural problems (location, power, water, communication).

Lack of scientific and industrial research.

Bureaucratic red tape and regulations.

III. MARKETING PROBLEMS


As regards marketing, this stands out to be the crux for the ultimate success of an
enterprise. Goods produced must be sold because the small entrepreneur can hardly
afford inventory build-up. In India, it has been noted that small enterprises supplying
manufactured products in the open market as well as to large scale units as ancillaries
continue to remain at the receiving end due to irregular payments. This seriously
affects the production cycle and is one of the main reasons for closure of many small
units. SSIs are facing the following marketing problems:

Lack of knowledge of markets.

Competition with medium and large size Sector.

Branding problems.

Lack of after sales services.

Distribution problems.

Advertising and sales promotion problems.

Poor bargaining power.

Unfamiliarity with export activities.

53

IV. PRODUCTION PROBLEMS


Technology and modernization of the industry particularly of the small sector is
going to play a very important role. So far as the small sector is concerned the thrust
of technology policy has been on indigenization and improved technologies through
indigenous effort till few years ago. Coming to Indian small scale sector, the thrust of
technology policy has been on indigenization and development of improved
technologies through indigenous R & D centers.
The different problems faced in production area are:

Lack of raw material.

Low capacity utilization.

Poor quality.

Inadequate utility services.

Technological problems.

Scale of production.

Lack of standardization.

High cost of production

The new policy regime, with a virtual open door policy towards foreign investment
and technology in most areas of industry and infrastructure, is likely to intensify and
accelerate the process of technological polarization between the large and small-scale
sectors.

OVERVIEW OF SMALL-SCALE SECTOR IN INDIA


The small scale Sector has acquired pre-eminent position in the economic structure
of the country. The contribution of the sector both towards the economic
advancement/development and removal of economic disparities among across
sections of the society has been tremendous.
Since independence, a series of six Industrial Policy Resolutions aimed at promoting
industrial growth and determining a pattern of state intervention and assistance have
been announced by the Central Government. While spelling out the framework of the
basic and strategic Sector, the Industrial Policy Resolution, 1948, emphasized that the
cottage and small scale Sector to be particularly suited for better utilization of local
54

resources and achievement of local self-sufficiency in respect of certain types of


industrial goods.
The Industrial Policy measures announced in 2000 laid special thrust on promotion
and strengthening of small, tiny and village Sector. Besides effecting changes in
investment limits, equity participation, etc., a new scheme of Integrated
Infrastructure Development for SSIs with the participation of State Governments and
Financial Institutions was initiated and a pro-active role for Non-Government
Organization (NGO) sector was mooted.
The definitional criteria of SSI are closely linked to the question of ownership since
SSI units cannot either be controlled or owned or be a subsidiary of any other
industrial undertaking. This suggest that in the case of proprietary/partnership firms,
the combined investment of all the units set up by the same proprietor/partners
should not exceed the total investment limit fixed for an SSI unit. The equity
investment by other companies should not exceed 24 percent of the total equity. The
objectives of such changes in classification are aimed at:

Facilitating and boosting the growth of SSIs in private sector;

Promoting SSIs within the framework of the social and economic policies of
the country;

Encouraging technology up gradation among existing units;

Helping technically qualified entrepreneurs to set up new units with advanced


technology;

Improving product standards;

Creating opportunities for in-house R&D;

Providing thrusts to exports.

NEW POLICY FOR SMALL SECTOR, 2000: MAJOR THRUST


AREAS
The future growth of SSIs under a liberalized regime is constrained by a number of
factors, among which the more important are as follows:
a) Change in consumer preference
b) Outmoded technology
55

c) Uneconomic sales of operation


d) Lack of organization
e) Total disregard of environment standards
f) High incidence of sickness
In a partial response to this situation, the government announced on August 6, 2000,
a joint package of policy measures for small, tiny, handloom, handicraft and village
Sector.
1.

Major Features
Emphasis to shift from subsidies/cheap credit to

2.

adequate credit.
Equity participation by other undertakings

3.
4.

domestic/foreign up to 24 percent
Introduction of factoring services through banks
Marketing of mass consumption goods under

5.

common brand name


Industry associations to be involved in setting

6.

up Sub-contracting Exchanges (SCXs)


Technology Development Cell in

7.

Industry Development Organizations (SIDO)


Industry association to establish quality

8.
9.

counselling and common testing facilities


Technology Information Centers and TBSE
Reoriented modernization and technology up

Objectives
To meet the emerging
demand for credit

To strengthen small industry


marketing

Small
To upgrade technology and
promote

gradation programmes-cluster-based approach

ROLE

OF

SMALL

SCALE

SECTOR

IN

THE

ECONOMIC DEVELOPMENT OF INDIA


Needless to comment that the cottage and small scale Sector play a significant role in
the growth of Indian economy. Despite the importance and development of large
scale industry, SSIs have an influential stature of their own, their growing present
position in the economy with the long strides during the various plans period and
hold out a commitment of bright prospects. These Sector economically speaking,
compromise with the available countrys resource endowments.
During 2014-15, the average annual growth in the number of units was around 4.1
percent and in employment 4.3 percent annually. Further, the annual average growth
56

in production, at current and constant prices, was 12.4 percent and 8.1 percent
respectively. Thus, there has been a significant increase in contribution of this sector
in the economic development of the country.
SSI sector should be encouraged to grow the natural way in the new economic
environment. Artificial barriers and protection may not help in the long run.
Innovativeness and efficiency must be rewarded in order to enable SSIs to emerge
competitive.
The role of SSIs can be understood in terms of the following arguments:

57

I. EMPLOYMENT GENERATION
300
239.09

250

260.13

249.09

271.36

282.91

200
158.34
150

EMPLOYMENT (Lakh Persons)

100
50
0
2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

This sector has a high potentiality of employment orientation. These are labourintensive in character i.e., they use more of labour per unit of output and investment.
The most important single argument advocated in favor of these Sector since a long
compass of time is that they are capable to create a large volume of employment for
the people relevant particularly in India where the problem of unemployment and
underemployment and seasonal unemployment are rampant on a mass scale which is
also characterized by the feature of lack of resources. In such a grave and contrast
situation, i.e. labour-abundant and capital-scarce economy, it is argued that the
development of this sector is the only alternative strategy which is labour intensive
and the level of employment can be enlarged by a smaller dose of capital. The
contribution of this sector in employment generation in different years is presented
below:

58

II. PROMOTION OF EXPORTS


120000
97,644

100000
86,013
80000

69,797

60000

71,244
EXPORT (Rs. Crore)

40000
20000

9,664

0
2009-10

2010-11

2011-12

2012-13

2013-14

One of the main arguments put forward in support of the growth of cottage and small
scale Sector in the country is that the contribution of these Sector in the field of
foreign exchange has increased abnormally. The bulk of exports of small scale Sector
consist of such non-traditional goods like ready-made garments, sports goods,
finished leather, leather products, woolen garments, processed foods, chemicals and
engineering goods. In the year 1999-2000, the contribution of SSIs in exports was
worth Rs. 9664 cores, than in the year 2009-10, it increased to Rs. 69,797 crores. By
the end of 2012-13, the total contribution of SSI sector in the total exports was worth
Rs. 97,644 crores. Thus, small scale sector plays a very important role in the
promotion of countries exports. The share of SSIs in total exports is illustrated in the
following graph:
III. REMOVAL OF REGIONAL DISPARITY
Another significant role of this sector is that it removes the burning problem of
regional disparity and promotes the wider scope of balanced regional development in
the country on account of decentralization of Sector which is not governed by the
factors of localization as we see in case of large scale Sector. A great bottleneck in
our industrial setup has been that the regional dispersal of Sector is uneven because
the large and medium scale Sector can be developed only in a special geographical
zoning factor which leads to disproportionate growth by concentrating in a particular

59

zone. The development of small Sector tends to solve this problem of uneven
distribution.
IV. BOOSTING CAPITAL FORMATION
The establishment of these Sector is conducive for capital formation of the country
on the ground of spreading of Sector over the countryside which could encourage the
habits of thrifts and investment in the rural areas. These Sector have a distinct
advantage as far as the mobilization of capital and entrepreneurial skill is concerned.

CHALLENGES FOR THE SSI SECTOR


The growth and development of small scale sector units has been constrained by
several factors including technological obsolescence, inadequate and irregular supply
of raw materials, lack of organized marketing channels, imperfect knowledge of
market conditions, unorganized nature of operations, inadequate availability of credit,
constraints of infrastructural facilities including power and deficient managerial and
technical skills. There has been lack of effective co-operation among the various
support organization set up over the period for the promotion and development of
these small Sector. Quality consciousness has not been generated to the desired level.
A major challenge facing the sector today is the compulsion to become selfsupportive with the phase dismantling of protective barriers. So far, Indian SMEs
have survived due to the protected environment in the form of product reservation,
market

reservation,

price

preference,

priority

sector

lending,

fiscal

exemptions/concession etc. With the emergence of WTO and its conditionality which
considers protection as discriminatory or barrier to trade, many of existing support
systems for protection of small scale sector will have to be dismantled. As a result,
SSI will have to compete on its own to find a place for itself in the domestic as well
as international market.
The challenge o SSI sector against the emerging global environment is to become
globally competitive. The small scale sector will have to upgrade its technology and
modernize, adopt modern marketing, management practices and improve the quality
of its products in order to be efficient and competitive. In the absence of these
changes, its survival may be at peril. Most of the small scale units are unaware of the
60

challenges thrown by the WTO agreements and negotiations because of the lack of
understanding about these agreements and negotiations. Thus makes it imperative for
the Government to review its policies concerning the sector with a view to not only
making them compatible with the WTO regime but also preparing them completely
to respond to the emerging environment as an opportunity rather than a threat.

SWOT Analysis of the Small Scale Industry


After the detailed study of small scale sector, a SWOT analysis of this sector reveals
its strengths and weaknesses to meet the challenges thrown open by liberalization
and globalization as well as the opportunities available and threats faced by the sector
in the new millennium.
a) STRENGTHS

Flexible manufacturing systems.

Lower cost of production.

Low level of capital investment per unit of output and employment.

Operational flexibility.

High contribution to domestic production.

Knowledge about internal markets.

Ability to make adjustment in changing economic and trading scenario.

Inherent ability to invent and innovate.

Utilization of local resources.

Location wise mobility

Import substitution

b) WEAKNESSES

Inadequate capital for investment/expansion.

Inadequate working capital

Expensive bank loans.

Technologically weak.

Absence of brand equity for made in India labels.

Lack of development policy framework; relook at reservation policy.

Lack of infrastructural facilities.

Lack of professionalism.
61

Lack of well developed information system.

Inability to face impact of WTO regime.

c) OPPORTUNITIES
Untapped export potential in sectors such as computer software, leather and
leather products, light engineering products, hand tools and implements, auto
components and ancillaries, garments including hosiery, etc.

Growing service sector.

Security and stability of access under the WTO regime.

Tariff reduction by all countries.

Establish Backward Forward Linkages, both nationally and inter-nationally.

Joint ventures.

Technology up gradation.

d) THREATS
Slow adoption of quality culture.
Poor infrastructure support.
Technological obsolescence.
Inadequate use of information and communication technologies.
International environmental agenda which is in stark contrast to low emphasis
laid by Indian firms.
Non-compliance with non-tariff barriers particularly environmental, health
and safety standards.
Growth of cheap imports.
High cost of funds.

62

CHAPTER-4
CONCLUSION &
IMPLICATIONS

63

CONCLUSION & IMPLICATIONS


The promotion of small-scale industry has been a consistent theme of postindependence Indian planning. While various protectionist measures and fiscal
concessions had been put in place in the 1950s, it was not until the late 1960s that
planners began to use directed credit as a tool of policy. A series of policies introduced
from 1967 onwards, and facilitated by the nationalisation of most of the commercial
banks in 1969, demanded sharp increases in the share of bank lending going to
designated 'priority' sectors.
The post-liberalisation business environment has become harsh for the small-scale
industries (SSI) sector because of increased internal and external competition. In
addition, the far-reaching impact of the various WTO norms are now threatening to
further affect the fortunes of small and medium enterprises. Unfortunately, despite
sufficient notice and the growing awareness of the impending threats, the SSI sector
does not appear to be adequately prepared for the new challenges. While a number of
units in the sector have been striving hard to obtain ISO or BIS certifications and
compete against cheaper imports, the overall picture appears gloomy for want of
proper policy support.
Even after several committees and study group reports over the past decade, the
policymakers are still groping for a WTO-compatible policy for this sector. There is
much confusion over a number of issues such as the cap on capital investment,
foreign direct investment (FDI) ceiling, interest subsidy, de-reservation of items, and
creation of a technology upgradation fund and so on. It has become fashionable for
successive governments to promise a new deal for the SSI sector, but deliver
practically nothing.
Even the creation of a new Ministry of Small-scale Industry and Agro and Rural
Industries in 2008 did not make any difference to the sector's plight. Soon after its
creation, the new Ministry decided to do a detailed sector-wise study of the impact of
various WTO agreements on the SSI sector but nothing seems to have happened
since. Not surprisingly, though the sector has grown at a rapid pace postIndependence, the incidence of sickness is on the rise.
64

While the official figures show only about 10 per cent of the over 32 lakh SSI units as
sick, the unofficial figures put this figure at over 40 per cent.
Given the crucial importance of the SSI sector to the economy with 40 per cent share
in the total industrial output, 35 per cent in exports and over 80 per cent in industrial
employment, it deserves all the policy support the Government can offer. What the
small entrepreneurs need is not protection but institutional support to fund
modernisation and technology upgradation, infrastructural support, and adequate
working capital finance from the banking sector.
There is also a need for small entrepreneurs to keep pace with the structural and
technological changes taking place in large industries. The accent should be on the
much greater degree of ancillarisation and on providing services as the larger
companies are keen on offloading a number of job works to smaller units. True, a
section of the SSI sector is already undergoing structural changes but the process is
still quite slow.
There is an urgent need to refashion the policies governing the sector so as to improve
its competitive strength and long-term outlook. The recast and reform of the SSI
policy will have to largely concentrate on the following areas:
As can be inferred from the information in the preceding section, the various Indian
governments have proclaimed many policies and also implemented several initiatives
and programs. Most of the policies before the 1999s were aimed at protecting the
small sector rather than making it competitive. Some of the major issues that these
policies did not address are as follows:
Problems in obtaining credit One of the serious problems affecting the small scale
sector is the hardship of obtaining credits from the banking sector. Although this has
been a problem for past several years and though the issue has been mentioned in
budget speeches by government, none of the policies seem to solve it. Many
entrepreneurs who had been drawn into industrial activities hoping to receive
financial assistance have subsequently found that working capital is not
forthcoming[4]. The internal financial resources of the SSIs are held to be so small
that have no surplus money in times of business strain. This along with the situation
of unstable profits prevent the banks from issuing them unsecured loans. As a result,
65

many of these SSIs are still dependent for funds on money-lenders who charge high
interest rates. And those who have tried to obtain loans from the various financial
institutions have only faced corruption associated with grant of loans and long delays
in delivery.
In a 2005 survey of small entrepreneurs by the Confederation of the Indian Industry
(CII), a large proportion of the respondents attributed their problems to delayed
payments, high cost of borrowing and inadequate credit.
Sickness in the SSIs As of September 2001, about 233 thousand small-scale units were
sick. Many of the sick units ultimately close down due to finance and marketing
problems. Poor management has also be identified as a major cause of sickness.
Therefore a need exists to countinously provide help in terms of training for the small
enterprises to manage themselves. The recent policies and programs providing
management training by the SIDBI is hopefully a step towards solving this problem.
Negative impacts of reservation policy The previous and current small-scale industries
policies have followed the policy of reserving certain items to be manufactured only
by the SSIs. Many of the items that are reserved are in the mechanical engineering,
chemical products and auto-ancillary industry groups. Though the policy was mainly
aimed at protecting the small firms from competition from the large firms, the lack of
any licensing to identify SSIs has resulted in the entery by large firms into those areas.
There is no enforceable penalty for moving into reserved areas. It is also held by
many authors that the policy is actually counterproductive as those producing nonreserved items have performed better than those in reserved areas. Hence the
reservation policy tends to become large redundant.
The Equity policyThe New Small Industry Policy allows the large firms to have equity
in SSIs. This policy is contended to be a bad one as it only encourages the small units
to continue to act as dependent on the large firm. A fear that the large firms might at a
later stage takeover the small units is also expressed by some industry experts.
Apart from the abovementioned critical issues, there are several other issues such as
non-classification of a separate medium enterprise under the Indian industrial sector,
regional imbalances in the concentration of small scale industries and survey data

66

showing that government institutions were the ``least important sources of


technological information.'' More information on these issues could not be obtained.
Another concern is the lack of coordination between the various support organizations
set up by the government. It would also be interesting to know if any evaluation
systems are in place for these institutes and their programs. Information on this aspect
could not be gathered.
An article by Ira Gang mentions that policies intended to support the small industry
such the reservation, financial incentives, etc. are ``neither promoting employment
nor improving the competitive base of small firms. Rather, they are working as strong
disincentives for growth of small firms.''
Though all the previous efforts at helping the SSIs to grow and modernize seem to
have had very little effect, the recent modernization efforts such as the setting up of
the

Technology

Development

Board,

the

Technology

Development

and

Modernization Fund, greater emphasis on providing management skills and in


obtaining ISO 9000 certification seem more focused and promising. Since these have
very new, no specific conclusions as to their success or impact can be drawn at this
time. Hopefully, some systematic methods to ensure that SSIs are actually receiving
benefits and necessary assistance will be put in place
The major environmental concerns in India today are poverty coupled with growing
population and the side effects of enhanced industrial activities. As long as poverty
remains the main stumbling block, industrialization provides hope of significantly
improving the standard of living. One of the measures most talked about that might
gain recognition within these industries is sustainable development. Removal of
poverty and environmental protection are two sides of the same coin that is
sustainable development (Dwivedi & Khator, 2004), but policy makers, governments,
politicians, and industrialists have challenged many of the underlying values and
assumptions of sustainability. Sustainability or sustainable development can also be
described as development or progress that meets the needs of the present without
compromising the ability of future generations to meet their own needs.
Although, industrialization is seen as a solution to providing economic growth and
increasing employment levels, irrespectively, industries, whether large or small, low67

tech or hi-tech, manufacturing or agricultural, all inevitably produce discharges and


wastes that are capable of polluting. Where high population and economic growth
demands resources (inputs) and discharges (outputs) in the form of pollutants, not
many industries have arrived at suitable suggestions on sustainable measures, thus
putting pressure on the environment. Hart (2006), in fact, recognised the problem of a
growing population, rapid economic development in emerging economies, and
political and social issues that exceed the mandate and the capabilities of any
corporation. However, the suggestion that learning to balance ecological principles,
economic growth, and social responsibility be priorities of businesses (Johannson,
2003) does eventually make more sense. Sustainable development challenges
industry to produce high levels of output while using lower levels of inputs and
generating less wastes with a more effective use of raw materials in production that
would eventually result in diminishing costs. This greener corporate image could then
lead to an increased market share (Welford & Bhargava, 2005). Hart (2006) states that
the business logic for greening has been largely operational or technical, and bottom
up pollution prevention programs have saved billions of dollars, but few have realised
that environmental opportunities might actually become a major source of revenue
growth. The suggestion made by Hart, and the concept of sustainable development
should, in fact, be made the core objective within the operations of small industries.
Small industries could also go one step further in addressing a sustainable vision i.e. a
trade-off between economic growth, profitability, and sustainable environment.
Within industries, management should be charged with the responsibility of
implementing this concept of the sustainable vision into action by firms. One such
measure is Johannson's (2003) trisect of sustainable business. It is founded on the
concept of balancing ecology, economic, and social factors that are included in the
industrys value system, and included in the business planning or design phase
resulting in profits through ecologically sound products, processes, or services. In a
complex relationship between population, economy, industry, and ecology, managing
the environmental responsibility is a prime issue in India. Population will always be a
problem if not properly curtailed, but in the case of industrialization there is a
growing need for a sustainable vision where industries are made responsible for their
acts. With today's current technology and strategic management systems, industries
can be effective in reducing the gravity of environmental impacts. The green
68

challenge is an issue that is relevant to every industry big or small. Every business
faces pressure to improve its eco-performance.
As regards regulatory pressure and compliance, many businesses spend more time in
fighting regulations and take a less proactive, strategic approach to environmental
management (Schoemaker and Schoemaker, 2004). Although Indian courts closed
almost 1,000 factories for pollution problems, and the Supreme Court fined 15 plants,
including some multinationals (Shaman, 2005), the effectiveness of these regulatory
pressures and compliance has still to be realized. Johannson (2003) addresses a
green firm as one that does not look at regulatory or legal compliance as a first step.
The ability to assure that a firm is in compliance is therefore a poor tactic, and very
cost-ineffective. Managers who understand environmental laws can be counted on. In
other words, regulation, compliance, and environmental laws will take care of
themselves if managers adopt a sustainable vision or green objectives for industries.
Much of the literature seeks to establish that there is an acute need for regulatory and
legal measures. However, pressure for sustainable vision in these small industries lies
within themselves. They must realize the importance of environmental management
and quality and that it could be highly effective if it is administered by the small units
themselves.

69

RECOMMENDATIONS

70

RECOMMENDATIONS
Recent modernization efforts
Inspite of the existence of all the aforementioned organizations to help the
development of the SSI, an increasing spread of sickness is reported in the sector.
Acknowledging this fact, the DCSSI set up a working group in 1985 to make
recommendations for a suitable action. The suggestions made by this group included
the following:

Establish a well-equipped design and technology development cell in the office of


the DCSSI to coordinate programs of modernization in the small small-scale
sector.

Special cells called ``Product-cum-Process Development Centers'' will be


necessary for undertaking research, locating sources of modern technology,
identifying suitable technology for transfer and help the small-scale industries in
obtaining inputs.

Liberal imports of technology and equipment should be allowed to modernize the


small-scale sector.

Incentives should be provided to enterprises with modern technologies to transfer


them to the SSIs.

In August 2000, the GoI announced its new policy towards the small scale sector.
The government announced that a Technology Development Cell would be set up
in the Small Industries Development Organization (SIDO). This Cell would
provide technology inputs ``to improve productivity and competitiveness of the
products of the small scale sector''. The Technology Development Cell would
coordinate with other industrial research and development organizations to
achieve its objectives. Information on whether such a Cell had been set up was not
available.

Under its scheme of direct assistance, the SIDBI had launched the Technology
Development and Modernization Fund. The main objective of this fund is ``to
encourage existing industrial units in the small scale sector to modernize their
71

production facilities and adopt improved and updated technology so as to


strengthen their export capabilities''. Through this fund, its helps the SSIs meet the
costs of purchasing capital equipment, acquisition of land, expenditure incurred in
obtaining ISO 9000 series certification and also the costs for improvements in
packaging. The SSIs have to meet some criteria before they can apply for financial
assistance under this schemee, for e.g. units must be in operation for atleast three
years. It is also working towards prospects of marketing the products of SSIs in
the internal and international markets.

One of Development and Support Services extended by the SIDBI is the


Enterprise Strengthening service. Under this service, there are specific programs
including technology transfer, technology upgradation in indentified industry
clusters and management development.

In the 2015-16 Union Budget, the government announced the setting up of a


Technology Development Board and this has been instituted under the Department
of Science and Technology. During the presentation of the budget, the Union
Minister for Finance proposed that the unutilized corpus of $1.75 billion under the
Technology Development and Modernization Fund Scheme of the SIDBI should
be provided to the State Financial Corporations and commercial banks. These
banks will in turn be able to make it available for the SSIs for modernization
projects.

In addition, the SIDO and SISIs have introduced a program for promoting
technological modernization of the SSIs. Under this initiative, the small
production units are provided information, advice and training. Reports are
distributed among them for spreading modernization information. The SSIs can
register for these programs for a fee. As of March 1986, there were 570 enterprises
registered under the modernization scheme of the SIDO. However only 24 of
these have been provided with modernization guides.

A recent change in the small-scale industrial policy allows the large firms to hold
up to 26 percent of equity in small enterprises without the requirement of
consolidation of accounts. This is considered as a good way to induce the transfer
of technology and skills from large industrial units to SSIs. Industry experts are
72

however skeptical about this. Most large units use the small-scale sector as subcontractors. Doubts have been expressed whether these large units would allow
for transfers of technology to SSIs and enable them to grow and become
independent units in their own right.

Adoption of new definitions


In most countries, small- and medium-scale units are clubbed together for policy
purposes and called SMEs. Hence, the Planning Commission Study Group on
Development of Small Enterprises, which submitted its final report in May 2010, has
suggested that tiny, small and medium establishments could be redefined in terms of
investment limits of Rs 25 lakh, Rs 5 crore and Rs 10 crore respectively. The
Government should think of creating a separate category of medium-scale units with
investment limits of Rs 10-15 crore and encourage them to raise equity capital,
including foreign equity to supplement institutional finance. While the broad policies
should be the same for the SMEs, the tiny units could be given a much higher level of
institutional support to promote self-employment.
The clubbing together of small and medium enterprises for policy purposes and
raising the investment limit would encourage technology upgradation and facilitate
seamless growth of small to medium and eventually even to large-scale units. This
would also attract more foreign investment in the sector. The present policy
discourages the small units to grow into bigger ones because of the low investment
limit in plant and machinery and the artificial props such as excise duty exemptions.

Dereservation
The rationale behind the policy of SSI reservation was studied by the Expert
Committee on Small Enterprises (the Abid Hussain Committee), which submitted its
report in 2006. The Committee listed the following arguments against reservation:

The policy has not actually helped the growth of small-scale industries.

The units in the unreserved sector have actually grown faster than those in the
reserved list. In other words, the SSI units have shown more dynamism in areas
where they had to compete with larger units.

73

Reservation in many areas has become irrelevant since a large number of reserved
products are not being produced by SSIs. It is also inconsistent with the new trade
policy that allows the items reserved for the SSI sector to be freely imported.

Reservation has hurt India's ability to expand exports in many crucial areas,
including textiles and leather.

A number of subsequent studies also recommended the de-reservation of items,


the latest being the CII study, covering over 200 small enterprises, to analyse the
impact of the removal of quantitative restrictions on the SSI sector. The study says
the government's reservation policy is hindering the SSI sector's growth. It is,
therefore, time to do away with SSI reservation and offer other forms of
promotional support.

Promoting clusters
International experience suggests that the small-scale enterprises flourish in situations
where they can be clustered together in areas where it is easier to develop common
infrastructure facilities of high quality. Many such clusters have already emerged.
However, at present we do not have any policy for providing special assistance for the
development and upgradation of specific industry clusters. The Abid Hussain
Committee had recommended that the States should identify the existing clusters and
promote joint ventures between the State government or local authority and business
associations in these clusters.
The Planning Commission Study Group went a step further and recommended that the
Centre should provide additional resources through a special centrally-sponsored
scheme aimed at upgrading infrastructure in areas where well-defined industry
clusters have already emerged.
According to a UNIDO study, there are 354 industrial clusters in India, of which 34
have a turnover exceeding Rs 1,000 crore. A few have a gross turnover exceeding Rs
10,000 crore. There is evidence to suggest that the new SSIs are increasingly moving
towards clusters to be near the centres of demand. The units that were initially lured to
the backward areas by the capital subsidy provided by the government found
themselves at a greater disadvantage. While in 1987-88 about two-thirds of the total
74

SSI units in the country were in backward areas, this proportion declined to 50 per
cent by 2003-04, according to a survey of SSIs. This proportion must have come
down further by now.

Institutional credit

Ensuring adequate flow of institutional credit to the SSI sector has remained a
major problem despite several attempts made by the Reserve Bank of India over
more than a decade to improve the situation.

A number of studies have clearly established that the major cause for the largescale incidence of sickness in the SSI sector is the non-availability of adequate
and timely working capital from the banking sector. For instance, the S. L. Kapur
Committee Report (2007) bemoaned that despite the central bank's instructions
and guidelines from time to time, banks have not been following the P. R. Nayak
Committee recommendations (2001) emphasising the need to improve the flow of
funds to this sector. It had recommended a minimum level of working capital
finance by banks to SSI units at 20 per cent of the value of their output.

Even today, this recommendation remains only on paper. Worse, according to the
estimates of the Kapur Committee, only 15-20 per cent of the SSI units could
access bank credit. Others have to depend on borrowings from private sources at
exorbitant interest rates. Now there is a new urgency to provide a new deal to this
crucial sector, which successive governments have been promising over the past
decade.

Instead of indulging in their popular pastime of appointing committees and


commissioning new studies to rediscover already well-known problems afflicting
the small industries, the policymakers would do well to focus on implementing the
pragmatic recommendations of the earlier committees.

75

EXPORT PROMOTION
Rationale Behind Export Promotion
The capability of Indian SSI products to compete in international markets is reflected
in its share of about 34% in national exports. In case of items like readymade
garments, leather goods, processed foods, engineering items, the performance has
been commendable both in terms of value and their share within the SSI sector while
in some cases like sports goods they account for 100% share to the total exports of the
sector. In view of this, export promotion from the small scale sector has been
accorded high priority in Indias export promotion strategy which includes
simplification of procedures, incentives for higher production of exports, preferential
treatments to SSIs in the market development fund, simplification of duty drawback
rules, etc. Products of SSI exporters are displayed in international exhibitions free of
cost under SIDO Umbrella abroad.

International Exposure to SSI Products

With a view to rendering assistance to Small Scale Units in the field of


exploring market potential, export promotion and exhibitional publicity, the
following schemes are being implemented:-

76

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S

77

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