Growth Prospects and Challenges of Small Scale Industries in India
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  GRA - GLOBAL RESEARCH ANALYSIS   X 1   Volume : 3 | Issue : 4 | April 2014 ã ISSN No 2277 - 8160 Research Paper  Management A Case Study on Growth Prospects and Challenges of Small Scale Industries in India Prakash Yadava research scholar BBD university The small scale industries play a vital role in the growth of the country. It contributes almost 40% of the gross industrial value added in the Indian economy. By less capital intensive and high labour absorption nature, SSI sector has made significant contribution to employment generation and also rural industrialization. Under the changing economic scenario, SSI has to face number of diverse problems like vast population, large scale un-employment and underemployment and scarcity of capital resources Hence, the government has been providing some special facilities through different policies and programmes to overcome the problems and for the growth and development of small scale industries. The efforts of the government have resulted in the phenomenal increase in the number of units in the small scale sector. ABSTRACT KEYWORDS : The Small scale Industries Board define the SSI “A Unit employing less then 50 persons, if using power and less then 100 person without the use of power, and with a capital assets not exceeding Rs. 5 lakhs . The employment criterion was dropped in the year 1960 and a small-scale industrial unit was defined in terms on investment in fixed assets only. The Ministry of commerce and Industries defined a small scale indus-tries as “A Unit with a capital investment of not more than Rs. 5 lakhs irrespective of the number of person employed” and in case of Ancillary units. The definition of small- scale industries was get modified again in 1966. The Ministry of industry defined a small scale industries as follows “An Undertaking having capital investment in plant and machinery of not more than 10 lakhs and Rs. 15 lakhs in case of Ancillary units. The Government of India, in its new Policy Initiative for Small Scale industry announced in 1990 -2000 has change the investment limits for Small Scale industries from Rs. 1 crore . The Definition of Village industry has been changed the capital investment ceiling from Rs. 15,000 to Rs. 1 lakh . Small and Medium Enterprise: Small and Medium Enterprise Units with investment in Plant and Ma-chinery in excess of SSI limit and upto Rs.10 crore may be treated as medium enterprises. The Micro, Small and Medium Enterprise Devel-opment Act 2006 has changed in the concepts of small scale industries. Enterprises engaged in the Manufacturing/ Production of the goods. Enterprises engaged in providing/ rendering services. Manufacturing Enterprise : Manufacturing Enterprise The Manufacturing Entreprise has been de-fined in terms of investment in plant and machinery. A unit is called Micro Enterprise if the Investment is upto Rs. 15 lakhs . As for Small Enterprise, the investment should be above Rs. 25 lakhs and upto Rs. 5 crores . And for Medium Enterprise the investment should be above Rs. 5 crore and upto Rs.10 Crores . Service Enterprise : Service Enterprise For a Micro Enterprise, the ceiling on investment is of Rs. 10 lakhs . Small Enterprise it is more than Rs. 10 lakhs and upto Rs. 2 crore . . In Respect of medium enterprise, the investment should be in the range of Rs. 2 crore or Rs. 5 crore .Indian economy is an under developed economy. Its vast resources are either unutilized or underutilized. A major section of man pow-er is lying idle. The per capita income is low. Capital is shy and scarce and investment is lean. Production is traditional and the technique is outdated. The output is insufficient and the basic needs of the people remain unfulfilled.  (1)  Industrialization is the only answer to this present state of disrupted economy. The problem is of the approach which should be direct, util-itarian and pragmatic. Such industries do not require huge capital and hence suitable for a country like India. The small scale industries have a talent of „dispersal.‟ they can be accessible to the remote rural areas of the country and do not lead to regional imbalances and concentration of industries at one place, which is responsible for many economic re-sources such as entrepreneurship and capital.  (2) Small scale industries were not given such importance during the British rule as is given today. We now have a pragmatic approach to the concept in view of the prevailing economic conditions, gradual industrial development and the difficulties that arise in the imple-mentation of planned programs.  ( 3)  Prof. K.T. Sash was the first In-dian economist, who realizing the importance of Small scale indus-tries in India, tried to give a workable definition of these industries. He defined “A small scale or cottage industry may be defined as an enterprise or series of operations carried on by a workman skilled in the craft on his responsibility, the finished product of which, he markets himself. (4)  Rethnam N.V., in his study entitled, “Rural Indus-trialization and IRDP” opined that infrastructure development for industrialization in the rural areas and investment in basic services designed to realize the full potential of human resources in the rural areas should receive a high priority.   (5) Various organizations for assisting Small and Medium Entre-preneurs Various organizations have been set up by the Central and State gov-ernments and banks to support the development of the small scale enterprises. The main organizations are as follows: – A. Central Government Small Industries Development Organization (SIDO). National Small In-dustries Corporation Limited. (NSIC). National Institute for Micro, Small and Medium Enterprises (NIMSME). B. State Government District Industries Centers (DIC) State Financial Corporations (SFCs) State Industrial Development Corporations/ State Industrial Invest-ment Corporations(SIDC/SIIC) State Small Industries Development Cor-poration (SSIDC) Khadi and Village Industries Commission (KVIC). C .Financial Institutions / Banks Small Industries Development Bank of India (SIDBI) Commercial Banks Regional Rural Banks Cooperative Banks National Bank for Agriculture and Rural Development (NABARD) D. Organizations promoted by the Government/ Banks/ Fi-nancial Institutions Technical Consultancy Organization in various states. India SME Tech-nology Services Ltd. SIDBI Venture Capital Ltd. Credit Guarantee Fund Trust for Micro and Small Industries India SME Asset Reconstructing Company (ISARC). E. Industry Associations Consortium of Women Entrepreneurs in India (CWEI) Confeder-ation of Indian Industry Federation of Indian Chamber of Com-merce and Industries (FICCI) Associated Chamber of Commerce and Industries in India (ASSOCHAM) World Association of Small and Medium Enterprises (WASME) Federation of Association of Small Scale Industries (FASSI).  GRA - GLOBAL RESEARCH ANALYSIS   X 2   Volume : 3 | Issue : 4 | April 2014 ã ISSN No 2277 - 8160 REFERENCES 1. Grabam Bannock. 1969, The Economics of small firms: Return form the wilderness. Oxford: Basil Blackwell. | 2. Ashokkumar singh. 1970, “Problems and prospects of small scale industries in Bibar: A critical study” PhD, Theis, Bibar University. | | | 3. Nisae Ahmad. 1970, “Problems and management of small scale and cottage Industries” New Delhi. Deep and Deep publication. | | 4. Interim report of the study group on Development of small Enterprises small industries Development organization, New Delhi. | Growth rates of SSI sector Year YearGrowth rates of 1970 base IIP Growth Rates of 2001-02 base IIP Growth rates of manufacturing sector with base year 1993-94 2002-03 7.68% 8.68% 3 2003-04 8.59% 9.64% 7.4 2004-05 9.96% 10.88% 9.2 2005-06 10.40% 12.32% 9.1 Source: Ministry of Small Scale Industries.  It may be seen that the overall industrial growth rate of the small Scale Industries sector hiked during the year 2005-06 as compared to the year 2004-05. This shows that the SSI sector has also consistently reg-istered a higher growth rate as compared to the overall manufacturing sector. Contribution of SSI in the Gross Domestic Product (GDP) Year YearTotal industrial productionGross 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 38.80 5.82 Source: Ibid It may be seen that overall contribution of small scale industries from 1999-2000 to 2003-2004 is similar in Indian economy. Growth of SSIs in India YearSSI Units (Lakh in no.)Investments(rs. In crores)Production(rs. In crores)Employment(Lakh Persons)Export (in crores)2004-05 118.59 178699 429796 282.57 1244172005-06 123.42 188113 497842 294.91 1502422006-07 261.01 500758 709398 594.61 1825382007-08 272.79 558190 790759 626.34 2020172008-09 285.16 621753 880805 659.35 NA S ource: MSME annual reports 2009-2010 accessed from http// Health of units in SSI sector in India Reasons for sicknessRegistered SSIUnregistered SSILack of Demand71.6 %84.1 %Shortage of Working Capital 48.0 %47.1 %Marketing Problems44.5 %41.2 %Power Shortage21.4 %14.8 %Non-availability of Raw Material15.1 %15.2 %Equipment Problems 10.6 %12.9 %Labour Problems7.4 %5.1 %Management Problems5.5%5.1% Source:” Final results: Third All India Census of SSI 2001-2007, 2004, Ministry of SSI, GOI  Problems of Small and Medium Enterprises The identified problems in U.P. are summarized as: – I. Project Implementation related problems Non– availability of land at the selected site. Non– availability/ difficul-ty in procuring construction materials like cement steel etc. Delay in de-livery of machines Difficulties/delay in tying up financial arrangements with other financial institutions and banks. Inability of the promoters to bring in funds to the extent proposed. Delay in disbursement of assis-tance due to non– compliance of the major terms and II. Production related problems Non– availability of raw materials or increase in the price of raw ma-terials without a corresponding increase in sale price of the products. Non– availability of important infrastructure facilities like power, water, transport etc. Unsatisfactory performance of certain machines result-ing in low production due to lack of routine and preventive mainte-nance leading to frequent breakdown. Lack of coordination between marketing and production planning. III. Finance related problems Low promoters contribution. High debt– equity ratio leading to high interest burden. Inadequate bank finance. Lack of proper follow up ac-tion for realization of debts. Recommendations and Strategies for revival of SSIs in India Ø Simple financing structure should be available to SSIs so that they can grow in the competitive era. Ø SSIs should develop their capabilities in manufacturing to meet the quality, technology and services in global economy. Ø FDI in SSI should be allowed 100 percent by Govt. so that technol-ogy transfers, tax benefits can be availed properly by SSIs. Ø Research institutions and academicians should be facilitated to encourage working in collaboration to improve SSIs capabilities. Ø SSI and Cottage industries should be encouraged to grow and be-come competitive.
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