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Submitted To : DR . S. Gupta
Introduction
1995-96 148290
197.93 36470
1990-00 234255
229.10 54200
2000-01 261289
239.09 69797
2001-02 282270
249.09 71244
2003-04 351427
271.36 N.A.
India has traditionally always had a vibrant and competitive SSI. Even
after the dawn of industrialization, British producers of textiles found
handmade Indian textiles such a threat that they lobbied hard to have
its import banned, succeeding in the late eightenth century (Gupta &
Sharma, 1996). During pre-economic liberalization time a wide variety
of incentives, concessions and institutional facilities were extended for
the development of small scale industries. But these socialistic
promotional policy measures, in many cases resulted in protection of
weak unit rather than the independent growth of units under
competitive business environment (Nyati, 1988). Such situation was
continueed up to the mid of 1991. Under the period of economic
liberalization, the focus was shifted from “protection” to “competitive
promotion” (Raja & Rajashekar, 2002).
The public policy in India had been attaching lot of importance to
village and small scale industries on the following grounds. Small scale
industries being labor-intensive, helped to increase the volume of
employment, particularly in rural areas, it is estimated that about 2
cror persons are engagment in India in these industries. The handloom
industry alone employs 50 lakh people.
They account for 6% of GDP, 95 % of all industrial unit, and 34% of
total exports. Around 39 lakh SSIs in India has emerged versatile
producing over 8000 products, from traditional handicrafts to high-end
technical instruments.
In developed OECD economy, about 60 % of GDP is generated by small
enterprises, i.e., enterprises with maximum of 50 employees. The
reason being large number of small enterprises guarantees a high
degree of competition, and variety of economic activity that require
millions of enterprises to be reasonable competitive and efficient. The
indirect jobs created through forward and backward linkage are no less
important. In real terms, the small scale industries recorded a growth
rates of 10.1% in 1994-95 as against 7.1% in 1993-94 and 5.6% in
1992-93. By the year 2025, if not controled, this sector will grow even
more rapidly (Parthasarathy, 1996).
Generalization are difficult because though there are firms which are
growing rapidly, there
also exist 1,38100 sick units within the sector in India. The contribution
of small scale industries in India to national development was meager
as compared to the contribution of SSI in other countries of the world.
India’s small scale industry shared 95 % of all establishments, 42 % of
output, 45% of employment and 34 % of exports. But Taiwan ranked
first with a share of 97% of establishments, 80 % of output, 7% of
employment, 47 % of exports followed by Japan contributing highly
with 99 % of establishments, 53 % of output, 71 % of employment and
13 % of exports (SIDBI Report, 2000).
The small companies are defined those with less than US $180,000 in
capital equipment (USAEP, 1996). In India the definition of small scale
industry has undergone changes over the years in terms of investment
limits in the following manner.
The small scale industry has played a very important role in the socio-economy
development of the country during the past 50 years. It has significantly
contributed to the overall growth in terms of the Gross Domestic Product (GDP),
employment generation and export . The performance of the SSI, therefore, has
a direct impact on the growth of the overall economies.
According to projection made by the Ministry of SSIs during 2000-01, the SSI
sector recorded growth in production of 8.09 per cent over the previous year.
The SSIs sector has recorded higher growth rate than the industrial sector as a
whole (4.8 per cent during 2000-01). This traditional sector in India is considered
to have huge growth prospect with its wide range of products. With 40 percent
share in total industry output and 35 percent share in exports, the small-scale
industrial sector in India is acting as Engine of Growth in the new millennium.
The definition for SSI, undertakings has changed over time. Initially they were
classified into two category- those using power with less than 50 employees and
those not using power with the employee strength being more than 55 but less
than 100. According to Ruddrdatt and K.P.M.
Sundaram1 the SSI is classified in to two categories i.e. traditional and modern
small-scale units. The traditional industries include khadi and handloom village
industry, handicrafts, sericulture, coir, etc. Modern small-scale industry provide
wide range of goods from comparatively simple items of sophisticated products
such as televisions, electronic control systems, various engineering products,
particularly as ancillary to the large industries. The traditional sector is highly
labour intensive and use less of machine power.
Till now the capital resources invest on plant and machineries building have been
the primary criteria to differentiate the SSI from the large & medium scale
sectors. An industrial unit can be categorized as a small scale unit if it fulfils the
capital investment limit fixed by the Government of India for the SSI.
These cover SSI units [both in the factory and Non /Factory sectors] and power
loom units. Such units mostly use power driven machinery and possess superior
production techniques. Units in this sub-sector are generally located in close
proximity to large industrial centers or urban areas. These industries are moving
away from the traditional products to knowledge-based products.
This sector comprises tiny and cottage industry segments like handlooms, Khadi
and Village Industries, handicrafts, sericulture and silk, rubber and coir. These
units are labor- intensive, are generally located in rural and semi-urban areas
and are artisan based. Usually the capital invested is also nominal.
The Laghu Udyami Credit Card Scheme has been provided to SSI where they can
credit up to Rs.10 lakhs. Apart from this, credit facilities up to maximum of Rs.25
lakh are provided through Credit Guarantee Fund Trust in collaboration with
SIDBI and Government of India.
Table X provides further insight into credit related information. The SSI is
provided working
capital by commercial banks and in some cases by cooperative banks and
regional rural banks.
Term loans are provided by State Financial Corporations (SFCs), Small Industries
Development
Corporations (SIDCs), National Small Industries Corporation (NSIC) and National
Bank for
Agriculture and Rural Development (NABARD). Financial assistance from NSIC
and to some
extent from SIDCs is available in the form of supply of machinery on hire
purchase
basis/deferred payment basis. Small sized SSI and tiny units also get some term
loans from
commercial banks along with working capital in the form of composite loans.
The Small Industries Development Bank of India (SIDBI) provides refinance to
these institutions.
Such refinance comprises assistance provided to State Financial Corporation
Bills, Finance
Scheme, Special Capital/Seed Capital Scheme, and new debt instruments and to
National Small
Industries Corporation. Long-term loan are provided to the smalls scale industrial
units by SFCs
mainly through Single Window Scheme and National Equity Fund as also direct
assistance
provided to State Financial Corporations in the form of refinance. Some part of
working capital
for pre-operative expenses is also provided by State Financial Corporations to
Small Scale
Industrial Units under the Single Window Scheme.
Financial requirements of small scale industries can be classified into two
heads:
During the 1990s, jobs in the organised sector grew at less than 1% per year
while jobs in the SSI sector increased by 3.5% every year. In the changing
scenario, on account of globalization and liberalization, what shall be the impact
on the creation of new jobs by SSIs? Does increase in capital intensity of SSIs, as
they go in for technological up gradation
.
Summary of main conclusions
1. Empirical findings show FB-small scale industries to be a large and important
part of both the forest and rural enterprise sectors in developing countries; there
is need to recognize this and to adjust forest sector strategies accordingly
2. Further study is needed in order to identify which forest based activity have
the potential for viable growth as small-scale enterprises; this information should
be widely disseminated to policy makers and sector managers
3. Assistance to FB-small scale industries needs to be geared to their very small
size, and to the consequent constraints on the resources and skills available to
them. Within this aggregate, support activity need to differentiate between the
micro household units using non-wood raw materials and the some what larger
and more advance wood working enterprises operating at a workshop level;
while the latter may be able to benefit from some existing support services the
former will usually not be able to do so and will require other modes of
assistance. Another category of enterprise likely to need special attention is that
in transition from the household to the workshop scale of operating
4. The forest based activity of many small scale industries are closely integrated
with other of their processing, agricultural and household activities, and
therefore can not effectively be dealt with in isolation
5. Support to FB-SSIs should not be unduly oriented towards encouraging and
perpetuating small scale as an objective in itself; growth and development of
many FB-small scale industry activities will logically require them to increase in
unit size
6. Care needs to be taken to ensure that support is cost effective and consistent
with the absorptive capacity of the enterprise, and does not intrude on the
entrepreneur to the point of undermining his or her self-reliance and decision-
making responsibility
7. In order to get access to supporting services, and be able to use them
effectively, FB-SSIs, in particular micro enterprises, will often need to organise
themselves in appropriate groupings
8. Informal mechanisms such as nongovernmental organisations may have an
important role in providing FB-SSIs with access to support and in improving its
effectiveness
9. As availability of markets is essential to FB-small scale industry viability and
growth, priority should be given to assisting entrepreneurs with market
information, product development, access to markets and marketing
10. Because of the nature of the forest resource, it is impossible for FB-small
scale industry to provide for their own raw material base. Measures to improve
their raw material situation include the following:
- improve raw material management and allocation procedures to accommodate
small as well as large enterprises,
- broaden forest management to include non-wood raw materials of value to FB-
SSIs
- amend legislation and regulations which unnecessarily restrict beneficial FB-SSI
operations - assist rural communities to develop ways of managing local forest
resources to supply sustainable FB-SSIs.
11. FB-small scale industries need improved access to finance from formal
sources. Such assistance needs to be adapted to the different circumstances of
micro, workshop and intermediate enterprises; in order to be effectively used it
needs to be accompanied by technical assistance to entrepreneurs in
organisation, record keeping and accounting, and to institutional lenders to
improve their ability to service small enterprises
12. The FB-small scale industries activities which will continue to be profitable
and grow will be those which are able to improve their productivity; the problems
of identifying appropriate technologies and of effectively transferring them, and
the necessary skills, are particularly acute for micro enterprises
13. The task of upgrading management of FB-small scale industries has to start
with recognition that the entrepreneurs have a technical not a managerial
background, and the particular difficulties that they face in adding a managerial
dimension to their responsibilities. To be effective, training materials and
methods must be accurately matched to their needs and capabilities.
Under the policy measures for promoting and strengthening SSIs and tiny
industries, it has been enunciated that adequate and equitable distribution of
raw materials, problem –free production processes, advanced technology and
infrastrustral facilities, would be ensured to small sector. Thus there is a
significant change in the overall strategy for small scale industry development . It
maybe too early to judge the sufficiency of the strategy to bring out the desired
outcome. But internationally rapid technological
Changes are revitalizing the SSIs and it is perceived that future role of SSIs will
be based on competition, productivity and efficiency . In this context, the shifting
policy emphasis in india is a welcome change.
Notes & References:
1. http://dcmsme.gov.in/publications/reserveditems/itemrese.htm
2. http://pib.nic.in/release/release.asp?relid=9408
3. www.textbooksonline.tn.nic.in/Books/11/Econ-EM/Chapter_07.pdf
4. http://www.education.nic.in/cd50years/15/8P/88/8P880402.htm
5. http://www.books.iupindia.org/overview.asp?bookid=IB1100165
6. http://www.smallindustryindia.com/ssiindia/reservitems.html#list2
7. http://dcmsme.gov.in/publications/reserveditems/itemrese.htm
8. http://dcmsme.gov.in/publications/reserveditems/itemrese.htm