Essays

When India attained independence, the industrial scenario was fraught with uncertainties; low productivity, lack of power and fuels and above all, a confusion about the real markets of the products manufactured. Industrial management systems were in the doldrums. The evil shadow of partition had its impact on industry as well.

We struggled during the period from 1947 to'1951. Industrial development was not at the requisite pace. Initially, small industries were established. Later, some medium and large enterprises were also set up. Another problem faced by the industrialists was the shortage of capital. India was a very poor nation during those times. She had attained independence and her economic and industrial policies had to be given concrete shape. There was no assistance of foreign investors. This was a precarious situation for Indian masses.

However, the government showed the path of prosperity to the nation by declaring that Five Year Plans would be the major growth engines "of Indian economy. Consequently, the First Five Year Plan was initiated in "1951. The economic mechanisms of the country funnel some objectives to achieve and therefore, there was an euphoria in the industrial sector due to the declaration of the First Five Year Plan. New enterprises were established and industrial development was witnessed by the masses and the leaders of the nation, albeit at a painfully slow pace.

The industrial enterprises were established with limited capital. Hence, these were termed as Small Scale Industries (SSIs). After a period of 5-10 years, the SSIs grew to become Medium Scale Industries (MSIs). Some of the MSIs became Large Scale Industries (LSIs). These LSIs did not come into existence in one single year or decade; behind their present forms, is the toil of several hundred thousand people who worked from the time of inception of those enterprises. And we should remember that the LSI of today was a SSI during the post-independence era.

From the aforementioned discussion, we conclude that SSIs could be expanded to make them MSIs or LSIs. The concept of conceiving a LSI and operating it as one was not logical in the context of the economic scenario that prevailed immediately after independence. The entrepreneurs preferred to grow in a steady manner, adding up to the production capacities, capital, market niches and assets slowly but surely. Perhaps, this is an ideal strategy for developing industrial infrastructure in a nation like ours.

However, the government did develop MSIs and LSIs from the inception stages. But that had to be done in order to develop a sound industrial infrastructure in the country. Coal, steel, power generation, nuclear energy, railways and defence manufacture could not be handed over to SSIs. Hence, SSIs were allowed to concentrate on those products that were:

(a) Required by MSIs;

(b) Required by LSIs or their subsidiaries;

(c) Required by other SSIs; or

(d) Required by the masses or the ultimate customers.

When the" government decided, through the Five Year Plans, to concentrate on the core sectors and steady development of infrastructure, the focus areas of SSTs were clearly demarcated. Therefore, SSIs were opened and operated to manufacture textile products, toys, plastic items, bicycle parts, automobile parts, packaged foods, garments, small engineering products (like pumps, motors, valves, seals etc), printing inks, dyes, various types of chemicals, rubber and neoprene parts etc. It could be a sole proprietorship, partnership or a private limited firm.

Many SSIs are also operated by Hindu Undivided Families (HUFs) under the supervision of the owner (karta) of the HUF. To begin with, a SSI could also be a sole proprietorship business. The turnover of the firm and its investments in plant and machinery would decide whether it is to remain as a SSI, in case it decides to grow. If the turnover and the investments in plant and machinery exceed the norms laid down for SSIs/ it would become either a MSI or a LSI, depending upon these two factors.

According to the report of SIDBI for SSI (for the fiscal year 1999-2005), the SSIs may grow at the rate of 7.5-8.5 per cent in real terms. The SSI sector has shown higher levels of growth viz-a-viz the performances of other industrial sectors. Growth in terms of exports of SSIs is likely to be 4.5-5.0 per cent during the fiscal year 1999-2005. SSIs give employment to lakhs of technical and non-technical personnel. Hence, they contribute effectively towards the solution of the grave crisis of unemployment. The growth in employment would be nearly 4.5 per cent during 1999-2005.

The SSIs are also involved in exports. In value terms, the exports of the SSIs, in 1999-2000, could touch the value of US$ 13.41-13.47 billion. Therefore, SSIs contribute effectively towards the generation of valuable foreign exchange reserves of the country. During 1999-2005, the overall rate of growth of SSIs could be 8.3-8.8 per cent. The government has extended credit facilities, capital, fuel, power and technologies to the SSI sector during the past 25 years and the results of these efforts have yielded good results.

In 1990-1991, there were 13.78 lakh registered SSI units. The number of registered SSI units rose to 23.52 lakh units in 1997-98 whereas the number of unregistered units rose to 6.62 lakh. Out of 1,076 items, which are dealt with SSIs, only 60 items contributed towards 80 per cent of total production of reserved items in the SSI sector. Many SSIs have developed themselves to become MSIs and some are even LSIs. The credit goes to the hard work of the owners, labour and the technical staff of the SSIs.

The growth rate of SSI is more prominent and healthy as compared to the growth rates of MSIs or LSIs. The reason is that the governments in the centre and at the state levels promote these industries so that all the industrial pockets of the nation are developed. The policy-makers of the nation have succeeded in achieving many coveted objectives in the context of the operations of the SSIs.

However, SSIs also face many problems. Some of the problems are as follows:—

(A) SSIs face chronic funds shortage. The government does not extend easy credits in terms of working capital loans or long term loans. The applications of the entrepreneurs are processed after long time periods. This retards the growth rates of the SSIs.

(B) The major financial institutions like IDBI and ICICI are not allowed to invest in SSIs. They enjoy strong financial clout that is a dire need of the SSIs,

(C) Employee turnover is a major problem in the operations of the SSIs.

(D) Many entrepreneurs start SSIs but they lack the technologies, managerial skills and human resources, which are required to operate a successful enterprise. As a result, the SSIs become sick. The investments of the government as well as those of the entrepreneurs are wasted as a result.

(E) SSIs also face power shortage, red tape and problems due to strikes, labour unrest and force majeure. These factors do not allow them to generate profits.

(F) The operations of the SSIs are labour intensive. The entrepreneurs do not buy (or are unable to buy) semi- automatic or automatic plants and machinery. This factor reduces their productivity levels.

Some solutions for the improvement of the performance of the SSIs are as follows: —

(A) The government should extend soft loans to the SSIs. The "holiday period, “ie, the period during which, the SSI is not required to pay the interest to the financial institution, has to be increased. The working capital limits should also be increased.

(B) The entrepreneurs should operate the SSIs on professional lines.

(C) SSIs would have to be allocated higher quotas of power, coal, fuels and other vital raw materials. A exports rather

(D) SSIs would have to concentrate more on exports rather than on the domestic markets, if they wish to grow at a faster pace. Import of technologies and machinery would have to be resorted to in order to be competitive and production.

(E) The sick units must not be allowed to operate as they would consume more capital but would generate low outputs.

(F) The issues of red tape, bureaucratic delays industries, corruption would have to be handled with a stern hand by   the government so that SSIs are able to overcome their functional problems.

For guiding the entrepreneurs of the Small Scale Industries, National Small Industries Corporation (NSIC) has been promoted by the central government. Its objective is to facilitate the growth of SSIs. Its headquarter is located in New Delhi. We would conclude by stating that SSIs would witness high rates of growth in the nfcw century. These would be a part of the economic backbone of the nation in this century. Industrial development and economic prosperity are closely linked to the formation, sustenance and growth of SSIs in our country.