46

CHAPTER III

SMALL SCALE INDUSTRIAL UNITS – AN OVERVIEW

INTRODUCTION

The small scale industrial sector comprising micro and small enterprises (previously
known as tiny and small industrial sector) has been recognized as an engine of growth all over
the world. This sector is characterized by low investment requirement, operational flexibility,
location wise mobility, and import substitutions. They have been the prime mover of industrial
development in many developed economies.

The small scale industrial units are the roots and fruits of economic activities. They
provide way of life to more number of people. With less amount of capital investment, this sector
contributes more towards GDP, provides more employment opportunities, offers unique product
and service offerings, and serves customers with personal attention. Though the large and
medium types of industries make the infrastructure and skeleton of an economy, the blood, flesh
and skin of a flourishing economy is made up of small scale industrial units.

SMALL SCALE INDUSTRIES (SSI) IN INDIA

Small scale industries have made considerable contribution to the socioeconomic

development of almost all the countries including India. In our country, the increasing pressure
of population and unemployment has made this contribution even more significant. In India,
ever since the days of Mahatma Gandhi, the small scale industry movement has been largely
regarded as a vehicle for uplifting the weaker sections of the population whether it is handloom
weavers, handicraft workers, rural women spinning at home, the rural artisans or the urban
craftsmen-all of them look to specific support in being able to compete with the modern
industrial sector. The small scale industry is phenomenal in our country that it has started
thinking global in the wake of liberalization in the nineties.

The SSI sector as an important segment of Indian economy, accounts for 95 per cent of
the industrial units; 40 per cent of output in the manufacturing sector; employment to over 17
million persons; 35 per cent of total exports.1 The SSI sector has been receiving due attention

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 47

and importance from the policy makers owing to its special characteristics, namely, low level of
investment required, high potential for creating employment opportunities, least location
constraints, thereby contributing to a balanced regional development and a high utilization of
local resources. This sector covers a wide spectrum of industries categorized under small, tiny
and cottage segments. The sector has also maintained its pace of growth over the years, and has
contributed significantly in supporting the overall economic development of the country.

Definition of Small Scale Industry

Defining small-scale industry is a difficult task because the definition of small-scale

industry varies from country to country and from one time to another in the same country
depending upon the pattern and stage of development, government policy and administrative set
up of the particular country.

Every country has set its own parameters in defining small-scale sector. Generally, small-
scale sector is defined in terms of investment ceilings on the original value of the installed plant
and machinery. But in the earlier times, the definition was based on employment. In the Indian
context, the parameters are as follows.

The Fiscal Commission, Government of India, New Delhi, 1950, for the first time
defined a small-scale industry as, one which is operated mainly with hired labour usually 10 to
50 hands. Fixed capital investment in a unit has also been adopted as the other criteria to make a
distinction between small-scale and large-scale industries. This limit is being continuously raised
upwards by the government. The Small Scale Industries Board in 1955 defined, "Small-scale
industry as a unit employing less than 50 employees if using power and less than 100 employees
if not using power and with a capital asset not exceeding Rs. 5 lakhs".

________________________________

1
SIDBI Report on Small Scale Industries,1999,p.18.

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 48

The initial capital investment of Rs. 5 lakhs has been changed to Rs. 10 lakhs for small
industries and Rs. 15 lakhs for ancillaries in 1975. Again this fixed capital investment limit was
raised to Rs. 15 lakhs for small units and Rs. 20 lakhs for ancillary units in 1980. The
Government of India in 1985, has further increased the investment limit to Rs. 35 lakhs for
small-scale units and Rs.45 lakhs for ancillary units.

Again the New Industrial Policy in 1991, raised the investment ceilings in plant and
machinery to Rs. 60 lakhs for small-scale units and Rs. 75 lakhs for ancillary units. An ancillary
unit is one which is engaged or proposed to be engaged in the manufacture of production of
parts, components, sub-assemblies, tooling or intermediaries or rendering services and the
undertaking supplies or renders or proposes to supply or render not less than 50% of its
production or services, as the case may be, to one or more other industrial undertakings and
whose investment in fixed assets in plant and machinery whether held on ownership terms or
lease or on hire-purchase does not exceed Rs. 75 lakhs. For small-scale industries, the Planning
Commission of India uses terms 'village and small-scale industries'. These include modern small-
scale industry and the traditional cottage and household industry.

REVISION IN THE DEFINITION SMALL SCALE INDUSTRY IN INDIA

In India, the term “small-scale industry” evokes different meanings for different agencies
for a long time. The Planning Commission of the Government of India views the entire village
and small industries (VSI) sector as SSI sector.

The National Sample Survey Organization under the Central Statistical Organization
(CSO) Government of India defines the entire industrial sector in terms of organized and
unorganized segments and also in terms of industrial enterprises run by the households and non-
households. The Central Excise Department, on the other hand, distinguishes SSI on the basis of
the annual turnover of the respective unit. However, with a view to determining the types of
industrial units requiring special support, a more clear cut definition was felt necessary.
Accordingly, from the industrial policy perspective the size of gross investments in plant and
machinery, land and buildings as well as the strength of the work-force in the respective units
were the criteria to demarcate a unit as SSI. These rules have undergone periodical changes over

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 49

the years. Shift from work-force criterion to investment criterion was made in the later period.
Further, a new concept of ancillary and tiny units was introduced with a view to bringing more
units under SSI concept. The SSI has been currently defined in terms of investment ceilings on
the original value of installed plant and machinery. This classification on the basis of investment
in plant and machinery also covers residual units not included under the assistance programme of
any of the Statutory Boards. In 1998, the Government of India fixed the ceiling as Rs. one crore
in plant and machinery for small-scale industries and ancillary industries. The ceiling was Rs.25
lakhs in plant and machinery for tiny industry.

With a view to building a sound industrial base and a strong village and small industrial
sector, the first step taken by the Government in the post-independence era was the
announcement of the Industrial Policy of 1948. It spelt out the framework of the basic and
strategic industries to be established by the states.

The enactment of the Constitution which guarantees fundamental rights for the citizens of
India, the launching of the First Five Year Plan, and the adoption of socialistic pattern of society
by the Parliament paved the way for the Industrial Policy Resolution, 1956. It recognized the
role of SSI sector in providing employment opportunities, mobilizing local skills and capital
resources and in the process, integrating with large-scale industrial sector. The global economy
witnessed several structural changes in the 1990s. Markets have become more open and
competitive, economies have become more independent and developments in the sphere of
international trade and finance have altered the pace and pattern of international flow of
commodities and investment.2

CURRENT DEFINITION OF MICRO AND SMALL ENTERPRISES

Now in India, the small enterprises in the manufacturing sector are defined in terms of
investment in plant and machinery (excluding land and buildings), and further classified into
micro, small and medium enterprises.

____________
2
B. Erram Raju, “Fortifying Small Sector: The Challenges”, Indian Management, Vol.39, No.8,
August 2000, p.43.

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 50

In accordance with the provisions of Micro, Small & Medium Enterprises Development
(MSMED) Act, 2006, the Micro, Small and Medium Enterprises (MSME) are classified into two
groups

(a) Manufacturing Enterprises

(b) Service Enterprises

The limit for investment in plant and machinery / equipment for manufacturing / service
enterprises, as notified, vide S.O. 1642(E) dtd.29-09-2006 is as under:

MICRO ENTERPRISE:
A micro-enterprise is one where the investment in plant and machinery (the original cost
excluding land, building and items specified by the Ministry of MSME in its notification
No.S.O.1722 (E) dated october 5, 2006) does not exceed Rs.25 lakh.

SMALL ENTERPRISE:
A small enterprise is one where the investment in plant and machinery (see above) is
more than Rs.25 lakh but does not exceed Rs.5 crore.

MEDIUM ENTERPRISE:
A medium enterprise is one when the investment in plant and machinery (see above) is
more than Rs.5 crore but does not exceed Rs.10 crore.
The definition of MSMEs in the service sector is:
Micro-enterprise: investment in equipment does not exceed Rs.10 lakh.
Small enterprise: investment in equipment is more than Rs.10 lakh but does not
exceed Rs.2 crore
Medium enterprise: investment in equipment is more than Rs.2 crore but does not
exceed Rs.5 crore.

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 51

(a) MANUFACTURING ENTERPRISES

The enterprises engaged in the manufacture or production of goods pertaining to any

industry specified in the first schedule to the Industries Development and Regulation Act, 1951)
or employing plant and machinery in the process of value addition to the final product having a
distinct name or character or use. The manufacturing enterprises are defined in terms of
investment in plant & machinery.

(b) SERVICE ENTERPRISES The enterprises engaged in providing or rendering of services

and are defined in terms of investment in equipment.

Manufacturing Sector
Enterprises Investment in plant & machinery
Micro Enterprises Does not exceed twenty five lakh rupees

Small Enterprises More than twenty five lakh rupees but does not exceed
five crore rupees

Medium Enterprises More than five crore rupees but does not exceed ten crore
rupees

Service Sector
Enterprises Investment in equipments
Micro Enterprises Does not exceed ten lakh rupees:

Small Enterprises More than ten lakh rupees but does not exceed two crore
rupees

Medium More than two crore rupees but does not exceed five crore
Enterprises rupees

Source: Ministry of Micro, Small and Medium Enterprises, Government of India, New
Delhi.

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 52

The last revision was with the enactment of the MSME Act, 2006 and the definition is a
part of the Act. The Act defined the MSME sectors overwriting the earlier concept of small-scale
industries of India.

The current classification marks enterprises in manufacturing sector with an investment

in plant and machinery of up to Rs 25 lakh as micro, up to Rs 5 crore as small and up to Rs 10
crore as medium enterprises. Similarly, the limits for enterprises providing services are set at Rs
10 lakh, Rs 2 crore and Rs 5 crore for micro, small and medium enterprises, respectively.

MSMEs IN INDIA AT PRESENT

(i) MANUFACTURING ENTERPRISES

The manufacturing enterprise are defined in terms of investment in plant &

machinery. The enterprises engaged in the manufacture or production of goods pertaining to any
industry specified in the first schedule to the Industries Development and Regulation Act, 1951)
or employing plant and machinery in the process of value addition to the final product having a
distinct name or character or use.

(b) SERVICE ENTERPRISES The enterprises engaged in providing or rendering of services

and are defined in terms of investment in equipment.

The promotion of small-scale industrial (SSI) sector becomes inevitable to countries like
India due to its inherent strength such as low capital intensity, short gestation period, the high
employment potential, capacity to induce dispersal of industrial activities and widening of the
entrepreneurial base. Advancements in social, economic and cultural life of human beings in the
previous and current centuries brought a significant improvement in the way people think and
live. The dawn of information age brought a notable change in the way goods, service and ideas
are created, delivered and consumed by the people. In the industrial world at present, more and
more manufactures try to communicate and convince more and more consumers. The complexity
and peculiarities of the industrial, commercial, economic and government activities reach new
peaks the manufacturers and consumers are found in all parts of the world, stretching beyond the
national boundaries. This warrants more innovative way of doing business in the 21st century.

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 53

MINISTRY OF SMALL SCALE INDUSTRIES

The Ministry of Small Scale Industries (SSI) is a defunct Indian government ministry. It
was merged with the Ministry of Agro and Rural Industries to form the Ministry of Micro, Small
and Medium Enterprises. The ministry was tasked with the promotion of micro and small
enterprises (MSEs). The Ministry of Small Scale Industries and Agro and Rural Industries
(SSI&ARI) was created in October 1999. In September 2001, the ministry was split into the
Ministry of Small Scale Industries (SSI) and the Ministry of Agro and Rural Industries (ARI).

The Ministry of Small Scale Industries merged with the Ministry of Agro and Rural
Industries to form the Ministry of Micro, Small and Medium Enterprises in 2007. The Small
Industries Development Organization (SIDO) was under the control of the ministry, as was the
public sector undertaking National Small Industries Corporation Limited (NSIC).

The small scale industrial units though seem to be small, when considered individually,
have emerged as a dominant force that directs the growth of the economy of a country. The
contributions of the small scale industry in different economies, in terms of share to total
establishment, share of output, share of employment and share of export are given in Table 3.13

__________________________
3
A.P. Pandey and Shivesh “Indian SMEs and their uniqueness in the Country, Munich Personal
REPEC Archive, 06. December 2007.

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 54

TABLE 3.1

CONTRIBUTION OF SSI

Share Share
Share of total Share of Criteria for
S.No Country of of
establishment employment recognition
output exports
1. India 95% 40% 45% 35% Fixed assets

2. U.S.A 98% N.A 53% N.A Employment

3. Japan 99% 52% 72% 13% Employment

Paid up capital
4. Taiwan 97% 81% 79% 13%
Assets & Sales

Fixed assets &

5. Singapore 97% 32% 58% 16%
employment

6. Korea 90% 33% 51% 40% Employment

Shareholders
7. Malaysia 92% 13% 17% 15% funds &
Employment

8. Indonesia 99% 36% 45% 11% Employments

Source: Dr. Pandey and A.P. Shivesh “Indian SMEs and their uniqueness in the Country,
Munich Personal REPEC Archive, 06. December 2007.

The above table makes it clear that the SSI sector in India is contributing better than
Singapore, Korea, Malaysia and Indonesia in terms of share of output. Further in terms of share
of exports, the small scale industries in India outperformed the countries like Japan, Taiwan,
Singapore, Malaysia and Indonesia.

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 55

The fast growth of production, transport and communication technologies paved the way
for the development of various industries at different levels of operation. Increase in population
and industrial activities in different countries lead to the formation of industrial units of all sizes,
namely, large, medium, small and micro.

Primarily, depending on the level of operation, the industrial units are classified under
three sectors, namely, large scale, medium scale and small scale sector. For the purpose of such
classification different countries follow different yardsticks. In Indian context, a small scale
enterprise is broadly defined in terms of the value of investment in fixed assets in plant and
machinery, whether held on ownership terms, on lease, or in hire purchase, is Rs. 25 Lakhs to
Rs. 5 Crore in case of manufacturing units and Rs. 10 Lakhs to Rs. 2 Crore in case of service
units.

According to United Nations Industrial Development Organization, UNIDO, SME

contribute to over 55% of GDP and over 65% of total employment in high income countries.
SMEs account for over 60% of GDP and over 70% of total employment in low income countries.
They contribute about 70% of GDP and 95% of total employment in middle income countries.4
In the last decade of 20th century, SSI sector contributed 7% to India’s GDP.

In marketing the products and services, the small scale industrial units face many
difficulties like, lack of customer awareness, adoption of latest marketing techniques, availability
of adequate finance to support marketing, dissemination of information on product offerings to
customers, higher price due to increased cost of products due to small scale production.

It is estimated that this sector has been contributing about 40% of the gross value of output
produced in the manufacturing sector and the generation of employment by the small-scale
sector is more than five times to that of the large scale sector. This clearly shows the importance
of small scale industries in the economic development of the country.

__________________________

4
http://www.thefreelibrary.com/The Importance of Small and medium Enterprises in Economic
Development.

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 56

The small scale industries have been playing an important role in the growth process of Indian
economy since independence inspite of stiff competition from the large sector and not very
encouraging support from the government.

Based on the data compiled by the Ministry of MSME (Micro, Small and Medium
Enterprises), the number of small scale enterprises in India, employment, percentage share in
total GDP and exports for the periods from 2000 - 01 to 2010 – 11 are given in table 3.2.5

TABLE 3.2

CONTRIBUTION BY MICRO SMALL AND MEDIUM ENTERPRISES

Year No. of Units Production Employment Exports

(in Lakhs)* (Rs. in (in Lakhs)* (Rs. in
Crores)* Crores)#
2001 – 02 105.21 2,82,270 249.33 71244
2002 – 03 109.49 3,14,850 260.21 86013
2003 – 04 113.95 3,64,547 271.42 97644
2004 – 05 118.59 4,29,796 282.57 124417
2005 – 06 123.42 4,97,842 299.85 150242
2006 – 07 261.01 7,09,398 594.61 182538
2007 – 08 272.79 7,90,759 626.34 202017
2008 - 09 285.16 8,80,805 659.35 NA
2009-10 298.08 9,82,919 695.38 NA
2010-11 311.52 10,95,758 732.17 NA
Sources: Annual Report, 2011-12, Ministry of Micro, Small and Medium Enterprises,
www.msme.gov.in Hand book of Statistics on Indian Economy (2011), Reserve Bank of India.

___________________

5
Shambhu Ghatak, Micro, Small and Medium Enterprises in India: An Appraisal,
shambhughatak@yahoo.com

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 57

From the above Table, it is observed that the total number of Small Scale Industries in
India has increased from 118.59 lakhs in 2004-05 to 311.52 lakhs in 2010-11. Coming to the
production and employment front also, there has been a steady increase in the over all
performance from Rs. 429796 crores and 282.57 lakh persons in the year 2004-05 to Rs.
10,95,758 crore and 659.38 lakh persons in 2010-11 respectively. The export front from SSI
Sector was Rs. 124417 crore in 2004-05, which increased to Rs. 202017 crore in 2007-08. From
the above data it is to be found that the percentage increases in number of SSIs i.e., 140.46 per
cent which results more or less the same in the percentage of employment i.e., 133.34 per cent.
This indicates the standard of living of the people some what extent can be raised by the increase
in number of SSI units by proving employment which in turn result the increase in national
economy.

The Report of Prime Minister’s Task Force on Micro, Small and Medium Enterprises,
Government of India, January 2010 states SSI units contribute 8 per cent of the country’s GDP,
45 per cent of the manufactured output and 40 per cent of our exports.6 The total number of
working enterprises, including unregistered units, during the year 2006-07 was 2,61,00,797. It
provided employment to 6,03,22,199 Units. Of them, 15,52,490 units were registered and made
a gross output of Rs.7,09,397,613 Crores.7

In the liberalized economy, the small scale industrial units need to strive hard to compete
and succeed as against large enterprises. They face a series of challenges from production,
marketing, financing, administration and growth point of view. A business has two and only two
basic functions: Marketing and Innovation. Marketing and Innovation produce results, all the rest
are costs.8 Marketing is the core business activity that makes a business unique among the
various activities of human beings.

___________________

6
T.K.A. Nair, Report of Prime Minister’s Task Force on Micro, Small and Medium Entrprises,
Government of India, January 2010,p.1.

7
Ibid.,pp.169-171.

8
Philip Kotler: “Marketing Insights from A to Z “, Wiley & Sons, 2003, p.37.

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 58

Marketing is the crucial area where small scale industrial units face many problems relating to
supply to the government departments, procurement of raw materials at right cost, storage,
display accessing international market.9

The industrial sector in Tamil Nadu consists of 5,57,761 micro, small and medium
enterprises in 2007-08. These units provide employment to 39,46,263 persons with a capital
investment of Rs.1,96,36,6406 lakhs. The production by these enterprises was Rs.1,14,71,946.10
Various studies were made by academicians and researchers relating to the different aspects of
small scale industries such as growth, role of promotion and government bodies, policy aspect,
finance, personnel management, marketing and administration.

The micro, small and medium enterprises (MSMEs) play a pivotal role in the economic
and social development of the country, often acting as a nursery of entrepreneurship. They also
play a key role in the development of the economy with their effective, efficient, flexible and
innovative entrepreneurial spirit. The MSME sector contributes significantly to the country’s
manufacturing output, employment and exports and is credited with generating the highest
employment growth as well as accounting for a major share of industrial production and exports.

MSMEs have been globally considered as an engine of economic growth and as key
instruments for promoting equitable development. The major advantage of the sector is its
employment potential at low capital cost. The labour intensity of the MSME sector is much
higher than that of the large enterprises. MSMEs constitute more than 90% of total enterprises in
most of the economies and are credited with generating the highest rates of employment growth
and account for a major share of industrial production and exports. In India too, MSMEs play an
essential role in the overall industrial economy of the country.

___________________

9
Ibid., p.67.

10
Tamil Nadu Statistical Handbook, 2011.p.6.

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 59

In recent years, the MSME sector has consistently registered higher growth rate compared with
the overall industrial sector. With its agility and dynamism, the sector has shown admirable
innovativeness and adaptability to survive the recent economic downturn and recession.

The MSME sector in India is highly heterogeneous in terms of the size of the enterprises,
variety of products and services, and levels of technology. The sector not only plays a critical
role in providing employment opportunities at comparatively lower capital cost than large
industries but also helps in industrialization of rural and backward areas, reducing regional
imbalances and assuring more equitable distribution of national income and wealth. MSMEs
complement large industries as ancillary units and contribute enormously to the socio-economic
development of the country.

GROWTH AND PERFORMANCE OF MICRO, SMALL AND MEDIUM

ENTERPRISES (MSMEs)

The micro, small and medium enterprises (MSMEs) sector contributes significantly to the
manufacturing output, employment and exports of the country. It is estimated that in terms of
value, the sector accounts for about 45 per cent of the manufacturing output and 40 per cent of
the total exports of the country. The sector is estimated to employ about 595 lakh persons in over

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 60

261 lakh enterprises throughout the country. Further, this sector has consistently registered a
higher growth rate than the rest of the industrial sector.
There are over 6000 products ranging from traditional to high-tech items, which are being
manufactured by the MSMEs in India. It is well known that the MSMEs provide good
opportunities for both self-employment and wage employment.

Source: - Final Report of the Fourth All India Census of Micro, Small & Medium Enterprises
2006-07: Registered Sector.

COMPARISON OF THE MICRO AND SMALL ENTERPRISES (MSEs)

SECTOR WITH THE OVERALL INDUSTRIAL SECTOR

The MSE sector has maintained a higher rate of growth vis-à-vis the overall industrial sector.
Comparative growth rates of production for both the sectors are given in the Table below

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 61

TABLE 3.3
COMPARATIVE DATA ON GROWTH RATES OF MSE SECTOR GROWTH RATES (%)

Year Growth rates of SSI Over all Industrial Sector

Sector
[2004-05 base IIP(%)]
2004-2005 10.88 8.40

2005-2006 12.32 8.00

2006-2007 12.60 11.90

2007-2008 13.00* 8.70

2008-2009 ** 3.20

2009-2010 ** 10.50

2010-2011 ** 7.80

* : Projected, IIP – Index of Industrial Production.

# : Source- M/o Statistics and PI website- http://www.mospi.nic.in
** : Due to revised definition of MSMEs Sector, methodological revisions are under progress.

Number of Enterprises in MSMEs Sector

The number of micro, small and medium enterprises in the year 2006-2007 was 267.12,
2007-08 was 285.16 and 2010-11 was 311.52. The following figure explains the increased
number of micro, small and medium enterprises from the year 2006-07 to 2010-11.

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 62

* Projected data for the year 2009-10 to 2010-11.

The above chart shows that in the year 2010-11 the number of micro, small and medium
enterprises increased to 311.52 lakhs.

Employment in MSMEs Sector

The employment in MSME sector is presented in the following figure.

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 63

* Projected data for the year 2009-10 to 2010-11.

The above figure shows that the number of employment in MSME sector has
increased from 2006 as 595.66 to 732.24 lakh in 2010-11.

Production in terms of Gross Output in MSMEs Sector

The following figure explains the production details of MSME sector from the year 2006-
07 to 2010-11.

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 64

* Projected data for the year 2009-10 to 2010-11.

The above figure shows that the production of MSME sector has increased from
Rs.709398 in the year 2006-07 to Rs.1095758 in 2010-11.

ESTIMATES OBTAINED FROM REGISTERED MSMES

SIZE OF THE REGISTERED MSMES SECTOR

The size of the registered MSMEs sector is estimated to be 15.64 lakh. Of the total
working enterprises, the proportion of micro, small and medium enterprises were 94.94%, 4.89%
and 0.17% respectively. This comprises 67.10% manufacturing enterprises and 32.90% services
enterprises. About 45.23% of the enterprises were located in rural areas.

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 65

Small industries sector (MSEs) is undoubtedly the engine of employment and income
generation. They help to empower the masses who have relatively less access to resources. The
interest in development of SSI was aroused only when it was realized that the development of
large scale industries in India was considered a difficult task. The constraints of capital, skilled
manpower and raw materials aided and abetted such difficulty. In a developing and
predominantly agricultural economy like India, small industries can exercise a stabilizing
influence on the vagaries and uncertainties of a rural economy, besides contributing to its
prosperity.12

________________________________

12
Valsamma Antony, “The Prospects and Growth of SSI in India – An Overview”, Southern
Economist, Vol.41, No.1, May 1, 2002, p.23.

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 66

The SSI sector enjoys the status of priority sector for seeking financial and non-financial
assistance from the Central Government, State Governments and other non-Government
organizations.

Various parameters have been laid down in different countries to describe the small-scale
industries. These parameters have changed continually from time to time mainly due to
operational consideration and partly to the changing needs of economic and social conditions. In
most of the countries of the world, the criterion for defining a small industry is based on the size
of employment.13 In present world all these players, due to liberalization policies adopted by
many countries, connect with each other freely to meet, convince, sell and satisfy consumers.
Every one of them focuses on their strength in influencing their prospective consumers.

PROFILE OF VIRUDHUNAGAR DISTRICT –THE STUDY AREA

In this section, an attempt is made to describe the profile of the study area, Virudhunagar
District, in terms of Origin, Location, Physical Features, Administrative set up, Area
Classification on the basis of Industrial Backwardness, Human Resources, Agricultural
Resources, Forest Resources, Trade and Commerce, Industries and other Infrastructure Facilities.
Tamil Nadu is situated in southern part of the Indian sub-continent. It is bound on the
north by Andhra Pradesh and Karnataka States, on the south by the Indian Ocean, on the west by
the State of Kerala and the Western Ghats and on the east by the Bay of Bengal. Tamil Nadu
covers a little over 1,30,000 sq.km., representing about four per cent of India’s geographical
area. In terms of area, Tamil Nadu ranks eleventh in the country.

________________________________

13
S.M.Pattanaik, Development Strategy for Small Industries, Himalaya Publishing House,
Mumbai, 1988, p.1.

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 67

TAMIL
L NADU MAP
M

A
According to the 2001 ceensus, Tamil Nadu had a population of 62.1 milllion which makes
m
it the sevventh largesst populous state in thee country. Tamil
T Nadu is one of the
t most dennsely
populatedd states in Inndia, with 3778 persons per
p square kiilometer, as against
a the all-India
a figu
ure of
324. As regards the density of poopulation, Tamil
T Nadu stands
s fifth among
a the Sttates of Indiaa.

hunagar – History - Hi
Virudh
StoryVirudunagar, a municipal town
t and thee headquarteers of Virudhhunagar Disttrict, is locatted at
a distance of 45 Kmss South-Wesst of Maduraai. This placee was once referred
r to ass 'Virudupattti'. In
the beginnning of 200th century A.D.,
A Viruduupatti was one
o among the six impportant places of
Ramanatthapuram Diistrict. Due to the rapidd growth in the field off trade and education,
e itt was
renamed as 'Virudunnagar' on 29tth October 1923.
1 The teerm 'virudu' means 'awarrd' in Tamil. The

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 68

people of this community migrated to improve their business status and settled in Virudunagar
during 19th century A.D. Virudhunagar exports all kinds of oil to Dubai and Srilanka and also
exports cotton, chilli, spices, cardamom to USA and Singapore. Virudhunagar is a famous
business centre without markets. The business people of Virudhunagar play an important role in
price fixation of consumer products. Hence, there is a popular saying, "Virudunagar produces
nothing but controls everything".

Industrial Glance
An analysis of the growth of small scale sector reveals that the significant change in
structure and pattern of the industrial development have taken place within the small scale sector
in Virudhunagar district. Promising changes in structure and pattern of industries have made a
noticeable impact on the production front. Virudhunagar District has the total geographical area
of 4,245 sq. km. The district has got 2 revenue divisions, 6 municipalities, 11 blocks and 7
taluks.

BLOCKWISE INVESTMENT CLASSIFICATION OF SSI AS ON 31-12-2009

The particulars regarding the investment classification of small scale industrial units on
31.12.2009 in Virudhunagar district are given in the following table.

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 69

TABLE 3.4

CLASSIFICATION OF SSI UNITS BLOCKWISE

Block Name Investment in % to total

lakh

Aruppukottai 354 3.2

Kariapatti - -
Narikudi - -
Rajapalayam 3,158 28.3
Satur 930 8.3
Sivakasi 5,800 52
Srivilliputhur 179 16
Tiruchuli - -

Vembakottai 177 1.6

Virudhunagar 568 5.1
Watrap - -

Total 11,166 100

Source: District Industries Centre, Virudhunagar.

Out of 11 blocks in Virudhunagar District only 7 blocks have made their investment in
small scale industries. Out of 7 blocks, investment in Sivakasi amounts to 5,800 lakh rupees,
Aruppukottai amounts to 354 lakh rupees, and Virudhunagar amounts to 568 lakh rupees. From
this table it is inferred that the investment in Sivakasi block is high which amounts to 5,800 lakh.

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 70

PRODUCTWISE MICRO AND SMALL ENTERPRISES IN VIRUDHUNAGAR

DISTRICT UPTO 28.03.2009
The industry group activities are classified into food, textiles, jute, woolen products,
chemical products, mineral products etc. The details about the small enterprises registered in the
year 2008-09 based on the industry group are listed in the Table 3.5.

TABLE 3.5
SSI UNITS REGISTERED UPTO 2009

Sl.No Classification No. of

Units

1. Food Products 785

2. Beverages, Tobacco and Tobacco Products 31
3. Cotton Textiles 1,057
4. Wool, Silk, Synthertic fibres 137
5. Jute, Hemp, Mest Textiles 16
6. Hosiery Garments 2,500
7. Wood products 1,601
8. Paper and paper products 2,497
9. Leather Products 76
10. Rubber Products 638
11. Chemical and chemical products 4,171
12. Metallic Mineral Products 319
13. Basic Metal Products 123
14. Metal product 450
15. Machinery and parts 227
16. Electrical Products 149
17. Transports and Equipments 269
18. Miscellaneous Manufacturing 1,145
Total 16,191
Source: District Industries Centre, Virudhunagar.

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 71

Out of the total 16,191 industries registered under the DIC upto the year 2009, 785 food
industrial units, 1057 cotton textile units, 2,500 hosiery mills, 1,601 wood industrial units, 2,497
paper industrial units, and 4,171 chemical industrial units are the total number of small scale
industrial units registered with the DIC upto the year 2009. It is clear from this table that more
number of chemical product units are registered with the DIC upto the year 2009.

BLOCKWISE INVESTMENT AND EMPLOYMENT OF SSI UNITS AS ON 31.3.2010

Blockwise investment and employment in SSI units of Virudhunagar District are
presented in table 3.6. Out of 11 blocks in Virudhunagar District small scale industries are
operated only in 7 blocks. The investment and employment opportunities provided by these 7
blocks are listed in the table 3.6

TABLE 3.6
BLOCKWISE INVESTMENT AND EMPLOYMENT ON 31.3.2010

Small
Block Name Investment Employment
Sl.No No.
Rs. In lakhs No.
1. Aruppukottai 2 3030.75 474
2. Kariapatti -- 54.65 54

3. Narikudi 233 -- --

4. Rajapalayam 137 5,970.7 894

5. Sattur 384 3,460.8 1,551

6. Sivakasi 113 9,676.5 2,757

7. Srivilliputhur 2 2,854.5 315

8. Thiruchuli 2 54.14 26

9. Vembakottai 16 60.17 24

10. Virudhunagar 6 417.65 64

11. Watrap -- --- --
Total 1,016 25,579.98 6,159

Source: District Industries Centre, Virudhunagar

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 72

Out of 6,159 employees employed in small scale industries in the 9 blocks, more
number of employees are employed in the order of Sivakasi 2757 employees, followed by Sattur
1551 employees and Rajapalayam 894 employees.Out of 9 blocks, investment in Sivakasi
amounts to Rs.9,676 lakh rupees, Aruppukottai amounts to 3030 lakh rupees, Sattur amounts to
3,460 lakh rupees, Srivilliputhur amounts to 2854 and Virudhunagar amounts to 417.65 lakh
rupees. From this table it is inferred that the more employment opportunities is created by
Sivakasi block and the investment in Sivakasi is high which amounts to Rs.9,676 lakh.

INDUSTIRES REGISTERED UPTO THE YEAR 2010

The industry group activities are classified into food, textiles, jute, woolen products,
chemical products, mineral products etc. The details about the enterprise registered in the year
2009-10 based on the industry group are shown in the Table 3.7

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 73

TABLE 3.7

SSI UNITS REGISTERED UPTO 2010

Sl.No Classification No. of

Units

1. Food Products 883

2. Beverages, Tobacco and Tobacco Products 31
3. Cotton Textiles 1,054
4. Wool, Silk, Synthertic fibres 137
5. Jute, Hemp, Mest Textiles 21
6. Hoisery Gaments 2,451
7. Wood products 1,558
8. Paper and paper products 3,648
9. Leather Products 73
10. Rubber Products 700
11. Chemical and chemical products 3,743
12. Metallic Mineral Products 333
13. Basic Metal Products 101
14. Metal product 642
15. Machinery and parts 222
16. Electrical Products 141
17. Transports and Equipments 394
18. Miscellaneous Manufacturing 707
Total 16,839
Source: District Industries Centre, Virudhunagar

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 74

It could been seen that out of the total 16,839 industries registered with the DIC upto the
year 2010, more number of SSI units are registered under the industry group, in the order of
chemicals, paper products, hosiery garments, wood products and cotton textiles. It is inferred
from the above table that more number of chemical product industries are registered in the DIC
upto the year 2010.

TWO DIGIT CODE FOR INDUSTIRAL GROUP

There are a number of industries registered with the District Industries Centre for the
purpose of receiving subsidy to their business. Those industries need not manufacture same type
of product. Each enterprise is involved in producing different type of product. The District
Industries Centre differentiates the various productivity functions of the SSI units with two digit
code number like 12, 13,29,31,41, and 42.
From that some of the product details and code wise information are presented in the
following table.
TABLE 3.8
TWO DIGIT CODE DETAILS

S.No Two digit Product

code
1 12 Fruits, Vegetables, Cerals& Pulses and other vegetables

2 13 Sugar, Molasses, Khandsari, Chocolate, cocoa etc.

3 15 Beverages, Tobacco & Pan Masala, vinegar, Soft drinks,

Mineral water etc.

4 29 Mineral Products.

5 31 Chemical Products

6 41 Leather products

7 42 Rubber products

8 54 Pulp of wood & other Fibroses Materials

9 61 Textile and Textile articles, silk and silk products

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 75

SSI UNITS REGISTERED DURING THE YEAR 2009-2010

A large number of enterprises is registered with the District Industries Centre year by
year. The following table shows the number of SSI units registered during the year 2009-2010
along with the details about industry group. The industry group activities are classified into
food, textiles, jute, woolen products, chemical products and mineral products. The details about
the enterprises registered in the year 2009-10 based on the industry group are listed in the Table
3.9.
TABLE 3.9

SSI UNITS REGISTERED IN THE YEAR 2009-2010

Industry group No. of units %

Food 49 6.8

Textiles 50 6.9

Jute, Hermp, Mest, Textiles 2 0.3

Hosiery Garments 32 4.4

Woolen products 9 1.3

Paper products & painting 241 33.5

Leather products 3 0.4

Rubber products 28 3.9

Chemical products 72 10

Mineral products 23 3.2

Metal products 141 19.6

Machinery parts 2 0.3

Electrical machinery parts 7 0.9

Transport and Equipment 5 0.7

Miscellaneous Industries 56 7.8

TOTAL 720 100

Source: District Industries Centre, Virudhunagar

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 76

It is inferred from the table that more number of paper products and printing units (241)
were registered with the DIC during the year 2009-2010.

WORKERS EMPLOYED IN SSI UNITS DURING 2009-2010

Workers employed in the SSI units industrywise are presented in the following table.

TABLE 3.10

WORKERS EMPLOYED IN SSI UNITS

Industry group No. of % to total

workers
Food 4,292 6.6

Textiles 4,852 7.4

Jute, Hemp, Mest, Textiles 93 0.1

Hosiery Garments 3,843 5.8

Woolen products 2,884 4.4

Paper products & painting 13,739 21

Leather products 301 0.5

Rubber products 1,742 2.7

Chemical products 26,740 40.8

Mineral products 1,147 1.8

Metal products 1,249 1.9

Machinery parts 494 0.8

Electrical machinery parts 333 0.5

Transport and Equipment 1,085 1.7

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)

 77

TABLE 3.10 (Contd..,)

Basic metal product 176 0.3

Beverage & Tobacco 82 0.1

Synthetic fiber wool silk 297 0.5

Miscellaneous Industries 2,016 3.1

TOTAL 65,365 100

Source: District Industries Centre, Virudhunagar

It is clear from the above table that, more number of workers are employed in the
chemical products units (26,740), followed by paper products and cotton textiles.

Print to PDF without this message by purchasing novaPDF (http://www.novapdf.com/)