Small Scale Industries

Introduction

Small enterprises typically make a large contribution to manufacturing employment in Poor countries. However, the developmental contribution of most of them is limited to Generating subsistence employment of last resort. Hence, in the face of fast labour Force growth and limited employment absorption in other sectors, developing country Governments have mounted efforts to improve productivity and earnings in these firms . This has spawned a plethora of policies and programmes, and an almost boundless Literature documenting them. This article is a review of one special subset of that literature, namely studies that Shed light on measures aimed at improving technological performance. This aspect has recently received less attention than other forms of assistance. Although much is being written about so-called business development services (BDS), of which technology Support is a component; most of that literature has a broader focus, dealing with Management, organization, sales, employment, income and general quality issues. Few Publications contain technical details about upgrading of products, processes and Organization, the support needed to bring about such improvements and the effectiveness of delivery mechanisms. Yet technological competence is an especially important determinant of small Manufacturers’ ability to hold their own in a context of liberalization and increasing Integration of manufacturing into global networks. Many of their markets, even traditional Ones are changing rapidly. In this situation, a lack of capability to produce efficiently, meet deadlines, or upgrade product quality and design spells defeat. The main objective is to identify important common factors behind the success and Failure of technology assistance projects of public agencies and non-governmental Organizations (NGOs).1 Insights into the question of what constitutes ª best practiceº in this field is still sorely lacking. The rationale for technology support for small firms is

1

Elaborated in Section 2. Lessons from past debates and interventions are drawn in Section 3. Section 4 treats recent developments in the debate about small industry Promotion more broadly, as these hold important lessons for current technical assistance Practices. This sets the scene for the discussion of recent approaches to project Design and implementation in Section 5, focusing on key principles behind the success of new approaches that are likely to have more general validity. These are illustrated with project case studies in Section 6. Conclusions are given in Section 7. The emphasis of this review is on small-scale workshops, so common throughout the developing world. They typically employ between five and 50 people, including Some hired labour. They have some division of labour and use basic machinery, but their managerial practices and technological characteristics are worlds removed from Those of modern large companies. They tend to be engaged in well-established or even traditional activities, making: basic wooden furniture; simple metal products such as Tractor-trailers, ploughs and window frames; leather goods; local construction materials; Or processed foodstuffs such as tofu and pasta. The customer base usually includes large numbers of the poor and lower middle class. Except in some Asian newly industrialized countries (NICs), few are in the forefront in new high-tech sectors and Successful exporters. Only a small minority engages in formal R&D.2 Self-employed Workers such as traditional blacksmiths, potters and weavers, and very small family-run Micro-enterprises operating in the informal sector are not part of this review. The Support programmes mounted for them are focused more on poverty alleviation than on business growth, and a discussion of these programmes raises different issues.

2

Small Scale Industries 7.65 The small scale sector has played a very important role in the socioeconomic development of the country during the past 50 years. It has significantly contributed to the overall growth in terms of the Gross Domestic Product (GDP), employment generation and exports. The performance of the small scale sector, therefore, has a direct impact on the growth of the overall economy. The performance of the small scale sectoring terms of parameters like number of units (both registered and unregistered), production, employment and exports During the one year period i.e., 2000-01over 1999-2000, the number of SSI units is estimated to have increased by 1,58,000, production at current prices by Rs.72,609 crore and at constant prices by Rs. 33,714 crore. Employment increased by 7,14,000 persons, while exports were higher by Rs. 5,778 crores. 7.67 According to projections made by the Ministry of Small Scale Industries during2000-01, the SSI sector recorded growth introduction of 8.09 per cent over the previous year. The small scale industries sector has recorded higher growth rate than the industrial sector as a whole (4.9 per cent during 2000-01). It contributed about 40 per cent towards the industrial production as a whole and 35 per cent of direct exports from thecountry.7.68 The Government has been taking various measures from time to time in order to enhance

3

The productivity, efficiency and competitiveness of the SSI sector. In pursuance of the comprehensive policy package announced last year, the major developments that have taken place in the SSI sector during 2001-02 are briefly outlined

Sickness in the SSI Sector 7.69 As on March 31, 2001, there were2,49,630 sick SSI units which had obtained loans from banks. An amount of Rs. 4,506 crore of bank credit was blocked in these units. Of these only 13,076 units were considered potentially viable by the banks with outstanding credit of Rs. 399 crore. Further, banks had identified2,25,488 units with outstanding bank credit amounting to Rs. 3,943 crore as unviable. Rehabilitation of sick units is a costly proposition As it involves rescheduling of past overdoes with concessions on interest amount due, additional credit for modernization and technology upgradation and provision for fresh working capital. Presently, the State Level Inter-Institutional Committee (SLIIC) of banks and financial institutions is the only forum looking into rehabilitation of potentially viable sick SSI units. However, in the absence of statutory backing, Slices has no power to enforce itsdecisions.7.70 To tackle the problem of rehabilitation of potentially viable sick SSI units, the RBI constituted a working group on November 25,2000 under the chairmanship of Sheri S.S. Kohli, The then chairman of Indian Banks Association, to look into the issue. The Working Group submitted its report in May, 2001. All the major recommendations of the working group have been accepted by the RBI, including a change in The definition of Sick SSI units, norms for deciding on the viability of sick units etc. The revised definition would enable banks to take action at an early stage for revival of the units. Based on the accepted recommendations of the Working Group, the RBI has drawn up the revised guidelines for Rehabilitation of Sick SSI units, which have been circulated on January 16, 2002 to all the Banks for implementation.

4

District Industries Centre The availability of infrastructure facilities likes, Industrial space, power water, Transport, Telecommunication linkage trained labour and financial assistance etc. is the important factors which determine the Industrial growth of the area.

Industrial Land/Area The state Government has developed the following Industrial

area's/Estate/Colonies in

the District where Industrial plots/sheds were made available to the entrepreneurs at most reasonable prices

Other Fiscal Incentives Granted by the DIC ·

Small Scale Industries

·

Electricity duty exemption

·

Exemption for electricity duty is granted to the units

·

Set-up in the State for initial five years.

·

Octroi Exemption

·

Priority Telephone Connection

PRIME MINISTER ROZGAR YOJANA The purpose of this scheme was to provide employment been made in the scheme to become more popular and meet out job opportunities i.e. candidate who is middle pass can take loan under this scheme. In case of S.C and female applicants age limit is enhanced from 35 years to 45 years. A target of 7 lacs up to the end 8th Five-year plan was fixed. The aim of the scheme is to self-dependence amongst youths by setting up Industrial units, business venture, servicing units etc. The results of this scheme are encouraging. The following are the achievements made under this scheme by the DIC, Hisar.

5

Registration of small-scale industries The industrial unit, which have investment up to Rs. One crore in plants and machinery can be registered as small-scale industries by the General Manager, District Industries Centre, Hisar. Registration has been divided in two categories 1.

Provisional registration and

2.

Permanent registration

Documents required for provisional registration ·

Application form

·

Affidavit

·

Copy of project report

·

Copy of land ownership proof

·

Copy of partnership deed in case of partnership firm

·

General power of Attorney in case of partnership form

·

Copy of resolution of Board of director in case Pvt. Ltd. / Ltd. Co.

·

Copy of Memorandum articles in case of Pvt. / Ltd. Co.

·

Any other documents required as per project.

6

SMALL SCALE INDUSTRIES FIGURES NO OF UNITS TAXTILE HANDLOOM PHARMACEUTICALS M. S. PIPES PVC PIPES CEMENT PAPER/PAPER PRODUCT CERAMICS CHEMICALS FOOD COTTON GINNING & OIL AGRI IMPLEMENTS REPAIRING WORK SHOP STEEL AND WOODEN FURNITURE PAINTS UTENSILS ROLLING MILLS ENGGINEERING ITEMS LATHER SHOES/JUTI ETC. MISC & OTHERS

20 180 12 6 10 1 12 04 26 258 312 516

INVESTMENT. (RS. IN LACS) 650.00 36.00 240.00 1218.00 250.00 52.00 145.00 162.00 26.20 1580.00 1896.00 103.00

EMPLOYMENT (IN NO.) 376 380 128 323 90 15 96 107 104 774 3712 778

418

201.60

896

6 4 5 626 398 558

36.00 24.00 440.00 313.00 19.00 238.55

36 40 214 939 597 2408

Details of Export Year

Items

1996-97

Amount Lacs)

(Rs. In

Countries to which exported

Polyster Buttons, Cotton Yarn.

3132.00

Bangla Desh, Korea, Tiwan, Malasya, Hong kong, Nepal, South Africa, Dubai, France, & U.K.

1997-98

Cotton Yarn, Stainless, Steel Coils, Steel Tubes.

2924.02

Hong Kong, Bangla Desh, Malaysia, Italy, Nepal South, Africa, U.A.E., Berlin, & Egypt.

1998-99.

Stainless Steel Strips, Plats, Coils, Sheets, Cotton Yarn, Button, Artificial Jewellary.

2834.00

Hong Kong, Italy, Nigeria, Nepal, Russia, Switzerland, USA, South Africa, U.K. France, South Korea, Sweden, Australia, Egypt, Bangla Desh, Germany.

1999-2000

----do----

13456.36

----do----

Statistical Details of SSI-Registered Unit/Workers year wise 7

Registered SSI working unit as on 31st Dec. 2000. Workers in registered working factories as on 31st Dec. 2000. Large & Medium units Employment

UNITS --------NO.

1997-98

98-99

1999-2000

2897

3305

3402

112

119

120

NO.

28

25

23

Hundred

87

78

75

Hundred

DETAILS OF SSE AND LARGE & MEDIUM INDUSTRIES. NO. OF UNITS TAXTILE INDUSTRIES VANASPATI GHEE G.I. PIPES PVC PIPES IRON & STEEL & OTHERS

8

INVESTMENT. (RS. IN CRORE) 152.48

EMPOLYMENT (IN NO.) 4654

3 4 2 6

14.50 6.66 9.48 173.37

115 559 218 1996

Small Scale Industrial Undertakings 8

The following requirements are to be complied with by an industrial undertaking to be graded as Small Scale Industrial undertaking w.e.f. 21.12.1999 An industrial undertaking in which the investment in fixed assets in plant and machinery whether held on ownership terms on lease or on hire purchase does not exceed Rs 10 million. (Subject to the condition that the unit is not owned, controlled or subsidiary of any other industrial undertaking) (Subject to the condition that the unit is not owned, controlled or subsidiary of any other industrial undertaking)

Explanation: For the purpose of this note:a. "owned" shall have the meaning as derived from the definition of the expression "owner" specified in clause (1) of section 3 of the said Act; b. "subsidiary" shall have the same meaning as in clause (47) of section 2, read with section 4, of the Companies Act, 1956 (1 of 1956); c. the expression "controlled by any other industrial undertaking" means as under:i.

where two or more industrial undertakings are set up by the same person as a proprietor, each of such industrial undertakings shall be considered to be controlled by the other industrial undertaking or undertakings,

ii.

where two or more industrial undertakings are set up as partnership firms under the Indian Partnership Act, 1932 (1 of 1932) and one or more partners are common partner or partners in such firms, each such undertaking shall be considered to be controlled by other undertaking or undertakings,

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iii.

where industrial undertakings are set up by companies under the Companies Act, 1956 (1 of 1956), an industrial undertaking shall be considered to be controlled by other industrial undertaking if:-

a. the equity holding by other industrial undertaking in it exceeds twenty four percent of its total equity; or b. the management control of an undertaking is passed on to the other industrial undertaking by way of the Managing Director of the first mentioned undertaking being also the Managing Director or Director in the other industrial undertaking or the majority of Directors on the Board of the first mentioned undertaking being the equity holders in the other industrial undertaking in terms of the provisions of the following items (a) and (b) of sub-clause (iv); (iv) the extent of equity participation by other industrial undertaking or undertakings in the undertaking as per sub-clause (iii) above shall be worked out as follows:a. the equity participation by other industrial undertaking shall include both foreign and domestic equity; b. equity participation by other industrial undertaking shall mean total equity held in an industrial undertaking by other industrial undertaking or undertakings, whether small scale or otherwise, put together as well as the equity held by persons who are Directors in any other industrial undertaking or undertakings even if the person concerned is a Director in other Industrial Undertaking or Undertakings; c. equity held by a person, having special technical qualification and experience, appointed as a Director in a small scale industrial undertaking, to the extent of qualification shares, if so provided in the Articles of Association, shall not be counted in computing the equity held by other industrial undertaking or undertakings even if the person concerned is a Director in other industrial undertakings or undertakings;

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(v) where an industrial undertaking is a subsidiary of, or is owned or controlled by, any other industrial undertaking or undertakings in terms of sub-clauses (i); (ii); or (iii) and if the total investment in fixed assets in plant and machinery of the first mentioned industrial undertaking and the other industrial undertaking or undertakings clubbed together exceeds the limit of investment specified in paragraphs (1) or (2) of this notification as the case may be, none of these industrial undertakings shall be considered to be a small scale or ancillary industrial undertaking.

Note2(a) In calculating the value of plant and machinery for the purposes of paragraphs (1) and (2) of this notification, the original price thereof, irrespective of whether the plant and machinery are new or second hand, shall be taken into account. (b) In calculating the value of plant and machinery, the following shall be excluded, namely:i.

the cost of equipments such as tools, jigs, dies, moulds and spare parts for maintenance and the cost of consumable stores;

ii.

the cost of installation of plant and machinery;

iii.

the cost of research and development equipment and pollution control equipment;

iv.

the cost of generation sets and extra transformer installed by the undertaking as per the regulations of the State Electricity Board;

v.

the bank charges and service charges paid to the National Small Industries Corporation or the State Small Industries Corporation;

vi.

the cost involved in procurement or installation of cables, wiring, bus bars, electrical control panels (not those mounted on individual machines), oil circuit breakers or miniature circuit breakers which are necessarily to be used for providing electrical power to the plant and machinery or for safety measures;

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vii.

the cost of gas producer plants;

viii.

transportation charges (excluding of sales tax and excise) for indigenous machinery from the place of manufacturing to the site of the factory;

ix.

charges paid for technical know how for erection of plant and machinery;

x.

cost of such storage tanks which store raw materials, finished products only and are not linked with the manufacturing process; and

xi.

Cost of fire fighting equipments.

(c) In the case of imported machinery, the following shall be included in calculating the value, namely:i.

import duty (excluding miscellaneous expenses as transportation from the port to the site of the factory, demurrage paid at the port);

ii.

the shipping charges;

iii.

customs clearance charges; and

iv.

Sales tax.

Every industrial undertaking which has been issued a certificate of registration under section 10 of the said Act or a license under sections 11, 11A and 13 of the said Act by the Central Government and are covered by the provisions of paragraphs (1) and (2) above relating to the ancillary or small scale industrial undertaking, may be registered, at the discretion of the owner, as such, within a period of one hundred and eighty days from the

date

of

publication

of

this

notification

12

in

the

Official

Gazette.

Ancillary Industrial Undertakings •

The following requirements are to be complied with by an industrial undertaking for being regarded as ancillary industrial undertaking: -

An industrial undertaking which is engaged or is proposed to be engaged in the manufacture or production of parts, components, sub-assemblies, tooling or intermediates, or the rendering of services and the undertaking supplies or renders or proposes to supply or render not less than 50 per cent of its production or services, as the case may be, to one or more other industrial undertakings and whose investment in fixed assets in plant and machinery whether held on ownership terms or on lease or on hirepurchase, does not exceed Rs 10 million.

Tiny Enterprises Investment limit in plant and machinery in respect of tiny enterprises is Rs 2.5 million irrespective of location of the unit.

Women Entrepreneurs A Small Scale Industrial Unit/ Industry related service or business enterprise, managed by one or more women entrepreneurs in proprietary concerns, or in which she/ they individually or jointly have a share capital of not less than 51% as Partners/ Shareholders/ Directors of Private Limits Company/ Members of Cooperative Society.

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Investment Limits The definition of small scale industries has undergone changes over the years in terms of investment limits in the following manner:-

YEAR

INVESTMENT LIMITS

ADDITIONAL CONDITIONS

1950

Up to Rs 5 lacs in fixed assets

Less than 50/100 persons with or without power

1960

Up to Rs 5 lacs in Plant & Machinery

No condition

1966

Up to Rs 7.5 lacs in Plant & Machinery

No condition

1975

Up to Rs 10 lacs in Plant & Machinery

No condition

1980

Up to Rs 20 lacs in Plant & Machinery

No condition

1985

Up to Rs 35 lacs in Plant & Machinery

No condition

1991

Up to Rs 60 lacs in Plant & Machinery

No condition

1997

Up to Rs 100 lacs in Plant & Machinery

No condition

(Dec)

Computation of Plant and Machinery (For calculating investment limit) In calculating the value of plant and machinery, the original price thereof irrespective of whether the plant and machinery are new or second hand, shall be taken into account. However, to determine the price of second hand imported machinery, the original vale of the said plant and machinery will be taken in foreign currency terms. The value of foreign currency will be converted into rupee using the "current" exchange rate, i.e. exchange rate prevalent at the time of import. The import duty will be added on the basis of "current" rate of import duty, i.e. the rate of import duty prevalent at the time of import.

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In calculating the value of plant and machinery, the following shall be excluded, namely:i.

Cost of equipments such as tools, jigs, dies, moulds and spare parts for maintenance and the cost of consumable stores.

ii.

Cost of installation of plant and machinery.

iii.

Cost of Research and Development (R&D) equipment and pollution control equipment.

iv.

Cost of generation sets, extra transformers, etc., installed by the undertaking as per the regulations of the State Electricity Board.

v.

Bank charges and service charges paid to the National Small Industries Corporation or the State Small Industries Corporation.

vi.

Cost involved in procurement or installation of cables, wiring, bus bars, electrical control

panels

(not

those

mounted

on

individual

machines),

oil

circuit

breaker/miniature circuit breakers, etc. which are necessarily to be used for providing electrical power to the plant and machinery safety measures.

vii.

Cost of gas producer plants.

viii.

Transportation charges (excluding taxes e.g., Sales tax, excise, etc.) for indigenous machinery from the place of manufacturing to the site of the factory.

ix.

Charges paid for technical know-how or erection of plant and machinery.

x.

Cost of such storage tanks which store raw materials, finished products only and are not linked with the manufacturing process.

xi.

Cost of fire-fighting equipments.

xii.

Cost of those items of plant and machinery installed purely for power generation using non-conventional energy sources such as wind, solar energy, ocean waves, bio-gas etc.

In case of imported machinery, the following shall be included in calculating the value namely:i.

Import duty, excluding miscellaneous expenses such as transportation from the port to the site of the factory, demurrage paid at the port.

ii.

Shipping charges

iii.

Customs clearance charges and

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iv.

Sales tax

Employment Generation SSI Sector in India creates largest employment opportunities for the Indian populace, next only to Agriculture. It has been estimated that a lakh rupees of investment in fixed assets in the small scale sector generates employment for four persons.

According to the SSI Sector survey conducted by the Ministry and National Informatics Centre with the base year of 1987-88, the following interesting observations were made related to employment in the small scale sector.

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Generation of Employment - Industry Group-wise Food products industry has ranked first in generating employment, providing employment to 4.82 lakh persons (13.1%). The next two industry groups were Non-metallic mineral products with employment of 4.46 lakh persons (12.2%) and Metal products with 3.73 lakh persons (10.2%). In Chemicals & chemical products, Machinery parts and except Electrical parts, Wood products, Basic Metal Industries, Paper products & printing, Hosiery & garments, Repair services and Rubber & plastic products, the contribution ranged from 9% to 5%, the total contribution by these eight industry groups being 49%. In all other industries the contribution was less than 5%.

Per unit employment Per unit employment was the highest (20) in units engaged in Beverages, tobacco & tobacco products mainly due to the high employment potential of this industry particularly in Maharashtra, Andhra Pradesh, Rajasthan, Assam and Tamil Nadu. Next came Cotton textile products (17), Non-metallic mineral products (14.1), Basic metal industries (13.6) and Electrical machinery and parts (11.2.) The lowest figure of 2.4 was in Repair services line. Per unit employment was the highest (10) in metropolitan areas and lowest (5) in rural areas. However, in Chemicals & chemical products, Non-metallic mineral products and Basic metal industries per unit employment was higher in rural areas as compared to metropolitan areas/urban areas.

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In urban areas highest employment per unit was in Beverages, tobacco products (31 persons) followed by Cotton textile products (18), Basic metal industries (13) and Nonmetallic mineral products (12).

Rural Non-metallic products contributed 22.7% to employment generated in rural areas. Food Products accounted for 21.1%, Wood Products and Chemicals and chemical products shared between them 17.5%.

Urban As for urban areas, Food Products and Metal Products almost equally shared 22.8% of employment. Machinery and parts except electrical, Non-metallic mineral products, and Chemicals & chemical products between them accounted for 26.2% of employment. In metropolitan areas the leading industries were Metal products, Machinery and parts except electrical and Paper products & printing (total share being 33.6%).

State-wise Employment Distribution Tamil Nadu (14.5%) made the maximum contribution to employment. This was followed by Maharashtra (9.7%), Uttar Pradesh (9.5%) and West Bengal (8.5%) the total share being 27.7%. Gujarat (7.6%), Andhra Pradesh (7.5%), Karnataka (6.7%), and Punjab (5.6%) together accounted for another 27.4%. Per unit employment was high - 17, 16 and 14 respectively - in Nagaland, Sikkim and Dadra & Nagar Haveli.

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It was 12 in Maharashtra, Tripura and Delhi. Madhya Pradesh had the lowest figure of 2. In all other cases it was around the average of 6.

Production The small scale industries sector plays a vital role for the growth of the country. It contributes 40% of the gross manufacture to the Indian economy. It has been estimated that a lakh rupees of investment in fixed assets in the small scale sector produces 4.62 lakhs worth of goods or services with an approximate value addition of ten percentage points. The small scale sector has grown rapidly over the years. The growth rates during the various plan periods have been very impressive.

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The number of small scale units has increased from an estimated 8.74 lakhs units in the year

1980-81

to

an

estimated

31.21

lakhs

in

the

year

1999.

From the year 1990-91 this sector has exhibited a comparatively lower growth trend (though positive) which continued during the next two years. However, this has to be viewed in the background of the general recession in the economy. The transition period of the process of economic reforms was also affected for some period by adverse factors such as foreign exchange constraints, credit squeeze, demand recession, high interest rates,

shortage

of

raw

material

etc.

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 estimates of growth for the year 1995-96 have shown an upswing. The growth of SSI sector has surpassed overall industrial growth from 1991 onwards. The positive trend is likely to strengthen in the coming years. This trend augurs a bright future for the small scale industry.

Export contribution SSI Sector plays a major role in India's present export performance. 45%-50% of the Indian Exports is being contributed by SSI Sector. Direct exports from the SSI Sector 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 small scale industrial units contribute around

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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. It would surprise many to know that non traditional products account for more than 95% 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 garment, leather and gems and jewellery units from this sector.

The lucrative 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.

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Opportunities Small industry sector has performed exceedingly well and enabled our country to achieve a wide measure of industrial growth and diversification.

By its less capital intensive and high labour absorption nature, SSI sector has made significant contributions to employment generation and also to rural industrialization. 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. The opportunities in the small scale sector are enormous due to the following factors : - Less Capital Intensive - Extensive Promotion & Support by the Government - Reservation for Exclusive Manufacture by small scale sector - Project Profiles

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- Funding - Finance & Subsidies - Machinery Procurement - Raw Material Procurement - Manpower Training - Technical & Managerial skills - Tools & Tools utilization support - Reservation for Exclusive Purchase by Government - Export Promotion - Growth in demand in the domestic market size due to overall economic growth - Increasing Export Potential for Indian products - Growth in Requirements for ancillary units due to the increase in number of Greenfield units coming up in the large scale sector. 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 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

23

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.

Economic Indicators The Small Scale Industry today constitutes a very important segment of the Indian economy. The development of this sector came about primarily due to the vision of our late Prime Minister Jawaharlal Nehru who sought to develop core industry and have a supporting sector in the form of small scale enterprises. Small Scale Sector has emerged as a dynamic and vibrant sector of the economy. - Today, it accounts for nearly 35% of the gross value of output in the manufacturing sector and over 40% of the total exports from the country. - In terms of value added this sector accounts for about 40% of the value added in the manufacturing sector. - The sector's contribution to employment is next only to agriculture in India. It is therefore an excellent sector of economy for investment.

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The Importance of Technology Support The importance of institutional (i.e. public and NGO) technology support to industry In general derives from the argument that investments in technological upgrading and Learning is subject to widespread market failure. Without corrective intervention, Private companies will under-invest in technological effort relative to the social optimum (Stone man, 1995; Dasgupta, 1987). First, new knowledge created by a company Tends to leak out to competitors, reducing its incentive to innovate. Second, investments in technological upgrading are subject to risk due to uncertainty. Third, new Knowledge often becomes substantially useful only in fairly large amounts, so that the required minimum investment outlay and risk will sometimes exceed the capacity of Individual investors. Scale advantages also occur in the form of benefits from interactive Technological learning, which creates positive externalities by sparking new knowledge and ideas. Co-coordinated action can: balance innovators’ and imitators’ interests; help Decide which industries and projects should receive priority in the national research effort; help mobilize sufficient resources to that end; get private actors to co-operate Towards the achievement of those goals; and reduce risk through improved access to Information and knowledge. Support policies are particularly vital in less-developed countries (LDCs), where Problems of appropriability, co-ordination and information are especially severe. The Financial, research and human capital base of firms tends to be weak. Most of their Technological efforts are relatively easy to copy because they are, for the most part, Adaptive and incremental, not amenable to patenting. Inter-firm communication and Cooperation are cumbersome because of poorly developed physical infrastructure, and Risk is high in an information-poor environment. Even relatively easy tasks become Difficult, costly and risky (Lall & Teubal, 1998, p. 1371). Small firms generally and it more difficult to cope than medium and large ones.

25

Their technological capabilities are weaker, and they are usually not in a position to get Funding for innovation on reasonable terms through the regular financial system. Owing To resource constraints, their information search efforts and investments in training and Education tends to be quite restricted. Lack of performance, skill and expertise combined with High uncertainty also lead to risk-averse behavior, depressing investments in technological Effort. In some industries, modern, efficient techniques of production suitable For a small scale of operation are also lacking. Moreover, problems associated with economies of scale affect small firms worse than large ones. While the latter can to some extent overcome scale problems and capture externalities from inter-personal interaction Within the cones of their own walls, small firms can create critical mass only through inter-firm co-operation and market exchange, which is often precluded by intense competitive rivalry, lack of trust, poorly functioning factor markets and underdeveloped private-sector services. The large majority of the workshops that are the Subject of this paper are caught in a vicious circle of low-tech, low-productivity production, unable to embark on substantial technological upgrading efforts without help. Potential benefits of institutional support to small firms are large. By improving access to information, performance and suitable technologies, support can help all the Missing middle observed in the manufacturing size structure in poor countries. Dynamic small firms could also contribute significantly to national exports. Moreover, Clusters of geographically close producers may create significant positive dynamic externalities.

3. Early

Programmes

The small enterprise sector was firmly put on the mental map of LDC policy-makers in the early 1970s as part of a general disenchantment with industrialization strategies 26

favoring top-down modernization through expansion of the modern large-scale sector that had been pursued in the 1950s and 1960s. As the benefits of trickle-down were Apparently limited, income-creation approaches based on direct targeting of poorer sections of the population gained widespread favor. The International Labour Organization took the lead in documenting the precariousness of those working in small Enterprises, and the serious constraints they faced (e.g. Sethuraman, 1981). Early technology support programmes predominantly adopted a supply-push approach (UNDP et al., 1988). It was thought that the provision of a variety of services could overcome producers’ resource constraints and thereby fosters competitiveness. Many countries set up state-run small and medium industry development organizations (SMIDOs) charged with providing services such as technical and management training, marketing assistance, advice about technology choice, assistance with technology procurement And provision of subsidized performance. The scope of the programmes was Generally broader than technological upgrading alone. However, there were also a Number of bodies, both state and NGO, focusing specially on technology. These Programmes achieved some good results, but they were also beset with a large number of problems. Here, we only discuss some issues that bear especially on technological Support. It is inevitably a broad-brush approach that does not do justice to the Special cities associated with particular programmes across different countries. Products (Stewart, 1987; Bhalla, 1985; Stewart & Ranis, 1990; Haggblade et al., 1990). Both arguments carried some weight. These policy-makers to promote Research in institutes aimed at the development of small-scale efficient technologies. Various strategies were identified (Bhalla et al., 1984; James, 1989). Foreign donors were much involved in such projects; it was the golden age of the appropriate technology movement. This approach achieved a degree of success, though many so-called appropriate technologies failed at the commercialization stage. One big lesson was that technology Development in the public domain and its subsequent diffusion in top-down, supply push fashion was not an effective model. Technology institutes often had competent Engineers, but they knew little about the requirements of poor producers and communicator.

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