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An Analysis of the Performance of SSIs in the Era of Globalization

B S Bodla and Sushma Rani Verma

The IUP Journal of Managerial Economics, 2008, vol. VI, issue 3, 40-53

Abstract: Small Scale Industries (SSIs) have a significant role to play in the socioeconomic upliftment of developing countries like India. The SSIs occupy a unique position in the Indian economy for its contribution towards value-addition, employment generation, expansion of entrepreneurial base, and also for the diversification of the industrial sector. After independence, the Indian government recognized the importance of developing SSIs and incorporated the same in its industrial policy. India initiated the economic reforms in 1991 with the objective of faster economic growth. Since, the liberalization process has been in vogue for the past 16 years, it becomes essential to analyze whether the new economic order has had a positive or negative impact on the performance of SSIs in India. The present paper is an attempt in this direction. The findings reveal that the growth in the share of exports of SSIs in total exports of India was higher in pre-liberalization period than the post-liberalization period. Compound Annual Growth Rate (CAGR), with reference to the number of units, employment level, production, and value of plant and machinery in SSIs were also comparatively higher in the pre-liberalization period. The percentage share of SSI sector in total bank credit and in total outlay of various five year plans has also declined significantly. Moreover, this sector is growing at a rate half of the total industrial growth rate. Obviously, the SSI sector could not grow to the desired level due to intense competition from large and medium sized domestic and multinational companies. Essentially, the objective of the policymakers as well as small industry associations should be to enable the sector to be vibrant and competitive. Now, it has become essential for the small and medium enterprises to focus on R&D not only to improve the overall quality, but also to deliver a superior product in the market.

Date: 2008
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Handle: RePEc:icf:icfjme:v:06:y:2008:i:3:p:40-53