Small scale industries

At present the Small Scale Industry (SSI) constitutes a Very Important Segment of the Indian
Economy & has emerged as a Dynamic & Vibrant Sector of the Economy.
The Small Scale Industry Sector holds the Key to Economic Prosperity of the Indian
Economy, Characterized by abundant Labor Supply, Unemployment & Under Employment , Scarcity
of Finance, Growing Modern Large Industries providing scope for development of Ancillary
Industries & so on. The Small Scale Industry has grown phenomenally during the last Six Decades &
has acquired a very prominent place in the Socio – Economic Development in the Country.

Objectives of Developing Small Enterprises :

Reasons for Developing Small Enterprises in India can be enumerated as follows :
1) To generate Large Scale Employment Opportunities for the Unemployed speedily with
relatively Low Investment.
2) To Eradicate Unemployment Problem from the Country.
3) To encourage dispersal of enterprises to all over the country covering Rural Areas smaller
towns & economically backward regions.
4) To bring Backward Regions too in the mainstream of national development.
5) To promote balanced regional development in the Whole Country.
6) To ensure more equitable distribution of National Wealth & Income.
7) To encourage effective mobilization of Untapped Resources of the Country.
8) To improve Socio – Economic Conditions & Standard of Living of the people in the
Country.
9) To seize the Vast Opportunities created for Small Enterprises due to Liberalization &
Globalization policies of the Govt of India.
10) To help earn Vital Foreign Exchange for the Country thro Exports of Goods / Services of
Small Enterprises.
11) To bring more Revenue to the Central & State Govts by way of Taxes.

Various Policy Initiatives undertaken by the Central Govt & Various State Govts whether by
way of Incentives or protection, have helped the sector in acquiring the Status of a Major
Contributor in the Growth Process.


The Process of Liberalization & Economic Reforms, since 1991, while creating
Tremendous Opportunities for the Growth of Small Scale Industrial Sector, have however
thrown up new Challenges for the Sector. This changed Industrial Scenario, has called for
building Competitive Strengths, Improving Quality & Productivity, Introducing Technology
Up gradation, reducing Wastages & Rejections, Intelligent Use of Resources, Employing
Modern Management Techniques etc in order to withstand growing competition & for
ensuring sustained growth.4

Concepts & Definitions of Small Scale Industry :

 It Comprises a Variety of Undertakings.
 These definitions generally relate to either the Capital Invested or people employed or both
or any other relevant criteria.

Classification & Definition of industries :

The earlier concept of Industries has been changed to Enterprises. Enterprises have been
classified broadly into Two Categories as Under :

1) Manufacturing Enterprises : Enterprises which are engaged in the Manufacture /

Production of Goods pertaining to any Industry are referred to as “Manufacturing
Enterprises”.
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2) Service Enterprises : Enterprises which are engaged in providing /rendering of Services
are referred to as “Service Enterprises.”

I) Manufacturing Enterprises : They have been defined in terms of Investment on Plant &
Machinery (Excluding Land & Buildings) & further classified into 3 Categories as under :

a) Micro Enterprises : An Enterprise where the Investment on Plant & Machinery is

upto Rs. 25 Lakh is referred to as a “Micro Enterprise.”

b) small Enterprises : An Enterprise where the Investment on Plant & Machinery is above
Rs. 25 Lakh upto Rs. 5 Crore is referred to as “Small Enterprise.”

c) Medium Enterprises : An Enterprise where the Investment on Plant & Machinery is

above Rs. 5 Crore & upto Rs. 10 Crore is referred to as “Medium Enterprise.”

II) Service Enterprises : They have been defined in terms of their Investment in Equipment
(excluding Land & Building)

a)& further classified into 3 Categories as under :

1) Micro Enterprises : An Enterprise where the Investment in Equipment is upto Rs. 10 Lakh
is referred to as “Micro Enterprise.”

2) Small Enterprises : An Enterprise, where the Investment in equipment is above Rs. 10

Lakh & upto Rs. 2 Crore is referred to as “Small Enterprise.”

3) Medium Enterprises : An Enterprise, where the Investment in Equipment is above Rs. 2

Crore & upto Rs. 5 Crore is referred to as “Medium Enterprise.”

EmErgEncE OF SSI UnITS In india

Ssi pre independence:
Before Independence, the present small scale industry was meant to denote the village
and the urban cottage industry.

This group included a variety of industries ranging from manufacturing of Iron safes,
locks, carpets, marble jigs, baskets, hand-loom cloth and the like.

In fact, at that time the term „cottage and Small scale industries‟ was used in juxtaposition to
large scale industries, which were established under the British patronage.
E
They received encouragement and support during the freedom movement.

The small scale industries found a prominent place in the economic programme envisaged
by the Indian National Congress.

Ssi post independence:

After 1947
Jawaharlal Nehru maintained separate entities of small scale industries. He was of the view
that a small industry was the middle sector and it would overlap both the cottage and the
large industries.

1977 industrial Policy

The basic policy support of SSI sector had its roots in the Industrial Policy Resolution 1977,
laid emphasis on reservation of items. The reservation economically viable and
technologically feasible products to be exclusively manufactured by small scale industry
began with a list of 47 items which was gradually extended to too many products.
12fkhusidughLDG

WHY WE nEED SSI?

1 for employment generation
2 for balance regional growth
3 for mobilisation of local resourses
4 for export promotion
5 for consumer surplus
6 for development of enterprenurship
7 for large scale employment with law investment
8 for attaining self reliance and self dependence
9 for ensuring equal distributionof income and wealth
Need & Rationale of Small Scale Industry Development
in India :
As per the IPR (Industrial Policy Resolution),1956, it emphasizes the Need & Rationale as
given below :
 “They provide immediate large scale employment, they offer a method of ensuring a
more equitable distribution of the National Income & they facilitate an Effective
Mobilization of Resources of Capital & Skill which might otherwise remain unutilized.
Some of the problems that unplanned urbanization tends to create will be avoided by the
establishment of Small Centers of Industrial Production all over the Country.”

SCOPE OF SSI IN DIFFERENT SECTORS

1 manufacturing industries
2 service industries
3 trading industries

1 manufacturing industries:
The branch of manufacture and trade based on the fabrication, processing, or preparation of
products from raw materials and commodities. This includes all foods, chemicals, textiles,
machines, and equipment. This includes all refined metals and minerals dirrived from
extracted ores. This includes all lumber, wood, and pulp products.

a)Village and cottege industries=

A cottage industry is a small-scale, decentralized manufacturing business often
operated out of a home rather than a purpose-built facility. Cottage industries are
defined by the amount of investment required to start, as well as the number of people
employed. They often focus on the production of labor-intensive goods but face a
significant disadvantage when competing with factory-based manufacturers that
mass-produce goods.
These are carried on in house of workers and these are carried out by the labours in
their houses. They use local service and local resources and the local skills
a) Handlooms and handicrafts=
These are the industries which include the artisans ans art and craft ehich come under
the handicraft and it also include the skilled craftsmenship and the hand made ietams
are included in these type of industries

2 service industries
a) Professional services=
Law, medicine and accounting
b) Commission service=
Transport, wherhousing and the repair shope
c) Personal service=
Fashion shops, and dry cleaning

3 trading industries

a) Wholeseller
 Person or firm that buys large quantity of goods from various producers or vendors,
warehouses them, and resells to retailers.

b)retailer
A business or person that sells goods to the consumer, as opposed to a wholesaler or supplier,
who normally sell their goods to another business

c)Commission agent=
Commission agents thrive in a variety of businesses. International agents work in the
export/import arena. Insurance and real estate agents also often work on a sales-based
commission.

Role of small scale industries:

The Role of Small Enterprises in Economic Development of our Country can be discussed
with reference to the following parameters during the last four Decades :

1) Increase in the Number of Small Enterprises.

2) Increase in the Value of Production in Rupee Terms.
3) Increase in the Number of People Employed.
4) Increase in the Export Earnings in Rupee Terms.

The Small Enterprises have registered phenomenal growth in their Number, Production,
Employment & Exports over the Last Four Decades.

In 1950, there were 16,000 Registered Small Scale Industries & this has increased to 31.21
Lakh Registered SSI’s during 1998 – 1999.

During 1973 – 74, the Total Value of Production reported by SSI’s was Rs. 7200 Crores &
this has grown phenomenally by about 75 Times to Rs. 5,38,357 Crores during 1998 – 1999.

As regards Employment, about 40 Lakh People were employed in SSI Sector during 1973 –
1974 & there is a Four Fold Increase in Employment during 1998 – 1999, that is 175.2 Lakh
People were employed in SSI Sector during 1998 – 1999.

Production From Small Scale Industries

Characteristics of Small Enterprises :

 “Small Enterprise is Beautiful” because of its following Important Characteristics :
1) A Small Enterprise is generally a “One Man Show”. Even Small Enterprises which run by
a Partnership Firm or a Private Limited Company, in most cases, the activities are mainly
carried out by one of the Partners or Directors. In Practice, the others mainly assist in
providing Capital / Funds.

2) Owner himself / herself is also a Manager of the Enterprise. Thus, a Small

 Enterprise is managed in a personalized manner. The Owner has First Hand Knowledge of
all aspects of the Enterprise & knows what is actually going on in the Business. He takes
effective participation in all matters of Business Decision Making.

3) A Small Enterprise has lesser Gestation Period compared to a Large Enterprise. i.e., the
period after which the return on Investment starts.

4) Small Enterprises generally carryout their operations so as to cater to the Local & Regional
Markets.

5) Small Enterprises use indigenous resources & therefore can be located anywhere subject to
the availability of these resources like Raw Materials, Labor, Transport Facilities etc.

6) They are fairly Labor Intensive with comparatively smaller Capital Investment than the
Larger Units. That is, for the same Investment, a Small Enterprise provides more jobs to the
people compared to a Large Enterprise.

7) Using Local Resources, Small Units are decentralized & dispersed to Rural Areas &
Smaller Towns. Thus, the development of Small Enterprises in Rural Areas & Smaller towns
promotes more Balanced Regional Development & thereby prevents influx of job seekers
from rural areas & smaller towns to bigger cities & urbanizing centers.

8) Small Enterprises are more susceptible & highly reactive & receptive to Socio – Economic
conditions compared to larger enterprises. They are more flexible to adapt changes like
Diversification to New Products, adopting to New Production Techniques, substituting New
Raw Materials, Changes in Organization Structure, New Market etc

Advantages of Small Enterprises :

They are the Back Bone of the Industrial Activity in the Country & are playing a very
important role in improving the Socio – Economic Conditions of the people. Advantages of
these Enterprises are as follows : (12 Points)

1) They create greater Employment Opportunities thro Labor Intensive processes & thereby
help in tackling the Unemployment Problem.

2) They have Low Gestation Period & thereby Expensive Financial Resources are not idled
unproductively for long periods.

3) They can be set up easily in Rural & Backward Areas.

4) They need Small / Local / Regional Market.

5) They encourage growth of Local Entrepreneurship.

6) They create Decentralized pattern of Ownership.

7) They foster Diversification of Economic Activities.

8) They Innovate & Introduce New Products particularly to cater to Local Needs.

9) They influence & improve Standard of Living of Local People.

10) They provide equitable dispersal of enterprises throughout Rural & Backward Areas

STEPS IN SETTING UP A SMALL SCALE INDUSTRIES:

1 PRILIMNARY STAGE=
Scanning of business environment

Selection of idea

Deciding organisational structure

Project appraisal

Selection of ilocation and site

2 IMPLIMENTATION STAGE=

Statutary licence

Arrangment of finance

Power and water connection

Recruitment of personal and training

Raw material precurment

Marketing and profit generation

PROBLEM FACED BY SMALL SCALE INDUSTRIES:

This sector can stimulate economic activity and is entrusted with the responsibility of

realising various objectives generation of more employment opportunities with less

investment, reducing regional imbalances etc. Small scale industries are not in a position to

play their role effectively due to various constraints. The various constraints, the various

problems faced by small scale industries are as under:

(1) Finance:

Finance is one of the most important problem confronting small scale industries Finance is

the life blood of an organisation and no organisation can function proper у in the absence of

adequate funds. The scarcity of capital and inadequate availability of credit facilities are the

major causes of this problem.

Firstly, adequate funds are not available and secondly, entrepreneurs due to weak economic

base, have lower credit worthiness. Neither they are having their own resources nov are

others prepared to lend them. Entrepreneurs are forced to borrow money from money lenders

at exorbitant rate of interest and this upsets all their calculations.

After nationalisation, banks have started financing this sector. These enterprises are still

struggling with the problem of inadequate availability of high cost funds. These enterprises

are promoting various social objectives and in order to facilitate then working adequate credit

on easier terms and conditions must be provided to them.

(2) Raw Material:

Small scale industries normally tap local sources for meeting raw material requirements.

These units have to face numerous problems like availability of inadequate quantity, poor

quality and even supply of raw material is not on regular basis. All these factors adversely

affect t e functioning of these units.

Large scale units, because of more resources, normally corner whatever raw material that is

available in the open market. Small scale units are thus forced to purchase the same raw

material from the open market at very high prices. It will lead to increase in the cost of

production thereby making their functioning unviable.

(3) Idle Capacity:

There is under utilisation of installed capacity to the extent of 40 to 50 percent in case of

small scale industries. Various causes of this under-utilisation are shortage of raw material

problem associated with funds and even availability of power. Small scale units are not fully

equipped to overcome all these problems as is the case with the rivals in the large scale

sector.

(4) Technology:

Small scale entrepreneurs are not fully exposed to the latest technology. Moreover, they lack

requisite resources to update or modernise their plant and machinery Due to obsolete methods

of production, they are confronted with the problems of less production in inferior quality and

that too at higher cost. They are in no position to compete with their better equipped rivals

operating modem large scale units.

(5) Marketing:

These small scale units are also exposed to marketing problems. They are not in a position to

get first hand information about the market i.e. about the competition, taste, liking, disliking

of the consumers and prevalent fashion.

With the result they are not in a position to upgrade their products keeping in mind market

requirements. They are producing less of inferior quality and that too at higher costs.

Therefore, in competition with better equipped large scale units they are placed in a relatively

disadvantageous position.

In order to safeguard the interests of small scale enterprises the Government of India has

reserved certain items for exclusive production in the small scale sector. Various government
agencies like Trade Fair Authority of India, State Trading Corporation and the National Small

Industries Corporation are extending helping hand to small scale sector in selling its products

both in the domestic and export markets.

(6) Infrastructure:

Infrastructure aspects adversely affect the functioning of small scale units. There is

inadequate availability of transportation, communication, power and other facilities in the

backward areas. Entrepreneurs are faced with the problem of getting power connections and

even when they are lucky enough to get these they are exposed to unscheduled long power

cuts.

Inadequate and inappropriate transportation and communication network will make the

working of various units all the more difficult. All these factors are going to adversely affect

the quantity, quality and production schedule of the enterprises operating in these areas. Thus

their operations will become uneconomical and unviable.

(7) Under Utilisation of Capacity:

Most of the small-scale units are working below full potentials or there is gross

underutilization of capacities. Large scale units are working for 24 hours a day i.e. in three

shifts of 8 hours each and are thus making best possible use of their machinery and

equipments.

On the other hand small scale units are making only 40 to 50 percent use of their installed

capacities. Various reasons attributed to this gross under- utilisation of capacities are

problems of finance, raw material, power and underdeveloped markets for their products.

(8) Project Planning:
Another important problem faced by small scale entrepreneurs is poor project planning.

These entrepreneurs do not attach much significance to viability studies i.e. both technical

and economical and plunge into entrepreneurial activity out of mere enthusiasm and

excitement.

They do not bother to study the demand aspect, marketing problems, and sources of raw

materials and even availability of proper infrastructure before starting their enterprises.

Project feasibility analysis covering all these aspects in addition to technical and financial

viability of the projects, is not at all given due weight-age.

Inexperienced and incomplete documents which invariably results in delays in completing

promotional formalities. Small entrepreneurs often submit unrealistic feasibility reports and

incompetent entrepreneurs do not fully understand project details.

Moreover, due to limited financial resources they cannot afford to avail services of project

consultants. This result is poor project planning and execution. There is both time interests of

these small scale enterprises.

(9) Skilled Manpower:

A small scale unit located in a remote backward area may not have problem with respect to

unskilled workers, but skilled workers are not available there. The reason is Firstly, skilled

workers may be reluctant to work in these areas and secondly, the enterprise may not afford

to pay the wages and other facilities demanded by these workers.

Besides non-availability entrepreneurs are confronted with various other problems like

absenteeism, high labour turnover indiscipline, strike etc. These labour related problems

result in lower productivity, deterioration of quality, increase in wastages, and rise in other

overhead costs and finally adverse impact on the profitability of these small scale units.

(10) Managerial:
Managerial inadequacies pose another serious problem for small scale units. Modern business

demands vision, knowledge, skill, aptitude and whole hearted devotion. Competence of the

entrepreneur is vital for the success of any venture. An entrepreneur is a pivot around whom

the entire enterprise revolves.

Many small scale units have turned sick due to lack of managerial competence on the part of

entrepreneurs. An entrepreneur who is required to undergo training and counseling for

developing his managerial skills will add to the problems of entrepreneurs.

The small scale entrepreneurs have to encounter numerous problems relating to

overdependence on institutional agencies for funds and consultancy services, lack of credit-

worthiness, education, training, lower profitability and host of marketing and other problems.

The Government of India has initiated various schemes aimed at improving the overall

functioning of these units.

GOVERNMENT POLICY TOWORDES SMALL SCALE INDUSTRIES:

Some of the Government Policies for development and promotion of Small-Scale Industries
in India are: 1. Industrial Policy Resolution (IPR) 1948, 2. Industrial Policy Resolution (IPR)

1956, 3. Industrial Policy Resolution (IPR) 1977, 4. Industrial Policy Resolution (IPR) 1980

and 5. Industrial Policy Resolution (IPR) 1990.

Since Independence, India has several Industrial Policies to her credit. So much so that

Lawrence A. Veit tempted to say that “if India has as much industry as it has industrial

policy, it would be a far well-to-do nation.” With this background in view, in what follows is

a review of India’s Industrial Policies for the development and promotion of small-scale

enterprises in the country.

1. Industrial Policy Resolution (IPR) 1948:

The IPR, 1948 for the first time, accepted the importance of small-scale industries in the

overall industrial development of the country. It was well realized that small-scale industries

are particularly suited for the utilization of local resources and for creation of employment

opportunities.

However, they have to face acute problems of raw materials, capital, skilled labour,

marketing, etc. since a long period of time. Therefore, emphasis was laid in the IPR, 1948

that these problems of small-scale enterprises should be solved by the Central Government

with the cooperation of the State Governments. In nutshell, the main thrust of IPR 1948, as

far as small-scale enterprises were concerned, was ‘protection.’

2. Industrial Policy Resolution (IPR) 1956:

The main contribution of the IPR 1948 was that it set in the nature and pattern of industrial

development in the country. The post-IPR 1948 period was marked by significant

developments taken place in the country. For example, planning has proceeded on an

organised manner and the First Five Year Plan 1951-56 had been completed. Industries

(Development and Regulation) Act, 1951 was also introduced to regulate and control
industries in the country.

The parliament had also accepted ‘the socialist pattern of society’ as the basic aim of social

and economic policy during this period. It was this background that the declaration of a new

industrial policy resolution seemed essential. This came in the form of IPR 1956.

The IPR 1956 provided that along with continuing policy support to the small sector, it also

aimed at to ensure that decentralised sector acquires sufficient vitality to self-supporting and

its development is integrated with that of large- scale industry in the country. To mention,

some 128 items were reserved for exclusive production in the small-scale sector.
Besides, the Small-Scale Industries Board (SSIB) constituted a working group in 1959 to

examine and formulate a development plan for small-scale industries during the, Third Five

Year Plan, 1961-66. In the Third Five Year Plan period, specific developmental projects like

‘Rural Industries Projects’ and ‘Industrial Estates Projects’ were started to strengthen the

small-scale sector in the country. Thus, to the earlier emphasis of ‘protection’ was added

‘development.’ The IPR 1956 for small-scale industries aimed at “Protection plus

Development.” In a way, the IPR 1956 initiated the modem SSI in India.

3. Industrial Policy Resolution (IPR) 1977:

During the two decades after the IPR 1956, the economy witnessed lopsided industrial

development skewed in favour of large and medium sector, on the one hand, and increase in

unemployment, on the other. This situation led to a renewed emphasis on industrial policy.

This gave emergence to IPR 1977.

The Policy Statement categorically mentioned:

“The emphasis on industrial policy so far has been mainly on large industries, neglecting

cottage industries completely, relegating small industries to a minor role. The main thrust of

the new industrial policy will be on effective promotion of cottage and small-scale industries

widely dispersed in rural areas and small towns. It is the policy of the Government that
whatever can be produced by small and cottage industries must only be so produced.”

The IPR 1977 accordingly classified small sector into three broad categories:

1. Cottage and Household Industries which provide self-employment on a large scale.

2. Tiny sector incorporating investment in industrial units in plant and machinery up to Rs. 1

lakh and situated in towns with a population of less than 50,000 according to 1971 Census.

3. Small-scale industries comprising of industrial units with an investment of upto Rs. 10

lakhs and in case of ancillary units with an investment up to Rs. 15 lakhs.

The measures suggested for the promotion of small-scale and cottage industries

included:

(i) Reservation of 504 items for exclusive production in small-scale sector.

(ii) Proposal to set up in each district an agency called ‘District Industry Centre’ (DIC) to

serve as a focal point of development for small-scale and cottage industries. The scheme of

DIC was introduced in May 1978. The main objective of setting up DICs was to promote

under a single roof all the services and support required by small and village entrepreneurs.

What follows from above is that to the earlier thrust of protection (IPR 1948) and

development (IPR 1956), the IPR 1977 added ‘promotion’. As per this resolution, the small

sector was, thus, to be ‘protected, developed, and promoted.’

4. Industrial Policy Resolution (IPR) 1980:

The Government of India adopted a new Industrial Policy Resolution (IPR) on July 23, 1980.

The main objective of IPR 1980 was defined as facilitating an increase in industrial

production through optimum utilization of installed capacity and expansion of industries.

As to the small sector, the resolution envisaged:

(i) Increase in investment ceilings from Rs. 1 lakh to Rs. 2 lakhs in case of tiny units, from

Rs. 10 lakhs to Rs. 20 lakhs in case of small-scale units and from Rs. 15 lakhs to Rs. 25 lakhs

in case of ancillaries.

(ii) Introduction of the concept of nucleus plants to replace the earlier scheme of the District

Industry Centres in each industrially backward district to promote the maximum small-scale

industries there.

(iii) Promotion of village and rural industries to generate economic viability in the villages

well compatible with the environment.

Thus, the IPR 1980 reimphasised the spirit of the IPR 1956. The small-scale sector still

remained the best sector for generating wage and self-employment based opportunities in the

country.

5. Industrial Policy Resolution (IPR) 1990:

The IPR 1990 was announced during June 1990. As to the small-scale sector, the resolution

continued to give increasing importance to small-scale enterprises to serve the objective of

employment generation.

The important elements included in the resolution to boost the development of small-

scale sector were as follows:

(i) The investment ceiling in plant and machinery for small-scale industries (fixed in 1985)

was raised from Rs. 35 lakhs to Rs. 60 lakhs and correspondingly, for ancillary units from Rs.

45 lakhs to Rs. 75 lakhs.

(ii) Investment ceiling for tiny units had been increased from Rs. 2 lakhs to Rs. 5 lakhs

provided the unit is located in an area having a population of 50,000 as per 1981 Census.

(iii) As many as 836 items were reserved for exclusive manufacture in small- scale sector.

(iv) A new scheme of Central Investment Subsidy exclusively for small-scale sector in rural

and backward areas capable of generating more employment at lower cost of capital had been

mooted and implemented.

(iv) With a view, to improve the competitiveness of the products manufactured in the small-

scale sector; programmes of technology up gradation will be implemented under the umbrella

of an apex Technology Development Centre in Small Industries Development Organisation

(SIDO).

(v) To ensure both adequate and timely flow of credit facilities for the small- scale industries,

a new apex bank known as ‘Small Industries Development Bank of India (SIDBI)’ was

established in 1990.
(vi) Greater emphasis on training of women and youth under Entrepreneurship Development

Programme (EDP) and to establish a special cell in SIDO for this purpose.

(vii) Implementation of delicencing of all new units with investment of Rs. 25 crores in fixed

assets in non-backward areas and Rs. 75 crores in centrally notified backward areas.

Similarly, delicensing shall be implemented in the case of 100% Export Oriented Units

(EOU) set up in Export Processing Zones (EPZ) up to an investment ceiling of Rs. 75 lakhs.

Impact of Liberalization, Privatization & Globalization of Small

Enterprises :
The process of Liberalization & Economic Reforms , since 1991, have thrown up new
challenges to the small enterprises sector , simultaneously creating tremendous opportunities
for the growth of this sector.

In this changed scenario, building Competitive Strengths, introducing Technology Up

gradation & Quality Improvement are important issues which need to be addressed in order to
build the capacity to withstand emerging pressures & ensure sustained growth. Also small
enterprises sector needs to reposition itself if it has to meet the growing demands for
ancillary items , subcontracting etc from other Medium & Large Enterprises , requiring
higher standards of Quality, Economies of Scale & strict delivery schedules.

Even before introduction of the Economic Reforms in 1991, following the inevitable
Globalization, the Small Enterprises sector was somewhat overprotected. With
Liberalization & Globalization, they are now more exposed to severe competition from
Large Domestic Private Enterprises & from Foreign & other MNC’s.

The problems of Small Enterprises in the Liberalized are many – Delay in Implementation
of Projects, Lack of Timely assistance of Finance & Credit from the Financial Institutions,
Marketing Problems, Lack of Proper Infrastructural Facilities, Delay in receiving payment
against the goods sold, outdated technology, poor quality of raw materials & consumables
& lack of managerial skills etc.

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