SSI-SCENARIO

This sector constitutes 95% of the industrial units and contributes 40%

to the total industrial output of the country and 35% to direct export. There are about 3.6 million SSI units in India and these employ approximately 19.3 million people, which is second highest next only to agriculture. This achievement has been possible due to the Government s policy of reservation, investment ceiling for the SSI sector and priority lending. The economic reforms started in 1991 in India provided the opportunity to SSIs to grow big. However, the formation of WTO in 1995 has started posing a major challenge to the SSIs in India. The protection of the SSI sector by way of reservations and quantitative restrictions have been removed. More than 160 items which were reserved for the SSI sector have been de-reserved.

SSI-SCENARIO
Indian industry does not

face any immediate threat from developed countries but faces serious competition from neighbouring countries particularly from Chinese manufacturers where productivity is 60-100% more than the Indian companies.

SSI-SCENARIO
The Studies have suggested that competitiveness is possible only if: There is a technology up-gradation adoption of new technologies. Introduce new tools and Equipments for production, Changes in manufacturing process Improvement in the quality of products quality assurance, Introduction of new designs diversification, use of new raw materials Usage of modern management and IT tools.

SSI-SCENARIO
The vulnerable areas as experienced by the SSIs have been cited as low capital base, difficulties in accessing technology, credit constraint, low access to business services, constraint of quality of human resources, low market awareness, low lobbying capacity, Inspectorraj and infrastructural constraints.

Definition
Govt of India-2000: An undertaking having an

investment in plant and machinery of not more than 1 crore.

Characteristics of SSI
Small capital investment Labor Intensive Small gestation period

Create immediate and Permanent employment

Use Locally available raw materials Brings Equitable distribution of Income Training ground for Local Entrepreneurs

Help Earn Foreign exchange through exports

Create Economic Stability and Prosperity Small risk is involved Have a faster rate of growth

Tend to meet the increasing demand of the consumer goods.

Importance
Source of employment

generation Self employment Lesser Capital requirement Mobilization of entrepreneurial skill Equitable income distribution Balance regional Development Savings on Foreign Exchange Quick Investment Beneficial to LSU

Advantages of SSI
Some small scale industries do not require high level of technology Generally labor intensive and do not require large amount of capital Projects can be undertaken in short period and hence increase production both in short and long run Most developing countries can employ locally available raw Training ground for the local entrepreneurs in decision making Help in the equitable distribution of the income They can help bring economic stability in the country by diffusing prosperity and checking expansion of monopolies Creates jobs in the rural areas in the developing countries Helps transfer the manufacturing monopolies from the congested urban to the rural areas There is a linkage between the agriculture, rural development and small scale industry There is also a linkage between the SSI and LSI

materials Helps both save and earn foreign exchange by exporting goods from local resources

Advantages of SSI
SSI have a role in building the
Bring integration of the LSI

economy ,though not cost effective they thrive in imperfect competition The development of SSI can be a part of the Integrated rural development programs Other advantages:
Immediate and permanent

employment Meet increased demand of the consumer goods Facilitate mobilization of the goods and skills

with SSI Require short gestation period Dont require heavy and costly infrastructure Have favorable cost-output ratio The products of SSI can earn substantial foreign exchange They aid in dispersal and avoid the problems of unplanned urbanization.

Role of SSI in India

Number of Units:

16,000 in 1950 36,000 in 1961 0.86 million in 1985 1.50 million in 1991 3.6 million currently.

Employment

Generation:

19.6 million people

Role of SSI in India

Investment:

2233 crore 1972-73 to 9588 crore in 1985 7200 cr in 1973-74 6,45,496 cr in 200-01 393 cr in 1973-74 53,975 cr in 1999-2000 (sports goods, readymade garments, woollen garments and knitwear, plastic products, processed food and leather products.)

Output:

Contribution to Exports:

Role of SSI in India

Equitable Distribution of Income
Mobilization of Capital Regional Dispersal of Industries

Problems of SSI
INTERNAL

EXTERNAL

Infrastructural
Location Power Water Post Office Etc Communication Capital Working Capital Long term Funds Recovery

Choice of and Idea Feeble Structure Faulty Planning Licensing Poor Project Implements Poor Management Poor Production Quality Marketing Inadequate Finance Labor Problems Capacity Utilization Lack of vertical and horizontal integration Inadequate training in skills Poor and loose Organization Lack of Strategies

Financial

Marketing Raw Material sourcing Inspections Technology Policy Industrial and Financial Regulations and Taxation Competitive and Volatile Environment

Problems of SSI
Marketing Problems: Poor product Quality Poor sales Promotion Scale of Production Lack of Knowledge and Marketing Lack of Marketing Opportunities Absence of Suitable Marketing Channels

Problems of SSI
Production Problems: Maintenance of Delivery Schedules Shortage of Raw Materials Ignorance of latest methods of production Underutilization of Production Capacity Import Restrictions Gestation period Diversification of Products Quality Control Product Cost Electricity

Problems of SSI
Finance Problems: Requirements of Capital and Credit Problems of Working Capital Inappropriate financial structure Hurdles in getting loans sanctioned Pattern of repayment of loan Structure of Interest Rate Wrong Financial Planning Improper Utilization of Funds Recovery of the funds

Problems of SSI
Human Resources Problems: Non Availability of Skilled Manpower Labour Problems

Problems of SSI
Other Problems: Technological changes Land and Building Infrastructural Facilities Inadequate appraisal of projects License System Managerial Inadequacies Analysis of Business Environment Machinery and Other Equipment Lack of Technological Up gradation