Analysis of Problems and Prospects of Small Scale Industries in India

7/23/2019 Analysis of Problems and Prospects of Small Scale Industries in India

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THE INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

NEW DELHI

THESIS

ON

“ANALYSIS OF PROBLEMS AND PROSPECTS

OF SMALL SCALE INDUSTRIES IN INDIA”

SUBMITTED TO: EXTERNAL GUIDE:

IIPM, NEW DELHI Mr. Lawana !r. A"arwa#

D$%&"na'&(n) CEO (* A%%a+ In-%'r&$%

SUBMITTED BY: NAME: PRATEE! AGARWAL

BATCH: FW

SESSION:/)01SS1FW

Mob no: 22220330/4

Email Id) 5$rr+(n'0667"+a&#.8(+

5$rr9+(n'7a((.8(.&n

mailto:[email protected]






2

ABSTRACT

Agro based industry is regarded as the sunrise sector of the Indian economy in ie!

of its large "otential for gro!th and li#ely socio economic im"act s"ecifically on

em"loyment and income generation$ Some estimates suggest that in deelo"ed

countries% a""ro&imately '( "er cent of the total !or# force is engaged in agro)

"rocessing sector directly or indirectly$ Ho!eer% in India% only about *$( "er cent of

the !or# force finds em"loyment in this sector reealing its underdeelo"ed state and

ast unta""ed "otential for em"loyment$ There is no denying that India has to lie

!ith the "roblem of unem"loyment for many years to come$ Therefore need arises toma#e all oer deelo"ment among all sections of the society es"ecially in rural agro

based industrial units$ The "resent "a"er is an attem"t to find out the status of agro

based units such as rice mill industry in the +atiala district of +un,ab and to analy-e

the arious "roblems being faced by them$ It has been found that .ice mill industry in

+atiala district is in the crisis and facing the arious "roblems regarding lac# of

financial assistance% im"ro"er mar#eting channel% high degree of brea#do!n of

finished "roducts and non aailability of research lab for /uality control$ Ho!eer% if

this sector !ill be "ro"erly deelo"ed% it can ma#e state +un,ab a ma,or "layer at the

global leel for mar#eting and su""ly of "rocessed food for billion "lus mouths to

feed$ All oer the !orld% the unorgani-ed manufacturing sector is #no!n as Small and

Medium Enter"rises 0SMEs1 !hile in India this is #no!n as SSI defined in terms of

inestment in "lant and machinery$ uring last (3 years% the limit of inestment has

changed from .s$ ( lacs in the si&ties to .s$ '33 lacs in 2334 to '3)(3 crore in 23'*$

5ithin the SSI sector% t!o sub segments hae been created$ 6 one for Tiny 7nits

haing inestment in "lant and machinery u" to .s$ 2( lacs and the other for industry

.elated Serice and Business Enter"rise 0SS and BE1 sector defined as haing

inestment in fi&ed assets e&cluding land and building not e&ceeding .s$ '3 lacs$ The

S+ 8u"ta Study 8rou" on Small Enter"rises in its interim re"ort has recommended

that the time is ri"e to moe from Industry to Enter"rise and also to include Medium

Enter"rises !ithin the SSI sector$ This is essential in order to bring Indian SSI sector

at "ar !ith the global Small Medium Enter"rises 0SMEs1 sector$



9

CERTIFICATE OF ORGINALITY

This is to certify that the thesis titled “Ana#%&% (* Pr(;#$+% an Pr(%5$8'% (* S+a##

S8a#$ In-%'r&$% &n In&a” is "re"ared and submitted by me to Indian Institute of

+lanning : Management% Ne! elhi in "artial fulfillment for the a!ard of the +ost

8raduate i"loma in Business Administration% and this re"ort has not been submitted

else!here$

Da'$: )4)640 +.ATEE;A8A.5A<BATCH6 +8+=SS)233>)3?

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Mob no6 ????((93Email Id) "errymonty(22'gmail$com

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AC!NOWLEDGEMENT

The "resent !or# is an effort to thro! some light on “Pr(;#$+% an Pr(%5$8'%

(* S+a## S8a#$ In-%'r&$% &n In&a” $ The !or# !ould not hae been "ossible

to come to the "resent sha"e !ithout the able guidance% su"erision and hel" to me by

number of "eo"le$

5ith dee" sense of gratitude I ac#no!ledged the encouragement and guidance

receied by Mr Lawana !r A"arwa# !ho hel"ed and su""orted me during the

course% for com"letion of my thesis$

+ratee# Agar!al



THESIS SYNOPSIS

DETAILS OF THE STUDENT:

Na+$ : Pra'$$< A"arwa#

Ba'8 : /)01SS1FW

S5$8&a#&=a'&(n : Mar<$'&n" an F&nan8$

S$8'&(n : FAB

P(n$ N( : 22220330/4

E+a&# I : 5$rr+(n'0667"+a&#.8(+ % 5$rr9+(n'7a((.8(.&n

DESIRED AREA OF RESEARCH: Mar#eting

TITLE OF THE THESIS:

“Pr(;#$+% an Pr(%5$8'% (* S+a## S8a#$ In-%'r&$% &n In&a”,

R$%$ar8 (;>$8'&?$:

' To understand the conce"t of Entre"reneurshi"

2 To understand its a""licability to the small scale sector in India$

9 To study the crtical role of entre"reneurshi" in Small Scale Industry in India

* To study the "resent status and future "ros"ects of Small Scale Industry in India

( To study the eolution of S"ecial Economic Dones in India% !ith "articular

reference to Small Scale Industry in India

In'r(-8'&(n '( '$ ar$a (* r$%$ar8:

Since the time of the inde"endence in '?*>% a significant feature of the Indian

economy has been the ra"id gro!th of the small industry sector$ The small industry

sector is considered to hae a ma,or role in the Indian economy due to its *3 "ercent

share in the national industrial out"ut along !ith an 43 "ercent share in industrial








>

em"loyment and nearly 9( "ercent share in e&"orts$ The small scale industries sector

has been assigned an im"ortant role in the industriali-ation of the country by the

"reious and current goernments 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 si-e%

ca"ital resources and labor force in the units$ At one time the goernment of India had

grou"ed small)scale industrial underta#ings into t!o categories ) those using "o!er

but em"loying less than (3 "ersons and those not using "o!er and em"loying less

than '33 "ersons$ Ho!eer% ca"ital inestment on "lant and machinery by units is

considered as main criteria for distinguishing bet!een the large and small industries$

An industrial unit can be classified as a small)scale unit only if it meets the ca"ital

inestment limits set by the goernment of India 08OI1$ These limits hae been

steadily increased oer the years$ In 233(% the inestment limit for small)scale

industry 0SSI1 !as raised from million to 93 million$ +roduction units that are

ancillary to large)scale units are also considered as small if they sell not less than (3

"ercent of their manufactured "roducts to one or more industrial units$

The "resent research study is an attem"t to study and highlight the im"lications% role%

and im"ortance of entre"reneurshi" in the light of small scale sector in India$

SCOPE OF THE STUDY:

• The sco"e of the study !ill be limited to undersatnd% !hat does the term Small

Scale Sector means in the broader sense in India$

• To critically analy-e the @inancial Incenties aailable to the Small scale

sector in India



4

RESEARCH METHODOLOGY:

.esearch Methodology defines the "ur"ose of the research% ho! it "roceeds% ho! to

measure "rogress and !hat constitute success !ith res"ect to the ob,ecties

determined for carrying out the research study$

The a""ro"riate research design formulated is detailed belo!$

E@5#(ra'(r r$%$ar8: this #ind of research has the "rimary ob,ectie of

deelo"ment of insights into the "roblem$ It studies the main area !here the "roblem

lies and also tries to ealuate some a""ro"riate courses of action$

The research methodology for the "resent study has been ado"ted to reflect these

realties and hel" reach the logical conclusion in an ob,ectie and scientific manner$

The "resent study contem"lated an e&"loratory research$

NATURE OF DATA

S$8(nar a'a6) ata !hich is already aailable through arious boo#s% ,ournals %

maga-ines% internet etc$

TOOLS AND TECHNIES

Analysis of data has been done !ith hel" of arious statistical tools li#e the tables and

gra"hs$

-%'&*&8a'&(n *(r C((%&n" a Par'&8-#ar R$%$ar8 Pr(5(%a#

There seems to be considerable inertia in the su""ly of entre"reneurs$ One reason is

that the culture affects the su""ly% and the culture itself changes only ery slo!ly$

Entre"reneurshi" is one of the ma,or aenues of social and economic adancement%



?

along !ith s"ort and entertainment$ But the Horatio Alger myth that the ty"ical

entre"reneur has risen from rags to riches disguises the fact that as @ran# Taussig and

others hae found% many of the most successful entre"reneurs are the sons of

"rofessionals and entre"reneurs$ They o!e much of their success to "arental training

and inherited family contacts$ Thus% in most societies there is insufficient social

mobility for entre"reneurial culture to change sim"ly because of the changing origins

of the entre"reneurial elite$ In any case% Fself)madeF entre"reneurs often ado"t the

culture of t he elite% neglecting their business interests for social and "olitical actiities

and een 0in Britain1 educating their children to "ursue a more Fres"ectableF career$

In the long run% though% changes can occur that hae "rofound im"lications for

entre"reneurshi"$ In modern economies large cor"orations !hose shares are !idely

held hae re"laced the family firm founded by the self)made entre"reneur$

Cor"orations dra! on a !ider range of management s#ill than is aailable from any

single family% and they aoid the "roblem of succession by an incom"etent eldest son

that has been the ruin of many family firms$ Cor"orations "lan large)scale actiities

using teams of "rofessional s"ecialists% but their efficiency gains are to some e&tent

offset by the loss of em"loyee loyalty that !as a feature of many family firms$ <oyal

em"loyees do not need close su"erision% or com"le& bonus systems% to ma#e them

!or#% because they are self)motiated$ Historically% family firms hae dra!n on t!o

main sources of Fcultural ca"italF6 the "aternalistic idea that em"loyees are ado"ted

members of the founderGs family% and the founderGs o!n religious and moral alues$

The first is effectie only !ithin small firms$

DETAILS OF THE EXTERNAL GUIDE

G-&$ Na+$: Mr Lawana !-+ar A"arwa#

http://www.econlib.org/library/briefbios.html#taussig

http://www.econlib.org/library/briefbios.html#taussig



'3

D$%&"na'&(n%: CEO

O**&8&a# Ar$%%: ASSAM INDUSTRIES, NEW MAR!ET ,HOAI ASSAM,



''

PIN CODE)6/0TABLE OF CONTENTS

CHAPTER): INTRODUCTION )0

⇒ Bac#ground

⇒ The "romotional measures coer

⇒ <iterature .eie!

⇒ Statistics on SSIs

⇒ Small)Scale Industry +olicy

⇒ Small Industries eelo"ment Organi-ation 0SIO1

⇒ irectorate of Industries

⇒ Small Industries Serice Institutes 0SISIs1

⇒ istrict Industries Centers 0IC1

⇒ National Small Industries Cor"oration 0NSIC1

⇒ National Institute of Small Industry E&tension Training 0NISIET1

⇒ .ole and +roblems of Small 7nits in India

⇒ Small Industries eelo"ment Ban# of India 0SIBI1

⇒ Techno)Managerial and @inancial +roblems

⇒ .egulatory +roblems

⇒ Enironmental +ollution <a!s

CHAPTER 6: LITERATURE REIEW 3)/0⇒ +roblem conte&ts industry= organi-ation= "ers"ecties= im"lications

⇒ Small industry deelo"ment organi-ation 0SIO1

⇒ National small industries cor"oration 0NSIC1 <td$

⇒ Small scale industries board

⇒ National commission for enter"rises in the unorgani-ed sector

⇒ National institutes for entre"reneurshi" deelo"ment

⇒ SSI in Indian economy

⇒ <ocation)!ise em"loyment distribution ) rural

⇒

7rban% E&"ort⇒ Ma,or e&"ort mar#ets

⇒ Increasing e&"ort "otential for Indian "roducts

CHAPTER )/: OBECTIES OF THE STUDY /3)/2

⇒ Sco"e of the study

⇒ Im"ortance of industriali-ation in India

CHAPTER ): RESEARCH METHODOLOGY 4)

⇒ .esearch sam"ling and design⇒ Ty"e of research design



'2

⇒ Nature of data

⇒ Tools and techni/ues

⇒ .esearch ariables and measurement

CHAPTER)0: DATA ANALYSIS 0)6

⇒ ata collection

⇒ ata analysis$

⇒ <imitation of the research

⇒ +resentation of data

⇒ Status classification of SSI

⇒ ata analysis

⇒ +roblems in moderni-ation of SSIS

⇒ Time series data for SSIS in India

⇒ iscussion and analysis

⇒ Introduction to small scale sector

⇒ Meaning of small)scale sector6

⇒ Need of small)scale sector6

⇒ Im"ortance of small sector6

⇒ +roblems of small sector in India6

⇒ Oerie! of small)scale sector in India

⇒ Ne! "olicy for small sector% 23336 ma,or thrust areas

⇒ .ole of small scale sector in the economic deelo"ment of India⇒ Challenges for the SSI sector

⇒ S5OT analysis of the small scale industry

CHAPTER)3: CONCLUSION J IMPLICATIONS /)

CHAPTER): RECOMMENDATIONS 6)2

⇒ .ecent moderni-ation efforts

⇒ Ado"tion of ne! definitions

⇒

ereseration⇒ +romoting clusters

⇒ Institutional credit

EXPORT PROMOTION

⇒ .ationale Behind E&"ort +romotion

⇒ International E&"osure to SSI +roducts

BIBLIOGRAPHY1REFERENCES 24)2/



'

CHAPTER-1

INTRODUCTION



2

INTRODUCTION

BAC!GROUND

Since the time of the inde"endence in '?*>% a significant feature of the Indian

economy has been the ra"id gro!th of the small industry sector$ The small industry

sector is considered to hae a ma,or role in the Indian economy due to its *3 "ercent

share in the national industrial out"ut along !ith an 43 "ercent share in industrial

em"loyment and nearly 9( "ercent share in e&"orts$ The small scale industries sector

has been assigned an im"ortant role in the industriali-ation of the country by the

"reious and current goernments 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 si-e%

ca"ital resources and labor force in the units$ At one time the goernment of India had

grou"ed small)scale industrial underta#ings into t!o categories ) those using "o!er

but em"loying less than (3 "ersons and those not using "o!er and em"loying less

than '33 "ersons$ Ho!eer% ca"ital inestment on "lant and machinery by units is

considered as a main criteria for distinguishing bet!een the large and small industries$

An industrial unit can be classified as a small)scale unit only if it meets the ca"ital

inestment limits set by the goernment of India 08oI1$ These limits hae been

steadily increased oer the years$ In 233(% the inestment limit for small)scale

industry 0SSI1 !as raised from million to 93 million$ +roduction units that are

ancillary to large)scale units are also considered as small if they sell not less than (3

"ercent of their manufactured "roducts to one or more industrial units$



9

Ho!eer% there is a clear distinction bet!een the traditional and modern small

industries$ The traditional small industries include #hadi and handloom% illage

industries% handicrafts% sericulture% coir% etc$ Modern small industries manufacture a

!ide ariety of goods from sim"le items to so"histicated items such as teleision sets%

electronics control system% arious engineering "roducts% "articularly as ancillaries to

large industries$ The traditional small industries are highly labor)intensie% !hile the

modern small industries use highly so"histicated machinery and e/ui"ment$ The term

small)scale industries is mostly used to re"resent modern small industries$ The SSIs

manufacture many items !hich include rubber "roducts% "lastic "roducts% chemical

"roducts% glass and ceramics% mechanical engineering items% hard!are% electrical

items% trans"ort e/ui"ment% electronic com"onents and e/ui"ments% automobile "arts%

bicycle "arts% instruments% s"orts goods% stationery items and cloc#s and !atches$ The

small scale industry sector out"ut contributes almost *3 of the gross Industrial

alue)added *( of the total e&"orts from India 0direct as !ell as indirect e&"orts1

and is the second largest em"loyer of human resources after agriculture$ The

deelo"ment of Small Scale Sector has therefore been assigned an im"ortant role in

IndiaGs national "lans$

In order to "rotect% su""ort and "romote small enter"rises as also to hel" them become

self)su""orting% a number of "rotectie and "romotional measures hae been

underta#en by the 8oernment$



*

T$ 5r(+('&(na# +$a%-r$% 8(?$r

Industrial e&tension serices institutional su""ort in res"ect of credit facilities%

"roision of deelo"ed sites for construction of sheds% "roision of training facilities%

su""ly of machinery on hire)"urchase terms%

9 Assistance for domestic mar#eting as !ell as e&"orts% s"ecial incentie for setting

u" enter"rises in bac#!ard areas etc$ technical consultancy : financial assistance for

technological u" gradation$

5hile most of the institutional su""ort serices and some incenties are "roided by

the Central 8oernment% others are offered by the state goernments in arying

degrees to attract inestments and "romote small industries in arying degrees to

attract inestments and "romote small industries !ith a ie! to enhance industrial

"roduction and to generate em"loyment in their res"ectie States$

The small)scale industries 0SSI1 constitute one of the ibrant sectors of the Indian

economy in terms of em"loyment generation% the strong entre"reneurial base it hel"s

to create and its share in industrial "roduction and e&"orts$ The 8oernment created

the Ministry of Small Scale Industries and Agro and .ural Industries 0SSI:A.I1 in

October% 2334 as the nodal Ministry for formulation of "olicy and co)ordination of

Central assistance relating to "romotion and deelo"ment of the small scale industries

in India$ The Ministry of Small Scale Industries and Agro and .ural Industries

0SSI:A.I1 !as bifurcated into t!o se"arate Ministries% namely% Ministry of Small

Scale Industries and Ministry of Agro and .ural Industries in Se"tember% 23'3$



S'a'&%'&8% (n SSI%

The total number of SSI units increased from 2$342 million units in 2333)3' to 2$>2*

million units in 233*)3($ uring the same "eriod% at constant "rices% the "roduction

increased from nearly '$ billion to a""ro&imately 2$2 billion$ The total number of

"ersons em"loyed in SSIs increased from '2$? million to '($2 million$ According to

Second All)India Census of .egistered SSI units% *2 "ercent of the units !ere

functioning in rural areas% *4 "ercent in urban areas and '3 "ercent in metro"olitan

areas$ 2$2 "ercent of the units !ere located in bac#!ard areas$ The rate of gro!th of

this sector has been higher as com"ared to the !hole industrial sector$

In terms of the aboe mentioned deelo"ment% the "rogress of the SSI sector is

considered im"ressie by e&"erts$ But the SSIs are mostly effected by a number of

"roblems that hae ham"ered its absolute g!oth$ According to the Seenth @ie Jear

+lan 0'?4()?31 the gro!th of the SSIs has been constrained by arious factors

KKincluding technological obsolescence% inade/uate and irregular su""ly of ra!

materials% lac# of organi-ed mar#et channels% im"erfect #no!ledge of mar#et

conditions% unorgani-ed nature of o"erations% inade/uate aailability of credit%

constraint of infrastructure facilities including "o!er etc$ and deficient managerial

and technical s#ills$GG

S+a##)S8a#$ In-%'r P(#&8

The goernment of India 08oI1 has ta#en many measures for the gro!th and

deelo"ment of the SSI sector$ It has follo!ed a "olicy of reseration of items for

e&clusie manufacturing by the small)scale sector$ Oer the years% the number of

items on the resered list hae increased reaching 49 items in 233($ Ho!eer% '* of

http://www.cherry.gatech.edu/sim/students/papers97S/perumalla.html#SECTION00010000000000000000






>

these items hae been deresered by the 233)3> 7nion Budget$ @or the "ast seeral

years the 8oI has recogni-ed the need for the moderni-ation of the SSI and has

initiated measures to!ards this end$ It has "ut in "lace an infrastructure consisting of

many institutions both at the national as !ell as state and district leels to !or# for the

moderni-ation of the SSIs$ Some of these institutions !ill no! be discussed in brief$

S+a## In-%'r&$% D$?$#(5+$n' Or"an&=a'&(n SIDO

One of the most im"ortant initiatie underta#en by 8oI is the establishment of the

SIO in '?(*$ This organi-ation is headed by a Small Industries eelo"ment

Commissioner 0CSSI1$ SIO is "laced under the ,urisdiction of the Ministry of

Industrial eelo"ment and has its head/uarters in Ne! elhi% India$ The branch

offices of the CSSI that are s"read all oer the country ta#e care of the

establishment% o"eration and gro!th of the SSIs$ The organi-ations under the control

CSSI% at central and state leel% organi-e arious ty"es of actiities including

training% seminar% "lant isits% and grou" discussions$ Some of the ma,or "rograms of

the SIO are technology deelo"ment% energy conseration% "ollution control% ISO)

?333 etc$ They hel" the SSIs by "roiding them !ith ra! materials that are not readily

aailable in the mar#et !hen needed$ 0Earlier% the small industries !ere mostly

de"edent on local ra! materials$ Ho!eer the modern small)scale industries

manufacturing more so"histicated and ne! "roducts are using im"orted ra! materials$

Sometimes "roblems arise in "rocuring the right /uality of ra! materials in time% for

o"erating their "roduction "lans and deliery schedules% due to foreign e&change

crisis or other reasons such as !or#ing ca"ital "roblems$1 The CSSI branch offices

also assist the SSIs in collecting outstanding dues from their customers$ The SIO is





4

an umbrella organi-ation under !hich a number of institutions o"erate$ These are the

serice institutes% the district industries centers and the information ban#s$

S+a## In-%'r&$% S$r?&8$ In%'&'-'$% SISI%

As of 2333% there !ere 2 SISIs% 92 branch institutes and 9? e&tension centers under

the CSSI$ These institutions are fully deoted to "roide assistance to the SSIs in all

"hases of their o"eration$ These organi-ations hel" the SSIs in identifying items for

manufacturing% "roide information on technologies% feasibility studies% training%

organi-ation of !or#sho"s and seminars and other such "rograms$ SISIs hae a

"rogram for stoc#ing u" s"are "arts and other su""ly items not readily aailable in the

mar#et but necessary for the small)scale industries$ The SISIs also hae Kreasonably

!ell)e/ui""edG !or#sho"s and labs that offer testing serices to small)scale industrial

units !hich are not e/ui""ed or hae no "ro"er "ersonnel$

D&r$8'(ra'$ (* In-%'r&$%

The irectorate of Industries is an a"e& body for "romoting industrial deelo"ment in

the states$ The eelo"ment Commissioner 0Industries1 heads the institution !hich is

su""orted by regional and 93 district leel establishments$ The regional offices in

each state are headed by the Loint irector of istrict Industries Centers$ The

im"ortant functions of this agency is the im"lementation of the small)scale industry

"romotional schemes$

D&%'r&8' In-%'r&$% C$n'$r% DIC

The idea of istrict Industries Centers 0IC1 !as introduced by the Industrial +olicy

Statement of ecember '?>>$ These ICs !ere established in each district to K"roide









'3

Center 0SENOC1 !as set u" at NISIET to assist the small industry in its information

needs$

S+a## In-%'r&$% D$?$#(5+$n' Ban< (* In&a SIDBI

The Small Industries eelo"ment Ban# of India 0SIBI1 !as set u" by 8oI under a

s"ecial act of the +arliament in A"ril '???$ It is a !holly o!ned subsidiary of the

IBI$ SIBI has a net!or# of 99 offices 0( regional and 24 branch offices1$ The Ban#

!as instituted to ensure the increased flo! of financial assistance to SSIs$ It assists the

SSIs through direct assistance schemes as !ell as indirect assistance such as

refinancing$

R(#$ an Pr(;#$+% (* S+a## Un&'% &n In&a

As industriali-ation gathered momentum so did the increase in small)scale industries$

Small units "lay an im"ortant role in the Indian economy% as they are labour intensie

and create ,ob o""ortunities$ Small com"anies are defined as those !ith less than 7S

'43%333 in ca"ital e/ui"ment 07S)AE+% 233(1$ They offer a higher "roductiity of

ca"ital than ca"ital intensie enter"rises% as they hae lo! inestment "er !or#er$

They hel" in dis"ersal of industries% rural deelo"ment% and the decentralisation of

economic "o!er$ All this is re/uired to increase and dis"erse economic gro!th$

In addition% small com"anies su""ort entre"reneurial talent and s#ills% stimulate

"ersonal saings% and hel" in deelo"ing innoatie and a""ro"riate indigenous

technology% "roiding dynamism and contributing to com"etition 0.a,endran% '?4?1$

Therefore these industries are su""orted by the goernment and hae been actiely

encouraged no "ublic or "riate enter"rise !ith more than '33 em"loyees has been





''

allo!ed to go out of business 07S)AE+% 233(1$ The goernment to su""ort this sector%

not only for em"loyment generation but also to enhance their com"etitie strength has

underta#en seeral "olicy initiaties and "rocedural sim"lifications$ The goernment

has also "roided measures such as greater infra)structural su""ort% more and easier

aailability of credit% lo!er rates of duty% technology u")gradation% assistance to build

entre"reneurial talent% facilities for /uality im"roement% and e&"ort incenties

0+arthasarathy% 233(1$

Contributions of small)scale industries 0SSIs1 to IndiaGs industrial "roduction% e&"orts%

and em"loyment are significant$ About 9 million SSI units em"loying nearly '$>

million "ersons account for 9( of IndiaGs total e&"orts and about *3 of industrial

manufacture 0SIBI re"ort on small scale industries sector% 2334% 2334% "$ 1$ In real

terms% the small)scale sector recorded a gro!th rate of '3$' in 2339)3* as against

>$' in 2332)39 and ($ in 233')32$ By the year 232(% if not controlled% this sector

!ill gro! een more ra"idly 0+arthasarathy% 233(1$

• The goernments "rime role has been to encourage gro!th of these industries%

often neglecting enironmental considerations$ Industrial effluent largely comes

from the 9 million small) and medium)si-ed units that are scattered throughout the

country% "articularly in the "roduction of "a"er% sugar% leather% and chemicals$

7nfortunately% only about half the medium) to large)scale industries hae "artial

or com"lete effluent treatment$ @ourfold industrial gro!th from '?9 to 2333

resulted in si&fold gro!th in to&ic releases$ Heay industries li#e iron and steel

"roducers contribute nearly >3 of the to&ic !astes released but only 23 of

industrial out"ut$ Industrial dis"osal of "olluted effluent occurs ia o"en drains



'2

into streams and reseroirs or through underground in,ection$ Most industrial

estates lac# !aste!ater treatment systems 07S)AE+% 233(1$

• Besides "ollution "roblems% small)scale industries also hae other #inds of

"roblems$ One is internal% that is% the techno)managerial and financial "roblems

that they encounter% and the other is the e&ternal "roblems that they confront due

to non)com"liance !ith regulatory and legislatie measures$

T$8n()Mana"$r&a# an F&nan8&a# Pr(;#$+%

Small industries by com"arison !ith large industries lac# enironmental commitment%

technical e&"ertise in enironmental management% and the financial ca"abilities to

address enironmental "roblems$ Nor do they hae standards or effectie treatment

o""ortunities and serices 0Nyati% '?441$ Interestingly% one !ould imagine that

because small industries are heaily su""orted by the goernment% aailability of

finance and obtaining finance for "ollution control measures should not be a "roblem$

Small industries also lac# additional s"ace for "ollution control facilities$ There are

difficulties in obtaining the technical assistance of #no!ledgeable consultants$ Since

most of the units are dis"ersed% they find it difficult to come together for a ,oint or

common treatment "lant$ The concern of de"ressed "rofit margins and decline in

com"etitieness "reents these units from using "ollution control measures$ More

em"hasis is laid on ne! inestments% "roduction% and other return oriented

o""ortunities$ Soft loans for "ollution control measures are not lucratie$ There are

subsidies offered for inestments in "ollution control as incenties% but the im"act of

these incenties on these units is little or nothing% for they do not alter the cost)benefit

analysis in faour of "ollution control inestments 0Nyati% '?441$



'9

R$"-#a'(r Pr(;#$+%

.esearch done by +argal% Mani% and Hu/ 02331 on industrial "lants in India%

indicated that high leels of "ollution elicit a formal regulatory res"onse in the form

of ins"ections% but these ins"ections a""ear to hae no im"act on the emissions$

Ins"ections are "robably ineffectie in bringing about desired changes in behaiour

because of bureaucratic or other "roblems% including the "robability that enforcement

is lo! and that the "enalty for non)com"liance is not stringent enough to act as a

deterrent$ They suggest that Indian "olicy ma#ers and regulators thus need to

e&"licitly recogni-e the trade)off in enironmental /uality of the e&isting regulatory

bias to!ards the small) and medium)scale sector$

.egulatory com"liance has been a ma,or issue for these units$ Enironmental

legislation in India% although seemingly as tough as that in ma,or deelo"ed nations% is

not !ell enforced$ Though multinationals and the large domestic com"anies are

monitored% "oorly funded regulatory bodies find it nearly im"ossible to "olice the

millions of small) and medium)scale units$ Bribing "oorly "aid ins"ectors is re"orted

to be common 0.oberts% 233*1$

Enironmentalists hae ie!ed enforcement as la&% des"ite the regulatory frame!or#

and oersight authority of the Central and State Boards$ There hae been no

incenties to inest in the "ollution control effort because of !ea# monitoring and

enforcement of enironmental regulations$ It is mainly small industries that continue

to lac# incenties to set u" treatment e/ui"ment or to o"erate e/ui"ment% if it already

is installed% because o"erating that e/ui"ment has been more e&"ensie than non)

com"liance 0asgu"ta% <a"lante% : Mamingi% 233>1$ Obiously% in India% scarcity of



'*

natural resources is less a concern than misuse of them$ The "ressure for "rofits

"redominates$ +orter and <indes 0233*1 suggestion that enironmental regulations

can s"ur innoations that increase "roduct alue and a decrease total cost seems

a""ro"riate$ The trade)off bet!een economy and enironment for "roduction

"rocesses% customer needs% and technology is dynamic and com"le&$ +orter and

<inde suggest that innoation)friendly regulations can im"roe resource "roductiity

and com"etitieness% but the "roblem is getting small industries to co)o"erate and to

ie! it as a long)term solution rather than a short)term goal$

En?&r(n+$n'a# P(##-'&(n Law%

India began to deelo" distinctie forms of enironmental la!s and regulations in the

'?>3s$ The first of Indias modern enironmental la!s !as the 5ater 0+reention and

Control of +ollution1 Act of '?>*% !hich established the Central and State 5ater

+ollution Control Boards the 5ater Cess Act of '?>> the Air 0+reention and

Control of +ollution1 Act of '?4' and the Enironment 0+rotection1 Act of '?4$ The

latter is umbrella legislation designed to "roide a frame!or# for central goernment$

The "roblem enisaged here is not insufficient la!s or "ollution control boards that

can control "ollution but% as the 5orld Ban# has stated% that these boards hae been

"lagued by "oor enforcement due to "olitical interference $ $ $ !hereas as !ith other

enforcement actiities in India% corru"tion is "erasieF 07S)AE+% 233(1$

Another "oint !orth noting is that the mandate of the Central +ollution Control Board

0C+CB1 is to set enironmental standards for all "lants in India% lay do!n ambient

standards% and coordinate the actiities of the State +ollution Control Boards

0S+CBs1$ 7nfortunately% the im"lementation of enironmental la!s and their



'(

enforcement are decentrali-ed and so is the res"onsibility of the S+CBs 0Mani% +argal%

: Hu/% 233(1$ This is another ha"ha-ard method of addressing the issue$

In addition% "ollution la!s hae achieed little success$ The courts hae been slo! to

res"ond to enforcement actions sought by state "ollution boards$ The boards

themseles hae been "oorly funded and charges of corru"tion hae been regular and

!ides"read$ <arge industries hae achieed "ollution com"liance more easily than

small industries 07S)AE+% 233(1$ The reason is that they are afraid of ta#ing ris#s$

<au and Sriniasans 02331 research on identifying the driing force for better

enironmental "erformance found results that im"lied the current effort in

enironmental management is drien largely by a fear of the "enalty that can be

im"osed by the goernment !hen enironmental la!s are iolated$ Ho!eer% Cornell

and Sha"iro 0'?4>1 e&"lained that a firmGs alue de"ended on the cost of e&"licit and

im"licit enironmental claims$ E&"licit claims of the shareholders can be recogni-ed%

but the im"licit claims of the firm cannot be ignored$ If the firm refuses to com"ly

!ith its social res"onsibility and /uality serice% "arties to im"licit contracts% li#e

consumers or regulatory agencies% can force burdensome e&"licit contracts on the

firm$ Cornell and Sha"iros e&"lanation a""lies !idely to large industries% but in the

case of small firms it is a""arent from the literature aboe that this can be totally

dismissed by resorting to other means$



'

CHAPTER – 2LITERATURE REVIEW



'4

em"hasi-ed that it is only the small scale sector through !hich economic "ros"erity

can reach the remotest sections of the society$ @rom the ery beginning since the

"rocess of economic deelo"ment started% the small scale sector has been "roiding

handsome em"loyment o""ortunities to millions of ,ob see#ers in the country$ @urther%

small scale industries use local ra! materials% em"loy local "eo"le and thus hel" in

generating em"loyment o""ortunities for the community$

National Council of A""lied Economic .esearch 0'?>21 conducted a study to

e&amine the economies of selected number of small industrial units o"erating in

different "arts of the country$ A sam"le of '(? units s"read oer 22 industrial grou"s

!as selected% of the selected units% *4 !ere manufacturing consumer "roducts% >

ca"ital goods and 9( intermediate "roducts$ The study sho!ed that besides other

"roblems% the under)utilisation of ca"acity among most of the units !as due to the

"roblems of "roduction as !ell as mar#eting$ The "roblems of "roduction !ere

closely associated !ith scarcity of ra! material and inade/uate finance$ The "roblems

of mar#eting are by and large attributed to such factors as limited si-e of o"eration%

"ractically little or no control oer /uality% "rice and !ea# financial base% restricting

the sco"e for engaging in sustained sales "romotion$ The "roblem of sales is more

acute !here the area of o"eration is large "articularly in case of consumer "roducts or

ca"ital goods% !here after)sale serice is essential$ In most of the cases the

entre"reneurs are found to be de"endent on middlemen for the mar#eting of their

"roducts$

Baner,ee 0'?>(1 e&amined the relationshi" bet!een ca"ital intensity and "roductiity

in the conte&t of Indian manufacturing industry$ The analysis has been carried out for

manufacturing sector as a !hole and fie indiidual industries 0i-$ cotton te&tiles%



'?

Lute te&tiles% sugar% "a"er and bicycle1 by using ASI data for the "eriod '?*)*$ The

study highlighted that the "erformance of the manufacturing sector !as sluggish oer

the "eriod '?*)*$ 5hile labour "roductiity sho!ed a significant u"!ard trend

during this "eriod% but this sector did not indicate the "resence of any Ptechnical

"rogress$ The hy"othesis of constant returns to scale !as not re,ected$ It has been

found that elasticity of substitution bet!een ca"ital and labour is near unity in almost

all the industries$

The idarbha Industries Association 0'?>1 made an em"irical surey of sic# units in

the region and dealt s"ecifically !ith the ma,or "roblem of finance% "olicies and

"rocedures of credit agencies as !ell as the difficulties that !ere being faced in

mar#eting$ The study asserted that most of the difficulties of small scale sector arise

from financial% administratie control% fre/uent interest changes and recession in

demand these tends to ma#e the units sic#$ @urther% the re/uirements of credit of small

scale industries located in far a!ay "laces are greater than those located at an

industrial centre because the former has to maintain higher inentories$ The study

made s"ecific obserations on the lo! and !ea# e/uity base of the units% the

unrealistic gestation "eriod allo!ed by state financial cor"orations% inade/uate loans

by commercial ban#s and these factors emerged as the ma,or causes of sic#ness in the

small scale sector$ The study suggested that the moment a danger of sic#ness a""ears%

action should be initiated and dues of a sic# unit should be conerted into a long term

loan$ The study also reealed that financial agencies hae not been able to "lay their

role in the deelo"ment of small scale sector in the under deelo"ed regions$ It has%

therefore% been recommended to set u" a regional deelo"ment cor"oration !hich

may finance sic# units and hel" them in mar#eting their "roducts$



23

Lain 0'?431 discussed the increasing role of small scale industries in industrial

structure of the country along !ith e&"ort "otential of small scale industries$ The

arious measures underta#en by the goernment agencies such as guidance formation%

financial su""ort% e&"ort house scheme etc$ to deelo" the formation of the consortia

for the benefit of the small industries hae also been e&"ressed$ It has been obsered

that the o"erational results of e&isting consortia may not be ery substantial but

encouraging$ Therefore% a "otential of gro!th of such consortia loo# immensely

faourable$

Mehta 0'?431 attem"ted to analyse "roductiity trends for 2> Indian industries by

using ASI data for the "eriod '?(9)($ The results reealed that there !as a

considerable diersity in the e&"erience of different industries regarding trends of

labour and ca"ital "roductiity$ <abour "roductiity !as found to hae increased

significantly in industries li#e egetable oil% chemical% glass and glass!are and

insignificantly in matches% iron and steel and cement industries$ Ho!eer% ca"ital

"roductiity has not increased a""reciably% rather the reerse !as true in most

industries$ The total factor "roductiity of Indian manufacturing sector hae declined

oer a "eriod of time$ The study noticed that most industries e&hibited the "resence of

constant returns to scale and diseconomies of scale had not set in$ The study

demonstrated that there !ere inter industry differences !ith res"ect to ease of ca"ital)

labour substitution !hich "rimarily e&"lained the inter industry gro!th differentials$

The elasticity of substitution !as found to be significantly different from -ero in

many industries$

+a"ola 0'?4'1 studied the im"act of concessional finance on industrial deelo"ment

and em"hasised that in order to ma#e concessional finance effectie% it !ill be



2'

necessary to "lan and deelo" a minimum threshold leel of industrial actiity

"referably !ith strong inter)relationshi" bet!een the financial institutions%

"romotional institutions% state and district administration and "otential industrial

entre"reneurs% es"ecially for more bac#!ard districts$ He further em"hasised that

almost one half of the fi&ed and !or#ing ca"ital re/uirements of the units studied

hae been met by institutional financing and most of the fi&ed ca"ital financing has

been met through concessional finance es"ecially in the bac#!ard districts$ 7nits

aailing concessional finance hae e&"erienced a higher rate of gro!th in out"ut than

those !ithout it$

8oldar 0'?491 e&amined "roductiity trends in Indian manufacturing sector and

estimated Total @actor +roductiity 0T@+1 by a""lying Solo! inde& and Translog

inde& using firstly '?(')( data coering all Census of Indian manufacturing

industries e&ce"t general engineering and electrical engineeringQ industry for '?(')

(4 and Annual Surey of Industries 0ASI1 data for '?(?)( and secondly% during the

"eriod of '?(?)>4 based on ASI data$ This analysis sho!s a rising trend in labour

"roductiity and ca"ital intensity and a falling trend in ca"ital "roductiity during this

"eriod$ 8ro!th in T@+ seems to hae been rather sluggish and its contribution to

out"ut gro!th is /uite small$ The obsered rise in labour "roductiity and fall in

ca"ital "roductiity may accordingly be attributed to increasing ca"ital intensity$

Substitution of labour by ca"ital seems to be the main feature of industrial gro!th$

The result of Cobb)ouglas function estimation faours the assum"tion of constant

returns to scale im"licit in the T@+ indices !hich is in broad agreement !ith the

results of T@+ indices es"ecially in terms of the direction of T@+ gro!th$ The study

has "ointed out that the general industrial situation !as not conducie to "roductiity



22

gro!th$ 7nder)utilisation of ca"acity% shortage of fuels% "o!er and trans"ort facilities

and deteriorating industrial relations had a significant de"ressing effect on

"roductiity gro!th$ Moreoer% gestation lags in the basic and ca"ital goods

industries% !hich accounted for a dominant "art of inestment in "ost '?( "eriod%

must hae had a de"ressing effect on "roductiity gro!th$ A "ronounced rising trend

in ca"ital intensity !as found% !hich im"lied that the gro!th in industrial

em"loyment has seriously lagged behind the gro!th in industrial inestment and

out"ut$ To some e&tent this is a result of the changing industrial structure in faour of

basic and ca"ital goods industries$ It has been obsered that metals% chemicals% rubber%

"etroleum and machinery industries are among the lo!est ran#ed in terms of T@+

gro!th% since these are the industries in !hich im"ort substitution has been attem"ted

on a considerable scale$ Though the "olicy of im"ort substitution contributed much to

the ob,ectie of self reliance% yet it has been inimical to "roductiity gro!th$

Ethio"ia 0'?4*1 ealuated the im"ortance of small scale industries for "roiding

em"loyment and income generation in the African countries$ The focus of the study is

on the analysis of efficiency of "roduction and em"loyment and results sho!ed that

the artisan and small scale industrial sector are im"ortant com"onent of the Ethio"ian

economy in terms of generation of income and em"loyment$ The em"irical eidence

of factor intensity and "roduction also indicates that many small enter"rises are

efficient in utili-ing scarce resources such as ca"ital and foreign e&change$ Small

scale industries hae also reasonable demand for their "roducts% but strengthening of

the lin#age bet!een small scale industry and the agriculture sector a""ears to be

necessary$ The study reealed that institutional% social and economic constraints

im"ede the deelo"ment of this sector$



29

Rommen 0'?>21 conducted a surey of randomly selected *( small scale units in

;erala to inestigate the mar#eting assistance "roided by the goernment to this

sector along !ith assistance of finance and serices$ The study undertoo# to e&amine

the modernisation% industrial estates "rogrammes and rural industries "ro,ect !ith

regard to small scale industries in ;erala$ It has been obsered that ** "ercent of the

units sell their "roducts throughout India% 24 "ercent at state leel and remaining 24

"ercent sell their goods in the local mar#et$ Most of the units sell their "roducts

through retailers% !holesalers% commission agents% goernment% ancillaries% sub)

contracting etc$ The study also reealed that there are arious mar#eting assistance

schemes such as mar#eting research% /uality mar#eting% ancillary deelo"ment% e&"ort

"romotion and direct goernment "urchase "rogramme% but small units could not ta#e

desired adantage of these "rogrammes due to ignorance and lac# of communication$

It has been obsered that the state of ;erala faces a "eculiar mar#eting "roblem of

Gdistant costG in the "urchase of in"uts as !ell as sale of out"ut and so s"ecial strategy

is desirable in this regard$

Brahma and Subas 0'?>?1 e&amined the deelo"ment of small scale industries in

India !ith s"ecial reference to its deelo"ment in +une region$ In this regard the data

!as collected from 2> modern units and ?4 traditional units$ The main focus of the

study !as to find out the "roblems of deelo"ment of small scale industrial units%

along !ith other "roblems% the study indicated that the "roblems of ra! material and

mar#eting by small scale units are the ma,or "roblems$ The irregular su""ly and lo!

/uality of ra! material are ery common% !ith regard to mar#eting% delay in "ayment

and e&"loitation at the hands of middlemen are the other note!orthy "roblems

mentioned in the study$



2*

;aur 0'?421 conducted a study of Haryana during the "eriod '?)>4 and found that

there !as oer!helming concentration of industrial units and em"loyment

o""ortunities in 8urgaon% Ambala and Sone"at districts and the relatie change in the

number of units% out"ut and em"loyment obsered during the study "eriod$ further%

author indicated that inter district dis"arities in the gro!th of industries had !idened

and !ith the hel" of location /uotient and coefficient of localisation% a high degree of

s"atial concentrations !as obsered in !ool% sil# and synthetic fiber% !ood and

!ooden "roducts% food manufacturing% beerages and cotton te&tile industry grou"$

Mohanty 0'?491 e&amined the mar#eting structure of small scale industrial "roducts

by ta#ing a sam"le of '>4 small units of Cuttac#$ The study reealed that * "ercent

of the units sell their "roducts directly to the consumers% !hile 9 "ercent sell their

"roducts through distributie agencies$ It has been further obsered that if mar#eting

cost is ta#en into consideration% it constitutes only a small "ercentage of the total

alue of "roduction of small units !hich indicates that small units do not ta#e "ains to

deelo" mar#et for their "roducts% further% it !as found that irector 8eneral Su""lies

and is"osal and other 8oernment stores do not "urchase items from small units$

Amin 0'???1 focused on the regional s"read and structural set u" of small scale

industries in 8u,arat and e&amine the regional share of small scale industries in the

industrial sector of the state$ @urther% the author attem"t to ma#e an oerall assessment

of the "erformance of the industries among three homogenous regions of the state

during the "eriod '?()'?4(6 the study found that the s"read of small scale industrial

sector across the industrially homogenous regions is "ositiely influenced by basic

economic characteristics of the concerned region$ The "attern of regional distribution

of the SSI sector suggests the gro!th "ros"ects of SSI sector oer a "eriod of time$



2(

PROBLEM CONTEXTS INDUSTRY/ ORGANIZATION/

PERSPECTIVES/ IMPLICATIONS

The Ministry of SSI designs "olicies% "rogrammes% "ro,ects and schemes in

consultation !ith its organi-ations and arious sta#eholders and monitors their

im"lementation !ith a ie! to assisting the "romotion and gro!th of small scale

industries$ The Ministry also "erforms the function of "olicy adocacy on behalf of

the SSI sector !ith other Ministries=e"artments of the Central 8oernment and the

State and 7nion Territories$

The im"lementation of "olicies and arious "rogrammes="ro,ects=schemes for

"roiding infrastructure and su""ort serices to small enter"rises is underta#en

through its attached office% namely the Small Industry eelo"ment Organi-ation

0SIO1 and the National Small Industries Cor"oration 0NSIC1 <td$% a "ublic sector

underta#ing under the Ministry$

SMALL INDUSTRY DEVELOPMENT ORGANIZATION

(SIDO)

The Office of the eelo"ment Commissioner 0Small Scale Industries1 is also #no!n

as the Small Industry eelo"ment Organi-ation 0SIO1$ It is an a"e& body for

assisting the Ministry in formulating% coordinating% im"lementing and monitoring

"olicies and "rogrammes for the "romotion and deelo"ment of small scale industries

in the country and is headed by the eelo"ment Commissioner 0SSI1$

In addition% the SIO "roides a com"rehensie range of common facilities%

technology su""ort serices% mar#eting assistance% etc$% through its net!or# of 93



2

Small Industries Serice Institutes 0SISIs1% 24 Branch SISIs% > @ield Testing Stations

0@TS1% * .egional Testing Centres% 2 Small Entre"reneur +romotion and Training

Institutes 0SE+TI1 and ' Hand Tool esign eelo"ment and Training Centre$ The

SIO also has a net!or# of Tool .ooms% +rocess)cum)+roduct eelo"ment Centres

0++Cs1 and technology and training su""ort institutes !hich are run as autonomous

bodies registered as societies under the Societies Act$

NATIONAL SMALL INDUSTRIES CORPORATION NSIC LTD$

The National Small Industries Cor"oration <td$ !as set u" !ith a ie! to "romoting%

aiding and fostering the gro!th of small scale industries in the country !ith focus on

commercial as"ects of these functions$ NSIC continues to im"lement its arious

"rogrammes and "ro,ects throughout the country to assist the SSI units$ The

Cor"oration has been assisting the sector through the follo!ing schemes and

actiities6

• Su""ly of both indigenous and im"orted machines on easy hire)"urchase terms

Com"osite term loan scheme +rocurement% su""ly and distribution% of indigenous

and im"orted ra!) materials Mar#eting of small industries "roducts

• E&"ort of small industries "roducts and deelo"ing e&"ort)!orthiness of small

scale units

• Enlisting com"etent units and facilitating their "artici"ation in 8oernment Stores

+urchase +rogramme

• Training in seeral technical trades

• Sensiti-ing SSI units on technological u" gradation through Soft!are Technology

+ar#s and Technology Transfer Centres



2>

• Mentoring : adisory serices

Technology business incubators$ Setting u" small scale industries in other deelo"ing

countries on turn#ey basis Other areas : international co)o"eration Oer the years%

the Cor"oration has made significant contribution to the gro!th of the SSI sector in

India$ The Cor"oration has also set u" a large number of turn#ey "ro,ects in a number

of deelo"ing countries$ The Cor"oration is an ISO6 ?33')233? Com"any$

SMALL SCALE INDUSTRIES BOARD

SSI Board is the a"e& non)statutory adisory body constituted by the 8oernment of

India to render adice on all issues "ertaining 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 +arliament% Secretaries of arious

e"artments of the Central 8oernment% Heads of @inancial Institutions%

.e"resentaties of Industry Associations and Eminent E&"erts$

• The SSI Board "roides to its members a forum for interaction to facilitate co)

o"eration and inter)institutional lin#ages and to render adice to the

8oernment on arious "olicy matters% for the deelo"ment of the sector$

• The Board !as first constituted in '?(*$ Its term is for t!o years$ The Board

!as last constituted on '4th Lanuary 23'2% !ith '3' members and held its *4th

meeting on '> Lanuary% 23'9$

NATIONAL INSTITUTES FOR ENTREPRENEURSHIP

DEVELOPMENT



24

As entre"reneurshi" deelo"ment and training is one of the #ey elements for the

"romotion of small scale industries% the Ministry has established three National

Institutes% i-$ the National Institute of Small Industry E&tension Training 0NISIET1 at

Hyderabad% the National Institute of Entre"reneurshi" and Small Business

eelo"ment 0NIESB71 at NOIA and the Indian Institute of Entre"reneurshi"

0IIE1 at 8u!ahati as autonomous bodies$ These Institutes are res"onsible for

deelo"ment of training models and underta#ing of research and training for

entre"reneurshi" deelo"ment in the SSI sector$

NATIONAL COMMISSION FOR ENTERPRISES IN THE

UNORGANIKED SECTOR

The National Commission for Enter"rises in the 7norgani-ed Sector !as constituted

in Se"tember% 23'9 under the chairmanshi" of r$ Ar,un ;$ Sengu"ta% an eminent

economist$ It has three full)time Members and t!o "art)time Members and an

Adisory Board consisting of '' eminent e&"erts from different fields relating to the

unorgani-ed=informal sector$ The Commission !ill recommend measures considered

necessary for bringing about im"roement in the "roductiity of the informal sector

enter"rises% generation of large scale em"loyment o""ortunities on a sustainable basis%

"articularly in the rural areas% enhancing the com"etitieness of the sector in the

emerging global enironment% lin#age of the sector !ith institutional frame!or# in

areas such as credit% ra! material% infrastructure% technology u"gradation% mar#eting

and formulation of suitable arrangements for s#ill deelo"ment$

In accordance !ith its terms of reference% the Commission and its Adisory Board

hae held seeral rounds of deliberations on a host of issues relating to the



2?

unorgani-ed=informal sector enter"rises$ In the light of these deliberations% the

follo!ing issues hae been identified so far by the Commission for detailed

consideration and recommendations6 notion of gro!th "oles for the informal sector in

the form of clusters=hubs% !here e&ternal economies need to be "roided to s"ur

em"loyment generation and "roductiity enhancement and the feasibility of

integrating the initiaties and "rogrammes of arious Ministries in this domain s#ill

formation in the informal sector and "otential for "ublic "riate "artnershi" in

"roiding the re/uired s#ills "roision of micro finance and related serices to the

informal sector enter"rises and strengthening of the institutional frame!or# in this

area and issues concerning social security for the !or#ers in the informal sector and

instrumentalities for achieing this ob,ectie$

E+5#(+$n'

SSI Sector in India creates largest em"loyment o""ortunities for the Indian "o"ulace%

ne&t only to Agriculture$ It has been estimated that '33%333 ru"ees of inestment in

fi&ed assets in the small)scale sector generates em"loyment for four "ersons$

G$n$ra'&(n (* E+5#(+$n' ) In-%'r Gr(-5)w&%$

@ood "roducts industry has ran#ed first in generating em"loyment% "roiding

em"loyment to 3$*4 million "ersons 0'9$'1$ The ne&t t!o industry grou"s !ere

Non)metallic mineral "roducts !ith em"loyment of 3$*( million "ersons 0'2$21 and

Metal "roducts !ith 3$9> million "ersons 0'3$21$

In Chemicals : chemical "roducts% Machinery "arts e&ce"t Electrical "arts% 5ood

"roducts% Basic Metal Industries% +a"er "roducts : "rinting% Hosiery : garments%



93

.e"air serices and .ubber : "lastic "roducts% the contribution ranged from ? to

(% the total contribution by these eight industry grou"s being *?$

In a## ('$r &n-%'r&$% '$ 8(n'r&;-'&(n wa% #$%% 'an 0.

P$r -n&' $+5#(+$n'

+er unit em"loyment !as the highest 0231 in units engaged in beerages% tobacco :

tobacco "roducts mainly due to the high em"loyment "otential of this industry

"articularly in Maharashtra% Andhra +radesh% .a,asthan% Assam and Tamil Nadu$ Ne&t

came Cotton te&tile "roducts 0'>1% Non)metallic mineral "roducts 0'*$'1% Basic metal

industries 0'9$1 and Electrical machinery and "arts 0''$2$1 The lo!est figure of 2$*

!as in .e"air serices line$

+er unit em"loyment !as the highest 0'31 in metro"olitan areas and lo!est 0(1 in rural

areas$ Ho!eer% in Chemicals : chemical "roducts% Non)metallic mineral "roducts

and Basic metal industries "er unit em"loyment !as higher in rural areas as com"ared

to metro"olitan areas=urban areas$ In urban areas highest em"loyment "er unit !as in

Beerages% tobacco "roducts 09' "ersons1 follo!ed by Cotton te&tile "roducts 0'41%

Basic metal industries 0'91 and Non)metallic mineral "roducts 0'21$

L(8a'&(n)w&%$ E+5#(+$n' D&%'r&;-'&(n ) R-ra#

Non)metallic "roducts contributed 22$> to em"loyment generated in rural areas$

@ood +roducts accounted for 2'$'% 5ood +roducts and Chemicals and chemical

"roducts shared bet!een them '>$($

Ur;an



9'

As for urban areas% @ood +roducts and Metal +roducts almost e/ually shared 22$4 of

em"loyment$ Machinery "arts e&ce"t electrical% Non)metallic mineral "roducts% and

Chemicals : chemical "roducts bet!een them accounted for 2$2 of em"loyment$

In metro"olitan areas the leading industries !ere Metal "roducts% Machinery and "arts

e&ce"t electrical and +a"er "roducts : "rinting 0total share being 99$1$ State)!ise

Em"loyment istribution$

• Tamil Nadu 0'*$(1 made the ma&imum contribution to em"loyment$

• This !as follo!ed by Maharashtra 0?$>1% 7ttar +radesh 0?$(1 and 5est

Bengal 04$(1 the total share being 2>$>$ 8u,arat 0>$1% Andhra +radesh

0>$(1% ;arnata#a 0$>1 and +un,ab 0($1 together accounted for another

2>$*$ +er unit em"loyment !as high ) '>% ' and '* res"ectiely ) in

Nagaland% Si##im and adra : Nagar Haeli$ It !as '2 in Maharashtra%

Tri"ura and elhi$ Madhya +radesh had the lo!est figure of 2$ In all other

cases it !as around the aerage of $

Jear Target0la#h nos$1

Achieement0la#h nos$1

8ro!th rate

233()3 '24$3 '9*$3 9$24

233)3> '99$3 '9?$94 9$24

233>)34 '94$ '*$( ($'(

2334)3? '**$* '(2$' *$'9

233?)'3 '(3$( '3$33 *$44

23'3)'' '( '>$23 *$(3

23'')'2 '>3$' '>'$(4 2$'

23'2)'9 '>($* '>>$9 9$99



99

23'3)'' 9?%2*? 0>$'1

23'')'2 *9?* 0''$?>1

23'2)'9 *4?>? 0'3$21

23'9)'* (9?>( 0'3$21

Ma>(r E@5(r' Mar<$'%

• An ealuation study has been done by M=s A$C$ Nielsen on behalf of Ministry of

SSI$ As "er the findings and recommendations of the said study the ma,or e&"ort

mar#ets identified haing "otential to enhance SSIs e&"orts are 7S% E7 and La"an$

The "otential items of SSIs hae been categorised into three broad categories$

E@5(r' D$%'&na'&(n%

• The E&"ort estinations of SSI "roducts hae been identified for ' "roduct

grou"s$

O55(r'-n&'

The o""ortunities in the small)scale sector are enormous due to the follo!ing factors6

• <ess Ca"ital Intensie

• E&tensie +romotion : Su""ort by 8oernment

• .eseration for E&clusie Manufacture by small scale sector

• +ro,ect +rofiles

• @unding ) @inance : Subsidies

• Machinery +rocurement

• .a! Material +rocurement



9*

• Man"o!er Training

• Technical : Managerial s#ills

• Tooling : Testing su""ort

• .eseration for E&clusie +urchase by 8oernment

• E&"ort +romotion

• 8ro!th in demand in the domestic mar#et si-e due to oerall economic gro!th

INCREASING EXPORT POTENTIAL FOR INDIAN

PRODUCTS

8ro!th in .e/uirements for ancillary units due to the increase in number of

greenfield units coming u" in the large scale sector$ Small industry sector has

"erformed e&ceedingly !ell and enabled our country to achiee a !ide measure of

industrial gro!th and diersification$

By its less ca"ital intensie and high labour absor"tion nature% SSI sector has made

significant contributions to em"loyment generation and also to rural industrialisation$

This sector is ideally suited to build on the strengths of our traditional s#ills and

#no!ledge% by infusion of technologies% ca"ital and innoatie mar#eting "ractices$

This is the o""ortune time to set u" "ro,ects in the small)scale sector$ It may be said

that the outloo# is "ositie% indeed "romising% gien some safeguards$ This

e&"ectation is based on an essential feature of the Indian industry and the demand

structures$ The diersity in "roduction systems and demand structures !ill ensure

long term co)e&istence of many layers of demand for consumer "roducts =

technologies = "rocesses$ There !ill be flourishing and !ell grounded mar#ets for the

same "roduct="rocess% differentiated by /uality% alue added and so"histication$ This



9(

characteristic of the Indian economy !ill allo! com"lementary e&istence for arious

dierse ty"es of units$ The "romotional and "rotectie "olicies of the 8ot$ hae

ensured the "resence of this sector in an astonishing range of "roducts% "articularly in

consumer goods$ Ho!eer% the bugbear of the sector has been the inade/uacies in

ca"ital% technology and mar#eting$ The "rocess of liberalisation cou"led !ith

8oernment su""ort !ill therefore% attract the infusion of ,ust these things in the

sector$ Small industry sector has "erformed e&ceedingly !ell and enabled our country

to achiee a !ide measure of industrial gro!th and diersification$

By its less ca"ital intensie and high labour absorbtion nature% SSI sector has made

significant contributions to em"loyment generation and also to rural industrialisation$

This sector is ideally suited to build on the strengths of our traditional s#ills and

#no!ledge% by infusion of technologies% ca"ital and innoatie mar#eting "ractices$

So this is the o""ortune time to set u" "ro,ects in the small scale sector$ It may be said

that the outloo# is "ositie% indeed "romising% gien some safeguards$ This

e&"ectation is based on an essential feature of the Indian industry and the demand

structures$ The diersity in "roduction systems and demand structures !ill ensure

long term co)e&istence of many layers of demand for consumer "roducts =

technologies = "rocesses$ There !ill be flourishing and !ell grounded mar#ets for the

same "roduct="rocess% differentiated by /uality% alue added and so"histication$ This

characteristic of the Indian economy !ill allo! com"lementary e&istence for arious

dierse ty"es of units$ The "romotional and "rotectie "olicies of the 8ot$ hae

ensured the "resence of this sector in an astonishing range of "roducts% "articularly in

consumer goods$ Ho!eer% the bug bear of the sector has been the inade/uacies in

ca"ital% technology and mar#eting$ The "rocess of liberalisation !ill therefore% attract

the infusion of ,ust these things in the sector$



9

CHAPTER )/

OBECTIES OF THE STUDY



9>

OBECTIES OF THE STUDY

This "ro,ect is an attem"t to do a conclusie research and analysis% !hich could lead

to charting out better future "ros"ects for Small Scale Industries in India$ In order to

achiee this "rimary ob,ectie !e "ro"ose to moe ahead in t!o)fold "rocess$ In the

first ste" !e !ould analy-e the "roblems and gro!th till date% !hich !ould sere as a

medium to bring out the realities of SSI in Indian economy and in the ne&t ste" !e

!ould go about analy-ing the data collected and formulate future strategies for SSI$

In brief our research ob,ecties can be broadly defined as6

To bring out the aerage mar#et reie! to!ards SSI

To analy-e the res"onses and find out the 8ot and Indiiduals "erce"tion of

SSI$

To understand the conce"t of Entre"reneurshi"

To understand its a""licability to the small scale sector in India$

To study the crtical role of entre"reneurshi" in Small Scale Industry in India

To study the "resent status and future "ros"ects of Small Scale Industry in

India

To study the eolution of S"ecial Economic Dones in India% !ith "articular

reference to Small Scale Industry in India

SCOPE OF THE STUDY

I+5(r'an8$ (* &n-%'r&a#&=a'&(n &n In&a

Industriali-ation is the central dynamic force for most countries$ It has been a #ey

gro!th ob,ectie of IndiaGs "lanned economy% !ith heay inestments being made in



94

this sector$ <abour "roductiity is highest in manufacturing industries this has

assisted in raising national income at a faster "ace$ It is a "recondition for agricultural

deelo"ment and it induces deelo"ment in other sectors 0Ti!ary : Singh% '???1$

The im"ortance of industriali-ation in economic deelo"ment is crucial for a gro!ing

economy !ith a large "o"ulation li#e India% so "ros"erity through industriali-ation has

been a long)term strategy for the Indian goernment$ Communities% businesses% and

goernments hae debated the results of industriali-ation% a debate that has continued

to gro! unabated$ Being reliant on agriculture and haing a large "o"ulation base has

made India im"oerished% and hence industriali-ation is roughly a synonym for

economic deelo"ment as a means to con/uer "oerty and "roide em"loyment$

Indias increasing "o"ulation crossed the ' billion mar# in May 233? 0edantam%

233?1 "lacing an additional burden on the Indian enironment$ The contrast bet!een

Indias successful economic deelo"ment and ra"idly deteriorating enironments%

"articularly urban)industrial enironments% ma#es this country a test for the

sustainable ision$

IndiaGs focus on gro!th !itnessed t!o "roblems$ One is "o"ulation and the other

industrialisation$ India realised that in order to become more self)reliant and increase

economic gro!th some changes had to be made$ uring the '?43s India moed a!ay

from its "lanned mar#et% em"hasi-ing industry gro!th$ Its economy gre! at about

($( annually$ +rior to those years there !as a 9$( gro!th and recently it has been

about % although 4? gro!th is re/uired for the '3 million ne! ,obs needed each

year 07nited States)Asia Enironmental +artnershi" 7S)AE+U% 233(1$



9?

Industriali-ation enables India to utili-e its resources o"timally% diersify the

economic base% raise the liing standard of "eo"le% and attain balanced regional

deelo"ment through fiscal incenties and concessional finance for bac#!ard

regions$ At the same time industries contribute significantly to "ollution$ Small

industries hae contributed significantly in the area of urban as !ell as rural

establishments$ .aising concerns on enironmental grounds are seen not so much as a

"roblem !ith large industries% as they are more su""ortie of enironmentally

"rotectie issues% but more so in the case of small industries$ These small industries

seem to hae acute enironmental "roblems$

• The sco"e of the study !ill be limited to undersatnd% !hat does the term Small

Scale Sector means in the broader sense in India$

• To critically analy-e the @inancial Incenties aailable to the Small scale

sector in India $



*3

CHAPTER -

RESEARCH METHODOLOGY



*2

6 C(n8#-%&?$ R$%$ar8

As the ob,ectie of this research is to derie a conclusion about "roblems and

"ros"ects of SSI% the grou" !ill use the Conclusie .esearch esign for the desired

analysis$

@urther% Conclusie .esearch is of t!o ty"es6

D$%8r&5'&?$ R$%$ar8

6 Ca%-a# R$%$ar8

As the mode of research for this "ro,ect is a surey to analy-e the Indian Mar#et

rather than an e&"eriment% the grou" !ill use escri"tie research for the analysis$

NATURE OF DATA

S$8(nar a'a6) ata !hich is already aailable through arious boo#s% ,ournals %

maga-ines% internet etc$

TOOLS AND TECHNIES

Analysis of data has been done !ith hel" of arious statistical tools li#e the tables and

gra"hs$

RESEARCH ARIABLES AND MEASUREMENT

The different ariables for research to be underta#en is listed belo!6

• Bio)tech Industry

http://www.smallindustryindia.com/schemes/#Biotech

http://www.smallindustryindia.com/schemes/#Biotech



*9

• Common Effluent Treatment +lant

• Corrugated Bo&es

• rugs and +harmaceuticals

• yes and Intermediates

• Industry based on Medicinal and Aromatic "lants

+lastic Moulded= E&truded +roducts and +arts= Com"onents

• .ubber +rocessing including Cycle= .ic#sha! Tyres

• @ood +rocessing 0including Ice Cream manufacturing1

• +oultry Hatchery : Cattle @eed Industry

• imensional Stone Industry 0e&cluding Ruarrying and Mining1

• 8lass and Ceramic Items including Tiles

• <eather and <eather +roducts including @oot!ear and 8arments

• Electronic e/ui"ment i- test% measuring and assembly= manufacturing% Industrial

"rocess control Analytical% Medical% Electronic Consumer : Communication

e/ui"ment etc$

• @ans : Motors Industry

• 8eneral <ight Serice08<S1 <am"s

• Information Technology 0Hard!are1

• Mineral @illed Sheathed Heating Elements

• Transformer= Electrical Stam"ings= <aminations =Coils=Cho#es including Solenoid

coils 5ires : Cable Industry Auto +arts and Com"onents Bicycle +arts

Combustion eices= A""liances @orging : Hand Tools

http://www.smallindustryindia.com/schemes/#TreatmentPlant

http://www.smallindustryindia.com/schemes/#CorrugatedBoxes

http://www.smallindustryindia.com/schemes/#DrugsandPharma

http://www.smallindustryindia.com/schemes/#DyesandInter

http://www.smallindustryindia.com/schemes/#AromaticPlants

http://www.smallindustryindia.com/schemes/#compositematerial

http://www.smallindustryindia.com/schemes/#rickshawtyres

http://www.smallindustryindia.com/schemes/#foodprocessing

http://www.smallindustryindia.com/schemes/#poultry

http://www.smallindustryindia.com/schemes/#dimensionalstone

http://www.smallindustryindia.com/schemes/#glassandceramicitems

http://www.smallindustryindia.com/schemes/#leatherproducts

http://www.smallindustryindia.com/schemes/#fansandmotors

http://www.smallindustryindia.com/schemes/#light

http://www.smallindustryindia.com/schemes/#IThr

http://www.smallindustryindia.com/schemes/#mineralfilled

http://www.smallindustryindia.com/schemes/#wiresandcables

http://www.smallindustryindia.com/schemes/#autoparts

http://www.smallindustryindia.com/schemes/#Bicycleparts

http://www.smallindustryindia.com/schemes/#handtools

http://www.smallindustryindia.com/schemes/#forging

http://www.smallindustryindia.com/schemes/#TreatmentPlant

http://www.smallindustryindia.com/schemes/#CorrugatedBoxes

http://www.smallindustryindia.com/schemes/#DrugsandPharma

http://www.smallindustryindia.com/schemes/#DyesandInter

http://www.smallindustryindia.com/schemes/#AromaticPlants

http://www.smallindustryindia.com/schemes/#compositematerial

http://www.smallindustryindia.com/schemes/#rickshawtyres

http://www.smallindustryindia.com/schemes/#foodprocessing

http://www.smallindustryindia.com/schemes/#poultry

http://www.smallindustryindia.com/schemes/#dimensionalstone

http://www.smallindustryindia.com/schemes/#glassandceramicitems

http://www.smallindustryindia.com/schemes/#leatherproducts

http://www.smallindustryindia.com/schemes/#fansandmotors

http://www.smallindustryindia.com/schemes/#light

http://www.smallindustryindia.com/schemes/#IThr

http://www.smallindustryindia.com/schemes/#mineralfilled

http://www.smallindustryindia.com/schemes/#wiresandcables

http://www.smallindustryindia.com/schemes/#autoparts

http://www.smallindustryindia.com/schemes/#Bicycleparts

http://www.smallindustryindia.com/schemes/#handtools

http://www.smallindustryindia.com/schemes/#forging



**

• @oundries Steel and Cast Iron 8eneral Engineering 5or#s 8old +lating and

Le!ellery <oc#s Steel @urniture

• Toys

Non)@errous @oundry

• S"ort 8oods

• Cosmetics

.eadymade 8arments

• 5ooden @urniture

• Mineral 5ater Bottle

• +aints% arnishes% Al#yds and Al#yd "roducts

• Agricultural Im"lements and +ost Harest E/ui"ment

• Beneficiation of 8ra"hite and +hos"hate

• ;hadi and illage Industries

• Coir and Coir +roducts

• Steel .e)rolling and =or +encil Ingot ma#ing Industries

• Dinc Sul"hate

• 5elding Electrodes

• Se!ing Machine Industry

http://www.smallindustryindia.com/schemes/#castiron

http://www.smallindustryindia.com/schemes/#genworks

http://www.smallindustryindia.com/schemes/#goldjewellery


http://www.smallindustryindia.com/schemes/#locks

http://www.smallindustryindia.com/schemes/#steel


http://www.smallindustryindia.com/schemes/#toys

http://www.smallindustryindia.com/schemes/#nonferrousfoundary

http://www.smallindustryindia.com/schemes/#sportsgoods

http://www.smallindustryindia.com/schemes/#cosmetics

http://www.smallindustryindia.com/schemes/#garments

http://www.smallindustryindia.com/schemes/#woodenfurnitures

http://www.smallindustryindia.com/schemes/#mineralwater

http://www.smallindustryindia.com/schemes/#paints

http://www.smallindustryindia.com/schemes/#postequipment

http://www.smallindustryindia.com/schemes/#phosphate

http://www.smallindustryindia.com/schemes/#Khadi

http://www.smallindustryindia.com/schemes/#coir

http://www.smallindustryindia.com/schemes/#steelmaking

http://www.smallindustryindia.com/schemes/#zincsulphate

http://www.smallindustryindia.com/schemes/#weldingElectrodes

http://www.smallindustryindia.com/schemes/#sewing

http://www.smallindustryindia.com/schemes/#castiron

http://www.smallindustryindia.com/schemes/#genworks



http://www.smallindustryindia.com/schemes/#locks


http://www.smallindustryindia.com/schemes/#toys

http://www.smallindustryindia.com/schemes/#nonferrousfoundary

http://www.smallindustryindia.com/schemes/#sportsgoods

http://www.smallindustryindia.com/schemes/#cosmetics

http://www.smallindustryindia.com/schemes/#garments

http://www.smallindustryindia.com/schemes/#woodenfurnitures

http://www.smallindustryindia.com/schemes/#mineralwater

http://www.smallindustryindia.com/schemes/#paints

http://www.smallindustryindia.com/schemes/#postequipment

http://www.smallindustryindia.com/schemes/#phosphate

http://www.smallindustryindia.com/schemes/#Khadi

http://www.smallindustryindia.com/schemes/#coir

http://www.smallindustryindia.com/schemes/#steelmaking

http://www.smallindustryindia.com/schemes/#zincsulphate

http://www.smallindustryindia.com/schemes/#weldingElectrodes

http://www.smallindustryindia.com/schemes/#sewing



*(

CHAPTER-!

DATA ANALYSIS



*

DATA PRESENTATIONS AND FINDINGS

DATA COLLECTION

• The "resent study contem"lated an e&"loratory research$ Secondary data has

been used !hich is collected through articles% re"orts% ,ournals% maga-ines%

ne!s"a"ers re"orts "re"ared by research scholars% uniersities and internet$

DATA ANALYSIS.

• Analysis of data has been done !ith hel" of arious statistical tools$ There are

gra"h% tables and the "ercentages to get the current re"ort$

LIMITATION OF THE RESEARCH

• As far as limitation are concerned "resent research !or# has been

com"leted in the face of follo!ing ma,or constraints$

The date used in my research study is secondary data$

• <atest data and information about the "roblem and "ros"ects of

the small sca le indus tr ie s in Ind ia$ T he data i s aa il ab le o f

almost a decade$

PRESENTATION OF DATA

Statement sho!ing All India cumulatie number of SSI 7nits 0SIO1 granted

+ermanent .egistration by the State=7T irectorates of Industries u"to the @inancial

Jear



*>

+osition as on632$3>$23'3

Sl

Name of Cumulatie Number of SSI 7nits granted +ermanent

State=7ni

233 233 233?)'3 23'3 23'' 23'2)'9

3 ANH.

''2 ''> '2'39? '2*? '249 '9(>94

3 ASSAM '?2 23> 2'?(* 29'9 2*'3 2((39

3 BIHA. '3' '34 ''*2? ''?' '29? + '93?39

3 87LA.A '2? '*' '(9*?> '*> '>*4 '4(334

3 HA.JAN ?** ?4* 929 (992 (*9> 442>'

3 HIMACH

'*3 '*( '(292 '(?* '3 '>(2

3 LAMM7 2(' 29 24*>' 2?94 93 + 923*3

3 ;A.NAT ''( '2* '*93>9 '(3 '(?? '?'4?

3 ;E.A<A '99 '*4 '*4* '4*' 2329 2'*3'?

' MAHJ

299 2*9 2(4*? 24> 2>>4 + 24?3*2

' MAHA. ?4' ''' '294( '9(3 '*9* '('>*?

' MANI+7 *?2 ('( (9'* (*9? ((44 (?''

' ME8HA 23' 2' 2929 2('* 2>'' 244

' NA8A< >*' >(> >42 4'9 '3(? ''23

' O.ISSA ' '>' '>?9' '4>9 '?(' 23*'

' +7NLAB '*( '*> '*?*3( '('' '(2> ''(?4

' .ALAST >'* >** >>3*> 4322 49( 44*4

' TAMI< 232 224 2(>3>? 24*? 9'94 9923''

' T.I+7. (49 (?3 (?* 33' 3(4 *3

2 7TTA. 932 929 9*'>44 9'3 9423 + *323

2 5EST '*( '*> '*?'*4 '(39 '('9 '334>

2 SI;;IM 2>( 2? 93( 9'2 993 + 9*?2 ANAM

'39 '3> ''' ''(' ''43 '2*4

2 A.7NA

> ?2 ?*( ?(? ?>' '32>

2 CHANI 244 2?( 2?( 933> 93*2 92'4

2 A.A *3? *(* '4 4>3 ?>4 '39(

2 E<HI 2(' 2(2 2(939 2(93 2(9* 243>

2 8OA ('' (2> (*44 (>' (?2' 29

2 <A;SHA *> (' (4 9 >2 >

9 MIDO.A 93' 9(' 9>32 *324 **'9 *4



*4

9 +ONIC *23 *2( **4* *>22 *4>9 ('((

9 AMAN ?9 ?23 ''9( '*(( '(3> '(?*

A<<)INIA 23' 2'( 22'2( 29>4 2(39 2>

NOTE: P ) +roisional% since figures for some of the /uarters=districts hae yet not

been receied : 0+,1 ) +ro,ected% since figures for the /uarters ending 9'$39$23'3

hae yet not been receied from the State=7T EM+<OJMENT

SSIs IN INIA

Estimated No$ of 7nits 9$(> Million

Em"loyment '?$? Million

Share in Industrial alue Added 9?

Share in Total E&"orts

irect

Oerall

*(

9*

Total Number of Items +roduced Oer 4333

Number of .esered Items >(

(Figures for 2011-2012)

T.ENS IN 8.O5TH SSI : IN7ST.IA< SECTO. 0in 1

Jear SSI Sector Industrial Sector

233()3 9$' 3$

233)3> ($ 2$9

233>)34 >$' $3

2334)3? '3$' ?$*

233?)'3 ''$* '2$'

23'3)'' ''$9 >$'

23'')'2 4$*9 ($4

23'2)'9 >$> *$3

23'9)'* 4$' $(

TRENDS IN GROWTH OF EMPLOYMENT INSSI J INDUSTRIAL SECTOR &n

+eriod 8+ 8ro!th "er annum

Increase in ,obs "er annum

Organised Sector

including8oernment

SSI sector

'?43)'??? ($> '$(? $>

2333)233 ($> 3$4 9$(

'?43 233



*?

Organised Sector (9$ la#h ne! ,obs

SSI Sector 43$33 la#h ne! ,obs



(3

GROWTH IN INDUSTRIAL SCTOR

SSIs IN INIAEstimated No$ of 7nits 9$(> Million

Em"loyment '?$? Million

Share in Industrial alue Added 9?

Share in Total E&"orts

irect

Oerall

*(

9*

Total Number of Items +roduced Oer 4333

Number of .esered Items >(

(Figures for 2013-2014)

T.ENS IN 8.O5TH SSI : IN7ST.IA< SECTO. 0in 1

Jear SSI Sector Industrial Sector

233()3 9$' 3$

233)3> ($ 2$9

233>)34 >$' $3

2334)3? '3$' ?$*

233?)'3 ''$* '2$'

23'3)'' ''$9 >$'

23'')'2 4$*9 ($4

23'2)'9 >$> *$3

23'9)'* 4$' $(

T.ENS IN 8.O5TH O@ EM+<OJMENT INSSI : IN7ST.IA< SECTO. 0in 1

+eriod 8+ 8ro!th "er annum

Increase in ,obs "er annum

Organised Sectorincluding

SSI sector



('

8oernment

'?43)'??? ($> '$(? $>

2333)233 ($> 3$4 9$(

'?43 233

Organised Sector (9$ la#h ne! ,obs

SSI Sector 43$33 la#h ne! ,obs

EXPORTS1GROWTH OF SSI EXPORTS• C((5$ra'&?$ S'a'$+$n' (* E@5(r' P$r*(r+an8$

Jear Total e&"orts0.s$ Crores1

E&"orts fromSSI sector 0.s$ Crores1

+ercentage share

'?>')>2 >' Negligible )

'?>)>> 3 Negligible )

'?4')42 '34 '(( ?$

'?4)4> ('*2 > '*$?

2333)3' >43? 23>' 2$(

233')32 '2(> 9** 2?$3

2332)39 **3*3 '9449 9'$(

2339)3* (944 '>>4( 99$'

233*)3( ?(*> 2(93> 9$*

233()3 42>* 2?34 9($'

233)3> '39(9 9*>3 9*$2

233>)34 ''44'> 9?2*? 99$*

2334)3? '224$33 ****2$'4 9($'?

233?)'3 '*'39$(9 *4?>?$29 9*$(?

23'3)'' '(?('$33 (*233$*> 99$?>23'')'2 232(3?$> ?>?$( 9*$*>

23'2)'9 23>>*($( >'2*9$?? 9*$2?

23'9)'* 2(2>4?$?> 43'2$(2 9*$39

S-;>$8' '( 8an"$ ;a%$ (n *&na# *&"-r$% $+$r"&n" *r(+ E@5(r'

Pr(+('&(n C(-n8&#%.

E ) E%'&+a'$



(2

• S(-r8$%: Total E&"orts ) Economic Sureys ) arious Issues

• SSI E&"orts O=o C0SSI1

• SIC;NESS

• Sic#ness in SSI Sector

Jear Total sic# units +otentially iable

No$ V Amount O=S No$ V Amount O=S

0.s$ Crores1 0.s$ Crores1

March 233 2%29%'> 9%**9 2'%*? >??

March 233> 2%(%*(2 9%43 '%(43 4

March 2334 2%4%4'( 9%(*> '(%(9? (?>

March 233? 2%2%9> 9%>22 '%*2* 9

March 23'3 2%9(%392 9%3? '%223 *>?

March 23'' 2%2'%(9 9%4(> '4%4 *(

March 23'2 9%3%22' *%9'9 '4%?2 9>>

March 23'9 9%3*%29( *%34 '*%9>9 9?

Source6 .BI

* These units include village industries as well.

STATUS CLASSIFICATION OF SSI



(9

According to Sam"le Surey of 2339)3* of registered small scale industries 0for the

base year 233')321% the status classification of SSI units is gien belo!$ The status has

been com"ared !ith the findings of Second All India Census 0base year '?4>)441$

SAMPLE

SUREY

SECOND

CENSUS

2339)3* '?4>)44

'1

<ocational Status

.ural Areas *2$23 *2$23

7rban Areas *4$(3 *4$33

Metro"olitan Areas ?$93 ?$?3

Bac#!ard Areas *4$93 2$23

21

Organisational Status

+ro"rietory 7nits 43$*4 >4$33

+artnershi" 7nits '$4* '$39

<imited Com"anies 2$3' 9$>4

91

istribution By Categories of Industries

Small scale Industries ?$2* 4>$24

Ancillary Industries 3$(2 '$(>

Small Serice Establishments 9$2* ''$'(

*1

Actiity Status

Engaged in manufacturing actiity only (3$'? ('$3'

Engaged in "rocessing actiity only '($29 '3$9>

(1

O!nershi" Status

By scheduled caste entre"reneur $4* *$(>

By scheduled tribe entre"reneur '$>3 '$*'

By !omen entre"reneur >$? ($'(

1

Im"ortant +arameters



(*

+er unit fi&ed inestment 0boo# alue10.s$ la#hs1

9$34 '$3

+er unit fi&ed inestment in +:M

0original alue1 0.s$ la#hs1

*$3 3$?9

+er unit !or#ing ca"ital 0.s$ la#hs1 $?4 '$29

+er unit "roduction 0.s$ in la#hs1 93$?9 >$94

+er unit em"loyment 0numbers1 4$(* $2?

Ca"acity utilisation 0"ercentage1 >?$> (3$

>1

Im"ortant .atio

+roduction=inestments in fi&ed assets

0.s$ la#hs1

'3$33 *$2

Net alue added=Inestment in fi&edassets 0.s$ la#hs1

$>( '$'3

Em"loyment=Inestment in fi&ed assets0.s$ la#hs1

2$>9 9$?*

5ages "aid=Em"loyemnt e&cluding self em"loyment 0.s$ 3331

'2$(3 4$33



((

DATA ANALYSIS

Pr(;#$+% &n +($rn&=a'&(n (* SSI%

The e&istence of a huge number of small industrial units manufacturing a ariety of

"roducts ma#es technological moderni-ation a difficult tas# in India$ Small industrial

units in India are mostly managed by entre"reneurs !ho are caught u" in the day)to)

day matters of "roduction and management of their units and find it difficult to #ee"

themseles abreast of the arious technological deelo"ments$ In addition% the 8oI

has "roided "rotection to the SSIs from com"etition from local large enter"rises and

im"orts through many "olicy measures$ Therefore there is no threat to their mar#ets$

The goernment also gies ca"ital subsidies% e&cise concessions and bac#!ard

technology subsidies to the SSIs$ All of these reduce any incentie for the small

industrial units to constantly u"grade their technology or for technological innoation$

In a business outloo# surey conducted by the Confederation of Indian Industry 0CII1

in 233(% 2 "ercent of those sureryed highlighted the lac# of moderni-ation$ The

same surey found an encouraging feature that there is a increasing a!areness of

/uality control among the SSIs$ *? "ercent of the those res"ondents in the surey had

initiated ste"s for obtaining ISO ?333 certification





(

T&+$ S$r&$% a'a *(r SSI% &n In&a

Jear No$ of

units

0millions1

@i&ed

inestmen

t

+roductio

n

Em"loymen

t

E&"ort

0at current

"rices1

0.s$

billion1

0at current

"rices1

0.s$ Bn$1

Nos$ in

million

0.s$

billion

1

'?>()> 3$*' 22$? >2$3 9$?> 9$?9

'?>)>> 3$*?4 2$?> ?2$3 *$3* ($*'

'?>>)>4 3$(* 92$3* ''3$3 *$(? ($92

'?>4)>? 3$(?2 9($(9 '2*$3 *$?4 >$

'?>?)43 3$> 9?$(? '*9$3 ($*3 4$*('?43)4' 3$ >9* **$9' '(>$3 $94 '3$?

'?4')42 3$43( (($*3 2'$9( $>3 '2$2

'?42)49 3$4>* (4$(3 243$ >$'3 '$*9

'?49)4* 3$?2 2$43 92$3 >$(3 23$>'

'?4*)4( '$3(? 4$33 9(3$3 >$?3 23$*(

'?4()4 '$'(( >9$3 *'$2 4$*2 2'$*

'?4)4> '$2* 49$43 (3($2 ?$33 2($*'

'?4>)44 '$9(9 ?($4( '2$24 ?$3 2>$?

'?44)4? '$*2 '34$4' >22$( '3$'* 9$*9

'?4?)?3 '$(49 '2$'3 4>9$3 '3$>3 *9$>2

'???)33 '$>'2 '(2$>? '3*$3 ''$3 (*$4?

2333)3' '$429 N$A$ '929$2 ''$? >$2(

233')32 '$?*4 N$A$ '((9$* '2$(9 ?$*

2332)39 2$342 N$A$ '>4$?? '2$?4 '94$49

2339)3* 2$2* N$A 23?9$3 '9$*3 '>>$4*

233*)3( 2$944 9($9> 2*'$*4 '9$?94 2(9$3>

233()3 2$(>' *3$>?? 2?44$4 '*$( 2?3$4

233)3> 2$(4 *?$23 92$( '($2' 9*$>

233>)34 2$439 (*$?4 *''4$(4 '$3 9?2$*4

2334)3? 2$?** 3$(*? *2$*' '$>2 ***$*2

233?)'3 9$34 4$'3 (23$( '>$'(4 *4?$>?

23'3)'' 9$2'2 >2$99 (>24$4> '>$4( (*2$33

23'')'2 9$9'2 >?$>39 9?3$2* '4$(* ?>$?>23'2)'9 9$**2 4*$92? ?39$' '?$229 >'2$**

23'9)'* 9$(>2 ?3$*(3 >*23$2' '?$?( 43$'2

S(-r8$: eelo"ment Commissioner 0SSI1% Ministry of Small Scale Industries%

8oernment of India

DISCUSSION AND ANALYSIS



(>

INTRODUCTION TO SMALL SCALE

SECTORMEANING OF SMALL-SCALE SECTOR"

In the official industrial "olicy formulation% a small industry is defined as a unit

haing inestment u" to .s$' crore in "lant and machinery$ In 23'9)'* inestment

limit has been raised from .s$'crore to .s$ ( crore in res"ect of ? items resered for

manufacture in small scale sector$ Small scale Sector are mainly located in urban

centres as se"arate establishments and "roduce goods !ith "artially or !holly

mechani-ed e/ui"ment em"loying hired labor$ Small Sector o"erate as full time

occu"ation and meet the demand of large area$ It de"ends on the conditions of

e&"anded mar#et and the nature of business here is "ermanent$

NEED OF SMALL)SCALE SECTOR:

The need for the small)scale Sector has ac/uired more releance today on account of

the follo!ing grounds6

• 8ro!ing "o"ulation "ressures in the rural areas

• .a"id e&"ansion of the labour forces% es"ecially among the marginal farmers

and landless agricultural labours

• Inade/uate o""ortunities for non)agricultural !or#

• <imitation of the organi-ed sector in absorbing the labour force

• E&istence of considerable under)em"loyment in the economy

• To aoid the "roblems created by urbani-ation

• To ensure self)reliance$



(4



(?

IMPORTANCE OF SMALL SECTOR:

The "romotion of small Sector has been regarded as an im"ortant element of the

deelo"ment strategy underlying our fie year "lans$ The rationale behind such an

a""roach is that small Sector "roide substantial sco"e for increasing em"loyment as

they are labour)intensie% and they re/uire com"aratiely less ca"ital$ These sector

hae a s"ecial "lace in the economic deelo"ment$

The main roles "layed by this sector in the Indian economy are as under6

• Encourage the "hiloso"hy of self)sufficiency% self)reliance and coordination

• .emoal of economic bac#!ardness of the rural and under deelo"ed

segments by deelo"ing industrial actiities in the rural India

• Create greater em"loyment o""ortunities and raise leels of out"ut% income

and standard of liing

• Contribution of these Sector in the "romotion of e&"orts

• .eduction in regional imbalances

• Integrate large)scale industrial sector !ith agriculture and allied sectors

leading to harmonious gro!th of the total industrial sector

• Creation of effectie demand

• Meet substantial "art of the economys re/uirement of consumer goods and

"roducer goods

• @acilitate the deelo"ment of economically !ea#er sections i$e$ "oerty)

stric#en "o"ulation



3

• 7"grade not only the s#ill of traditional artisans but also induce the

unem"loyed youths to underta#e entre"reneurshi" !ith s"ecial em"hasis on

the !omen

• Chec# the migration of rural mass from the illages to the urban

conglomerations

• Entail e/uitable distribution of national income

• @acilitate mobili-ation of resources% ca"ital and s#ills and their o"timum

utili-ation

• E&ercise a stabili-ing influence on the agaries and uncertainties of rural

economy

• Ensure a harmoniously balanced% integrated and egalitarian socio)economic

order in the country$

PROBLEMS OF SMALL SECTOR IN INDIA:

The gro!th and deelo"ment of small sector units has been constrained by seeral

factors$ 7ndoubtedly% the smooth deelo"ment of cottage and small Sector is a

"rere/uisite for economic gro!th of our country$ But they can "lay their ital role

only under their sound conditions$

The ma,or "roblems faced by these Sector in India are6

I. FINANCIAL PROBLEMS

@inance is as crucial to an enter"rise as is blood to the human body$ The re/uirement

of finance is ineitable for setting u" a ne! enter"rise almost eery!here in the

!orld$ Easy aailability of credit both in terms of need and cost is the "rere/uisite of

all enter"rises$ In India des"ite of the goernment haing ta#en seeral measures to



'

e&"and aailability of credit to small enter"rises through commercial ban#s for

!or#ing ca"ital and through term lending institutions 0SIBI% S@C1% the "roblems of

SSIs are far oer$

The sector has been facing the follo!ing ma,or "roblems in financial area6

a1 <ong term ca"ital

b1 5or#ing ca"ital

c1 .ecoery

d1 Ta&ation

e1 Inade/uate finance

SSIs cannot resort to ca"ital mar#et% nor float C+s or ta" 8.=Euro)route% they hae

"oor ca"ital base and are com"elled to sell their "roducts and serices on credit basis

to their clients !hich in turn im"airs their resource aailability$

II. ADMINISTRATIE PROBLEMS

In this enironment of com"etitieness% it is essential that all the resources are "ut to

o"timal use$ In this conte&t% the Human .esources are assuming im"ortance as

o"timal usage of other resources !ould largely de"end on them$ SSIs hae

e&"erience both /uantitatie and /ualitatie s#ill shortages$ Most of the small

enter"rises in India are one man sho!Q of the human resources$ Also the industry

associations !ill hae to !or# in close collaboration and liaison !ith the ocational

training institutions to ensure that ,ob)oriented training s#ills are im"arted to the

youth not only to ensure aailability of right ty"e of s#ills but also from the "oint of

ie! of the em"loyability of trained man"o!er for the ne! and moderni-ing SSIs$

The follo!ing are the ma,or "roblems in administratie area6



2

• @aulty "lanning$

• +oor "ro,ect im"lementation$

• +oor management$

• <abor "roblems$

• Ca"acity utili-ation$

• <ac# of ertical and hori-ontal integration$

• Inade/uate training s#ills$

• <ac# of strategies$

• Infrastructural "roblems 0location% "o!er% !ater% communication1$

• <ac# of scientific and industrial research$

• Bureaucratic red ta"e and regulations$

III. MAR!ETING PROBLEMS

As regards mar#eting% this stands out to be the cru& for the ultimate success of an

enter"rise$ 8oods "roduced must be sold because the small entre"reneur can hardly

afford inentory build)u"$ In India% it has been noted that small enter"rises su""lying

manufactured "roducts in the o"en mar#et as !ell as to large scale units as ancillaries

continue to remain at the receiing end due to irregular "ayments$ This seriously

affects the "roduction cycle and is one of the main reasons for closure of many small

units$ SSIs are facing the follo!ing mar#eting "roblems6

• <ac# of #no!ledge of mar#ets$

• Com"etition !ith medium and large si-e Sector$



9

• Branding "roblems$

• <ac# of after sales serices$

• istribution "roblems$

• Adertising and sales "romotion "roblems$

• +oor bargaining "o!er$

• 7nfamiliarity !ith e&"ort actiities$

I. PRODUCTION PROBLEMS

Technology and moderni-ation of the industry "articularly of the small sector is

going to "lay a ery im"ortant role$ So far as the small sector is concerned the thrust

of technology "olicy has been on indigeni-ation and im"roed technologies through

indigenous effort till fe! years ago$ Coming to Indian small scale sector% the thrust of

technology "olicy has been on indigeni-ation and deelo"ment of im"roed

technologies through indigenous . : centers$

The different "roblems faced in "roduction area are6

• <ac# of ra! material$

• <o! ca"acity utili-ation$

• +oor /uality$

• Inade/uate utility serices$

• Technological "roblems$

• Scale of "roduction$

• <ac# of standardi-ation$



*

• High cost of "roduction

The ne! "olicy regime% !ith a irtual Po"en door "olicy to!ards foreign inestment

and technology in most areas of industry and infrastructure% is li#ely to intensify and

accelerate the "rocess of technological "olari-ation bet!een the large and small)scale

sectors$

OERIEW OF SMALL)SCALE SECTOR IN INDIA

The small scale Sector has ac/uired "re)eminent "osition in the economic structure

of the country$ The contribution of the sector both to!ards the economic

adancement=deelo"ment and remoal of economic dis"arities among across

sections of the society has been tremendous$

Since inde"endence% a series of si& Industrial +olicy .esolutions aimed at "romoting

industrial gro!th and determining a "attern of state interention and assistance hae

been announced by the Central 8oernment$ 5hile s"elling out the frame!or# of the

basic and strategic Sector% the Industrial +olicy .esolution% '?*4% em"hasi-ed that the

cottage and small scale Sector to be "articularly suited for better utili-ation of local

resources and achieement of local self)sufficiencyQ in res"ect of certain ty"es of

industrial goods$

The Industrial +olicy measures announced in 2333 laid s"ecial thrust on "romotion

and strengthening of small% tiny and illage Sector$ Besides effecting changes in

inestment limits% e/uity "artici"ation% etc$% a ne! scheme of Integrated

Infrastructure eelo"ment for SSIs !ith the "artici"ation of State 8oernments and



(

@inancial Institutions !as initiated and a "ro)actie role for Non)8oernment

Organi-ation 0N8O1 sector !as mooted$

The definitional criteria of SSI are closely lin#ed to the /uestion of o!nershi" since

SSI units cannot either be controlled or o!ned or be a subsidiary of any other

industrial underta#ing$ This suggest that in the case of "ro"rietary="artnershi" firms%

the combined inestment of all the units set u" by the same "ro"rietor="artners

should not e&ceed the total inestment limit fi&ed for an SSI unit$ The e/uity

inestment by other com"anies should not e&ceed 2* "ercent of the total e/uity$ The

ob,ecties of such changes in classification are aimed at6

• @acilitating and boosting the gro!th of SSIs in "riate sector

• +romoting SSIs !ithin the frame!or# of the social and economic "olicies of

the country

• Encouraging technology u" gradation among e&isting units

• Hel"ing technically /ualified entre"reneurs to set u" ne! units !ith adanced

technology

• Im"roing "roduct standards

• Creating o""ortunities for in)house .:

• +roiding thrusts to e&"orts$

NEW POLICY FOR SMALL SECTOR, 6444: MAOR THRUST

AREAS



The future gro!th of SSIs under a liberali-ed regime is constrained by a number of

factors% among !hich the more im"ortant are as follo!s6

a1 Change in consumer "reference

b1 Outmoded technology

c1 7neconomic sales of o"eration

d1 <ac# of organi-ation

e1 Total disregard of enironment standards

f1 High incidence of sic#ness

In a "artial res"onse to this situation% the goernment announced on August % 2333%

a ,oint "ac#age of "olicy measures for small% tiny% handloom% handicraft and illage

Sector$

Major Features Objectives

'$ Em"hasis to shift from subsidies=chea" credit to

ade/uate credit$ To meet the emergingdemand for credit 2$ E/uity "artici"ation by other underta#ingsdomestic=foreign u" to 2* "ercent

9$ Introduction of factoring serices through ban#s

To strengthen small industrymar#eting

*$ Mar#eting of mass consum"tion goods under common brand name

($ Industry associations to be inoled in settingu" Sub)contracting E&changes 0SCWs1

$ Technology eelo"ment Cell in SmallIndustry eelo"ment Organi-ations 0SIO1

To u"grade technology and

"romote

>$ Industry association to establish /uality

counselling and common testing facilities 4$ Technology Information Centers and TBSE

?$ .eoriented moderni-ation and technology u"gradation "rogrammes)cluster)based a""roach

ROLE OF SMALL SCALE SECTOR IN THE

ECONOMIC DEELOPMENT OF INDIA



>

Needless to comment that the cottage and small scale Sector "lay a significant role in

the gro!th of Indian economy$ es"ite the im"ortance and deelo"ment of large

scale industry% SSIs hae an influential stature of their o!n% their gro!ing "resent

"osition in the economy !ith the long strides during the arious "lans "eriod and

hold out a commitment of bright "ros"ects$ These Sector economically s"ea#ing%

com"romise !ith the aailable countrys resource endo!ments$

uring 23'9)'*% the aerage annual gro!th in the number of units !as around *$'

"ercent and in em"loyment *$9 "ercent annually$ @urther% the annual aerage gro!th

in "roduction% at current and constant "rices% !as '2$* "ercent and 4$' "ercent

res"ectiely$ Thus% there has been a significant increase in contribution of this sector

in the economic deelo"ment of the country$

SSI sector should be encouraged to gro! the natural !ay in the ne! economic

enironment$ Artificial barriers and "rotection may not hel" in the long run$

Innoatieness and efficiency must be re!arded in order to enable SSIs to emerge

com"etitie$

The role of SSIs can be understood in terms of the follo!ing arguments6

I. EMPLOYMENT GENERATION



?

233?)'3 23'3)'' 23'')'2 23'2)'9 23'9)'*3

23333

*3333

3333

43333

'33333

'23333

?%*

?%>?> >'%2**

4%3'9

?>%**

EW+O.T 0.s$ Crore1

One of the main arguments "ut for!ard in su""ort of the gro!th of cottage and small

scale Sector in the country is that the contribution of these Sector in the field of

foreign e&change has increased abnormally$ The bul# of e&"orts of small scale Sector

consist of such non)traditional goods li#e ready)made garments% s"orts goods%

finished leather% leather "roducts% !oolen garments% "rocessed foods% chemicals and

engineering goods$ In the year '???)2333% the contribution of SSIs in e&"orts !as

!orth .s$ ?* cores% than in the year 233?)'3% it increased to .s$ ?%>?> crores$ By

the end of 23'2)'9% the total contribution of SSI sector in the total e&"orts !as !orth

.s$ ?>%** crores$ Thus% small scale sector "lays a ery im"ortant role in the

"romotion of countries e&"orts$ The share of SSIs in total e&"orts is illustrated in the

follo!ing gra"h6

III. REMOAL OF REGIONAL DISPARITY

Another significant role of this sector is that it remoes the burning "roblem of

regional dis"arity and "romotes the !ider sco"e of balanced regional deelo"ment in



>3

the country on account of decentrali-ation of Sector !hich is not goerned by the

factors of locali-ation as !e see in case of large scale Sector$ A great bottlenec# in

our industrial setu" has been that the regional dis"ersal of Sector is uneen because

the large and medium scale Sector can be deelo"ed only in a s"ecial geogra"hical

-oning factor !hich leads to dis"ro"ortionate gro!th by concentrating in a "articular

-one$ The deelo"ment of small Sector tends to sole this "roblem of uneen

distribution$

I. BOOSTING CAPITAL FORMATION

The establishment of these Sector is conducie for ca"ital formation of the country

on the ground of s"reading of Sector oer the countryside !hich could encourage the

habits of thrifts and inestment in the rural areas$ These Sector hae a distinct

adantage as far as the mobili-ation of ca"ital and entre"reneurial s#ill is concerned$

CHALLENGES FOR THE SSI SECTOR

The gro!th and deelo"ment of small scale sector units has been constrained by

seeral factors including technological obsolescence% inade/uate and irregular su""ly

of ra! materials% lac# of organi-ed mar#eting channels% im"erfect #no!ledge of

mar#et conditions% unorgani-ed nature of o"erations% inade/uate aailability of credit%

constraints of infrastructural facilities including "o!er and deficient managerial and

technical s#ills$ There has been lac# of effectie co)o"eration among the arious

su""ort organi-ation set u" oer the "eriod for the "romotion and deelo"ment of

these small Sector$ Ruality consciousness has not been generated to the desired leel$



>'

A ma,or challenge facing the sector today is the com"ulsion to become self)

su""ortie !ith the "hase dismantling of "rotectie barriers$ So far% Indian SMEs

hae suried due to the "rotected enironment in the form of "roduct reseration%

mar#et reseration% "rice "reference% "riority sector lending% fiscal

e&em"tions=concession etc$ 5ith the emergence of 5TO and its conditionality !hich

considers "rotection as discriminatory or barrier to trade% many of e&isting su""ort

systems for "rotection of small scale sector !ill hae to be dismantled$ As a result%

SSI !ill hae to com"ete on its o!n to find a "lace for itself in the domestic as !ell

as international mar#et$

The challenge o SSI sector against the emerging global enironment is to become

globally com"etitie$ The small scale sector !ill hae to u"grade its technology and

moderni-e% ado"t modern mar#eting% management "ractices and im"roe the /uality

of its "roducts in order to be efficient and com"etitie$ In the absence of these

changes% its surial may be at "eril$ Most of the small scale units are una!are of the

challenges thro!n by the 5TO agreements and negotiations because of the lac# of

understanding about these agreements and negotiations$ Thus ma#es it im"eratie for

the 8oernment to reie! its "olicies concerning the sector !ith a ie! to not only

ma#ing them com"atible !ith the 5TO regime but also "re"aring them com"letely

to res"ond to the emerging enironment as an o""ortunity rather than a threat$

SWOT Ana#%&% (* '$ S+a## S8a#$ In-%'r

After the detailed study of small scale sector% a S5OT analysis of this sector reeals

its strengths and !ea#nesses to meet the challenges thro!n o"en by liberali-ation



>2

and globali-ation as !ell as the o""ortunities aailable and threats faced by the sector

in the ne! millennium$

a STRENGTHS

• @le&ible manufacturing systems$

• <o!er cost of "roduction$

• <o! leel of ca"ital inestment "er unit of out"ut and em"loyment$

• O"erational fle&ibility$

• High contribution to domestic "roduction$

• ;no!ledge about internal mar#ets$

• Ability to ma#e ad,ustment in changing economic and trading scenario$

• Inherent ability to inent and innoate$

• 7tili-ation of local resources$

• <ocation !ise mobility

• Im"ort substitution

; WEA!NESSES

• Inade/uate ca"ital for inestment=e&"ansion$

• Inade/uate !or#ing ca"ital

• E&"ensie ban# loans$

• Technologically !ea#$

• Absence of brand e/uity for ade in !ndia labels$

• <ac# of deelo"ment "olicy frame!or# reloo# at reseration "olicy$

• <ac# of infrastructural facilities$



>9

• <ac# of "rofessionalism$

• <ac# of !ell deelo"ed information system$

• Inability to face im"act of 5TO regime$

8 OPPORTUNITIES

7nta""ed e&"ort "otential in sectors such as com"uter soft!are% leather and

leather "roducts% light engineering "roducts% hand tools and im"lements% auto

com"onents and ancillaries% garments including hosiery% etc$

• 8ro!ing serice sector$

• Security and stability of access under the 5TO regime$

• Tariff reduction by all countries$

• Establish PBac#!ard @or!ard <in#ages% both nationally and inter)nationally$

• Loint entures$

• Technology u" gradation$

THREATS

Slo! ado"tion of /uality culture$

+oor infrastructure su""ort$

Technological obsolescence$

Inade/uate use of information and communication technologies$

International enironmental agenda !hich is in star# contrast to lo! em"hasis

laid by Indian firms$

Non)com"liance !ith non)tariff barriers "articularly enironmental% health

and safety standards$



>*

8ro!th of chea" im"orts$

High cost of funds$

CHAPTER-#



>(

CONCLUSION $

IMPLICATIONS



>

CONCLUSION $ IMPLICATIONS

The "romotion of small)scale industry has been a consistent theme of "ost)

inde"endence Indian "lanning$ 5hile arious "rotectionist measures and fiscal

concessions had been "ut in "lace in the '?(3s% it !as not until the late '?3s that

"lanners began to use directed credit as a tool of "olicy$ A series of "olicies introduced

from '?> on!ards% and facilitated by the nationalisation of most of the commercial

ban#s in '??% demanded shar" increases in the share of ban# lending going to

designated G"riorityG sectors$

The "ost)liberalisation business enironment has become harsh for the small)scale

industries 0SSI1 sector because of increased internal and e&ternal com"etition$ In

addition% the far)reaching im"act of the arious 5TO norms are no! threatening to

further affect the fortunes of small and medium enter"rises$ 7nfortunately% des"ite

sufficient notice and the gro!ing a!areness of the im"ending threats% the SSI sector

does not a""ear to be ade/uately "re"ared for the ne! challenges$ 5hile a number of

units in the sector hae been striing hard to obtain ISO or BIS certifications and

com"ete against chea"er im"orts% the oerall "icture a""ears gloomy for !ant of

"ro"er "olicy su""ort$

Een after seeral committees and study grou" re"orts oer the "ast decade% the

"olicyma#ers are still gro"ing for a 5TO)com"atible "olicy for this sector$ There is

much confusion oer a number of issues such as the ca" on ca"ital inestment%

foreign direct inestment 0@I1 ceiling% interest subsidy% de)reseration of items% and

creation of a technology u"gradation fund and so on$ It has become fashionable for



>>

successie goernments to "romise a ne! deal for the SSI sector% but delier

"ractically nothing$

Een the creation of a ne! Ministry of Small)scale Industry and Agro and .ural

Industries in 2334 did not ma#e any difference to the sectorGs "light$ Soon after its

creation% the ne! Ministry decided to do a detailed sector)!ise study of the im"act of

arious 5TO agreements on the SSI sector but nothing seems to hae ha""ened

since$ Not sur"risingly% though the sector has gro!n at a ra"id "ace "ost)

Inde"endence% the incidence of sic#ness is on the rise$

5hile the official figures sho! only about '3 "er cent of the oer 92 la#h SSI units as

sic#% the unofficial figures "ut this figure at oer *3 "er cent$

8ien the crucial im"ortance of the SSI sector to the economy !ith *3 "er cent share

in the total industrial out"ut% 9( "er cent in e&"orts and oer 43 "er cent in industrial

em"loyment% it deseres all the "olicy su""ort the 8oernment can offer$ 5hat the

small entre"reneurs need is not "rotection but institutional su""ort to fund

modernisation and technology u"gradation% infrastructural su""ort% and ade/uate

!or#ing ca"ital finance from the ban#ing sector$

There is also a need for small entre"reneurs to #ee" "ace !ith the structural and

technological changes ta#ing "lace in large industries$ The accent should be on the

much greater degree of ancillarisation and on "roiding serices as the larger

com"anies are #een on offloading a number of ,ob !or#s to smaller units$ True% a

section of the SSI sector is already undergoing structural changes but the "rocess is

still /uite slo!$



>4

There is an urgent need to refashion the "olicies goerning the sector so as to im"roe

its com"etitie strength and long)term outloo#$ The recast and reform of the SSI

"olicy !ill hae to largely concentrate on the follo!ing areas6

As can be inferred from the information in the "receding section% the arious Indian

goernments hae "roclaimed many "olicies and also im"lemented seeral initiaties

and "rograms$ Most of the "olicies before the '???s !ere aimed at "rotecting the

small sector rather than ma#ing it com"etitie$ Some of the ma,or issues that these

"olicies did not address are as follo!s6

"ro#les in o#taining credit One of the serious "roblems affecting the small scale

sector is the hardshi" of obtaining credits from the ban#ing sector$ Although this has

been a "roblem for "ast seeral years and though the issue has been mentioned in

budget s"eeches by goernment% none of the "olicies seem to sole it$ Many

entre"reneurs !ho had been dra!n into industrial actiities ho"ing to receie

financial assistance hae subse/uently found that !or#ing ca"ital is not

forthcoming*U$ The internal financial resources of the SSIs are held to be so small

that hae no sur"lus money in times of business strain$ This along !ith the situation

of unstable "rofits "reent the ban#s from issuing them unsecured loans$ As a result%

many of these SSIs are still de"endent for funds on money)lenders !ho charge high

interest rates$ And those !ho hae tried to obtain loans from the arious financial

institutions hae only faced corru"tion associated !ith grant of loans and long delays

in deliery$

In a 233( surey of small entre"reneurs by the Confederation of the Indian Industry

0CII1% a large "ro"ortion of the res"ondents attributed their "roblems to delayed

"ayments% high cost of borro!ing and inade/uate credit$

http://www.cherry.gatech.edu/sim/students/papers97S/perumalla.html#budget

http://www.cherry.gatech.edu/sim/students/papers97S/perumalla.html#budget



>?

$ic%ness in the $$!s As of Se"tember 233'% about 299 thousand small)scale units !ere

sic#$ Many of the sic# units ultimately close do!n due to finance and mar#eting

"roblems$ +oor management has also be identified as a ma,or cause of sic#ness$

Therefore a need e&ists to countinously "roide hel" in terms of training for the small

enter"rises to manage themseles$ The recent "olicies and "rograms "roiding

management training by the SIBI is ho"efully a ste" to!ards soling this "roblem$

&egative i'acts of reservation 'olic The "reious and current small)scale industries

"olicies hae follo!ed the "olicy of resering certain items to be manufactured only

by the SSIs$ Many of the items that are resered are in the mechanical engineering%

chemical "roducts and auto)ancillary industry grou"s$ Though the "olicy !as mainly

aimed at "rotecting the small firms from com"etition from the large firms% the lac# of

any licensing to identify SSIs has resulted in the entery by large firms into those areas$

There is no enforceable "enalty for moing into resered areas$ It is also held by

many authors that the "olicy is actually counter"roductie as those "roducing non)

resered items hae "erformed better than those in resered areas$ Hence the

reseration "olicy tends to become large redundant$

The uit 'olicThe Ne! Small Industry +olicy allo!s the large firms to hae e/uity

in SSIs$ This "olicy is contended to be a bad one as it only encourages the small units

to continue to act as de"endent on the large firm$ A fear that the large firms might at a

later stage ta#eoer the small units is also e&"ressed by some industry e&"erts$

A"art from the aboementioned critical issues% there are seeral other issues such as

non)classification of a se"arate medium enter"rise under the Indian industrial sector%

regional imbalances in the concentration of small scale industries and surey data



43

sho!ing that goernment institutions !ere the KKleast im"ortant sources of

technological information$GG More information on these issues could not be obtained$

Another concern is the lac# of coordination bet!een the arious su""ort organi-ations

set u" by the goernment$ It !ould also be interesting to #no! if any ealuation

systems are in "lace for these institutes and their "rograms$ Information on this as"ect

could not be gathered$

An article by Ira 8ang mentions that "olicies intended to su""ort the small industry

such the reseration% financial incenties% etc$ are KKneither "romoting em"loyment

nor im"roing the com"etitie base of small firms$ .ather% they are !or#ing as strong

disincenties for gro!th of small firms$GG

Though all the "reious efforts at hel"ing the SSIs to gro! and moderni-e seem to

hae had ery little effect% the recent moderni-ation efforts such as the setting u" of

the Technology eelo"ment Board% the Technology eelo"ment and

Moderni-ation @und% greater em"hasis on "roiding management s#ills and in

obtaining ISO ?333 certification seem more focused and "romising$ Since these hae

ery ne!% no s"ecific conclusions as to their success or im"act can be dra!n at this

time$ Ho"efully% some systematic methods to ensure that SSIs are actually receiing

benefits and necessary assistance !ill be "ut in "lace

The ma,or enironmental concerns in India today are "oerty cou"led !ith gro!ing

"o"ulation and the side effects of enhanced industrial actiities$ As long as "oerty

remains the main stumbling bloc#% industriali-ation "roides ho"e of significantly

im"roing the standard of liing$ One of the measures most tal#ed about that might

gain recognition !ithin these industries is sustainable deelo"ment$ .emoal of

"oerty and enironmental "rotection are t!o sides of the same coin that is



42

gro!th$ The suggestion made by Hart% and the conce"t of sustainable deelo"ment

should% in fact% be made the core ob,ectie !ithin the o"erations of small industries$

Small industries could also go one ste" further in addressing a sustainable ision i$e$ a

trade)off bet!een economic gro!th% "rofitability% and sustainable enironment$

5ithin industries% management should be charged !ith the res"onsibility of

im"lementing this conce"t of the sustainable ision into action by firms$ One such

measure is LohannsonGs 023391 trisect of sustainable business$ It is founded on the

conce"t of balancing ecology% economic% and social factors that are included in the

industrys alue system% and included in the business "lanning or design "hase

resulting in "rofits through ecologically sound "roducts% "rocesses% or serices$ In a

com"le& relationshi" bet!een "o"ulation% economy% industry% and ecology% managing

the enironmental res"onsibility is a "rime issue in India$ +o"ulation !ill al!ays be a

"roblem if not "ro"erly curtailed% but in the case of industriali-ation there is a

gro!ing need for a sustainable ision !here industries are made res"onsible for their

acts$ 5ith todayGs current technology and strategic management systems% industries

can be effectie in reducing the graity of enironmental im"acts$ The green

challenge is an issue that is releant to eery industry big or small$ Eery business

faces "ressure to im"roe its eco)"erformance$

As regards regulatory "ressure and com"liance% many businesses s"end more time in

fighting regulations and ta#e a less "roactie% strategic a""roach to enironmental

management 0Schoema#er and Schoema#er% 233*1$ Although Indian courts closed

almost '%333 factories for "ollution "roblems% and the Su"reme Court fined '( "lants%

including some multinationals 0Shaman% 233(1% the effectieness of these regulatory

"ressures and com"liance has still to be reali-ed$ Lohannson 023391 addresses a



49

green firmQ as one that does not loo# at regulatory or legal com"liance as a first ste"$

The ability to assure that a firm is in com"lianceQ is therefore a "oor tactic% and ery

cost)ineffectie$ Managers !ho understand enironmental la!s can be counted on$ In

other !ords% regulation% com"liance% and enironmental la!s !ill ta#e care of

themseles if managers ado"t a sustainable ision or green ob,ecties for industries$

Much of the literature see#s to establish that there is an acute need for regulatory and

legal measures$ Ho!eer% "ressure for sustainable ision in these small industries lies

!ithin themseles$ They must reali-e the im"ortance of enironmental management

and /uality and that it could be highly effectie if it is administered by the small units

themseles$



4*

CHAPTER-%

RECOMMENDATIONS



4(

RECOMMENDATIONS

R$8$n' +($rn&=a'&(n $**(r'%

Ins"ite of the e&istence of all the aforementioned organi-ations to hel" the

deelo"ment of the SSI% an increasing s"read of sic#ness is re"orted in the sector$

Ac#no!ledging this fact% the CSSI set u" a !or#ing grou" in '?4( to ma#e

recommendations for a suitable action$ The suggestions made by this grou" included

the follo!ing6

• Establish a !ell)e/ui""ed design and technology deelo"ment cell in the office of

the CSSI to coordinate "rograms of moderni-ation in the small small)scale

sector$

• S"ecial cells called KK+roduct)cum)+rocess eelo"ment CentersGG !ill be

necessary for underta#ing research% locating sources of modern technology%

identifying suitable technology for transfer and hel" the small)scale industries in

obtaining in"uts$

• <iberal im"orts of technology and e/ui"ment should be allo!ed to moderni-e the

small)scale sector$

• Incenties should be "roided to enter"rises !ith modern technologies to transfer

them to the SSIs$

• In August 2333% the 8oI announced its ne! "olicy to!ards the small scale sector$

The goernment announced that a Technology eelo"ment Cell !ould be set u"

in the Small Industries eelo"ment Organi-ation 0SIO1$ This Cell !ould

"roide technology in"uts KKto im"roe "roductiity and com"etitieness of the





4

"roducts of the small scale sectorGG$ The Technology eelo"ment Cell !ould

coordinate !ith other industrial research and deelo"ment organi-ations to

achiee its ob,ecties$ Information on !hether such a Cell had been set u" !as not

aailable$

• 7nder its scheme of direct assistance% the SIBI had launched the Technology

eelo"ment and Moderni-ation @und$ The main ob,ectie of this fund is KKto

encourage e&isting industrial units in the small scale sector to moderni-e their

"roduction facilities and ado"t im"roed and u"dated technology so as to

strengthen their e&"ort ca"abilitiesGG$ Through this fund% its hel"s the SSIs meet the

costs of "urchasing ca"ital e/ui"ment% ac/uisition of land% e&"enditure incurred in

obtaining ISO ?333 series certification and also the costs for im"roements in

"ac#aging$ The SSIs hae to meet some criteria before they can a""ly for financial

assistance under this schemee% for e$g$ units must be in o"eration for atleast three

years$ It is also !or#ing to!ards "ros"ects of mar#eting the "roducts of SSIs in

the internal and international mar#ets$

• One of eelo"ment and Su""ort Serices e&tended by the SIBI is the

Enter"rise Strengthening serice$ 7nder this serice% there are s"ecific "rograms

including technology transfer% technology u"gradation in indentified industry

clusters and management deelo"ment$

• In the 233()3 7nion Budget% the goernment announced the setting u" of a

Technology eelo"ment Board and this has been instituted under the e"artment

of Science and Technology$ uring the "resentation of the budget% the 7nion

Minister for @inance "ro"osed that the unutili-ed cor"us of '$>( billion under the



4>

Technology eelo"ment and Moderni-ation @und Scheme of the SIBI should

be "roided to the State @inancial Cor"orations and commercial ban#s$ These

ban#s !ill in turn be able to ma#e it aailable for the SSIs for moderni-ation

"ro,ects$

• In addition% the SIO and SISIs hae introduced a "rogram for "romoting

technological moderni-ation of the SSIs$ 7nder this initiatie% the small

"roduction units are "roided information% adice and training$ .e"orts are

distributed among them for s"reading moderni-ation information$ The SSIs can

register for these "rograms for a fee$ As of March '?4% there !ere (>3 enter"rises

registered under the moderni-ation scheme of the SIO$ Ho!eer only 2* of

these hae been "roided !ith moderni-ation guides$

• A recent change in the small)scale industrial "olicy allo!s the large firms to hold

u" to 2 "ercent of e/uity in small enter"rises !ithout the re/uirement of

consolidation of accounts$ This is considered as a good !ay to induce the transfer

of technology and s#ills from large industrial units to SSIs$ Industry e&"erts are

ho!eer s#e"tical about this$ Most large units use the small)scale sector as sub)

contractors$ oubts hae been e&"ressed !hether these large units !ould allo!

for transfers of technology to SSIs and enable them to gro! and become

inde"endent units in their o!n right$

A(5'&(n (* n$w $*&n&'&(n%

In most countries% small) and medium)scale units are clubbed together for "olicy

"ur"oses and called SMEs$ Hence% the +lanning Commission Study 8rou" on

eelo"ment of Small Enter"rises% !hich submitted its final re"ort in May 23'3% has



44

suggested that tiny% small and medium establishments could be redefined in terms of

inestment limits of .s 2( la#h% .s ( crore and .s '3 crore res"ectiely$ The

8oernment should thin# of creating a se"arate category of medium)scale units !ith

inestment limits of .s '3)'( crore and encourage them to raise e/uity ca"ital%

including foreign e/uity to su""lement institutional finance$ 5hile the broad "olicies

should be the same for the SMEs% the tiny units could be gien a much higher leel of

institutional su""ort to "romote self)em"loyment$

The clubbing together of small and medium enter"rises for "olicy "ur"oses and

raising the inestment limit !ould encourage technology u"gradation and facilitate

seamless gro!th of small to medium and eentually een to large)scale units$ This

!ould also attract more foreign inestment in the sector$ The "resent "olicy

discourages the small units to gro! into bigger ones because of the lo! inestment

limit in "lant and machinery and the artificial "ro"s such as e&cise duty e&em"tions$

D$r$%$r?a'&(n

The rationale behind the "olicy of SSI reseration !as studied by the E&"ert

Committee on Small Enter"rises 0the Abid Hussain Committee1% !hich submitted its

re"ort in 233$ The Committee listed the follo!ing arguments against reseration6

• The "olicy has not actually hel"ed the gro!th of small)scale industries$

• The units in the unresered sector hae actually gro!n faster than those in the

resered list$ In other !ords% the SSI units hae sho!n more dynamism in areas

!here they had to com"ete !ith larger units$



4?

• .eseration in many areas has become irreleant since a large number of resered

"roducts are not being "roduced by SSIs$ It is also inconsistent !ith the ne! trade

"olicy that allo!s the items resered for the SSI sector to be freely im"orted$

• .eseration has hurt IndiaGs ability to e&"and e&"orts in many crucial areas%

including te&tiles and leather$

• A number of subse/uent studies also recommended the de)reseration of items%

the latest being the CII study% coering oer 233 small enter"rises% to analyse the

im"act of the remoal of /uantitatie restrictions on the SSI sector$ The study says

the goernmentGs reseration "olicy is hindering the SSI sectorGs gro!th$ It is%

therefore% time to do a!ay !ith SSI reseration and offer other forms of

"romotional su""ort$

Pr(+('&n" 8#-%'$r%

International e&"erience suggests that the small)scale enter"rises flourish in situations

!here they can be clustered together in areas !here it is easier to deelo" common

infrastructure facilities of high /uality$ Many such clusters hae already emerged$

Ho!eer% at "resent !e do not hae any "olicy for "roiding s"ecial assistance for the

deelo"ment and u"gradation of s"ecific industry clusters$ The Abid Hussain

Committee had recommended that the States should identify the e&isting clusters and

"romote ,oint entures bet!een the State goernment or local authority and business

associations in these clusters$

The +lanning Commission Study 8rou" !ent a ste" further and recommended that the

Centre should "roide additional resources through a s"ecial centrally)s"onsored

scheme aimed at u"grading infrastructure in areas !here !ell)defined industry

clusters hae already emerged$



?3

According to a 7NIO study% there are 9(* industrial clusters in India% of !hich 9*

hae a turnoer e&ceeding .s '%333 crore$ A fe! hae a gross turnoer e&ceeding .s

'3%333 crore$ There is eidence to suggest that the ne! SSIs are increasingly moing

to!ards clusters to be near the centres of demand$ The units that !ere initially lured to

the bac#!ard areas by the ca"ital subsidy "roided by the goernment found

themseles at a greater disadantage$ 5hile in '?4>)44 about t!o)thirds of the total

SSI units in the country !ere in bac#!ard areas% this "ro"ortion declined to (3 "er

cent by 2339)3*% according to a surey of SSIs$ This "ro"ortion must hae come

do!n further by no!$

In%'&'-'&(na# 8r$&'

• Ensuring ade/uate flo! of institutional credit to the SSI sector has remained a

ma,or "roblem des"ite seeral attem"ts made by the .esere Ban# of India oer

more than a decade to im"roe the situation$

• A number of studies hae clearly established that the ma,or cause for the large)

scale incidence of sic#ness in the SSI sector is the non)aailability of ade/uate

and timely !or#ing ca"ital from the ban#ing sector$ @or instance% the S$ <$ ;a"ur

Committee .e"ort 0233>1 bemoaned that des"ite the central ban#Gs instructions

and guidelines from time to time% ban#s hae not been follo!ing the +$ .$ Naya#

Committee recommendations 0233'1 em"hasising the need to im"roe the flo! of

funds to this sector$ It had recommended a minimum leel of !or#ing ca"ital

finance by ban#s to SSI units at 23 "er cent of the alue of their out"ut$

• Een today% this recommendation remains only on "a"er$ 5orse% according to the

estimates of the ;a"ur Committee% only '()23 "er cent of the SSI units could

access ban# credit$ Others hae to de"end on borro!ings from "riate sources at



?'

e&orbitant interest rates$ No! there is a ne! urgency to "roide a ne! deal to this

crucial sector% !hich successie goernments hae been "romising oer the "ast

decade$

• Instead of indulging in their "o"ular "astime of a""ointing committees and

commissioning ne! studies to rediscoer already !ell)#no!n "roblems afflicting

the small industries% the "olicyma#ers !ould do !ell to focus on im"lementing the

"ragmatic recommendations of the earlier committees$

EXPORT PROMOTION

Ra'&(na#$ B$&n E@5(r' Pr(+('&(n

The ca"ability of Indian SSI "roducts to com"ete in international mar#ets is reflected

in its share of about 9* in national e&"orts$ In case of items li#e readymade

garments% leather goods% "rocessed foods% engineering items% the "erformance has

been commendable both in terms of alue and their share !ithin the SSI sector !hile

in some cases li#e s"orts goods they account for '33 share to the total e&"orts of the

sector$ In ie! of this% e&"ort "romotion from the small scale sector has been

accorded high "riority in Indias e&"ort "romotion strategy !hich includes

sim"lification of "rocedures% incenties for higher "roduction of e&"orts% "referential

treatments to SSIs in the mar#et deelo"ment fund% sim"lification of duty dra!bac#

rules% etc$ +roducts of SSI e&"orters are dis"layed in international e&hibitions free of

cost under SIO 7mbrella abroad$



?2

BIBLIOGRAPHY/REFERENCE

S



?9

BIBLIOGRAPHY/REFERENCES

R$*$r$n8$%

' asgu"ta% S$% <a"lante% B$% : Mamingi% N$ 0233>1$ Ca"ital mar#et res"onses to

enironmental "erformance in deelo"ing countries 05orld Ban# +olicy .esearch

5or#ing +a"er X '?3?1$ .etrieed from the 5orld 5ide 5eb6

htt"6==!!!$!orldban#$org=ni"r=!or#"a"er=inde&$htm

2 !iedi% O$ +$ : ;hator% .$ 0233*1$ IndiaGs enironmental "olicy% "rograms and

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Analysis of Problems and Prospects of Small Scale Industries in India

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