GROWTH AND PERFORMANCE OF SMALL SCALE INDUSTRIES IN INDIA

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1 International Refereed Journal ISSN No Journal of Current Trends in Education and Research Vol.6, Issue 1, pp.11-15, Jun RESEARCH ARTICLE Journal of Current Trends in Education and Research GROWTH AND PERFORMANCE OF SMALL SCALE INDUSTRIES IN INDIA V. USHA RANI 1 and V.P.JAYALAKSHMI 2 1 Assistant professor, P.G. Dept of Economics & Research Scholar, Chikkaiah Naicker College, Erode 2 Associate Professor of Economics, Government Art College (Autonomous), Salem Abstract Keywords National Income, Small Scale Industry, Economic, capital formation The Small Scale Sector in India has particularly emerged as a vibrant and dynamic segment of the economy. The strategy of economic development of any country that formulate programmed for removal of poverty by providing large scale employment, education and training, capital formation, effective mobilization of resources, balanced economic, expansion of trade, transport and equitable distribution of national income with effective involvement and participation of all is citizens in the accomplishment of the goal, cannot neglect small scale industrial sector (SSI).Second generation of economic reforms gave momentum to SSI with more relaxed regulatory framework to provide further impetus to. Indian economy has undergone transition phase witnessing the challenges of more free and market oriented environment of the liberalized era. One of the major drivers of the economy, the biggest challenge before SSI is not only to survive but also to grow and compete on a sustainable basis. This paper analyze the performance of Small Scale Industry in India Copy Right, JCTER, 2014, All rights reserved Introduction The small scale industries have been playing a momentous role in overall economic development of a country like India where millions of people are unemployed or underemployed. Poverty and unemployment are two burning problems of the country today. This sector solves these two problems through providing immediate large scale employment, with lower investment. The strength of SSI lies in their wide spread dispersal in rural, semi-urban and urban areas, fostering entrepreneurial base, shorter gestation period, and equitable distribution of income and wealth. Having recognized the significance of Small Scale Industrial sector, the Government of India has set up various agencies and institutions at different levels Central, State and the Local Government, has been pursuing the policy of protection and promotion of this sector since independence and also offered several incentives and concessions for their promotion and development. Since the launching of Five Year Plans in our country, the Small Scale Industrial sector has grown at a phenomenal rate. This sector comprises 95 per cent of the total industrial units in the country, accounting for 40 percent of the total industrial production 34 percent of the national export, and employment of Rs 250 lakh persons. So, this sector emerged as a dynamic and vibrant sector of the Indian economy. Classification of small scale industries in India Small Scale Industries is broadly classified into two sectors: (A) Traditional small industries (B) Modern small industries (A) Traditional small industries: The term Traditional Industry usually refers to the handicraft production methods of the preindustrial

2 Journal of Current Trends in Education and Research Vol.6, Issue 1, pp , Jun period and the continuation of such forms of manufacturing even during the of factory based industrialization. Traditional manufacturing was labour intensive and was carried out on small scale within the family or a small workshop. Traditional small industries include: Khadhi and village industries Hand looms Handicrafts Coir and Sericulture (B) Modern Small Industries These units produce wide range of goods from comparatively simple items to sophisticated products such as television sets, electronic control system, and various engineering products particularly as ancillaries to the large industries. These industries make use of highly sophisticated machinery and equipment. Following may be classified as modern small scale industries Small Scale Industries undertaking Export oriented Small Scale Industrial units Ancillary industrial undertaking Tiny enterprises Small scale services and business enterprises and Power loom Statement of the Research Problem The role of Small Scale Industries in the economic and social development of the country is well established. The Small Scale Industries is a nursery of entrepreneurship often driven by individual creativity and innovation. The small Scale Industries in India is highly heterogeneous in term of size of the enterprises, variety of products and service products and the level of technology employed. While one end of the Small Scale Industries spectrum contains highly innovative and high enterprises, more than 94 percent of Small Scale Industries are unregistered with large number of established in the informal or unregister or unorganized sector. Beside the potential of the sector and its critical role in the manufacturing and value chains, the heterogeneity and the unorganized nature of Indian Small Scale Industries are important aspects that need to be factored into policy making and program implementation. Review of Literature Dixit and Pandey 4 applied co-integration analysis to examine the causal relationship between SME s output, export, employment, and number of SME s and their fixed investment and India s GDP, total exports and employment for the period to Their study revealed the positive causality between SMW s output and India s GDP. Singh et al 5 analyzed the performance of Small Scale Industry in India and focused on policy changes which have opened new opportunities for this sector. Their study concluded that SSI sector has made good progress in terms of number of SSI units, production and employment level. The study recommended the emergence of technology development and strengthening of financial infrastructure to boost SSI and to achieve target. Venkatesh and Muthiah 6 found that the role of small and medium enterprises in the industrial sector is growing rapidly and they have become a thrust area for future. They emphasized that nurturing SME sector is essential for the economic well-being of the nation. Objective To analyze the overall performance of the SSIs in India from to The specific objective of this paper is to analyze the performance of SSI, in terms of number of units registered, Production recorded, employment generated and export from to Methodology The study is based on descriptive analysis. The variables such as number of small scale units, Production, employment and exports from to were used to evaluate its performance. For the purpose of the study, the required information relating to number of units, labour employed, value of production and exports at all India level was collected from MSME Annual Report of and various issues of Economic Survey of India. Definition of Small Scale Industries in India The definition of Small Scale Industries varies from one country to another. In most of the countries of the world, the criterion for defining small enterprise is related to the sized of employment. For instance, in the USA, small business is one which has employment of less than 500 people. In the

3 Journal of Current Trends in Education and Research Vol.6, Issue 1, pp , Jun U.K. it is less than 20 skilled workers, in Swedan and Italy less than 50 and 500 people respectively. In some countries both employment and investment are taken into account. The Small Scale Sector owes its definition to the Industries (Development and Regulation) Act, The sector is defined in terms of investment limited in plant and machinery (Original value) up to a prescribed value. Earlier small scale enterprises were defined on the basis of number of employees, sector of operation and incurred intensity of investment; Small Scale Industries in India are two types: manufacturing and service providers. MSMED act 2006 (Micro Small Medium Enterprises Development) introduced the concept of medium or micro enterprises. Under this act the limited industries have been widened to that of enterprises (Ghatak 2010) Small scale industries (SSIs) are defined on the basis of their investment in plant and machinery (for manufacturing enterprise) as well as in equipments for service enterprises. The Ministry of Micro Small and Medium Enterprises, Government of India imposed the Micro, Small and Medium, Enterprises Development (MSMED) Act in 2006 which defines MSME for both manufacturing and service sector. In case of manufacturing sector, micro enterprise is one where the investment in plant and machinery does not exceed Rs 25 lakhs ; small enterprise is that enterprise in which the investment in plant and machinery is more than Rs 25 lakhs but does not exceed Rs 5 crore ; medium enterprise is that having investment in plant and machinery more than Rs 5 crore ; but does not exceed in Rs10 crore. In case of the enterprises engaged in providing or rendering of services, micro enterprises are that one in which the investment in equipment does not exceed Rs 10 lakh. Small enterprise where the investment in equipment is more than Rs10 lakh but does not exceed Rs 2 crore ; medium enterprise is where the investment in equipment is ranges between Rs 2 crore and Rs 5 crore. The ceiling on investment for the micro, small and medium enterprises both in manufacturing sector and service sector can be summarized in the following Table: 1. Table 1 Classification of MSME s based on Investment Slabs Manufacturing Enterprises Enterprises Investment in plant &manufacturing Micro Upto Rs 25 lakhs Small More than Rs 25 lakhs and upto Rs 5 crores Medium More than Rs 5 crores and upto Rs 10 crores Service Enterprises Enterprises Investment in Equipments Micro Upto Rs 10 lakhs Small More than Rs 10 lakhs and upto Rs 2 crores Medium More than 2 crores and upto Rs 5 crores Source: MSME Development Act, Growth and Industries Performance of Small Scale The performance of the Small Scale Industrial units on various parameters viz. number of units, value of production and number of persons employed and exports has been impressive. The Small Scale Sector, which plays a pivotal role in the Indian economy in terms of employment and, has recorded a high rate of in spite of tough competition from the large scale sector. It is one of the fastest growing sectors in the country and it has made steady progress during recent year. The good performance of the small scale units is evident from the number of units registered, production recorded, employment generated and earnings from exports. The following Table: 2 gives information on the various parameters. Table : 2 Growths of Small Scale Industries in India from to No.of Small Production Year Scale units Employ ment Export

4 Journal of Current Trends in Education and Research Vol.6, Issue 1, pp , Jun Year No.of Small Production Scale units Employ ment Export Source: ministry of SSI s, Annual Report and Economic Survey of India Table: 3 Growth pattern of number of small scale units Year SSI Units ( in lakh) Growth Pattern of number of Small Scale Units Small firms are often said to grow faster than the large firms. Table 3 reveals the pattern of number of SS units in India from to From the Table-3, it is clear that the number of small scale units in India was increased from lakh units in the year to lakh units in the year The tremendous is seen in terms of units registered in the period of 12 years. It was increased to nearly 3.22 times in the year and the reason for the same was continuous promotional measures under taken by the Government of India for the development of Small Scale Industries. Table: 4 Growth Pattern of Production of Small Scale Units Year Production (Rs in Growth Pattern of Production of Small Scale Units It is clear from the Table-4 that there is remarkable in the production of SSI units in terms of value. The production was Rs crore in the year and it has been increased to Rs crore in the year It shows that the production was increased to 4.67 times in the period of 12 years. It is largely due to numerous Entrepreneurial Development Programme conducted by both the State and the Central Government. Table : 5 Growth Pattern of Number Of Employees Year No. of employees (in lakhs) Growth Pattern of Number of Employees The development of small scale sector is important in India because it provides more employment than the large scale sector. Table: 5 show that there is continuous in the number of persons employed in the period of 12 years. It is clear from the table that the number of employees was lakh in the year and the number increased to lakh in It reveals that the employment has increased nearly to 3.23 times in , which is largely due to increase in number of units in India. Table : 6 Growth Patterns Of Exports of Small Scale Units Year Export (Rs. In Growth Pattern of Exports of Small Scale Units Small Scale Industries plays an important role in India s export performance. The table 6 shows the pattern of exports of Small Scale Industries in India in terms of value over the period

5 Journal of Current Trends in Education and Research Vol.6, Issue 1, pp , Jun of 12 years. The Table clearly shows that the value of export was Rs crore in and it has increased to crore during the year It is clear that the exports were increased to nearly 3.86 times in 12 years. The increase in the value of exports due to proportional measures introduced both by the central and the state Government Conclusion Small Scale Industries has emerged as a dynamic and sector of the economy. They performed extremely well and enabled our country to attain wide ranging events of industrial amplification and diversification. Because of their less capital and high labour intensive nature, the SSIs have made important contribution to increased employment, increase in production and increase in export and also to rural industrialization. Today, it accounts for nearly 35 percent of the gross value of output in the manufacturing sector and over 40 percent of the total export from the country. The contribution of this sector to employment is next only to agriculture in India. It is therefore an excellent sector of economy for investment and employment generation. Reference 1. Ruddar Datt and K.P.M. Sundaram Indian Economy, 61th revised Edition. 2. Vasanth Desai, Small Scale Industries and Entrepreneurship Himalaya Publishing House,page Dr. C.B. Gupta and Dr. S.S. Khanka Entrepreneurship and Small Business Management, page Dixit A., and Pandey A.K., SME s and Economic Growth in India: Co-integration Analysis, The IUP Journal of Financial Economics, Vol.9,No.2,pp Singh R., Verma O.P., and Arjun B., Small Scale Industry: An Engine of Growth, Zenith International Journal of Business Economics and Management Research, 2012, Vol. 2 Issue Venkatesh S., and Muthiah K., SME s in India: Importance and Contribution, Asian Journal of Management Research, Vol.2, No