The Bonanza in Small-Scale Services

Transcription

1 CHAPTER 27 The Bonanza in Small-Scale Services The small-scale services sector represents a large opportunity for widespread economic growth and employment generation. Many services, such as local transportation, restaurants, retail outlets, travel agencies, packaging, publication, hair/beauty care, carpentry, laundry services, local advertising and promotional agencies, etc., mushroom rapidly as an economy grows and evolves into a servicesled economy. In fact, small-scale services form a large part of the services economy. For example, over 40 per cent of the wages in the US services economy is currently paid within small services enterprises. With economic growth, small-scale services will offer huge employment potential. This is important for Andhra Pradesh considering that, based on population growth and the worker participation rate, close to one million jobs have to be created annually for the next 20 years. More importantly, job opportunities will have to be created to absorb the large number of under-employed people in agriculture. Since the larger proportion of people in need of employment will be rural dwellers, livelihoods have to be found to suit people whose current occupations are dictated largely by their background and who have trade skills handed down over generations. They must also be found for rural women, who constitute a large part of the rural workforce, and whose mobility is limited by their role as primary caregivers in the family. Small-scale services have great potential for providing such livelihoods and will thus become a key vehicle for the transition from an agrarian to an industry- and services-led economy. 311

2 By 2020, Andhra Pradesh will have a competitive, widespread small-scale services sector. The State will be the benchmark for promoting and developing small-scale services. Small-scale services enterprises will flourish in the State and facilitate the transition to a services economy by generating substantial employment opportunities. As the economy grows, the services sector will grow in three ways 32 : (1) Growth in related and support services, i.e., services like grain transportation or fertiliser retailing, which are linked to growth in underlying sectors such as agriculture or industry. (2) Growth in semi-autonomous services which are services which need local purchasing power, e.g., personal services like laundry, hair cutting, etc. These will grow based on the needs of a growing economy and rising incomes. (3) Growth in autonomous services, i.e., services not linked to agriculture/industry or not dependent on local purchasing power, e.g., tourism, software development. Growth in these services is independent of growth in other areas (Exhibit 27.1). Andhra Pradesh will be the benchmark for promoting and developing the small-scale services sector. The different types of services will grow at different rates. The fastest growing services will be those linked to other sectors of the economy, particularly agroindustry, the allied sector in agriculture, mining, tourism, and information technology. Next will be those in which both production and consumption are local. Remote services linked to the growth engines, such as grain transportation, will also grow quickly, if not as fast as the earlier two. To stimulate the growth of small-scale services, Andhra Pradesh will adopt the following approach: Invest in building human capital and infrastructure. Promote the development of the small-scale services sector through focused development around the growth engines, creating high awareness about the new opportunities, and developing an independent Small Business and Entrepreneurship Promotion Board on the lines of similar efforts in the US and Singapore. Remove regulatory and financing obstacles to the development of new smallscale services enterprises. BUILDING HUMAN CAPITAL AND INFRASTRUCTURE To ensure that the State s people can capture the opportunities available, Andhra Pradesh will promote investment in building its human capital and in infrastructure. 32 Vijay Mahajan, Promoting Sustainable Rural Livelihoods in India: The Challenge of This Decade,

3 Building human capital Small-scale services, including services businesses, will need people with specific skills such as carpentry, restaurant management, hairdressing, etc. These skills can best be developed through a proliferation of vocational training institutes or polytechnics (on the lines of the various computer training institutions) that have already developed in the State. The Government will encourage the private sector to set up such institutions in a variety of areas. In addition, a select group of local colleges will offer evening courses in these areas. 313

4 Skills will be developed in a host of areas. In agriculture and horticulture, these will include manual skills such as producing hybrid seeds; sorting and grading fresh produce; repairing equipment; etc. For tourism and entertainment, they will include cookery, catering, housekeeping, lighting, etc. In higher end areas such as business and financial services and software, they will be data entry, sorting, filing, mailing, courier services, and so on. Furthermore, to ensure that its people can achieve the capability and productivity levels they will need to succeed in services jobs or businesses, Andhra Pradesh will ensure that they have access to primary healthcare and universal primary education. Scholarships for poor students and residential schools in remote areas will be emphasised to ensure that even disadvantaged groups can benefit from this important growth area. Building infrastructure The State will attract private investment in roads, bridges, low-income housing, warehouses, cold storage, etc. Investment will be promoted in areas such as ruralurban transportation, providing roads and bus services to facilitate worker mobility. Where necessary, the Government will itself invest in building infrastructure in rural and remote areas. In addition, the State will provide incentives to private investors to build hotels, hospitals, etc., that will foster small-scale services businesses or provide services jobs. It will also promote further investments in communications and entertainment, such as Hi-Tec City and Film City. PROMOTING THE DEVELOPMENT OF SMALL SCALE SERVICES Many developed and newly developed nations have not passively waited for the small-scale services sector to evolve as part of the process of economic development. Instead, they have actively promoted its development. Small business and entrepreneurship promotion associations sponsored by the government are common in the US. These associations proactively identify opportunities, offer loans, sponsor training programmes on general business skills and provide guidance on tapping export markets. Similarly, Singapore s Enterprise Development Board provides a comprehensive support package for new enterprises (Exhibit 27.2). 314

5 In India and Andhra Pradesh, the government and its financial institutions have promoted the development of the small-scale sector. But this effort has suffered from an excessive manufacturing bias, often in industries where small-scale manufacturing is counter-productive. The result is an uncompetitive small-scale manufacturing sector in some segments and an under-developed small-scale services sector. The Government s focus on the development of the small-scale sector will now shift toward services. It will set up a Small Services Promotion Board (SSPB) in the State with a charter to: 315

6 Identify small-scale services cluster opportunities: The SSPB will proactively identify and promote small-scale services clusters linked to other growth engines. Examples include local transportation services in the logistics hub; person-to-person services such as restaurants, beauty salons, etc., in towns and cities; tour operators and retail outlets in key tourism centres; security services in locations with many large companies, such as the IT hub/knowledge Corridor, etc. Exhibit 27.3 provides a list of some small-scale services opportunities that the growth engines will spawn. 316

7 Guide entrepreneurs on legal, financial and business issues: Entrepreneurs with basic skills will be trained on how to create a company, manage accounts, manage people, ensure quality control, undertake marketing, etc. Provide small loans in key target areas to highly deserving entrepreneurs: The SSPB will develop a benchmark entrepreneur plan through a rigorous selection process (often through events like a Business Plan Competition ), and provide loans to deserving entrepreneurs. Finally, promotion will also mean spreading awareness about new possibilities. By creatively using public media and holding innovative events like a tool bazaar in small towns and villages, the Government will spread the message that entrepreneurship in services can be lucrative and rewarding. For the SSPB to be effective, it has to penetrate to the local district level and generate excitement throughout the State. Its operations will be based on rigorous and fair practices that provide opportunities for the ventures with the highest potential for success REMOVING REGULATORY AND FINANCING OBSTACLES The Government in the past has taken several steps to promote small-scale enterprises (albeit with a manufacturing bias). For example, District Industry Centres (DICs) were set up to promote small-scale industry. But many of these measures have lacked force. For instance, the DICs are more focused on control than on promotion. The Government will rapidly change this situation by making the DICs more effective. Over time, they may evolve into the local chapter of the SSPB. Lack of financing is another constraint to the rapid development of the small-scale services sector. While the SSPB will make a contribution, the State government will also encourage banks operating in the State to launch special programmes to promote small-scale service enterprises. Small-scale services represent one of the biggest areas of opportunity for Andhra Pradesh. By facilitating their development, the State will transform the fortunes of many of its people. 317