CHAPTER-I

INTRODUCTION
INTRODUCTION
BACKGROUND

Since the time of the independence in 1947, a significant feature of the Indian

economy has been the rapid growth of the small industry sector. The small industry

sector is considered to have a major role in the Indian economy due to its 40 percent

share in the national industrial output along with an 80 percent share in industrial

employment and nearly 35 percent share in exports. The small scale industries sector

has been assigned an important role in the industrialization of the country by the

previous and current governments of India.

There are no clear official definitions of small. Small scale industries are usually

distinguished from the large-scale and medium-scale industries on the basis of size,

capital resources and labor force in the units. At one time the government of India had

grouped small-scale industrial undertakings into two categories - those using power

but employing less than 50 persons and those not using power and employing less

than 100 persons. However, capital investment on plant and machinery by units is

considered as a main criteria for distinguishing between the large and small industries.

An industrial unit can be classified as a small-scale unit only if it meets the capital

investment limits set by the government of India (GoI). These limits have been

steadily increased over the years. In 2005, the investment limit for small-scale

industry (SSI) was raised from $6 million to $30 million. Production units that are

ancillary to large-scale units are also considered as small if they sell not less than 50

percent of their manufactured products to one or more industrial units.

However, there is a clear distinction between the traditional and modern small

industries. The traditional small industries include khadi and handloom, village
industries, handicrafts, sericulture, coir, etc. Modern small industries manufacture a

wide variety of goods from simple items to sophisticated items such as television sets,

electronics control system, various engineering products, particularly as ancillaries to

large industries. The traditional small industries are highly labor-intensive, while the

modern small industries use highly sophisticated machinery and equipment. The term

small-scale industries is mostly used to represent modern small industries. The SSIs

manufacture many items which include rubber products, plastic products, chemical

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

items, transport equipment, electronic components and equipments, automobile parts,

bicycle parts, instruments, sports goods, stationery items and clocks and watches. The

small scale industry sector output contributes almost 40% of the gross Industrial

value-added 45% of the total exports from India (direct as well as indirect exports)

and is the second largest employer of human resources after agriculture. The

development of Small Scale Sector has therefore been assigned an important role in

India's national plans.

In order to protect, support and promote small enterprises as also to help them become

self-supporting, a number of protective and promotional measures have been

undertaken by the Government.

The promotional measures cover

Industrial extension services institutional support in respect of credit

facilities, provision of developed sites for construction of sheds, provision of training

facilities, supply of machinery on hire-purchase terms,

3 Assistance for domestic marketing as well as exports, special incentive for setting

up enterprises in backward areas etc. technical consultancy & financial assistance for

technological up gradation.

While most of the institutional support services and some incentives are provided by

the Central Government, others are offered by the state governments in varying

degrees to attract investments and promote small industries in varying degrees to

attract investments and promote small industries with a view to enhance industrial

production and to generate employment in their respective States.

The small-scale industries (SSI) constitute one of the vibrant sectors of the Indian

economy in terms of employment generation, the strong entrepreneurial base it helps

to create and its share in industrial production and exports. The Government created

the Ministry of Small Scale Industries and Agro and Rural Industries (SSI&ARI) in

October, 2008 as the nodal Ministry for formulation of policy and co-ordination of

Central assistance relating to promotion and development of the small scale industries

in India. The Ministry of Small Scale Industries and Agro and Rural Industries

(SSI&ARI) was bifurcated into two separate Ministries, namely, Ministry of Small

Scale Industries and Ministry of Agro and Rural Industries in September, 2010.

Taking into account the high potential for growth in the SSI sector in terms of output,

employment and exports, the role of the Ministry of Small Scale Industries is to
strengthen the SSI sector, to enable it to remain competitive in market-led economy

and generate additional employment opportunities. For achieving these objectives, the

endeavor of the Ministry is to provide the SSI sector proper and timely inputs like:

1. Adequate credit from financial institutions/banks;

2. funds for technology up gradation and modernization;

3. adequate infrastructure facilities;

4. Modern testing facilities and quality certification laboratories;

5. Modern management practices and skill up gradation through advanced training

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

industries sector.

Statistics on SSIs

The total number of SSI units increased from 2.082 million units in 2000-01 to 2.724

million units in 2004-05. During the same period, at constant prices, the production

increased from nearly $1.6 billion to approximately $2.2 billion. The total number of

persons employed in SSIs increased from 12.9 million to 15.2 million. According to

Second All-India Census of Registered SSI units, 42 percent of the units were

functioning in rural areas, 48 percent in urban areas and 10 percent in metropolitan

areas. 62.2 percent of the units were located in backward areas. The rate of growth of

this sector has been higher as compared to the whole industrial sector.

In terms of the above mentioned development, the progress of the SSI sector is

considered impressive by experts. But the SSIs are mostly effected by a number of

problems that have hampered its absolute gwoth. According to the Seventh Five Year
Plan (1985-90) the growth of the SSIs has been constrained by various factors

``including technological obsolescence, inadequate and irregular supply of raw

materials, lack of organized market channels, imperfect knowledge of market

conditions, unorganized nature of operations, inadequate availability of credit,

constraint of infrastructure facilities including power etc. and deficient managerial

and technical skills.''

Small Industries Development Bank of India (SIDBI)

The Small Industries Development Bank of India (SIDBI) was set up by GoI under a

special act of the Parliament in April 1999. It is a wholly owned subsidiary of the

IDBI. SIDBI has a network of 33 offices (5 regional and 28 branch offices). The Bank

was instituted to ensure the increased flow of financial assistance to SSIs. It assists the

SSIs through direct assistance schemes as well as indirect assistance such as

refinancing.

Role and Problems of Small Units in India

As industrialization gathered momentum so did the increase in small-scale industries.

Small units play an important role in the Indian economy, as they are labour intensive

and create job opportunities. Small companies are defined as those with less than US

$180,000 in capital equipment (US-AEP, 2005). They offer a higher productivity of

capital than capital intensive enterprises, as they have low investment per

worker. They help in dispersal of industries, rural development, and the

decentralisation of economic power. All this is required to increase and disperse

economic growth.
In addition, small companies support entrepreneurial talent and skills, stimulate

personal savings, and help in developing innovative and appropriate indigenous

technology, providing dynamism and contributing to competition (Rajendran,

1989). Therefore these industries are supported by the government and have been

actively encouraged; no public or private enterprise with more than 100 employees

has been allowed to go out of business (US-AEP, 2005). The government to support

this sector, not only for employment generation but also to enhance their competitive

strength has undertaken several policy initiatives and procedural simplifications. The

government has also provided measures such as greater infra-structural support, more

and easier availability of credit, lower rates of duty, technology up-gradation,

assistance to build entrepreneurial talent, facilities for quality improvement, and

export incentives (Parthasarathy, 2005).

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

and employment are significant. About 3 million SSI units employing nearly 16.7

million persons account for 35% of India's total exports and about 40% of industrial

manufacture (SIDBI report on small scale industries sector, 2008, 2008, p. 6). In real

terms, the small-scale sector recorded a growth rate of 10.1% in 2003-04 as against

7.1% in 2002-03 and 5.6% in 2001-02. By the year 2025, if not controlled, this sector

will grow even more rapidly (Parthasarathy, 2005).

 The government’s prime role has been to encourage growth of these industries,

often neglecting environmental considerations. Industrial effluent largely comes

from the 3 million small- and medium-sized units that are scattered throughout the

country, particularly in the production of paper, sugar, leather, and

chemicals. Unfortunately, only about half the medium- to large-scale industries

have partial or complete effluent treatment. Fourfold industrial growth from 1963
 to 2000 resulted in sixfold growth in toxic releases. Heavy industries like iron and

steel producers contribute nearly 70% of the toxic wastes released but only 20%

of industrial output. Industrial disposal of polluted effluent occurs via open drains

into streams and reservoirs or through underground injection. Most industrial

estates lack wastewater treatment systems (US-AEP, 2005).

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

problems. One is internal, that is, the techno-managerial and financial problems

that they encounter, and the other is the external problems that they confront due

to non-compliance with regulatory and legislative measures.

Techno-Managerial and Financial Problems

Small industries by comparison with large industries lack environmental commitment,

technical expertise in environmental management, and the financial capabilities to

address environmental problems. Nor do they have standards or effective treatment

opportunities and services (Nyati, 1988). Interestingly, one would imagine that

because small industries are heavily supported by the government, availability of

finance and obtaining finance for pollution control measures should not be a problem.

Small industries also lack additional space for pollution control facilities. There are

difficulties in obtaining the technical assistance of knowledgeable consultants. Since

most of the units are dispersed, they find it difficult to come together for a joint or

common treatment plant. The concern of depressed profit margins and decline in

competitiveness prevents these units from using pollution control measures. More

emphasis is laid on new investments, production, and other return oriented

opportunities. Soft loans for pollution control measures are not lucrative. There are

subsidies offered for investments in pollution control as incentives, but the impact of
these incentives on these units is little or nothing, for they do not alter the cost-benefit

analysis in favour of pollution control investments (Nyati, 1988).

 CHAPTER – 2
LITERATURE REVIEW
 LITERATURE REVIEW

Due to rapid pace of technological developments and intensified competition, small

and medium enterprises in India have started realising the significance of improving

their productivity levels more than ever before. In this context, the present chapter

reviews the literature relating to the study so as to formulate the problem precisely

and develop a rationale for its undertaking. The basic objective is to indicate in a

general way the type of work done in this direction rather than to give exhaustive

review of all the research work done on the problem. The review of various studies

done in this chapter provides a broad spectrum about the productivity and efficiency

analysis of small scale industrial sector which would be helpful to design the

appropriate methodology for the present study.

Various empirical studies have been conducted from time to time to examine the

different aspects of growth pattern and performance of small scale industrial sectors in

India and in this context, important studies are reviewed below in a chronological

order. For this purpose, the chapter has been divided into three sections, Section -I

highlights the review of studies relating to the performance evaluation of small scale

industrial sector at All India level, whereas, Section-II focuses on the studies

pertaining to the performance evaluation of the small scale industrial sector at

regional level. However, the last section is concluding in nature and pinpoints the

rationale of undertaking the present study.

Habib (1972) through his study came to the conclusion that small scale industries play

an important role in the economic development by providing numerous chances of

income generation and improving the standard of living of the masses. Habib

emphasized that it is only the small scale sector through which economic prosperity
can reach the remotest sections of the society. From the very beginning since the

process of economic development started, the small scale sector has been providing

handsome employment opportunities to millions of job seekers in the country.

Further, small scale industries use local raw materials, employ local people and thus

help in generating employment opportunities for the community.

National Council of Applied Economic Research (1972) conducted a study to

examine the economies of selected number of small industrial units operating in

different parts of the country. A sample of 159 units spread over 22 industrial groups

was selected, of the selected units, 48 were manufacturing consumer products, 76

capital goods and 35 intermediate products. The study showed that besides other

problems, the under-utilisation of capacity among most of the units was due to the

problems of production as well as marketing. The problems of production were

closely associated with scarcity of raw material and inadequate finance. The problems

of marketing are by and large attributed to such factors as limited size of operation,

practically little or no control over quality, price and weak financial base, restricting

the scope for engaging in sustained sales promotion. The problem of sales is more

acute where the area of operation is large particularly in case of consumer products or

capital goods, where after-sale service is essential. In most of the cases the

entrepreneurs are found to be dependent on middlemen for the marketing of their

products.

Banerjee (1975) examined the relationship between capital intensity and productivity

in the context of Indian manufacturing industry. The analysis has been carried out for

manufacturing sector as a whole and five individual industries (viz. cotton textiles,

Jute textiles, sugar, paper and bicycle) by using ASI data for the period 1946-64. The

study highlighted that the performance of the manufacturing sector was sluggish over
the period 1946-64. While labour productivity showed a significant upward trend

during this period, but this sector did not indicate the presence of any ‘technical

progress’. The hypothesis of constant returns to scale was not rejected. It has been

found that elasticity of substitution between capital and labour is near unity in almost

all the industries.

The Vidarbha Industries Association (1976) made an empirical survey of sick units in

the region and dealt specifically with the major problem of finance, policies and

procedures of credit agencies as well as the difficulties that were being faced in

marketing. The study asserted that most of the difficulties of small scale sector arise

from financial, administrative control, frequent interest changes and recession in

demand these tends to make the units sick. Further, the requirements of credit of small

scale industries located in far away places are greater than those located at an

industrial centre because the former has to maintain higher inventories. The study

made specific observations on the low and weak equity base of the units, the

unrealistic gestation period allowed by state financial corporations, inadequate loans

by commercial banks and these factors emerged as the major causes of sickness in the

small scale sector. The study suggested that the moment a danger of sickness appears,

action should be initiated and dues of a sick unit should be converted into a long term

loan. The study also revealed that financial agencies have not been able to play their

role in the development of small scale sector in the under developed regions. It has,

therefore, been recommended to set up a regional development corporation which

may finance sick units and help them in marketing their products.

Jain (1980) discussed the increasing role of small scale industries in industrial

structure of the country along with export potential of small scale industries. The

various measures undertaken by the government agencies such as guidance formation,

financial support, export house scheme etc. to develop the formation of the consortia

for the benefit of the small industries have also been expressed. It has been observed

that the operational results of existing consortia may not be very substantial but

encouraging. Therefore, a potential of growth of such consortia look immensely

favourable.

Mehta (1980) attempted to analyse productivity trends for 27 Indian industries by

using ASI data for the period 1953-65. The results revealed that there was a

considerable diversity in the experience of different industries regarding trends of

labour and capital productivity. Labour productivity was found to have increased

significantly in industries like vegetable oil, chemical, glass and glassware and

insignificantly in matches, iron and steel and cement industries. However, capital

productivity has not increased appreciably, rather the reverse was true in most

industries. The total factor productivity of Indian manufacturing sector have declined

over a period of time. The study noticed that most industries exhibited the presence of

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

demonstrated that there were inter industry differences with respect to ease of capital-

labour substitution which primarily explained the inter industry growth differentials.

The elasticity of substitution was found to be significantly different from zero in

many industries.

Papola (1981) studied the impact of concessional finance on industrial development

and emphasised that in order to make concessional finance effective, it will be

necessary to plan and develop a minimum threshold level of industrial activity

preferably with strong inter-relationship between the financial institutions,

promotional institutions, state and district administration and potential industrial

entrepreneurs, especially for more backward districts. He further emphasised that

almost one half of the fixed and working capital requirements of the units studied

have been met by institutional financing and most of the fixed capital financing has

been met through concessional finance especially in the backward districts. Units

availing concessional finance have experienced a higher rate of growth in output than

those without it.

Amin (1999) focused on the regional spread and structural set up of small scale

industries in Gujarat and examine the regional share of small scale industries in the

industrial sector of the state. Further, the author attempt to make an overall

assessment of the performance of the industries among three homogenous regions of

the state during the period 1965-1985: the study found that the spread of small scale

industrial sector across the industrially homogenous regions is positively influenced

by basic economic characteristics of the concerned region. The pattern of regional

distribution of the SSI sector suggests the growth prospects of SSI sector over a

period of time.

PROBLEM CONTEXTS INDUSTRY/ ORGANIZATION/

PERSPECTIVES/ IMPLICATIONS

The Ministry of SSI designs policies, programmes, projects and schemes in

consultation with its organizations and various stakeholders and monitors their

implementation with a view to assisting the promotion and growth of small scale

industries. The Ministry also performs the function of policy advocacy on behalf of

the SSI sector with other Ministries/Departments of the Central Government and the

State and Union Territories.

The implementation of policies and various programmes/projects/schemes for

providing infrastructure and support services to small enterprises is undertaken

through its attached office, namely the Small Industry Development Organization

(SIDO) and the National Small Industries Corporation (NSIC) Ltd., a public sector

undertaking under the Ministry.

 CHAPTER -3
OBJECTIVES OF THE STUDY
 OBJECTIVES OF THE STUDY

This project is an attempt to do a conclusive research and analysis, which could lead

to charting out better future prospects for Small Scale Industries in India. In order to

achieve this primary objective we propose to move ahead in two-fold process. In the

first step we would analyze the problems and growth till date, which would serve as a

medium to bring out the realities of SSI in Indian economy and in the next step we

would go about analyzing the data collected and formulate future strategies for SSI.

In brief our research objectives can be broadly defined as:

 To bring out the average market review towards SSI

 To analyze the responses and find out the Govt and Individuals perception of

SSI.

 D To understand the concept of Entrepreneurship

 To understand its applicability to the small scale sector in India.

 To study the crtical role of entrepreneurship in Small Scale Industry in India

 To study the present status and future prospects of Small Scale Industry in

India

 To study the evolution of Special Economic Zones in India, with particular

reference to Small Scale Industry in India

 CHAPTER -4
RESEARCH METHODOLOGY
 RESEARCH METHODOLOGY

RESEARCH SAMPLING AND DESIGN

RESEARCH DESIGN

A research design is a framework or blueprint for conducting any marketing research

project. It details the procedures necessary for obtaining the information needed to

structure or solve marketing research problems.

Research Methodology defines the purpose of the research, how it proceeds, how to

measure progress and what constitute success with respect to the objectives

determined for carrying out the research study.

The appropriate research design formulated is detailed below.

Exploratory research: this kind of research has the primary objective of

development of insights into the problem. It studies the main area where the problem

lies and also tries to evaluate some appropriate courses of action.

The research methodology for the present study has been adopted to reflect these

realties and help reach the logical conclusion in an objective and scientific manner.

The present study contemplated an exploratory research.

TYPE OF RESEARCH DESIGN

The research design is of two types:

1. Exploratory Research

2. Conclusive Research
As the objective of this research is to derive a conclusion about problems and

prospects of SSI, the group will use the Conclusive Research Design for the desired

analysis.

Further, Conclusive Research is of two types:

1. Descriptive Research

2. Casual Research

As the mode of research for this project is a survey to analyze the Indian Market

rather than an experiment, the group will use Descriptive research for the analysis.

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

magazines, internet etc.

TOOLS AND TECHNIQES

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

graphs.

RESEARCH VARIABLES AND MEASUREMENT

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

 Bio-tech Industry

 Common Effluent Treatment Plant

 Corrugated Boxes

 Drugs and Pharmaceuticals

 Dyes and Intermediates

 Industry based on Medicinal and Aromatic plants

Plastic Moulded/ Extruded Products and Parts/ Components

 Rubber Processing including Cycle/ Rickshaw Tyres

 Food Processing (including Ice Cream manufacturing)

 Poultry Hatchery & Cattle Feed Industry

 Dimensional Stone Industry (excluding Quarrying and Mining)

 Glass and Ceramic Items including Tiles

 Leather and Leather Products including Footwear and Garments

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

process control; Analytical, Medical, Electronic Consumer & Communication

equipment etc.

 Fans & Motors Industry

 General Light Service(GLS) Lamps

 Information Technology (Hardware)

 Mineral Filled Sheathed Heating Elements

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

coils Wires & Cable Industry Auto Parts and Components Bicycle Parts

Combustion Devices/ Appliances Forging & Hand Tools

 CHAPTER-5
RESULT AND DISCUSSION
 DATA PRESENTATIONS AND FINDINGS

DATA COLLECTION

 The present study contemplated an exploratory research. Secondary data has

been used which is collected through articles, reports, journals, magazines,

newspapers reports prepared by research scholars, universities and internet.

DATA ANALYSIS.

 Analysis of data has been done with help of various statistical tools. There are

graph, tables and the percentages to get the current report.

LIMITATION OF THE RESEARCH

 As far as limitation are concerned present research work has

been compl eted in the face of following major constraints.

The date used in m y research study is secondary data.

 Latest data and information about the problem and prospects of

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

almost a decade.

PRESENTATION OF DATA

Statement showing All India cumulative number of SSI Units (SIDO) granted

Permanent Registration by the State/UT Directorates of Industries upto the Financial

Year
Position as on:02.07.2010
Sl. Name of the State Cumulative Number of SSI Units granted Permanent Registration upto:
No. State/Union 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
01. ANDHRA
Territory 112916 117132 121039 124950 128321 135738
02. ASSAM
PRADESH 19242 20721 21954 23136 24109 25503
03. BIHAR 101221 108148 114296 119107 123933 P 130903
04. GUJARAT 129455 141951 153497 164785 174899 185008
05. HARYANA 94462 98455 63623 53321 54375 88271
06. HIMACHAL 14015 14593 15232 15941 16602 17562
07. JAMMU &
PRADESH 25165 26363 28471 29387 30667 P 32040
08. KARNATAKA
KASHMIR 115353 124504 143073 150675 159944 169189
09. KERALA 133114 148275 166484 184166 202325 214019
10. MADHYA 233225 243481 256849 268741 277804 P 289042
11. MAHARASHTRA
PRADESH 98144 111129 123856 135016 143457 151749
12. MANIPUR 4928 5157 5314 5439 5588 5911
13. MEGHALAYA 2014 2166 2323 2514 2711 2868
14. NAGALAND 741 757 782 813 1059 1120
15. ORISSA 16623 17173 17931 18732 19513 20641
16. PUNJAB 145471 147563 149405 151180 152768 161598
17. RAJASTHAN 71479 74450 77047 80229 83651 88486
18. TAMIL NADU 202210 228936 257079 284943 313861 332011
19. TRIPURA 5833 5901 5946 6001 6058 6406
20. UTTAR 302557 323475 341788 361033 382027 P 402606
21. WEST BENGAL
PRADESH 145713 147462 149148 150327 151340 160087
22. SIKKIM 275 296 305 312 330 P 349
23. ANDAMA & 1038 1071 1116 1151 1180 1248
24. ARUNACHAL
NICOBAR 766 926 945 959 971 1027
25. CHANDIGARH
PRADESH 2880 2952 2965 3007 3042 3218
26. DADRA & 409 454 618 870 978 1035
27. DELHI
NAGAR HAVELI 25174 25284 25303 25306 25342 26807
28. GOA 5118 5278 5488 5761 5921 6263
29. LAKSHADWEEP 47 51 58 63 72 76
30. MIZORAM 3018 3515 3702 4028 4413 4668
31. PONDICHERRY 4209 4255 4484 4722 4873 5155
32. DAMAN & DIU 693 920 1135 1455 1507 1594
ALL-INDIA TOTAL: 2017499 2152794 2261256 2378070 2503641 2672188
NOTE: (P) - Provisional, since figures for some of the quarters/districts have yet not been received & (Pj) - Projected, since figures for the
quarters ending 31.03.2010 have yet not been received from the State/UT EMPLOYMENT
SSIs IN INDIA

Estimated No. of Units 3.57 Million

Employment 19.96 Million

Share in Industrial Value Added 39%

Share in Total Exports

Direct 45%
Overall 34%

Total Number of Items Produced Over 8000

Number of Reserved Items 675

(Figures for 2011-2012)

TRENDS IN GROWTH SSI & INDUSTRIAL SECTOR (in %)

Year SSI Sector Industrial Sector
2005-06 3.1 0.6
2006-07 5.6 2.3
2007-08 7.1 6.0
2008-09 10.1 9.4
2009-10 11.4 12.1
2010-11 11.3 7.1
2011-12 8.43 5.8
2012-13 7.7 4.0
2013-14 8.16 6.5

TRENDS IN GROWTH OF EMPLOYMENT IN

SSI & INDUSTRIAL SECTOR (in %)
Period GDP Growth per Increase in jobs per annum
annum Organised Sector SSI sector
including
Government
1980-1999 5.7% 1.59% 6.7%
2000-2006 5.7% 0.86% 3.5%
1980 – 2006
Organised Sector 53.66 lakh new jobs

SSI Sector 80.00 lakh new jobs

GROWTH IN INDUSTRIAL SCTOR

SSIs IN INDIA

Estimated No. of Units 3.57 Million

Employment 19.96 Million

Share in Industrial Value Added 39%

Share in Total Exports

Direct 45%
Overall 34%

Total Number of Items Produced Over 8000

Number of Reserved Items 675

(Figures for 2013-2014)

TRENDS IN GROWTH SSI & INDUSTRIAL SECTOR (in %)

Year SSI Sector Industrial Sector

2005-06 3.1 0.6

2006-07 5.6 2.3

2007-08 7.1 6.0

2008-09 10.1 9.4

2009-10 11.4 12.1

2010-11 11.3 7.1

2011-12 8.43 5.8

2012-13 7.7 4.0

2013-14 8.16 6.5

 TRENDS IN GROWTH OF EMPLOYMENT IN
SSI & INDUSTRIAL SECTOR (in %)

Period GDP Growth per Increase in jobs per annum

annum

Organised Sector SSI sector

including Government
1980-1999 5.7% 1.59% 6.7%

2000-2006 5.7% 0.86% 3.5%

1980 – 2006
Organised Sector 53.66 lakh new jobs

SSI Sector 80.00 lakh new jobs

EXPORTS/GROWTH OF SSI EXPORTS

 Cooperative Statement of Export Performance
Year Total exports Exports from Percentage share
(Rs. Crores) SSI sector
(Rs. Crores)
1971-72 716 Negligible -
1976-77 660 Negligible -
1981-82 1608 155 9.6
1986-87 5142 766 14.9
2000-01 7809 2071 26.5
2001-02 12567 3644 29.0
2002-03 44040 13883 31.5
2003-04 53688 17785 33.1
2004-05 69547 25307 36.4
2005-06 82674 29068 35.1
2006-07 106353 36470 34.2
2007-08 118817 39249 33.4
2008-09 126286.00 44442.18 35.19
2009-10 141603.53 48979.23 34.59
2010-11 159561.00 54200.47 33.97
2011-12 202509.7 69796.5 34.47
2012-13 207745.56 71243.99 34.29
2013-14 252789.97 86012.52 34.03
Subject to change based on final figures emerging from Export

Promotion Councils.

 E - Estimated

 Sources: Total Exports - Economic Surveys - Various Issues

 SSI Exports O/o DC(SSI)

 SICKNESS

 Sickness in SSI Sector

Year Total sick units Potentially Viable

No. * Amount O/S No. * Amount O/S
(Rs. Crores) (Rs. Crores)

March 2006 2,23,176 3,443 21,649 799

March 2007 2,56,452 3,680 16,580 686
March 2008 2,68,815 3,547 15,539 597
March 2009 2,62,376 3,722 16,424 636
March 2010 2,35,032 3,609 16,220 479
March 2011 2,21,536 3,857 18,686 456
March 2012 3,06,221 4,313 18,692 377
March 2013 3,04,235 4,608 14,373 369
Source: RBI

* These units include village industries as well.

STATUS CLASSIFICATION OF SSI

According to Sample Survey of 2003-04 of registered small scale industries (for the

base year 2001-02), the status classification of SSI units is given below. The status

has been compared with the findings of Second All India Census (base year 1987-88).

SAMPLE SECOND
SURVEY CENSUS
2003-04 1987-88
1) Locational Status
Rural Areas 42.20% 42.20%
Urban Areas 48.50% 48.00%
Metropolitan Areas 9.30% 9.90%
Backward Areas 48.30% 62.20%

2) Organisational Status
Proprietory Units 80.48% 78.00%
Partnership Units 16.84% 16.03%
Limited Companies 2.01% 3.78%
3) Distribution By Categories of Industries
Small scale Industries 96.24% 87.28%
Ancillary Industries 0.52% 1.57%
Small Service Establishments 3.24% 11.15%
4) Activity Status
Engaged in manufacturing activity only 50.19% 51.01%
Engaged in processing activity only 15.23% 10.37%
5) Ownership Status
By scheduled caste entrepreneur 6.84% 4.57%
By scheduled tribe entrepreneur 1.70% 1.41%
By women entrepreneur 7.69% 5.15%
6) Important Parameters
Per unit fixed investment (book value) 3.08 1.60
(Rs. lakhs)
Per unit fixed investment in P&M 4.0 0.93
(original value) (Rs. lakhs)
 Per unit working capital (Rs. lakhs) 6.98 1.23
Per unit production (Rs. in lakhs) 30.93 7.38
Per unit employment (numbers) 8.54 6.29
Capacity utilisation (percentage) 79.7% 50.6%
7) Important Ratio
Production/investments in fixed assets 10.00 4.62
(Rs. lakhs)
Net value added/Investment in fixed 6.75 1.10
assets (Rs. lakhs)
Employment/Investment in fixed assets 2.73 3.94
(Rs. lakhs)
Wages paid/Employemnt excluding self 12.50 8.00
employment (Rs. 000)
 DATA ANALYSIS

Problems in modernization of SSIs

The existence of a huge number of small industrial units manufacturing a variety of

products makes technological modernization a difficult task in India. Small industrial

units in India are mostly managed by entrepreneurs who are caught up in the day-to-

day matters of production and management of their units and find it difficult to keep

themselves abreast of the various technological developments. In addition, the GoI

has provided protection to the SSIs from competition from local large enterprises and

imports through many policy measures. Therefore there is no threat to their markets.

The government also gives capital subsidies, excise concessions and backward

technology subsidies to the SSIs. All of these reduce any incentive for the small

industrial units to constantly upgrade their technology or for technological innovation.

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

in 2005, 26 percent of those surveryed highlighted the lack of modernization. The

same survey found an encouraging feature that there is a increasing awareness of

quality control among the SSIs. 49 percent of the those respondents in the survey had

initiated steps for obtaining ISO 9000 certification

Time Series data for SSIs in India

Year No. of Fixed Production Employment Export

units investment
(millions) (at current (at current Nos. in (Rs.
prices) prices) million billion)
(Rs. (Rs. Bn.)
billion)
1975-76 0.416 22.96 72.0 3.97 3.93
1976-77 0.498 26.97 92.0 4.04 5.41
1977-78 0.546 32.04 110.0 4.59 5.32
1978-79 0.592 35.53 124.0 4.98 7.66
1979-80 0.67 39.59 143.0 5.40 8.45
1980-81 0. 734 44.31 157.0 6.38 10.69
1981-82 0.805 55.40 216.35 6.70 12.26
1982-83 0.874 58.50 280.6 7.10 16.43
1983-84 0.962 62.80 326.0 7.50 20.71
1984-85 1.059 68.00 350.0 7.90 20.45
1985-86 1.155 73.60 416.2 8.42 21.64
1986-87 1.24 83.80 505.2 9.00 25.41
1987-88 1.353 95.85 612.28 9.60 27.69
1988-89 1.462 108.81 722.5 10.14 36.43
1989-90 1.583 126.10 873.0 10.70 43.72
1999-00 1.712 152.79 1064.0 11.0 54.89
2000-01 1.823 N.A. 1323.2 11.96 76.25
2001-02 1.948 N.A. 1553.4 12.53 96.64
2002-03 2.082 N.A. 1786.99 12.98 138.83
2003-04 2.246 N.A 2093.0 13.406 177.84
2004-05 2.388 35.376 2416.48 13.938 253.07
2005-06 2.571 40.799 2988.86 14.656 290.68
2006-07 2.658 49.620 3626.56 15.261 364.7
2007-08 2.803 54.698 4118.58 16.0 392.48
2008-09 2.944 60.549 4626.41 16.72 444.42
2009-10 3.08 86.106 5206.5 17.158 489.79
2010-11 3.212 72.633 5728.87 17.85 542.00
2011-12 3.312 79.703 6390.24 18.564 697.97
2012-13 3.442 84.329 6903.16 19.223 712.44
2013-14 3.572 90.450 7420.21 19.965 860.12

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

Government of India
 DISCUSSION AND ANALYSIS
INTRODUCTION TO SMALL SCALE SECTOR
MEANING OF SMALL-SCALE SECTOR:
In the official industrial policy formulation, a small industry is defined as a unit

having investment up to Rs.1 crore in plant and machinery. In 2013-14 investment

limit has been raised from Rs.1crore to Rs. 5 crore in respect of 69 items reserved for

manufacture in small scale sector. Small scale Sector are mainly located in urban

centres as separate establishments and produce goods with partially or wholly

mechanized equipment employing hired labor. Small Sector operate as full time

occupation and meet the demand of large area. It depends on the conditions of

expanded market and the nature of business here is permanent.

NEED OF SMALL-SCALE SECTOR:

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

the following grounds:

 Growing population pressures in the rural areas;

 Rapid expansion of the labour forces, especially among the marginal farmers

and landless agricultural labours;

 Inadequate opportunities for non-agricultural work;

 Limitation of the organized sector in absorbing the labour force;

 Existence of considerable under-employment in the economy;

 To avoid the problems created by urbanization;

 To ensure self-reliance.
ROLE OF SMALL SCALE SECTOR IN THE

ECONOMIC DEVELOPMENT OF INDIA

Needless to comment that the cottage and small scale Sector play a significant role in

the growth of Indian economy. Despite the importance and development of large

scale industry, SSIs have an influential stature of their own, their growing present

position in the economy with the long strides during the various plans period and

hold out a commitment of bright prospects. These Sector economically speaking,

compromise with the available country’s resource endowments.

During 2013-14, the average annual growth in the number of units was around 4.1

percent and in employment 4.3 percent annually. Further, the annual average growth

in production, at current and constant prices, was 12.4 percent and 8.1 percent

respectively. Thus, there has been a significant increase in contribution of this sector

in the economic development of the country.

SSI sector should be encouraged to grow the natural way in the new economic

environment. Artificial barriers and protection may not help in the long run.

Innovativeness and efficiency must be rewarded in order to enable SSIs to emerge

competitive.

The role of SSIs can be understood in terms of the following arguments:

I. EMPLOYMENT GENERATION
 300 282.91
271.36
260.13
249.09
250 239.09

200
158.34
150 EMPLOYME
NT (Lakh
Persons)
100

50

0
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

This sector has a high potentiality of employment orientation. These are labour-

intensive in character i.e., they use more of labour per unit of output and investment.

The most important single argument advocated in favor of these Sector since a long

compass of time is that they are capable to create a large volume of employment for

the people relevant particularly in India where the problem of unemployment and

underemployment and seasonal unemployment are rampant on a mass scale which is

also characterized by the feature of lack of resources. In such a grave and contrast

situation, i.e. labour-abundant and capital-scarce economy, it is argued that the

development of this sector is the only alternative strategy which is labour intensive

and the level of employment can be enlarged by a smaller dose of capital. The

contribution of this sector in employment generation in different years is presented

below:

II. PROMOTION OF EXPORTS

 120000

97,644
100000
86,013
80000 71,244
69,797

60000 EXPORT (Rs.

Crore)
40000

20000
9664

0
2009-10 2010-11 2011-12 2012-13 2013-14

One of the main arguments put forward in support of the growth of cottage and small

scale Sector in the country is that the contribution of these Sector in the field of

foreign exchange has increased abnormally. The bulk of exports of small scale Sector

consist of such non-traditional goods like ready-made garments, sports goods,

finished leather, leather products, woolen garments, processed foods, chemicals and

engineering goods. In the year 1999-2000, the contribution of SSIs in exports was

worth Rs. 9664 cores, than in the year 2009-10, it increased to Rs. 69,797 crores. By

the end of 2012-13, the total contribution of SSI sector in the total exports was worth

Rs. 97,644 crores. Thus, small scale sector plays a very important role in the

promotion of countries exports. The share of SSIs in total exports is illustrated in the

following graph:
 CHAPTER-6
CONCLUSION & IMPLICATIONS
 CONCLUSION & IMPLICATIONS

The promotion of small-scale industry has been a consistent theme of post-

independence Indian planning. While various protectionist measures and fiscal

concessions had been put in place in the 1950s, it was not until the late 1960s that

planners began to use directed credit as a tool of policy. A series of policies

introduced from 1967 onwards, and facilitated by the nationalisation of most of the

commercial banks in 1969, demanded sharp increases in the share of bank lending

going to designated 'priority' sectors..

The Equity policyThe New Small Industry Policy allows the large firms to have equity

in SSIs. This policy is contended to be a bad one as it only encourages the small units

to continue to act as dependent on the large firm. A fear that the large firms might at a

later stage takeover the small units is also expressed by some industry experts.

Apart from the abovementioned critical issues, there are several other issues such as

non-classification of a separate medium enterprise under the Indian industrial sector,

regional imbalances in the concentration of small scale industries and survey data

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

technological information.'' More information on these issues could not be obtained.

Another concern is the lack of coordination between the various support organizations

set up by the government. It would also be interesting to know if any evaluation

systems are in place for these institutes and their programs. Information on this aspect

could not be gathered.

An article by Ira Gang mentions that policies intended to support the small industry

such the reservation, financial incentives, etc. are ``neither promoting employment
nor improving the competitive base of small firms. Rather, they are working as strong

disincentives for growth of small firms.''

Though all the previous efforts at helping the SSIs to grow and modernize seem to

have had very little effect, the recent modernization efforts such as the setting up of

the Technology Development Board, the Technology Development and

Modernization Fund, greater emphasis on providing management skills and in

obtaining ISO 9000 certification seem more focused and promising. Since these have

very new, no specific conclusions as to their success or impact can be drawn at this

time. Hopefully, some systematic methods to ensure that SSIs are actually receiving

benefits and necessary assistance will be put in place

Scope of the study

Importance of industrialization in India

Industrialization is the central dynamic force for most countries. It has been a key

growth objective of India's planned economy, with heavy investments being made in

this sector. Labour productivity is highest in manufacturing industries; this has

assisted in raising national income at a faster pace. It is a precondition for agricultural

development and it induces development in other sectors (Tiwary & Singh, 1999).

The importance of industrialization in economic development is crucial for a growing

economy with a large population like India, so prosperity through industrialization has

been a long-term strategy for the Indian government. Communities, businesses, and

governments have debated the results of industrialization, a debate that has continued

to grow unabated. Being reliant on agriculture and having a large population base has

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

economic development as a means to conquer poverty and provide employment.

India’s increasing population crossed the 1 billion mark in May 2009 (Vedantam,

2009) placing an additional burden on the Indian environment. The contrast between

India’s successful economic development and rapidly deteriorating environments,

particularly urban-industrial environments, makes this country a test for the

sustainable vision.

India's focus on growth witnessed two problems. One is population and the other

industrialisation. India realised that in order to become more self-reliant and increase

economic growth some changes had to be made. During the 1980s India moved away

from its planned market, emphasizing industry growth. Its economy grew at about

5.5% annually. Prior to those years there was a 3.5% growth and recently it has been
about 6%, although 8–9% growth is required for the 10 million new jobs needed each

year (United States-Asia Environmental Partnership [US-AEP], 2005).

Industrialization enables India to utilize its resources optimally, diversify the

economic base, raise the living standard of people, and attain balanced regional

development through fiscal incentives and concessional finance for backward

regions. At the same time industries contribute significantly to pollution. Small

industries have contributed significantly in the area of urban as well as rural

establishments. Raising concerns on environmental grounds are seen not so much as a

problem with large industries, as they are more supportive of environmentally

protective issues, but more so in the case of small industries. These small industries

seem to have acute environmental problems.

 The scope of the study will be limited to undersatnd, what does the term Small

Scale Sector means in the broader sense in India.

 To critically analyze the Financial Incentives available to the Small scale

sector in India .
BIBLIOGRAPHY/REFERENCES
 BIBLIOGRAPHY/REFERENCES

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