Small Scale Industriesand Economic Development

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Small Scale Industries and Economic Development: Special Reference to India
Article · April 2012
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Indian Streams Research Journal
Vol.2,Issue.III/April; 12pp.1-4 Dr. S. N. Babar ISSN:-2230-7850
Research Papers
Small Scale Industries and Economic Development:

Special Reference to India
Dr. S. N. Babar,
Assistant Professor,
Department of Economics,
Vinayakrao Patil College, Vaijapur,
Dist. Aurangabad.(M.S.) 423701,
Abstract
The small scale industries 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 59 million persons in over 26 million units throughout the country. The production of SSI unit in
India was Rs 84,413 crore in 1992-93, which increased and reached up to Rs. 9,82919 crore in 2009-10. The
production of SSI units shows continually raising trend during the study period. During 1992-93 SSI units
shows 4.71 growth rate in production which gone up to 11.59 percent in 2009-10.
The production of Small Scale Industries increased with an annual average growth rate of 15.15
percent during 1992-93 to 2009-10. The production of SSI shows highest growth rate of 42.49 per cent
growth in 2006-07. The total employment from SSI sector in the country as per the third All India Census
of SSIs conducted with the reference year of 2001-02 was 249.33 lakh numbers. Units operated with
fixed premises are treated as SSIs. As per the estimates compiled for the year 2005-06 the employment
was 294.91 lakh persons in SSI sector. SSI Sector plays a major role in India's present export
performance. 45 to 50 percent of the Indian Exports is contributed by SSI Sector. Direct exports from the
SSI Sector account for nearly 35 percent of total exports. Besides direct exports, it is estimated that
small-scale industrial units contribute around 15 percent to exports indirectly.
Key Words: Small Scale Industries, Decentralization, Economic Development.
Introduction:
The small scale industries 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 59 million persons in over 26 million units 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 MSME sector provide the maximum opportunities for
both self-employment and jobs after agriculture sector.
By its less capital intensive and high labour absorbtion nature, SSI sector has made significant
contributions to employment generation and also to rural industrialisation. This sector is ideally suited to
build on the strengths of our traditional skills and knowledge, by infusion of technologies, capital and
innovative marketing practices. So this is the opportune time to set up projects in the small scale sector. It
may be said that the outlook is positive, indeed promising, given some safeguards. This expectation is
Please cite this Article as : Dr. S. N. Babar , Small Scale Industries and Economic Development: Special Reference to
India : Indian Streams Research Journal (April ; 2012)
Vol.2,Issue.III/April; 2012
based on an essential feature of the Indian industry and the demand structures. The diversity in
production systems and demand structures will ensure long term co-existence of many layers of
demand for consumer products / technologies / processes. There will be flourishing and well grounded
markets for the same product/process, differentiated by quality, value added and sophistication. This
characteristic of the Indian economy will allow complementary existence for various diverse types of
units. The promotional and protective policies of the Govt. have ensured the presence of this sector in an
astonishing range of products, particularly in consumer goods. However, the bug bear of the sector has
been the inadequacies in capital, technology and marketing. The process of liberalization will therefore,
attract the infusion of just these things in the sector.
Scope and Objective of the Study:
The aim of present study is to highlighting the role of small-scale industrial units in economic
development of India. The period of the study is limited to 15 years, i.e. from 1991-92 to 2007-08 and
only secondary data are taken into consideration for purpose of the study. The relevant secondary data
are collected from Statistical Hand Book of Indian Economy, and from Annual Report of MSME.
Review of Literature:
A significant portion of the economy consists of the self-employed who are both wage-earners
and shareowners. The share of the proprietorship and partnership forms of organizations in the national
income is 35 per cent, that of corporate around 15 per cent, of government around 25 per cent, and
agriculture around 25 per cent. Combine agriculture and the self-employed in industry and service
sectors, nearly 60 per cent of the national income is generated by the self-employed and does not fall in
the paradigm of either capitalism or socialism (Mathew. J, Mainimala 2006).
India has traditionally always had a very vibrant and competitive SSI. Even after the dawn of
industrialization, British producers of textiles found hand made Indian textiles such a threat that they
lobbied hard to have its import banned, succeeding in the late eighteenth century (Gupta & Sharma,
1996).
During pre-economic liberalization period a wide variety of incentives, concessions and
institutional facilities were extended for the development of SSIs. But these socialistic promotional
policy measures, in many cases resulted in protection of weak units rather than the independent growth
of units under competitive business environment (Nyati, 1988).
The relationship between necessity entrepreneurship and economic development is most likely
negative in low income countries, while the relationship between entrepreneurship and economic
development in high income countries is mostly likely positive. India is having high level of
opportunity entrepreneurship, at least in certain part of country, even though the level of income in India
is very low. SSI Sector plays a major role in India's present export performance. SSI is contributing
almost 45% of the Indian Exports. Direct exports from the SSI account for nearly 35% of total exports.
The number of small-scale units that undertake direct exports would be more than 5000. Besides direct
exports, it is estimated that SSI contribute around 15% to exports indirectly. This takes place through
merchant exporters, trading houses and export houses. They may also be in the form of export orders
from large units or the production of parts and components for use for finished exportable goods. The
non-traditional products account for more than 95% of the SSI exports. The rewarding product groups
where the SSI dominates in exports are sports goods, readymade garments, woolen garments and
knitwear, plastic products,
processed food and leather products (Vidya Suresh and P shashidhar).
SSI Industry and India's Economic Development:
The role of SSI sector is estimates in respect of various performance parameters relating to the
Sector. The time series data in respect of the Sector on various economic parameters is incorporated in
the some following table. The data in the Table No. 1 refer to micro and small scale industry only. The
SSI provides estimates in respect of various performance parameters relating to the growth of SSI
sector. The table showing the time series data on various economic parameters is given below.
Table No. 1 Growth of SSI s Production in India:
Sr. No. Year Production (Rs crore) Growth Rate

Current Prices
1 1992-93 84413 4.71
2 1993-94 98796 17.04
3 1994-95 122154 23.64
4 1995-96 147712 20.92
5 1996-97 167805 13.60
6 1997-98 187217 11.57
7 1998-99 210454 12.41
8 1999-00 233760 11.07
9 2000-01 261297 11.78
10 2001-02 282270 8.03
11 2002-03 314850 11.54
12 2003-04 364547 15.78
13 2004-05 429796 17.90
14 2005-06 497842 15.83
15 2006-07 709398 42.49
16 2007-08 790759 11.47
17 2008-09 880805 11.39
18 2009-10 982919 11.59
The figures in brackets show the percentage growth over the previous year. The data for the period up to
2005-06 is of small scale industries (SSI). Subsequent to 2005-06, data with reference to micro, small
and medium enterprises (MSMEs) are being compiled.
Source: S&D Division – Office of the DC (MSME) Annual Report 2010-11
The small-scale industries sector plays a vital role in the growth of the country. It contributes
almost 40 percent of the gross industrial value added in the Indian economy. The small-scale sector has
grown rapidly over the years. The growth rates during the various plan periods have been very
impressive. The number of small-scale units has increased from an estimated 0.87 million units in the
year 1980-81 to over 3 million in the year 2000. When the performance of this sector is viewed against
the growth in the manufacturing and the industry sector as a whole, it instills confidence in the resilience
of the small-scale sector.
The production of SSI unit in India was Rs 84,413 crore in 1992-93, which increased and
reached up to Rs. 9,82919 crore in 2009-10. The production of SSI units shows continually raising trend
during the study period. During 1992-93 SSI units shows 4.71 growth rate in production which gone up
to 11.59 percent in 2009-10. The production of Small Scale Industries increased with an annual average
growth rate of 15.15 percent during 1992-93 to 2009-10. The production of SSI shows highest growth
rate of 42.49 per cent growth in 2006-07.
Contribution of (SSI) units in GDP:

The contribution of the small scale industries in GDP has been almost same since 1999–2000 to
2003–04. The total SSI production has also been very similar from 1999–2000 onwards till 2003–2004.
TABLE No. 2: Contribution of SSI units in GDP

Year Total industrial production Gross Domestic Product
(GDP)
1999-2000 39.74 5.86
2000-2001 39.71 6.04
2001-2002 39.12 5.77
2002-2003 38.89 5.91
2003-2004 38.74 5.79
2004-2005 38.62 5.84
2005-2006 38.56 5.83
2006-2007 45.62 7.20
2007-2008 45.24 8.00
2008-2009 44.86 8.72
Source : (MSME) Annual Report 2010 -11
Employment and SSIs:

SSI Sector in India creates largest employment opportunities for the Indian populace, next only
to Agriculture. It has been estimated that 100,000 rupees of investment in fixed assets in the small-scale
sector generates employment for four persons. The total employment from SSI sector in the country as
per the third All India Census of SSIs conducted with the reference year of 2001-02 was 249.33 lakh
numbers. Units operated with fixed premises are treated as SSIs. As per the estimates compiled for the
year 2005-06 the employment was 294.91 lakh persons in SSI sector. The share of SSIs in the total
employment among units engaged in manufacturing and services is around 34.93 percent.
Table No. 3 Employment Growth in SSI Sector:

Sr. No. Year Employment (lakh Growth Rate
person)
1 1992-93 174.84 5.33
2 1993-94 182.64 4.46
3 1994-95 191.40 4.79
4 1995-96 197.93 3.42
5 1996-97 205.86 4.00
6 1997-98 213.16 3.55
7 1998-99 220.55 3.46
8 1999-00 229.10 3.88
9 2000-01 238.73 4.21
10 2001-02 249.33 4.44
11 2002-03 260.21 4.36
12 2003-04 271.42 4.31
13 2004-05 282.57 4.11
14 2005-06 294.91 4.37
15 2006-07 594.61 101.62
16 2007-08 626.34 5.34
17 2008-09 659.35 5.35
18 2009-10 695.38 5.47
The figures in brackets show the percentage growth over the previous year. The data for the
period up to 2005-06 is of small scale industries (SSI).
Subsequent to 2005-06, data with reference to micro, small and medium enterprises (MSMEs) are
being compiled.
Source: S&D Division – Office of the DC (MSME) Annual Report 2010-11
The total employment from the SSI sector in the country as per the Fourth Census of MSEs with
Reference Year 2006-07 was 594.61 lakh numbers. As per the estimates compiled for the year 2009-10,
the employment was 695.38 lakh persons in the sector. The growth of small scale industries sector is
shown in table 3. The employment has increased marginally over the period of 1999–2000 to 2005–06.
During 2005–06, 123.4 lakh units provided employment to 294.9 lakh persons. Percentage growth of
employment in SSI sectors was 5.33 percent in 1992-93, which was 5.47 percent in 2009-10. On an
average simple annual growth rate was 9.80 percent during 1992-93 to 2009-10.
Export of SSI:
SSI Sector plays a major role in India's present export performance. 45 to 50 percent of the
Indian Exports is contributed by SSI Sector. Direct exports from the SSI Sector account for nearly 35
percent of total exports. Besides direct exports, it is estimated that
Table No. 4: Growth of SSI Exports:

Year Total exports Exports from SSI Percentage share
sector
(Rs. Crores) (Rs. Crores)
1991-92 44040 13883 31.5

1992-93 53688 17785 33.1
1993-94 69547 25307 36.4
1994-95 82674 29068 35.1
1995-96 106353 36470 34.2
1996-97 118817 39249 33.4
1997-98 126286 44442.18 35.19
1998-99 141603.53 48979.23 34.59
1999-00 159561 54200.47 33.97
2000-01 202509.7 69796.5 34.47
2001-02 207745.56 71243.99 34.29
2002-03 252789.97 86012.52 34.03
2002-03 252137 86013 34.03
2003-04 291582 97644 33.49
2004-05 375339.52 124416.56 33.15
2005-06 456417.88 150242.03 32.92
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)
small-scale industrial units contribute around 15 percent to exports indirectly. This takes place
through merchant exporters, trading houses and export houses. They may also be in the form of export
orders from large units or the production of parts and components for use for finished exportable goods.
It would surprise many to know that non-traditional products account for more than 95 percent of the
SSI exports. The exports from SSI sector have been clocking excellent growth rates in this decade. It has
been mostly fuelled by the performance of garments, leather and gems and jewellery units from this
sector. The product groups where the SSI sector dominates in exports are sports goods, readymade
garments, woolen garments and knitwear, plastic products, processed food and leather products. The
SSI sector is reorienting its export strategy towards the new trade regime being ushered in by the WTO.
Conclusions:
The small scale industries 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 59 million persons in over 26 million units throughout the country.
The production of SSI unit in India was Rs 84,413 crore in 1992-93, which increased and reached up to
Rs. 9,82919 crore in 2009-10. The production of SSI units shows continually raising trend during the
study period. During 1992-93 SSI units shows 4.71 growth rate in production which gone up to 11.59
percent in 2009-10. The production of Small Scale Industries increased with an annual average growth
rate of 15.15 percent during 1992-93 to 2009-10. The production of SSI shows highest growth rate of
42.49 per cent growth in 2006-07. The total employment from SSI sector in the country as per the third
All India Census of SSIs conducted with the reference year of 2001-02 was 249.33 lakh numbers. Units
operated with fixed premises are treated as SSIs. As per the estimates compiled for the year 2005-06 the
employment was 294.91 lakh persons in SSI sector. SSI Sector plays a major role in India's present
export performance. 45 to 50 percent of the Indian Exports is contributed by SSI Sector. Direct exports
from the SSI Sector account for nearly 35 percent of total exports. Besides direct exports, it is estimated
that small-scale industrial units contribute around 15 percent to exports indirectly.
References:
1. Vidya Suresh and P shashidhar, Competitiveness of Small-Scale Industries of India,
Conference on Global Competition & Competitiveness of Indian Corporate.
2. Nyati, K. (1988). Problems of pollution and its control in small-scale industries.
3. Gupta, M. & Sharma, K. (1996, third quarter). Environmental operations management: An
opportunity for improvement. Production and Inventory Management Journal, 40-46.
4. Manimala J. Mathew, (2006), Entrepreneurship Education and Training in India: Global
Education, University of Essex, Scotland.
5. Ahluwalia, I.J., (1985) Industrial Growth in India: Stagnation Since the Mid- Sixties (London,
Oxford University Press).
6. Lal, K Anil and Clement W. Roland, (2005), Economic Development in India; The role of
Individual Enterprises, Asia-pacific Development Journal, Vol 12. No 2.
7. Acs J. Zoltan,(2007), How is Entrepreneurship good for Economic Growth?, Progress
Foundation, Zurich: Switzerland.
8. (MSME) Annual Report 2010-11.
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See discussions, stats, and author profiles for this publication at: https://www.researchgate.

Small Scale Industries and Economic Development: Special Reference to India

Article · April 2012

The user has requested enhancement of the downloaded file.

Small Scale Industries and Economic Development:

Table No. 1 Growth of SSI s Production in India:

Sr. No. Year Production (Rs crore) Growth Rate

Contribution of (SSI) units in GDP:

TABLE No. 2: Contribution of SSI units in GDP

Source : (MSME) Annual Report 2010 -11

Employment and SSIs:

Table No. 3 Employment Growth in SSI Sector:

Table No. 4: Growth of SSI Exports:

(Rs. Crores) (Rs. Crores)

1991-92 44040 13883 31.5

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