chapter ii review of literature -...
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CHAPTER – II
Review of Literature
Small scale industries have been given an important place in the economy of both
developing and developed countries. The economic development achieved by many
developed countries can be linked directly to the growth of this sector. In India the small
scale industrial sector has registered a rapid growth. The growth and development of
small scale industrial sector has attracted a good deal of academic and research attention.
A large volume of literature thus available on the different aspects of small scale
industries has been studied and a brief review is presented here.
The small scale industrial sector provides a down stream base for the products
manufactured by big industries, especially heavy and basic industries. Suryakant Parikh,
(1947)1 stated that small enterprises are labour intensive and thus, create more
employment per unit of capital employed. Emphasizing the employment potential of
such enterprises, the Karve Committee, (1955)2 stated that self employment is as that of
self government is as important to a successful democracy.
Basu (1957)3 makes an attempt to examine the financial problems of small scale
industries and assess their place in the country‟s second five year plan, and highlights the
role of State Finance Corporation (SFC) in financing small scale industries.
Commenting on the role of small industry, the International Labour Organisation (ILO)
1 Parikh M. Suryakant, How to finance small Business Enterprises, (New Delhi: Macmillan Company Ltd., 1947.).P.9
2
Government of India, Report of the Village and Small Scale Industries committee, (New Delhi: Karve Committee, 1955.) P.8
3 Basu S.K. Financial Problems of SSI Calcutta (Calcutta : A Mukherjee and Company ( Pvt) Ltd.
1957.) P.21.
21
(1961)4 states that small scale industries provide employment for a substantial portion of
the industrial labour force and accounts for a large proportion of all industrial
establishments in all the countries. It has a strategic role to play in the economic
development of industrially less advanced countries as well as highly industrialised
countries.
In view of this Narayanan (1964)5 analyzed the financial problems faced by
Industries in general and recommended the setting up of an Industrial Development Bank
at the state level for mitigating the problems.
Rao (1965)6 identified that the small scale and cottage industries will result in a
large and most widely distributed sharing of the productive function and therefore, a
more equitable distribution of the produce of the industry.To further prove this, United
Nation states (1966)7 that much emphasis has been laid on the development of SSIs in
the developing country. It is due to the fact that the establishment of small scale
industries provides employment and tends to achieve more equitable distribution of the
National income. This facilitates mobilisation of resources of capital and skill which
might otherwise remain unutilised.
In another study on industrialisation process of developed countries united
Nation (1966)8 states that it reveals the importance of modern small scale industry in the
4 ILO, Series for Small Scale Industry ( Geneva: 1961) P.1
5 Narayanan.B, Financing of Industries in Bihar (An Industrial Development Bank for Bihar) Ph.D.
Thesis, Bihar University, 1964.
6 Rao, V.K.R.V. Small Scale and Cottage Industries, Edited by Jain.P.C. - Industrial Problems of India, (Allahabad: Chaitanya Publishing House,1965.) P.107
7
United Nations. Industrial Estates: Policies, plan and progress (New York: United Nations, 1966.) P.6
8 United Nations. Report of the Seminar on Small scale Industry in Latin America – Chuito Ecuador,
No.V.28, Dec.3.1966. P.51
22
industrial structure. The study also reveals that SSI plays a dynamic role in industry
relations, development and growth of developed countries.
Further, Gunnar Myrda (1968) 9explains the need for promoting small industry
because small business not only brings about economic growth of various regions of
a country, but also creates a balance between large and small production units.
Suresh Chandra Jain (1971)10 in his work analyses in detail, the problems of
institutional finance for small scale industries in Uttar Pradesh. Sharma (1973)11 in his
study explains industrial financing by national level financial institutions. It also
discusses the role of the state financial institutions in financing industries of Bihar. The
author suggests that the financial institution should act as a guide, philosopher and
promoter of industries and recommends the setting up of small industries back.
Suresh Chandra Jain (1973)12 in his study emphasises the need for greater co-
ordination of financial Institutions / non-financial institutions and agencies engaged in
the promotion of small scale Industries.
Roy and Walter (1974)13 explain that the distribution of economic power through
a system of small firms leads to a more favourable distribution of power in society in
9 Myrda, Gunnar. Asian Drama: An inquiry into the poverty of nations, vol. II (England: Pergain Book ltd., 1968.) P.123
10
Suresh Chandra Jain, Industrial Finance for Small – Scale Industries in Uttar Pradesh, Ph.D. Thesis Agra University, 1971.
11 Sharma.M.L., Role of Institutional Finance in the Industrial Development of Bihar Ph.D.Thesis,
Bhagalpur University,1973.
12 Suresh Chandra Jain, “Institutional Finance for Small – Scale Industries Since 1956- With Particular
Reference to Merit, “ Ph.D Thesis Agra University, 1973.
13 Roy Rothwell and Walter Ziegfelds. Innovation and the small and medium sized firms,(London: Frances Publishers, 1974.) P.1
23
general. It also substantiates that the existence of small firms has positive effects on
political and social stability.
Inderjith Singh and Gupta (1977)14 state that the expansion of the bank credit is
not only desirable but also essential for the economic development of Jammu and
Kashmir. Commercial banks have taken up this task of credit expansion on a challenging
basis and should exploit the tremendous potentiality by establishing personal contact
with small industrialists.
Suryakant (1977)15
explains that Small business sector contributes towards
capital formation by providing scope for the utilisation of skills and resources scattered
all over the country. Pareek‟s (1978)16 research reveals the role of financial institutions
and state agencies in extending credit to small-scale units and pinpoint, their attitude of
indifference in catering the need of the tiny units. He suggests that financial institutions
have to tune their policies in consonance with the needs of small scale sector in general.
In the words of the World Bank (1978)17, one way to faster the creation of more
urban or non-farm jobs per unit of capital invested is by encouraging the development of
small scale enterprises, which is generally more labour intensive than larger units
Harman and Parl (1979)18
states that business may be valuable, small business
develops components and ideas which big business uses it. This is due to the fact that
14 Inderjith Singh and Gupta.N.S., Financing of Small Industries, (New Delhi: S.Chand and Co. 1977.)
P.244
15 Parikh M. Suryakant, How to finance Small Business Enterprises, (New Delhi: Mac Millan Company Ltd., 1977.) P.11
16 Pareek.H.S, Financing of Small Scale Industry in a Developing Economy, (New Delhi: National Publishing House, 1978.) P.217
17
World Bank, Sector Policy Paper-Employment of Small Enterprises( Washinston: D.C. U.S.A, February 1978.) P.18
18 Harmon, Parl. Small Business management a practical Approach,(New York: D. Vanvostr and
company, 1979. ) P.3
24
small firms train workers who help big firms to solve their problems. Small companies
Contribute to community in such ways that a big business cannot.
Murthy (1980)19 has pointed that it is a multi dimensional one and it is revolving
around the availability of adequate finance, more so with working capital. Graham
Bannock (1981)20 presents a vivid picture of the practical problems of the individual
small business, showing how they relate to the wider issues of economic policy. He
believes that the release of the economic dynamisms inherent in the small business sector
could help to generate the social and economic change needed for the resumption of
inflation-free growth.
Papola and Tewaris (1981)21 in their study discuss the impact of concessional
finance on industrial development of backward areas and found that the concessional
finance was one of the important considerations in the location of new units in the
backward districts.
Singaravelu (1982)22 points out the need to establish national level institutions or
institutions at state level to finance tiny units, which come with in the scope of small
scale sector. He also states that the loan should be project based not security based.
Roth Well and Water Zegveld (1982)23 reveal that SME have been and in
general, continue to be, technologically innovative. Technology based new SME plays
19 Murthy.G.K., Financing of SSI in Rayalaseema, Sri. Venkatsawara University, Anantapur. 1980. ) P.46
20
Graham Banneck, The Economies of Small Firms: Return from the wilderness. (Oxford : Basil Blockwell, 1981.) P.124
21 Papola T.S. and Tewari R.T. Impact of Concessional Finance on Industrial. Development of
Backward areas, (Luck Now: Giri Institue of Development Studies, 1981.) P.87
22 Raviprakash Singaravelu.S, “Financing Small Scale Industries in Madras City” Institute of
Management Development and Research. Poona, 1982. P.215
23 Roy Roth well, Walter Zegveld, Innovation and Small and Medium Sized Firm.(London: Frances Printer (Publishers) 1982.) P.163
25
an important part in the emergence of new technology and in economic growth. SME,
particularly, young technology based SMEs also make an exceptional contribution to
employment creation. SME, and their larger counterparts, does represent an important
vehicle for regional regeneration.
Chico (1983)24 states that many developing countries, with rapidly growing
population and inadequate capital resources have to rely heavily on small industries,
which use modern capital saving technologies to increase gainful employment and
thereby to improve standards of living and working condition for the masses.
Reddy (1983)25 in his doctoral thesis reports that SSI units are to equip
themselves with better and improved methods of marketing, disseminated through proper
training programmes conducted by the Institute of Marketing, which may be started
exclusively.
Vepa (1983)26 in his study reports that over the last 25 years a network of
institutions and policies has been developed in the country but not all of them have been
successful. But taken in total, they have provided a well-organised frame work in which
the small and cottage industry have been allowed to grow.
24 Leon V. Chico Small Enterprise and Entrepreneurship Development in Eleven Asian-pacific countries-proceedings of a workshop held in pattaya, lCanadian International Development Agency, Thailand, Feb. 17-22, 1983. P.7
25
Narayana Reddy.P, “Marketing Problems in Small scale Industries“ Ph, D. Thesis, Sri, Krishna devaraya University, Anantapur, 1983.
26 Ram K.Vepa, “ Small Industry Development program,” (New Delhi: India Institute of public
Administration.,1983.) P.49-51
26
Report of high-level committee (1984)27 on trade and power states that on the
credit front, the efforts of Kerala Financial Corporation and banks were found to be
inadequate and were riddled with delays and too many formalities.
State Planning Board reports (1984)28 that the task force on small scale industries
does not distribute subsidies and concessions to eligible units at the right time and the
assistance announced by the government are badly delayed for several reasons such as
delay in issuing detailed orders, inadequacy of budget provisions etc.
Chita and Lied Holm (1985)29 in a comprehensive study of SSI in Sierra Leone
provide a new insight into the role of SSI in providing production, employment and
earning opportunities. Besides giving an overview of the role of the rural and urban
industry in Sierra Leone, the determinants of the demand for and supply of SSI products
are examined.
The report of the subgroup on small scale industries for the Seventh Plan (1985)30
identifies that the efforts of the government have not met with the same degree of
success in different parts of the country, nor have they removed the basic weakness of
the small scale sector. TaraNand Singh Tarun and Devandra Thankar (1986)31 reveal that
the fundamental problem of industrial development in India is the problem of
27 State Planning Board, Report of High-Level Committee on Industry Trade and Power Vol. 1 and 2.
Government of Kerala, Trivandrum 1984.
28 State Planning Board Report of High Level Committee on Industry Trade and Power (Trivandrum
Vol. II, Government of Kerala, 1984.) P.36
29 Envy vinna chuta and C.Liedholun, Employment Growth in SSI Industry Empirical Evidence and Assessment from Sierra Leone, (Handbills and The Macmillan Press Ltd, 1985.) P 218.
30
Sub group on Scale Industries Report of the Working Group on Small Scale Industries For the seventh Plan, (New Delhi: Government of India, 1985.) P.10
31 TaraNand Singh Tarun and Devendra Thakur. “ Small scale Industries and Indian Economic
Development” (New Delhi :Deep and Deep publications , 1986.) P.83
27
transplanting and acclimatizing the fruits of technology so as to raise the whole level of
productivity.
Kumar Suman (1986)32 examines the overall performance of the Bihar State
Industrial Development Corporation and expresses systematically and scientifically the
troubles faced by the corporation. Radhey Syhan Singh (1986)33 in his study makes an
analytical survey of the institutional sources of finance to the SSI and other small/tiny
units, after critically examining the financial institutions for the growth of the small scale
sector.
Tarun (1986)34 reveals that the small industries sector has been recognised as an
effective instrument for attaining the objectives of additional productive employment in
rural and backward areas and increased production of items of mass consumption.
Phili neck and Robert (1987)35 state that because of their unique economic and
organisation characteristics, small enterprises are well placed to have important
economic, social and political roles in all spheres of activity. In developing countries,
where there is a shortage of the capital, managerial resources & skilled labour of the
small enterprises may be an important approach to economic development.
32 Pratalad Kumar Suman, “ A study of Bihar State Industrial Development Corporation:Ph.D. Thesis
Mithila.L.N, Bihar University . 1986.
33 Radhey Shyan Singh, Financing of SSI In India, Ph.D. Thesis Banaras Hindu University, 1986.
34
Tarun. T.N.S. Small Scale Industries and India‟s Economic Development Problems, Programmes and policies, (New Delhi : Deep & Deep publications, 1986.) P.155
35 Phili P.A.Neck and Robert. E.Nelson (EDs) Small Enterprises Development: Policies and
programmes- Management Development Series No.4, ILO, Geneva, 1987. PP 1-5.
28
Agarwal (1987)36 reports that the Indian banking system has failed to extend
appropriate amounts of loan to SSI. He has the opinion that lending institution should be
more practical and flexible in their attitude rather than straightly legal with a view of
enabling the borrowing units to overcome any temporary difficulties.
Sandesara (1988)37 describes the Institutional framework for the small and
medium Industries in India. The impact of assistance on firms in this sector and the
working of these institutions are also analysed. He argues for a fresh approach to the
institutional set-up and policy framework for this sector.
Sandesara (1988)38 made a study of assistance programmes for small scale
industries. The study revealed that units producing items in the reserved list did not
show away superior performance over other units, mainly due to the easy entry of new
small scale units and competition among the small units that exist.
Suri (1988)39 in his study found that the Small Scale Industries including
traditional village industries, small workshops and modern small enterprises have been
given an important place in the frame work of Indian economic planning for ideological
and economic reasons.
36 Agarwal.M.S, Bank Financing of Small Scale Industries in India Ph.D.Thesis, Rohilkhand University
1987.
37 Sandesara.J.C, Institutional Frame Work for Promoting Small Scale Industries in India Asian Development Review vol.vi.no:2 1988. P.10-140.
38
Sandesara J.C. (1988 a) “ Small Industry Development Programme in India – Efficiency Explanations and Lessons : Some Field Study in Suri K.B. (Ed.) opcit P.227-298, see also Sandesara J.C (1988 : b) “Industrial Framework for Promoting Small – Scale Industries in India Asian Development Review vol, vi, no ; 2 1988. P. 10 – 40.
39 Suri K.B. Small scale Industries and Industrial Development The Indian Experience, New Delhi: Sage
publications, 1988.) P.1
29
Vepa (1988)40 in his study discussed the growth of small scale industry,
organisational structure, some key issues, and field planning for small scale Industry
and its prospectus for nineties. Kalchelty Eresi (1989)41 throws light on the various
sources of long-term and short-term finance and the problem faced by the units in raising
such funds; he also enquires into the policies, procedures and practices of small units in
managing their finance.
Tyabji (1989)42 analyses the structure of small scale industries and role of small
industry policy as a component of the Indian development process and changes in the
structure of industry and nature of small enterprise development. In the words of the
Asian Development Bank (1990)43, SSI stimulates the growth of indigenous
enterprises, promotes balanced growth that leads to diversification of the industrial
structure and contributes to a reduction of employment and alleviation of poverty.
Shankar Dash and Jyotinayeekar (1990)44 in a study undertaken in Balasori
district in Orissa attempt to analyse the operational problems in launching SSI units.
They conclude that although policies are good, they often delay in implementation and
faulty implementation upset the entrepreneur‟s plan and in many cases lead the
production process to a stand still.
40 Ram K.Vepa, “Modern Small Industry in India Prospectus”(New Delhi : Sage Publication, 1988.) P.23
41 Kalachetty Eres; Management of Finance in Small Scale Industry,( Allhabad: Vohra Publishers and
Distributors, 1989.) P.29
42 Nasir Tyabji, “The Small Industry Policy in India (Oxford: Oxford University Press, 1989.)
43
Asian Development Bank, (Manila: Asian Development out look, 1990.)
44 Sidhartha Shankar, Jyotinnayee Kar and Arabinda sarangi, Operational and Government Support in Promoting SSI in Balasore District of Orissa SEDEME 17. No : 3, 1990. .PP. 31 – 37.
Social-and-Economic-Studies 40(3) September 1991. P.155.
30
Theophilus (1990)45 observed that the operation of SSIs in India and Nigeria
encounter similar incidences and show the same environmental characteristics. They
further explain the need for a separate ministry exclusively for SSIs at the central level
headed by a central minister in the country. Kumar, Ghosh (1991)46 in his study on
management of small scale industry explains the management practices and performance
of small scale industries and their relationship with demographic features.
William and Leila (1991)47 investigated the hypothesis that small enterprises play
an important and dynamic role in the structural adjustment process and industrial
development in Africa. It discusses the role of small enterprises in the industrial
development and introduces the adjustment context, the evolution of large and small
scale industry in Ghana, and the Economic recovery program and its impact.
Tulus (1991)48 examines the role of small scale industries in economic
development of Indonesia. This survey found that the macro-level leads to a much less
pessimistic view of the performance of SSI units in Indonesia though imperfections in
comparison with medium and large-scale industries do exist. It also gives attention to a
critical question of appropriate policies needed to support this sector.
45 Theophilus –ouche, “ A Study of Impact of the Government „s Promotional and Protective measures
on Small scale Industries Development “ A Comparative Analysis of India and Nigeria, Ph. D Thesis, Nagpur University, 1990.
46
Prem Kumar, Asit K. Ghosh Management of SSI, (New Delhi : Anmol Publications,1991.) P.15
47 Steal William.F, Webster Leila.M, Small Enterprises Under Adjustment in Ghana, World Bank
Technical Paper No : 138, Industry and Finance series Washington D.C. World Bank 1991. P.X.67.
48 Tambunan Tulus, The Role of small scale Industries in Economic Development: A care of Indonesia,
31
Syrian (1991)49 examines the scale, nature and effects of current sub contracting
linkages between small and large industries in Srilanka. In general, weaker relationships
exist between large and small industries, however strong links exhibit with respect to
more organized few large firms. The reason for this weaker relationship is the
immaturity of small industries in meeting the requirements of large industries in terms of
technology, production cost and quality and delivery services.
Solomon (1991)50 explores the small scale industry that has grown and thrived in
informally developed communities of rudimentary buildings and dirt roads surrounding
the city of Delhi. It presents, an overview of Delhi‟s informally developed suburbs,
called unauthorised colonies, discuss their growth and regularisation and introduces the
setting in which small scale manufacturing exists within such colonies.
Albert and Dipak (1991)51 state that the small scale industry has been important
in the successful development of many of the economies of East and South Asia, both in
cases like Japan, Korea and Taiwan where import-substitution proceeded and/or
accompanied the manufactured exporting phase and in Hong Kong, the only essentially
laissez faire economy in the region. An important general characteristic of the small
scale sector and one long commented upon in the Japanese case, is the prevalence of
subcontracting relationships either with larger manufacturing firms or with traders.
49 Dias Sriyani, Sub contracting in small scale Industries, The case of Srilanka Industry-and-Developmet (29), 1991. PP.23-35
50
Benjamin Soloman J, Jobs, Land, and Urban Development, The Economics Success of Small Manufactures in East Delhi, India, Cambridge, Mass : Lincoln Institute of Land Policy 1991.
51 Berry Albert Mazumder Dipak, Small-scale Industry in the Asian Specific Region Asian Pacific-
Economic Literature 5(2) September 1991. PP 35-67
32
Arora (1992)52 in his study examines the role of various institutions at the state
level responsible for rendering assistance for the growth of small scale industries in
Punjab. This study also outlines a profile of the growth of small scale industries in
Punjab.
Jamuar (1992)53 in his study discusses the development of small scale and cottage
industry in India. The role of small scale industry in India, its present position and
problems of small scale Industry with special references to industrial sickness,
government policy and measures to develop small scale and cottage industry are
discussed. Balla (1992)54 in his study compares the centralised and decentralized policy
towards small and medium enterprises, technological policy for small and medium
enterprises in China.
Venugopal (1993)55 observed that governmental agencies set up for promoting
village and cottage industries are inactive and their performance is below the level of
expectations. He argues that the survival of village and cottage industries depends on
their ability to become competitive. Their efforts should be to reduce cost and improve
quality through technological up gradation.
52 Ashok K.Arora, Financing of Small Scale Industries, (New Delhi: Deep and Deep Publications,1992.)
P.64
53 Jamuar.R.S, “Small Scale and Cottage Industry in India Problems Government Policy Measures for Development, (New Delhi: Deep and Deep Publications, 1992.) P.154
54
Balla.A.S, “Small and Medium Enterprises Technology Policies and Options” (London: Intermediate Technology Publications, 1992.) P.37
55 Venugopal.S, A study of village and Cottage Industries in Kerala: Problems and Prospects, School of
Management Studies; Ph-D. Thesis-Cochin University, 1993
33
Kumar (1993)56 in his study observed that SFC has disbursed more amounts of
loans and all the loans are of long term nature. The cost and terms of the loan from SFC
are found to be more attractive. In addition, obtaining loan from SFC is found to be less
difficult process, despite all these positive factors, it is observed that SFC has made less
impact on the development of SSI in Kerala.
Swamy (1993)57 in his study examines three hypothesis regarding small scale
manufacturing units namely, small firms use more labour per unit of capital, they
produce more output per unit of capital and small firms use resources more efficiently
than large firms in terms of total factor productivity. The analysis indicates that capital
intensity and partial productivities are sensitive to alternative measures of firm size, and
total factor productivity is not systematically related.
Ramabijoy (1993)58 in his study analyses government support, capacity under
utilisation, marketing and financing power, transport of small scale industries and the
entrepreneurship.
Ahmed Jaleel (1993)59 made an attempt to throw light on the question to whether
trade and industrial policies in developing countries discriminate against the development
of small and large scale industry. This is done by a detailed examination of
56 Ganesh Kumar.C, The Role of SFCS in Financing Small Industries Ph.D. Thesis Kerala University,
Trivandrum, 1993.
57 Rama Swamy K.V. Capital Intensity, Productivity and Returns to scale in Modern Small Industries in
Indian Economic Review, 28(2) July December 1993. PP.57-73
58 Ramabijoy, “Small scale Industries in India” (New Delhi: Mittal Publications, 1993.) P.26
59 Ahmed Jaleel, Trade and Industrial Policies and Small-Scale Industry : The case of Indonesia
Srilanka, Pakistan, Canadian-Journal-of-Development-studies ; 14 (1) 1993. PP.43-54
34
the structure of tariff and non-tariff protection as well as industrial policy measure such
as foreign exchange allocation and licensing.
Manale (1994)60 reported that the working of banks and financial institutions
showed that the total assistance made available in Kerala for SSI units was
comparatively small. The effectiveness of any incentive packages, however well
designed it may be, depends on the quality of the delivery, of the same was perceived by
the entrepreneurs to be poor in relation to what it gets in other states.
Thomas (1994)61 states that there is a need for extensive education of the small
scale industrial units promoters in general management and specifically in the
fundamentals of marketing management. Pillai (1994)62 in his study analyzed the future
role of small scale sector in the evolving economic setting and the challenges it may have
to face to sustain its place as an important contributor to the development process.
Himachalam, et al (1995)63 in their study on financing of small scale units by
Andhra Pradesh State Finance Corporation reveals that though the state financial
institutions came into existence to promote small scale units, their effort to extend
financial, managerial and technical assistance have been far from satisfactory, and they
have failed to fulfill the expectations
60 James Manale. Role of Incentives in the Development of SSI Units in Kerala, Ph.D. thesis Cochin
University Cochin, 1994.
61 Thomas T. Thomas, Marketing Channels of SSI Units Manufacturing Selected Food Products in Ernakulum (DT), Ph-D thesis, Cochin University, 1994.
62
Pillai.K.R, The Indian Small scale Sector in the New Economic Setting, Productivity, July-September 1994. PP.258-265
63 Himachalam.D and Jayachandran.G., Narchda Kumar.D., Financing of Small – Scale Unit by APSFC-
A Study , SEDEME XXII (2) June 1995. PP.35-41
35
Rao (1995)64 reported that the potential for investment related to technology,
requisition and transfer in small scale and medium sector has assumed considerable
significance in their interest to face the challenges of liberalisation and globalisation of
markets. Prasad (1995)65 in his study states that there has been a steady growth in the
flow of institutional finance to SSI during the last two decades. But inadequate access to
credit, both short and long term remain a perennial problem of the small scale sector.
Report on SSI in India (1995)66 quotes from the international prospective
planning team” which made an extensive study of India‟s small scale industries was of
the opinion that government‟s, efforts for the promotion of this sector were largely
scattered and dealt with only isolated segments of the problem.
Hebert (1995)67 in his study is concerned with the growth of small local industry
in developing countries and explores one particular route for understanding and fostering
such growth. It focuses on the clustering of firms and the competitive advantage which
they derive from external economic and joint action, captured in the concept of collective
efficiency.
Dayal (1996)68 reported that the available resources of Uttar Pradesh Finance
Corporation (UPFC) has increased manifold, yet it failed to cope with the growing needs
64 Rao.N.K.A, Small is Beautiful Technology Transfer in SMES Sector, Laghu Udyog Samachar, April 1995. PP.3-6
65
Prasad.C.S. Financing Small Scale Industrie: Some Recent Changes, Yojana, Feb 1995. PP.8-10
66 The International Prospective Planning Team, Report on Small Scale Industries in India, Ministry of commerce and Industry, Government of India New Delhi, 1995.
67
Schmitz Hubert, Collective Efficiency. Growth Path for Small Scale Industry Journal-of- Development-Studies: 31(4), April 1995. PP.529-566.
68 Sharmila Dayal “Project on Role of Uttar Pradesh Finance Corporation (UPFC) in the Development
of Small Scale Industry – A Case study of Meerut Dt. ICSSR, New Delhi 1996.
36
of industrialization of the state. Prasad and Kaushik (1997)69 have traced out
comprehensive policies and programmes of the small scale sector during the 50 years of
independence.
Salim (1998)70 in his study proves that in most categories of industries there is
more number of high performing units. High performing units have more market
orientation than low performing units. There is a strong positive correlation between
market orientation and business performance.
Desai (1997)71 reviews the institutional frame work for promoting small scale
industries in India. The institutional frame work for the promotion of small scale
industries aims at storing the small scale sector by solving their problem.
Hayani, et al (1998)72 suggests establishing marketing channels to connect small
rural producers with large urban and/or foreign demand. The study investigates various
forms of production and trade contracts being practiced at the grass root level in the
metal craft manufacturing industry on the outskirts of Greater Manila in the Philippines.
Hina (1998)73 in his study states that, employment generation has increased over
a period of time. The other findings of the study are related to the decline in
69 Prasad.C.S. and Kaushik.K.C, 50 years of Small Scale Industries in India (Policies and Programmes)
Laughu Udyog Samacher January-December 1997, PP.5-24.
70 Salim M.H. Marketing Orientation of Small Firms – A Study With Reference to Trivandrum District, Ph.D. Thesis, Cochin University, Cochin – 1998.
71
Vasant Desai, Institutional Frame Works for Industry, (Mumbai: Himalaya Publishing House, 1997.) P.214
72 Hayani – Yujiro , Kikuchi, Masao ; Marciano, Esther – B1 Structure of Rural- Based Indus-
trialisation Metal Craft Manufacturing on the Out skirts of Greater Manila, The Philippines, Developing Economies ; 36, Philippines, June 1998. PP. 132-154.
73 Sidhu Hina, Employment Generation in Small-scale Industries in Gujarat Indian Journal of labour
Economics, 41 (1) Jan – March 1998. PP. 133-139.
37
employment in the household industries and a decline in the contribution of the large-
scale sector to employment generation. Subrahmanya (1998)74 in his study describes the
elements of India‟s small industry policy with specific reference to protective measures
and it‟s impact on the growth and efficiency of the sector.
Datey (1999)75 in his study entitled practice manual to small scale industries
discusses the importance of small scale industries, clubbing of SSI, finance to SSI and
management of SSI units.
Bagchi (2000)76 reports that the small scale sector contributes significantly to
industrial output employment and earning of foreign exchange. Sunil George (2000)77 in
his study observed that the policy of protection with privileges for SSI has induced this
sector to become more inefficient with poor product quality. It is not production but
competition should be the rule of the day.
Koshy and Joseph (2000)78 in their study reported that the considerable increase
in the number of women entrepreneurs is a result of the various support measures
extended by governmental and non governmental agencies and the changing attitude
towards women entrepreneurship. However, women entrepreneurship registers low level
74 Balasubramanya.M.H, Shift in India‟s Small Industry Policy, Small Enterprise Development Vol 9 No: 1. March 1998. PP.34-45.
75
Datey.V.S. Practice Manuel to Small Scale Industries,( New Delhi: Tan Prints Ltd., 1999.) P.73
76Bagchi.D.P, Credit Linked Capital Subsidy Scheme for Technology Up gradation of Small Industries, Laghu Udyog Samachar, April – September 2000. P.59
77
Sunil George, Small Scale Industries and Economics Liberalisation: A Micro View, Southern Economics, Bangalore January 15 , 2000. P. 13-15.
78 Moli P. Koshy and Mary Joseph Women Entrepreneurship in the Small Scale Industrial Units: A
Study of Kerala Southern Economist, Bangalore, March 2000. P.19.
38
in backward districts of Wynad, Kannur and Kasargod. Specific programme may be
implemented in these areas to increase the level of entrepreneurship.
Vasandhara Raje (2000)79 states that credit is an essential input for the working
of small scale industries. Any delay or inadequate supply of credit is detrimental to the
growth of the SSI units. Therefore timely and adequate availability of credit is of crucial
importance for setting up and expanding the existing SSI units.
Mathew (2000)80 reports that small industry policy in India is ambivalent.
Divergence of interests and their expression through lobbying is a characteristic of any
democratic policy. It is also not correct to consider the government as a machinery to
immune such influences.
Kulkarni and Kaveri (2000)81 examine the need for support and extension
services in accelerating its growth. Such support and extension service include, market
intelligence, marketing services, modernization, technology upgradation, quality testing
etc. It is also attempted to discuss the available institutional network in India to provide
support and extension services.
Raju (2001) 82 examines that the SSI sector has been a very important contributor
to the economy of the country. It being the nursery for the entrepreneurship, future of
the economy also, to a large extent, hinges on the growth of SSI sector. It also suggested
79 Vasandhara Raje, Taking SSI towards New Millennium Message of Hope, Laughu Udyogsamachar,
April – September 2000. P.132.
80 Mathew.P.M, Small Industries Problems of Policy, Economics and Political Weekly, April 22, 2000. PP.91– 92
81
Kulkarni.P.R., Kaveri .V.S Support Services for Acceleration Growth of SSI : An Overview, SEDME, NISIET Hyderabad, Sept 2000. PP. 20-23.
82 Raju S.V. The Recent Environmental Changes and Impact on Small Scale Industrial sector, Southern
Economist April 1 and 15, 2001. PP.7-9
39
that enhancing the investment level can bring in many medium scale units within the
purview of small scale sector. This may cause an unhealthy scramble for the limited
facilities offered by the government, including provision of raw material on concessional
rates, allotment of sheds and technical support offered to the SSI units.
Soundarapandian. (2001)83 in his study, Liberalisation in small scale industries
provides an opportunity to achieve national goal of growth with equity and growth with
efficiency. It is also stated that the recent globalisation aspect retard the growth of
domestic village industries, unless there is development of modern skilled training for
the workers in small scale industries with the effective implementation of workers
participation in industries.
Valsamma Antony (2002)84 in his study on small scale sector holds the key to
economic prosperity in a labour intensive, capital scale economy. The contribution of
small scale industries towards the planned economic development of the country can be
explained by means of their role in terms of value of output, employment creation,
exports and the number of units that sprang up every year. There is the need for
providing better information and excellent networking for the SSIs besides development
of quality infrastructural facilities.
Namasivayam and Vijayakumar (2004)85 in their study on Liberalisation and
globalisation of country‟s economy have brought serious challenges for the Indian
83 Soundarapandian .M Labourisation in Small Scale Industries: Needs & Issues, Southern Economist, and October 1, 2001. PP.9-10
84
Valsamma Antony, The prospects and Growth of SSIs in India: An Overview, Southern Economist, May 1, 2002. PP.23-26
85 Namasivayam N. and Vijay Kumar S. Globalisation and Small Scale Industries :An overview,
Southern Economist, January 1,2004. P.8
Journal of Small Business Management, Vol.43, No.1, 2005. PP.16-25
40
industry, particularly for small scale industries. This is the time for the SSI to produce
excellent products with good quality equivalent to foreign goods at competitive price; in
turn the SSI can survive in the field of globalisation area.
Raghurama and Hala Naik (2004)86 in their study found that small scale
industries face marketing problems. Marketing problem is not an independent one, it is
a related issue and it is a complex problem of marketing , finance, marketing
infrastructure like forward and backward linkages, product decision, pricing decision,
promotion policy, selection of distribution channel and the like. Therefore it requires
collective efforts on the part of the entrepreneurs of the units, government, policy
makers, promotion of small scale units, customers and the financial institution providing
finance.
The study of Jyothi (2004)87 based on the data collected from 18 small scale
units of the pharmacy sector located in Andhra Pradesh, has identified that newspaper
advertisements, referrals and consultants are sources of recruitment. Majority of the
firms do not evolve any policy for employee promotions and all firms train their
employees. Majority of the firms conduct, performance appraisal, and not much linkage
is found between performance and rewards.
Kotey and Slade (2005)88 have examined the rate of adoption of formal HRM
practices with increasing firm size. The results demonstrate a move toward division of
86 Raghurama and Hala Naik . Marketing problems of Small Scale units in Dakshina Kannada, Southern Economist, March 1, 2004. P.11
87
Jyothi, P. “Practices of HR Functions in a Small Scale Organsaiton”, SEDME, Vol.31, No.4. 2004. PP.19-26
88 Kotey. B and Slade. P , “Formal Human Resource Management Practices in Small Growing Firms”,
41
labour, hierarchical structures, increased documentation, and more administrative
process as the number of employees‟ increases.
Raghurama (2005)89 has examined small scale industries and states that it must
be promoted on a large scale, considering the fall in investment and increase in
unemployment in the state. This requires initiative on the part of the entrepreneurs,
change in the attitude of entrepreneurs and people, motivation and incentive from the
government. For the real development of small scale industries, commitment, dedication
and hardworking is required on the part of the entrepreneurs.
Kim Cheng and Yermekbayeva (2005)90 in their study address the problems and
prospects faced by small business owners in the Republic of Kazakhstan. They suggested
motivating the growth of small business in the Republic. It also includes a call for greater
governmental support to entrepreneurs, better government-small business owner
relationships, and setting up of more infrastructure and governmental umbrella bodies to
promote these business entities and their products or brands.
Anand and Murugaiah (2006)91 in their study Small Scale Industries facilitated
the tapping of resources for productive purposes with minimum amount of capital
investment, which in turn helps to strengthen the industrial structure of a nation. SSIs
existed in India for a long time in various sectors and contributed significantly in
89 Raghurama . A “Globalisation and challenges for small scale sector in India, Southern Economist,
February 1, 2005. P. 18
90 Patrick Kim Cheng and Makhabbat Yermekbayeva, “Problems and Prospects : A small Business Owner‟s Perspective In Kazakhstan”, The ICFAI Journal of Entrepreneurship Development , December 2005. P.41
91 Anand. S and Murugaiah V. Small Scale Industries in India: An Evaluation of Performance in the
Post-liberalized Scenario, The ICFAI Journal of Managerial Economics, Vol. IV, 2006. P.63
42
bringing down regional imbalance, generating employment opportunities, output and
exports, fostering entrepreneurship and in accelerating economic development.
Kamalakannan and Namasivayam (2007)92 in their study found that small scale
industries is producing a vast range of more than 7500 products, accounting for almost
40 percent of total production of the manufacturing sector and 35 percent of the total
exports. The growth of Indian economy to a large extend is due to industrial units. The
development of small scale units is essential to provide employment opportunities to
youth, to utilize locally available resources, to promote entrepreneurial skill among,
youth and to improve the balance of payments of our country. The availability of
adequate and timely credit is vital for the growth of small scale industrial units.
Srivastav and Syngkon (2007)93 in their study found that the various emerging aspects of
Small Scale Industries in the East Khasi Hills district of Meghalaya, a state located in the
Northeastern region of India. It reveals that most of the SSI units are adopting direct
selling marketing strategy rather than indirect selling strategy of the product mainly to
cater to the local market demands. It is found that the number of labor absorption by the
SSIs per unit is very low. The population size of SSIs must also increase in numbers
since each unit on an average employs five persons only.
92 Kamalakannan k. and N. Namasivayam, “Incentives for small Scale Industries”, Economic and
Political weekly, Vol.XLI,No.39, 2007. PP 23-31.
93 Nirankar Srivastav and Ricky Syngkon A.J, Marketing Management and Entrepreneurship Development
in a Tribal Dominated Economy: A case study of Small Scale Industries in East Khasi Hills District of Meghalaya, The ICFAI Journal of Entrepreneurship Development, Vol .IV, No. 4, 2007. PP.28-45.
43
Brinda Kalyani (2008)94 in her study, problems of these entrepreneurs are
analysed due to production, marketing, finance, labour and infrastructure. While the
challenges are effectively tackled by the entrepreneurs the results, in terms of profits,
need to be more rewarding. Absenteeism of the lower level employees is a unique feature
in the industrial estates of Madurai and other problems are industry specific.
Hasan Banu and Sangeetha (2008)95 in their study on the vital scope for the
development of SMEs in India have suggested that the Nationalised Banks‟ role is very
important in promoting or developing the SMEs in the villages and sub-urban areas.
Banks need to introduce more dynamic and innovative SME loan schemes and need to
focus on mass customisation versus mass market.
Joshi and Ganapathi (2008)96 in their study on small and medium enterprises
have declared that SMEs are of great importance to the region due to socioeconomic and
political reason. Its role is played by the national and international agencies and
framework based on the experience of Indian entrepreneurship development movement
and a model which can be replicated considering certain socioeconomic and political
similarities of India at the various stages of the economic development with other
countries of the Indian subcontinent as well as other south and south east Asian
countries.
94 Brinda Kalyani,P.R “Problems Faced by Small Scale Entrepreneur of the Industrial Estates of
Madurai Region”, The ICFAI journal of Management Research, Vol.VII, No.2, 2008. P.35
95 Hasan Banu S and Sangeetha P. “Role of Nationalized Banks in SME credit: A study in Theni District”, Indian Journal of Marketing, December, 2008. P.58
96
Rajiv Joshi and B Ganapathi, Current status of SMEs and Entrepreneurship Education and Training Intervention in select South and South –East Asian Countries, The ICFAI Journal of Entrepreneurship Development, Vol.V, No.1, 2008. P.35
44
Sobha Rani and Keswara Rao (2008)97 in their study on financing of Micro and
Small Enterprises, which is part of the SME sector, has been given special attention by
banks and financial institutions, and is included in priority sector lending. It also
examines the recent trends in credit flow to MSEs, in particular, and medium enterprises,
in a limited way from commercial banks and the Small Industires Development Bank of
India.
Abdelsalam (2008)98 in his study on the credit assessment problem of small
business in Egypt stated that in addition to the challenges faced in small business there
is also absence of credit bureaus to provide the trade credit providers with data about the
small business credit history, in addition to the risk that the credit providers will not be
able to mitigate through credit insurance which doest not cover local sales in Egypt.
Rana Zehra Masood (2009)99 in his study on the development of SSIs found that
the increase in the supply of manufactured goods, the promotion of capital formation, the
development of indigenous entrepreneurial talents and skills the creation of broader
employment opportunities and better standard of living are due to SSI. In addition, they
include socio-economic goals such as the decentralization and dispersal of manufacturing
activities from the metropolitan to the nonmetropolitan and rural areas, the reduction of
regional economic imbalances within a country.
97 Sobha Rani and Keswara Rao, Financing Small Enterprises: Recent Trends, The ICFAI Journal of Entrepreneurship Development, Vol.V, No.1, 2008. P.6
98
Hisham M.E. Abdelsalam, A credit Assessment Model for Small Businesses In Egypt, Indian Journal of Finance, July, 2008. P.15
99 Rana Zehra Masood, “Globalisation and Its impact on Small Scale Industries – An Analysis, Indian
Journal of Marketing, September, 2009. P.50
45
Arti Singh (2010)100 in his study provides a glimpse of the SSIs in India, in terms
of production, employment and export contributions; historical perspective of SSIs and
their conceptual framework, role and achievements. It also states the industrial policies
and the institutional set-up for the development and diversification of SSI units.
100 Arti Singh, “Role of Small-Scale Industries in District Level Development: A Study of Varanasi The IUP Journal of Entrepreneurship Development. VII, No.3, 2010.P.37
46
CHAPTER - III
Methodology
This chapter aims at stating the significance of the study, objectives and the
means of realising the objectives with the help of formulating appropriate hypotheses.
The methodology of the study in terms of the sampling, method of data collection,
classification and tabulation of the collected data, methods of data analysis through
appropriate statistical tools, and the particulars regarding the pilot study are also given.
The rationale behind hypotheses formulated, limitations of the study and finally chapters
scheme are also given.
3.1 Significance of the study
In the post globalisation era, small scale industrial units faced number of
problems in day to day life. There is very high level of competition between large scale
units and small scale industrial units. Multinational corporation and Foreign Direct
Investment create more number of problems to SSI units. Because of the multinational
corporation‟s arrival in India, small scale industrial units are not able to balance with
them self in their business. Multinational corporation paid more prices for raw material
and wages for labourers. Small scale industrial units faced production problems, labour
problems, financial problems, and marketing problems. Like Krishnagiri District, a
backward industrial area it affected too. This environment motivated the researcher to
undertake this survey.