CHAPTER V PROBLEMS FACED BY SMALL SCALE...

209

CHAPTER – V

PROBLEMS FACED BY SMALL SCALE INDUSTRIES

The development of small-scale industries is hampered by a

diversity of problems. There are certain problems common to all types of

cottage and small scale industrial units. In this context, the present

chapter is devoted to a detailed study of the problems of the small-scale

industrial sector. It also seeks to suggest remedial measures. The basic

requirement for the industrial development of a region is the presence of

entrepreneurship in that area. The non-availability of adequate finance,

paucity of raw materials, absence of technical and managerial guidance,

and non-availability of industrial accommodation and marketing facilities

are the other major problems facing the small-scale sector.

The slow growth industries in Tamil Nadu have been due to lack of

entrepreneurship, which performs the function of initiating, establishing

and organizing industries. The people of Tamil Nadu, in fact lack

enterprising character as compared with people in other states. Under

the circumstances, the state Government entered the economic field and

established important industries in the public sector. Without private

participation, it is very difficult for an under-developed state to active

industrialization. Therefore, the development of local private talent is

highly essential. In this connection, it should be kept in view that

entrepreneurship talent is not the monopoly of any particular race.

210

Entrepreneurship can be developed by proper education, training,

and provision of necessary cost and market data. It also requires

complete reorientation of the curriculum so that young persons are

provided with opportunities to develop new skills and attitudes that

would turn them into entrepreneurs. The provision of proper training

facilities helps in the development of entrepreneurship. Proper training,

persuasion, guidance and assistance can bring about radical change.

The self-employment schemes in the state can be made successful by the

formulation of gainful schemes of industries mainly based on local

factors, endowments and demand conditions.

Problems of Small Scale Industries

In this section problems faced by the small scale industrial units

are discussed. Problems related with marketing, Labour, Production,

Finance, Technology and Management are ranked and the scores are

taken for analysis. Plan for expansion the units are also assessed in this

section.

The problems of small-scale industries may be classified as

external and internal. External problems are those, which are beyond

the control of the industrialists, such as the availability of power, and

other infrastructural facilities required for running the units. Contrarily,

the internal problems are those which are not influenced by external

forces like problems involved in organization, structure, and production

process, channel of distribution, technology, know-how, training,

industrial relations and inadequacy of management

211

Marketing Problems

Marketers are increasingly recognizing the importance of formal

approaches to market planning, to meet the challenges of growing

competition, rising material costs, declining profit margins and limited

cash reserves. Market decisions made by the entrepreneurs at a

particular time influence the direction and fate of the small-scale units

for a number of years. Successful market planning involves an analysis

of market opportunities and assessment of the firm’s ability to take

advantage of these opportunities. The success of an industrial unit

depends on the marketing of its finished products.

Marketing is a crucial area especially in small units whose

marketing infrastructure is susceptible to frequent and chronic illnesses.

Units with strong marketing set-up grow better even in rough weather.

The organizational design should be so planned as to meet any

marketing situation. The marketing team should be dynamic and

aggressive enough to produce and market such have been contemporary

needs and the products should be better than those of competitors. The

market for a product is an external element, which cannot, in general, be

controlled by small-scale industrialists. They should constantly study the

trend and adjust their production to meet it. Small-scale industrialists

may need to change their marketing techniques from time to time.

The marketing problems of the small-scale industrial units of

Pudukkottai are identified as competition from large-scale industries,

slackness in demand, price competition and competition from

established brands.

212

Scores are calculated by giving weights to each response namely 4

/ 4 for first rank and 3 / 4 for second rank and 2 / 4 for third rank and

1 / 4 for fourth rank. Competition from large scale units is considered

the foremost problem by 40 per cent of the respondent. Slackness in

demand is the second problem with 25 per cent and the third rank is for

the problem of price competition (19 per cent).

The competition from large-scale units has been the greatest

problem. Being organized and large in size they could have economies of

scale and thereby could sell at lower rates than the small units. In price

competition is also similar to competition with large-scale units and the

slackness in demand may be indirectly caused by sharing of the markets

with the large-scale units, which might be providing products at lower

prices. Therefore, it is possible that the second and third rank problems

are also creates indirectly by the competition from large units.

The problem of marketing the products of small-scale industrial

units has arisen chiefly due to the reasons stated below.

i) An abnormal increase in cost of production during the

last few years, and increase in the selling price.

ii) Competition from the large scale firms producing similar

goods at cheaper rate and selling at lower prices.

iii) Lack of advertising at national and international levels.

The role of the Government in this connection has been

insignificant.

iv) Absence of market research either by the private

manufacturer cum traders or by the State Government.

The small-scale industrial workers are not in a position to

bear the cost involved in market research.

213

The following Table 5.1 shows the percentages and the ranks for

marketing problems of different categories, there has been lost by the

sample units.

Table 5.1

Marketing Problems fased by different Categories of Industries

Category of

Industries

Sample

units

Slackness

in

Demand

Price

Competition

Competition

Withlarge

Scale units

Competition

with other

Products

Agro based Industry

10 4

(40%)

2

(20%)

3

(30%)

1

(10%)

Forest based industry

15 3

(20%)

5

(33%)

4

(27%)

3

(20%)

Mineral based

Industry

05 3

(60%) -

1

(20%)

1

(20%)

Textile based industry

30 5

(17%)

7

(23%)

13

(43%)

5

(17%)

Engineering based

industry

10 2

(20%)

1

(10%)

4

(40%)

3

(30%)

Chemical based

industry

10 3

(30%)

1

(10%)

5

(50%)

1

(10%)

Miscellan eous based

industry

20 5

(25%)

3

(15%)

10

(50%)

2

(10%)

Total

100

25

(25%)

19

(19%)

40

(40%)

16

(16%)

Rank II III I IV

Sources: Complied by the Researcher

Note: figures ins brackets indicate percentages to total.

214

Labour Problems

Labour is an active and essential factor of production. The supply

of labour in the State has rapidly increased because of increase in

population. It is however, important to mention that mere increase of

population is not helpful in the economic advancement of a nation,

which can put its material resources to better economic use only if

labour of a superior quality becomes available. The quality of labour can

be improved by proper education and training. General education is

important for every citizen but an industry requires special type of

literate persons i.e., technical and managerial personnel.

The small-scale sector is predominantly labour-intensive and it

provides employment to a large number of people. The role of labour is

many sided and varied in the small industrial sector. Therefore, the over-

all development of labourers is inevitable for the growth of this sector.

The small scale units under survey indicated that they face some labour

problems like absenteeism, high wage rates, work stoppages, training

cost and unionization. Labour is a major contributor to industrial

production. Small Scale Industrialists have to be abreast of labour laws,

since the legal codes are changing from time to time.

Labour related problems are classifying into absenteeism, high

wage rate and frequent work stoppages. The perception of refurnish is

presented in Table 5.2. Training of workers, unionization were the two

problems where no response was received and hence these two problems

were ignored.

215

Absenteeism is assessed the first rank. It has a score value of 38

per cent. In case of small-scale industrial units, almost all the units face

this problem since they engage temporary workers. Unlike large-scale

industries where most of them are in direct or permanent employment

provided with all benefits as per law, the small-scale units hardly provide

such benefits. They normally appoint only casual labour so every now

and then there may shift from unit to another. Since they are casual or

temporary in nature they tend to move to concerns where they are

offered higher wages. Similarly higher wages offered by other industries

and other sectors attract labour and thereby cause scarcity and increase

of wages.

This would in turn compel small units to pay higher wages and

return low profit margins. It is observed from the sample units that the

workers are not permanent employees. The majority of the units keep the

workers on daily wages.

The researcher has further observed that the entrepreneurs have

not taken care to provide safety measures to the workers. This has

caused problems. Poor working conditions and low piece rate system of

payment has caused dissatisfaction. Naturally the problem of labour

absenteeism, is acute most of the workers have migrated from the

surrounding villages and in sowing and harvesting seasons they go home

to attend to agricultural activities.

216

The following Table 5.2 showed the different categories of small

scale industrial units for labour problems of rank and percentages.

Table 5.2

Labour Problems fased by different Categories of

Industries

Category of

Industries

Sample units

Absent-deism

High Wages Rates

Work stoppage

Training cost

Unioniza- tion

Agro based

Industry 10

6

(60%)

2

( 20%)

1

(10%)

1

(10%) _

Forest

based

industry

15 9

(60%)

2

(13%)

2

(13%)

1

(7%)

1

(7%)

Mineral

based

industry

05 1

(20%)

2

(40%)

2

(40%) - _

Textile

based

industry

30 7

(23%)

8

(27%)

6

(27%)

7

(23%)

2

(7%)

Engineering

based

industry

10 4

(40%)

3

(30%)

2

(20%)

1

(10%) _

Chemical

based

industry

10 3

(30%)

1

(10%)

2

(20%)

1

(10%)

3

(30%)

Miscellane

ous based

industry

20 8

(40%)

3

(15%)

3

(15%)

5

(25%)

1

(5%)

Total 100

38

(38%)

21

(21%)

18

(18%)

16

(16%)

7

(7%)

Rank I II III IV V

Sources: Complied by the Researcher Note: figures in brackets indicate percentages to total.

217

The industries also face the problem of labour unrest in the form of

unionization and strikes. It is noticed that low wages and poor working

and living conditions create labour unrest. Except for five units, others

have faced problems of unionization and strikes. Low wages, bad working

and living conditions, bad treatment by the owner, managers, etc., are

the main causes for unrest.

Production Problems

The objective of an entrepreneur is achieved when he is able to

dispose of his products at a price, which covers necessary profits to

maintain production levels. In a competitive market, an individual

producer or seller has to supply such goods as are not inferior to the

goods of other competing firms. Therefore, the problem is to maintain

and improve quality of production. The inferior quality of goods

produced in the small-scale industrial sector is due to certain reasons:

i. The small-scale producers tend to produce goods of poor

quality for the simple reason that inferior production

involves a lesser capital outlay and production time.

ii. The small-scale producers are encouraged to produce

goods of poor quality because such goods are easily sold

in the market as a result of their low prices.

iii. Shortage of raw materials of good quality at reasonable

rates also compels the small-scale producers to utilize

inferior raw materials, which are available easily at a

cheaper rate.

218

iv. The quality of goods is inferior due to the inappropriate

use of modern technology by the small-scale industrial

units, which cannot afford to pay the expenditure

involved in production research.

The price of a product is determined by its quality. It is essential

that quality products are produced at reasonable prices. Therefore, the

main aim should be to motivate the small-scale sector to produce high

quality goods by providing them necessary financial assistance, raw

materials, technical guidance, marketing assistance, etc.

The Small-Scale Units are faced with the problems of scarcity of raw

materials. There is shortage of raw materials like iron and steel, pig iron,

‘A’ grade coke, chemicals etc., small scale industries are weak in

financial position. They have to utilize the services of intermediaries to

get raw materials on credit. Such an arrangement results in higher costs

and is disadvantageous when raw materials are imported, for the profit

margins of intermediaries are rather high.

Different types of industries require different types of raw materials.

There are industries, which use indigenous raw materials while there are

also industries, which are based on imported raw materials. According to

their availability, raw materials can be classified into scarce raw

materials and freely available raw materials. The non–availability of raw

material in sufficient quantities has been the main problem with small-

scale industries.

219

The shortage of scarce raw materials is likely to continue in future

also. Therefore, the strategy for the further development of industries

should be such that the industries based on indigenous and local raw

materials are encouraged and those based on imported raw materials are

discouraged. However, it should be the responsibility of the state to meet

all the needs of the existing industries by guaranteeing liberal

distribution of raw materials from the state depots and issuing import

licenses for reasonable quantities of foreign raw materials required for

production.

It is clear from the following Table 5.3 that 28 units out of the 100,

i.e., 28 per cent, suffer from shortage of raw materials. Industry-wise 4

units from agro based, 3 units from forest- based, 2 units from Mineral

based, 4 units from Textile based, one unit from Engineering- based, 3

units from chemical based and 11 units from the service and

miscellaneous units face problems of raw material shortage. Cashew nut

units have recovered from problems in cashew nut supply. Though the

units are located in cashew growing areas in the Gandarvakottai block,

the required supply of cashew has become a major problem. This is due

to export of cashew to Kerala State by cashew wholesalers.

A sawmill a forest-based industry is also suffering from shortage of

wood. As the unit is far away from the place of supply of wood,

transportation problems, create shortage of wood. The raw materials are

to be brought from various places far away from the location. Hence, the

entrepreneur is bound to get them in smaller quantities. The financial

hindrances involved in purchasing raw material in bulk quantities lead

to raw material shortage.

220

The following Table 5.3 shows by the units in the sample

production problems faces analyses by the researcher.

Table 5.3

Production Problems fased by different Categories of

Industries

Category of Industries

sample units

Shortage of Raw

materials

Lack of finance

Power shortages

Govt. support inadequ

ate

Price fluctuation

Changes in

Technology

Agro based Industry

10 4

(40%)

1

(10%)

2

(20%)

1

(10%) -

2

(20%)

Forest based

industry

15 3

(20%)

6

(40%)

2

(13%)

1

(7%) -

3

(20%)

Mineral based

Industry

05 2

(40%)

1

(20%) - - -

2

(40%)

Textile based

industry

30 4

(13%)

4

(13%)

6

(20%)

2

(7%)

4

(13%)

10

(34%)

Engineering based

industry

10 1

(10%)

3

(30%)

4

(40%) - -

2

(20%)

Chemical based

industry

10 3

(30%)

1

(10%)

2

(20%)

1

(10%)

2

(20%)

1

(10%)

Miscellaneous based industry

20 11

(55%) - -

4

(20%)

3

(15%)

2

(10%)

Total 100

28

(28%)

16

(16%)

16

(16%)

9

(9%)

9

(9%)

22

(22%)

Rank I III III IV IV II


Note: figures in brackets indicate percentages to total.

221

Four units among the textile-based industries suffer due to

shortage of raw materials. One engineering-based unit too has expressed

problems of raw material shortage. These units are established in the

industrial estates located in Aranthangi and Pudukkottai.

They are not allotted any quota of raw materials. All these pose

problems of raw material shortage to these units. Two units in the agro-

based category 2 units in the forest-based industries, 6 units in textile

industries, 4 units in engineering based industries and 2 units in

chemical based industries actually have been experiencing problems of

power shortage. The erratic supply of power results in damage to the

machinery and causes suspension of work for long hours keeping men,

materials and machines idle.

One agro-based unit, 6 forests based units, one mineral-based

unit, four textile units, three engineering based units and one chemical

based unit, suffered from lack of finance. One unit each of the agro,

forest and chemical based industries two textile units and four units

comber service and miscellaneous industries faced problems due to

inadequacy of governmental support.

Price fluctuation problems were faced by four units among the

textile-based industries, 2 units among the chemical based industries

and 3 units among the service and miscellaneous industries. Two agro

based units, three forests based units, 2 mineral-based units, and 10

textiles based units, two engineering based units; one chemical based

unit and two service and miscellaneous units suffered from the problems

arising from changes in technology.

222

Financial Problems

Industrial finance has been one of the most important problems of

the small scale industrial producers who are persons of small means and

require short-term and medium –term finance to meet their business

obligations. Short-term loans are needed for meeting the current

expenditure on items like purchase of raw materials, payment of wages,

overheads, etc, and medium term loans are required for purchase of fixed

assets like land and building, machinery, utensils, furniture and other

equipments of a permanent nature. The success of the small-scale

producers is largely affected by their ability to arrange adequate money

in time.

From the following Table 5.4 analyses of the problems of finance

and their weighted scores are given in Table 5.4. The problems identified

are shortage of working capital 33 per cent of rank respondents this on

the foremost problem 26 per cent face inadequate assistance from

commercial banks, 19 per cent suffer from shortage of funds for fixed

assets. The hostile attitude of Government agencies is listed by 14 per

cent.

Efforts have been made to analyses the various financial problems

of the small-scale sector. The analysis is done based on the data

obtained from the sample units. In addition, care is taken to draw

meaningful conclusions. Small Scale Industrialists do not have sufficient

funds of their own for fixed capital as well as for working capital. The

shortage of funds makes it difficult for them to install modern machinery

and tools and to maintain well-organized factories. Generally, the small-

scale units are not in a position to offer the guarantees required by the

223

banking sector. The Small Scale units have to depend on more than one

source for their working capital and pay heavy interest and pass through

many an ordeal and consequent delay.

The different categories of sample units for finance problems

shown in the Table 5.4 for analysis by the researcher.

Table 5.4

Financial Problems fased by different Category of Industries


Sample units

A

B

C

D

E

Agro based Industry

10 4

(40%)

2

(20%)

2

(20%)

2

(20%) _


15 6

(40%)

3

(20%)

1

(7%)

4

(27%)

1

(6%)

Mineral based Industry

05 2

(40%) _

1

(20%)

2

(40%) _


30 7

(23%)

8

(27%)

2

(7%)

9

(30%)

4

(13%)

Engineering based industry

10 4

(40%)

2

(20%)

2

(20%)

2

(20%) _

Chemical based industry

10 2

(20%)

1

(10%)

4

(40%)

3

(30%) _


20 8

(40%)

3

(15%)

2

(10%)

4

(20%)

3

(15%)

Total 100

33

(33%)

19

(19%)

14

(14%)

26

(26%)

8

(8%)

Rank I III IV II V



A. Shortage of working capital B. Shortage of income for fixed assets C. Hostile attitude of Govt. agencies D.Inadequate assistance from Bank E. Inadequate assistance from financial institutions

224

Working capital shortage has been the foremost problem followed

by inadequate assistance from banks. It is best a corollary of the

previous factor since working capital is mainly granted by banks and if

the banks are not extending sufficient assistance then the shortage of

working capital will be the result. Banks prefer only those industries,

which could repay regularly. The small units often fail to repay the loan

in the stipulated period and therefore banks are not willing to assist of

the small units and therefore there is hardly any profit reinvest able in

future. Most of the small units remain small due to lack of profits to

plough back.

Sources of Finance

Most of the entrepreneurs in the small-scale sector see shortage of

finance or capital as the most important factor responsible for a host of

problems. Small scale sector units generally depend on two kinds of

capital, viz.,(a) equity or own capital and (b) borrowed capital consisting

of (i) long term capital for investment in equipment and other capital

assets and (ii) short term capital to meet current needs of the industry.

The industrialists themselves usually provide equity capital. The

resources obtained from friends and relatives as either partners or

shareholders sometimes supplement it. Small entrepreneurs generally

do not encourage equity capital from outside agencies as it involves

sharing of management and control. Much of this initial capital is

225

required for the purchase of fixed assets like land, building, plants and

equipments and the balance for working capital.

Owned capital may not be sufficient to meet the long-term needs.

In such cases, besides owned capital, long-term capital is needed for

expansion and renovation of plants, and modernization of machinery.

Short-term credit is needed for working capital to buy raw materials and

stores, to pay wages, to hold stocks of finished goods, etc.

From the following Table 5.5, it can be observed that out of the

total capital of sample units as much as 61 per cent has been raised

through bank loans. The second rank (13 per cent) is assigned to

borrowing from friends and relatives. 10 per cent received assistance

from the commercial banks and state finance corporations, and

remaining 7 per cent borrowed from moneylenders. The least score and

rank (4 per cent) borrowed from banks, money lenders, friends and state

finance corporation, only 3 per cent received finance from state finance

corporations, and 2 per cent borrowed from money lenders and friends.

Small-scale entrepreneurs cannot bank upon their own resources

alone to meet their needs and the need to resort to some external

resources on their part is obvious. During the survey, it was observed

that many industries are unable to make good progress owing to the

shortage of finance. They have depended on borrowed capital.

226

The following Table 5.5 shows that the percentages and ranks for

sources of working capital analysis by the researcher.

Table 5.5

Sources of Working Capital for different Categories of

Industries

Category

of

Industries

sample

units A B C D E F G

Agro

based

Industry 10

4

(40%)

2

(20%)

1

(10%) _

2

(20%) _

1

(10%)

Forest

based

industry

15 10

(67%) _

3

(20%)

2

(13%) _ _ _

Mineral

based

Industry

05 5

(100%) _ _ _ _ _ _

Textile

based

industry

30 20

(67%) _

3

(10%)

5

(17%) _

2

(6%) _

Engineeri

ng based

industry 10

2

20%) _ _ _

5

(50%) _

3

(30%)

Chemical

based

industry

10 6

(60%)

1

(10%) _ _

3

(30%) _ _

Miscellan

eous

based

industry

20 14

(60%) _

6

(30%) _ _ _ _

Total 100

61

(61%)

3

(3 %)

13

(13%)

7

(7 %)

10

(10%)

2

(2%)

4

(4%)

Rank I VI II IV III VII V

Sources: Complied by the Researcher Note: figures in brackets indicate percentages to total. A. Borrowing from Commercial Banks B. State Finance Corporation

C. Friends and Relatives D. Moneylenders

E. Banks and State Finance Corporation F. Friends and Money Lenders

G. Banks, Money lenders, friends and state finance corporation

227

Borrowing Capital

The following Table 5.6 shows details of financial assistance

received from the various organized agencies by the sample units.

Table 5.6

Financial Assistance Received from Various Organized and Unorganized agencies by Sample Units of Different Category of

Borrowed Capital


Commercial Banks

State Finance

Corporation

Money lenders

Friends &

Relatives

Total Borrowed capital

Agro based Industry

87.21

(59%)

54.37

(37%)

2.00

(1%)

4.55

(3%)

148.13

Forest based Industry

0.87

(100%) - - -

0.87


4.70

(100%) - - - 4.70

Textile based Industry

0.52

(100%) - - - 0.52

Engineering based

Industry

24.50

(72.1%)

7.50

(22.0%) -

2.00

(5.9%) 34.00

Chemical based

Industry

19.00

(90.5%)

2.00

(9.5%) - -

21.00

Miscellaneous Based

Industry

0.61

(67.0%) - -

0.30

(33.0%)

0.91

Total 137.32

(65.35%)

63.87

(30.39%)

2.00

(1%)

6.85

(3.26%)

210.13

(100%)

Rank I II IV III



228

It is observed from the Table 5.6 that out of the total borrowed

capital of 210.13 (100%) lakh, assistance by the commercial banks,

accounts for 137.32 (65.35%) lakh. The second rank Rs. 63.87 (30.39%)

lakh is taken by state financial corporations, the third position Rs.6.85

(3.26%) lakh is for borrowing from the friends and relatives and that

remaining alone is from money lenders Rs.2.00 (1.00%) lakh.

The following Table 5.7 observed that these units have secured a

significant proportion of their total capital from commercial banks and

SFC’s. Scores are calculated by giving weights to each response namely

5/5 for moneylender’s first rank, 4/5 for friends and relatives borrowing

capital second rank. The capital borrowed from state finance corporation

3/5 for third rank, 2/5 for the capital borrowing from the commercial

banks fourth rank and remaining 1/5 for the own capital of the small

scale industrial entrepreneur’s.

It is observed from the table, which furnishes the extent of finances

received by sample units of different industries, that the units secured a

significant proportion of their total capital from commercial banks and

state finance corporation and others.

The professional moneylenders had been an important link in

financing the small-scale product producers. The moneylenders charge

high rates of interest and adopt such policies that the permanent

debtors. “Short-term credit in the form of cash or raw materials sold on

credit is provided by money lenders and dealers to producers often to the

advantage of the latter due to unjust terms on which the bargain is

struck between the parties of the transaction.” 1 Thus, this source of

finance is against the interest of the borrower and should be replaced by

some better alternative method of financing.

1. Ramakrishna, K.R., Finances for Small Scale Industry in India, Asia Publishing House, 1962, p.10.

229

The following Table 5.7 shows the percentage of borrowed capital

obtained by the sample units from various financial institutions.

Table 5.7 Financial Assistance Received from various Organized and

Unorganized Agencies by Sample Units of Different Category as a percentage of Total Capital

Category of

Industries

Own

Capital

Commerci

al banks SFC

Money

lenders

Friends

&

Relative

Total

Capital

Agro based

Industry

259.20

(63.6%)

87.21

(21.4%)

54.37

(13.3%)

2.00

(0.5%)

4.55

(1.2%)

407.33

Forest based

Industry

16.00

(94.8%)

0.87

(5.2%)

_ _ _

16.87

Mineral based

Industry

49.00

(91.2%)

4.70

(8.8%)

_ _ _

53.70

Textile based

Industry

5.00

(90.6%)

0.52

(9.4%)

_ _ _

5.52

Engineering

based

Industry

76.00

(69.1%)

24.50

(22.3%)

7.50

(6.8%)

_

2.00

(1.8%)

110.00

Chemical

based

Industry

33.50

(61.5%)

19.00

(34.9%)

2.00

(3.6%)

_ _

54.50

Miscellaneous

Based

Industry

9.25

(91.0%)

0.61

(6.0%)

_ _

0.30

(3.0%)

10.16

Total

447.95

(68%)

137.41

(21%)

63.87

(9.7%)

2.00

(0.3%)

6.85

(1%)

658.08

(100%)

Rank I II III V IV



230

Agro based industry in small scale sector secured 63.6 per cent of

its total capital from own as against 21.4 per cent,13.3 per cent, 0.5 per

cent, 1.2 per cent from commercial banks, state finance corporation,

money lenders and friends and relatives respectively.

Forest based industries secured 94.8 per cent and 5.2 percent of

assistance of the total capital from own and commercial banks only.

Mineral and Textile based industries are secured 91.2 and 90.6 per cent

assistance of the total capital from own, 8.8 and 9.4 per cent of

assistance of the capital from commercial banks.

Engineering based units have secured 69.1 per cent own capital,

22.3 per cent capital from commercial banks, 6.8 per cent and 1.8 per

cent from state finance corporation and friends and relatives respectively.

The Chemical based industrial units have obtained 61.5 per cent of their

total capital from own capital as against 34.9 per cent from commercial

banks and 3.6 per cent assistance from state finance corporation. The

miscellaneous industrial units have secured only 6 per cent of total

capital from commercial banks and remaining capital for the own capital

of the entrepreneur’s. The financial assistance rendered by commercial

banks, SFC, Moneylenders, friends,

And relatives to the small-scale units. From the Table 5.7 it is

clear that commercial banks have played a dominant role in financing

small-scale unit. Banks also granted loan to industrial units under

various government schemes. The banks’ assistance to small-scale units

under study under different schemes.

231

Financing Small Scale Units

The facilities available for financing small scale units in

Pudukkottai district are reflected in the analysis of the actual amount of

loans granted to them by various organized and unorganized agencies.

Commercial banks have played a vital role in financing the

different categories of industries. In each category, the role of the banks

is significant, as they have helped the largest number of units compared

to other organized and unorganized agencies. From the following

analysis, it can be seen that in the case of small-scale units the role of

borrowed funds is found to be significant. The role of banks in this

regard is found to be significant.

From the following analysis the sample units out of 100 units, 82

units (82%) have borrowed from nationalized commercial banks, 8 units

(8%) from the TIIC, 7 (7%) from the SIPCOT, remaining 3 units (3%)

have approached the DIC.

Thus, commercial banks have established supremacy over other

sources of financing. No other single agency has sanctioned so much as

banks. Thus, it is observed, that a majority of units borrowed to meet

their working capital needs.

232

The following Table 5.8 shows that the sample units have

approached various financial agencies to assistance.

Table 5.8

Financial Assistance Obtained from different Agencies


Sample units

Nationalized Bank

TIIC DIC SIPCOT

Agro based Industry

10 10

(100 %)

_ _ _

Forest based

industry

15 15

(100 %)

_ _ _

Mineral based

Industry

05 3

(60%)

2

(40%)

_ _


30 20

(67%)

4

(13%)

_ 6

(20%)


10 10

(100%)

_ _ _

Chemical based

industry

10 4

(40%)

2

(20%)

3

(30%)

1

(10%)


20 20

(100%) _ _ _

Total

100

82

(82%)

8

(8%)

3

(3%)

7

(7%)

Rank I II IV III


233

Total Capital of Small Scale Units

The particulars of the composition of total capital of small-scale

units are presented in the following table 5.9.

Table 5.9

Particulars of capital of different categories of industries

(Rs. in lakh with units)

Category of

Industries

Own

capital

Borrowed

capital

Total

capital

Agro based

industries

259.20

(64%)

148.13

(36%)

407.33

(100%)

1 9 10

Forest based

Industries

16.00

(94.8%)

0.87

(5.2%)

16.87

(100%)

2 13 15

Mineral based

Industries

49.00

(91.2%)

4.70

(8.8%)

53.70

(100%)

2 3 05

Textile based

Industries

5.00

(90.6%)

0.52

(9.4%)

5.52

(100%)

_ 30 30

Engineering based

Industries

76.00

(69.1%)

34.00

(34.9%)

110.00

(100%)

3 7 10

Chemical based

Industries

33.50

(61.5%)

21.00

(38.5%)

54.50

(100%)

_ 10 10

Miscellaneous based

Industries

9.25

(91.0%)

0.91

(9.0%)

10.16

(100%)

4 16 20

Total

447.95

(68.0%)

210.13

(32.0 %)

658.08

(100 %)

Units 12 88 100


234

From the above Table 5.9 shown the total capital of the small-scale

units in the samples is presented. It shows the capital structure of the

sample units. Out of 100 units, 12 units maintain the own capital

funds. Remaining 88 units have borrowed from commercial banks and

other financial institutions.

Problems of Sample Units

Small-scale industrial units suffer a lot for want of financial

assistance. Though 88 units received assistance from various

commercial banks for their total capital, it is not sufficient for their

smooth running. These units fail to benefit from other sources of finance

and are over dependant on commercial banks and SFC’s. The main

reasons for these units not approaching other sources of finance are high

rates of interest levied by moneylenders and lack of information about

other sources.

The major source of long and medium term finance to the small-

scale sector has been the State Financial Corporation while the

commercial banks cater to the need for short-term loans. In getting

finance from these sources, several problems are reported to have been

faced by small-scale industrialists.

Various problems are encountered by small-scale entrepreneurs in

dealing with the financial agencies in raising funds and repaying the

loans to them. The important among them are security, delay in

sanction, insufficient financing, high rates of interest and cumbersome

procedures. This can be seen from Table 5.9.

235

Table 5.10 shows that the problems of sample units an analyzed

by the researcher.

Table 5.10

Problems Experienced by Sample Units

Category of Industry

Security

Delay

in

sanction

Insufficient

Financing

High

Rate of interest

Cumber

-some

procedures

No. of Units approached

the Financial

Agencies

Agro based Industry

2

(22%)

1

(11%)

4

(45%)

1

(11%)

1

(11%)

9

Forest based

Industry

2

(15%) -

3

(23%)

4

(31%)

4

(31%)

13

Mineral based

Industry

1

(33%)

1

(33%)

1

(34%) - -

3

Textile based

Industry

- - 30

(100%) - -

30

Engineering based

Industry

- - 7

(100%) - -

7

Chemical based

Industry

3

(30%) -

5

(50%) -

2

(20%)

10

Miscellaneous based Industry

6

(37%) -

6

(37%) -

4

(26%)

16

Total 14

(16%)

2

(2.3%)

56

(63.6%)

5

(5.6%)

11

(12.5%)

88

Sources: Complied by the Researcher Note : figures in brackets indicate percentages to total.

236

The table makes clear that the out of the 88 units, 56 units (63.6

per cent) expressed problems of insufficient financing. 14 units (16 per

cent) faced the problems in offering securities for loans. 11 units (12.5

per cent) have expressed problems with the cumbersome procedures of

the government, 5 units (5.6 per cent) faced problems of high rates of

interest and 2 units (2.3 per cent) experienced problems of delay in

sanction. The main reasons for these units not approaching other

sources of finance are higher rate of interest levied by moneylenders and

lack of information about the other sources.

It is worth mentioning that some of the units from the small-scale

sector admitted that they could not approach the financial agencies due

to the problems with security. From the above analysis, it is clear that

the majority of the small-scale units that have approached the financial

agencies faced problems of security.

From the above discussion it can be clearly seen that commercial

banks are taking much time for sanctioning the advances from the date

of application, and that when once the funds are sanctioned, they are

released immediately or whenever required, in most of the cases.

Technology and Management related problems

Adoption of new technology is the base of all industrial activities.

One of the major handicaps of small-scale industrialists has been the

absence of latest technology, which ensures fine quality, and high rates

of productivity. The small industrialists, therefore, should keep

themselves abreast of developments in technology so as i) to remain in

the market, ii) to improve the quality of their products, iii) to lower the

cost of production and iv) to pass on the benefits to the consumer.

237

Existing small-scale industries sometimes experience technical

difficulties due to which they fail to run the plant smoothly and ensure

the quality of production. The small-scale units are also in search of

better techniques of production and marketing. The improvement can be

effected by providing modern training facilities to the entrepreneurs. The

training programme becomes essential not only to make the workers

familiar with latest techniques of production but also to attract new

talents to the industry. The State Government has realized the

importance of training.

Management problems of small sale industries are different from

those of large-scale industries, which are managed by professional

managers. Owner-managers who mostly do not possess any formal

training manage small-scale industries. Most of them lack efficiency in

the management of business affairs. It is unfortunate that Government

stresses the need for training entrepreneurs for increasing production

but it does not mention the necessity of training managerial personnel

for these units. The problem of ineffective consultancy service by

government agencies is given the first rank for 33 per cent followed by

have access to new technologies for 26 per cent. 23 per cent procure

problems of non-availability of professional managers remaining. 18 %

note the problem of non-availability of skilled work force.

It is often emphasized that the small-scale units become sick

primarily due to mismanagement and lack of up gradation of technical

expertise. It is also true that monitoring agencies or Government

agencies fail to provide effective consultancy services. Therefore, the

small-scale units remain backward in technical and managerial aspects.

238

Technology and management related problems and their weighted

scores are given in Table 5.11.

Table 5.11

Technology and Management Problems and Rank


Sample units

Non-availability of Skilled work force

Non-availability of professional managers

Ineffective consultancy service by

Govt. Agencies

In access to new

Technology

Agro based Industry

10 1

(10%)

1

(10%)

6

(60%)

2

(20%)


15 4

(27%)

3

(20%)

5

(33%)

3

(20%)


05 1

(20%)

2

(40%)

1

(20%)

1

(20%)


30 7

(24%)

10

(33%)

9

(30%)

4

(13%)

Engineering based

industry 10

2

(20%)

3

(30%)

2

(20%)

3

(30%)

Chemical based

industry 10

1

(10%)

2

(20%)

2

(20%)

5

(50%)


20 2

(10%)

2

(10%)

8

(40%)

8

(40%)

Total 100 18

(18%)

23

(23%)

33

(33%)

26

(26%)

Rank

IV III I II



239

Lack of access to new technology is inherent in small units as they

are very small in scale. Their ability or capacity to absorb new

technology is very limited particularly due to financial reasons. The other

two reasons namely non-availability of professional managers and skilled

labourers may also be attributed to their poor economic status and their

problems in survival. They may not be able to pay for skilled workers

with efficient technical expertise or qualified and experienced managers.

Role of Power Cut

From the following survey, it is revealed that about 57 per cent of

the units are affected by power cut 25 per cent units follow the shift

system in production and the rest 18 per cent have stated that they are

not affected by power cut. The majority of the units have immediate

power cut as a major hardship.

The Tamil Nadu government has also announced power cut timings

to the industries. Apart form the scheduled timings; additional power

cuts were also made. Most of the units have taken some remedial action

against power-cut-problems. The majority of the units use generators as

an alternative. A few units are adopting the shift system in their

production process. It is observed from the study that most of the units

have planned strategically to avoid the problems arising out of power

cuts.

240

The following Table 5.12 gives the details of the ranks of power cut

problems in the sample unit’s analysis by the researcher.

Table 5.12

Role of Power Cut


Sample units

Affected Not

Affected Shift System in Production

Agro based Industry 10 5

(50%)

3

(30%)

2

(20%)


15 8

(53.3%)

3

(20%)

4

(26.7%)

Mineral based

Industry 05

3

(60%)

1

(20%)

1

(20%)


30 18

(60%)

5

(16.7%)

7

(23.3%)

Engineering based

industry 10

6

(60%)

1

(10%)

3

(30%)


10 5

(50%)

2

(20%)

3

(30%)

Miscellaneous

based industry 20

12

(60%)

3

(15%)

5

(25%)

Total

100

57

(57%)

18

(18%)

25

(25%)


241

Plant and Machinery

The following Table 5.13 shown the details of the rank possess the

plant and machinery of the sample unit’s analysis by the researcher.

Table 5.13

Possess the Plant and Machinery


Sample units

Own Machinery

Own &

Leased Machinery

Own, Leased

& Hired Machinery

Agro based Industry

10 5

(50%)

5

(50%) _


15 8

(54%)

3

(20%)

4

(26%)


05 3

(60%)

1

(20%)

1

(20%)


30 14

(47%)

11

(37%)

5

(16%)


10 6

(60%)

1

(10%)

3

(30%)


10 5

(50%)

2

(20%)

3

(30%)

Miscellaneous

based industry 20

7

(35%)

8

(40%)

5

(25%)

Total

100

48

(48%)

31

(31%)

21

(21%)


242

Nearly 48 units possessed their own machinery 31 units are

having both owned and leased machinery in their factories. The other 21

units have a combination of owned, leased and hired machines. It is

gathered from the study that way a few units purchased and owned

machinery with financial assistance provided by commercial banks and

other term-lending institutions. Some of the units have availed the

necessary machinery from the National Small Industries Corporation on

hire purchase.

Industrial Accommodation

At present, many small-scale entrepreneurs have to force the

problem of inadequate space in their industrial location. The problem is

aggravated by the increase in the size of business. Regularity of work

without disturbance is essential for increasing production and labour

productivity. It has therefore become necessary that the entrepreneurs

work in a peaceful and healthy environment and the work place is

adequate to meet their requirements.

Improvement in Techniques

To affect economy and efficiency in production, the use of the

latest techniques and improved tools is highly essential. The small-scale

industries in Pudukkottai District provide vast scope for improvement in

their productive processes as most of them, at present are being run with

traditional techniques, which are less productive. In respect of small

scale, production little attention has been paid in the direction of

improvements in methods and techniques of production. From the

economic and social point of view, the arrangement of study visits by

small-scale entrepreneurs to units in other parts of the country with is a

welcome step.

243

Future plan for Expansion

Every unit will have a plan for the future. The responses of the

sample units about such plans are given in the following Table 5.14.

About 35 per cent of the units have some definite plans for the future

and 28 per cent of the units have expressed that they do not have any

proposed plans. The rest (37 per cent) have not yet decided about the

plan.

The Table 5.14 given below showed the percentages for the sample

units of future plan for expansions analysis by the researcher.

Table 5.14

Plan for Expansion


Sample units

Yes No Not yet Decided

Agro based Industry

10 4

(40%) 2

(20%) 4

(40%)

Forest based

industry 15

6 (40%)

3 (20%)

6 (40%)


05 2

(40%)

1

(20%)

2

(40%)


30 10

(33%) 5

(17%) 15

(50%)

Engineering based

industry 10

5 (50%)

4 (40%)

1 (10%)

Chemical based

industry 10

6 (60%)

1 (10%)

3 (30%)


20 2

(10%)

12

(60%)

6

(30%)

Total 100

35

(35%)

28

(28%)

37

(37%)


244

Development Designs

Design is of basic importance in any production process. It is the

design, which gives identity to any object. Consumers are always in

search of new designs and therefore, it is essential that development of

design be given due weight in any scheme for the development of small-

scale industries.

The Form of Plan

The following Table 5.15 shows the thirty-five units have some

plans for expanding their business in future. The form of such future

plans as described by the units include starting new units improving the

design or layout, introducing or adding new products, installation of new

machinery, making changes in the marketing procedure following new

methods of production and combination of either two or three forms.

Diversification to new products has been planned by most of the

units followed by bringing in new machinery and starting new units.

Thirty-five units have spelt out diversification in the form of new

products, new technology, new units and new area and others did not

have any such plan. It is necessary that the other units also diversify

their plan of production so that they can survive in the field.

Four of the agro based industrial units have indicated the plan of

starting new units. Forest based industrial units are plans to start new

unit; another has plan of improving the design or layout and another

plan to install of new machinery and make change in the marketing

procedure.

245

The following Table 5.15 shows the various forms of plan analyses

the sample units by the researcher.

Table 5.15

The Form of Plan for Various Categories of Industries

Category of

Industries

Sample

Units A B C D E F AB

C

D AE CE BDE

Agro based

Industry 4 4 - - - - - - - - - -

Forest based

industry 6 1 1 - 1 1 - 2 - - - -

Mineral

based

Industry 2 1 1 - - - - - - - - -

Textile based

industry 10 2 1 1 1 1 1 1 - 1 - 1

Engineering

based

industry 5 - 2 1 1 - - - - - 1 -

Chemical

based

industry 6 - 1 - 2 1 1 - 1 - - -

Miscellaneous

based industry 2 - 1 - 1 - - - - - - -

Total

35 8 7 2 6 3 2 3 1 1 1 1



A.Starting new units B.Improving the design or layout

C.Introducing new products D.Installation of new machinery

E.Making change in the marketing production F. Following new methods of Procedure

246

One mineral based unit is going to start a new unit having

improved product design and layout. Two units amount textile based

industries have plans for starting new units. Among engineering based

units.

Two plan to improve the design of work and layout of products.

They have plans for installation of new machinery, introducing new

products and the remaining units plan to introduce new products.

Two chemical-based industries are planning to new machinery

install they also plan to change the marketing procedure, and production

technology. Among miscellaneous and service based industries one unit

has taken steps to improve the design or layout another has taken up

installation of new machinery for production as their plans.

The reasons, which have directed the units to plan for such

changes include competition, low profits and the desire to raise the

earnings. In order to avoid competition from other units they have also

tried to produce other related products using the same machinery. Some

units have planned to diversify their field. In order to raise the earnings,

some of the units have expanded their market area and are introducing

changes in the marketing system. The units believe that all these

changes will further improve their earnings.

Electric power

Most of the small-scale industrial units use electric power for

production purposes and there are possibilities of introducing power for

accomplishing certain processes in small-scale industries. The demand

for power for industrial purposes will increase in the future.

247

Economic Facilities

Production is, no doubt, carried out by combining different factors

of production in a certain proportion, but to make it smooth, it is

essential that the factors of production are assisted by other economic

facilities, which might include regular supply of electric power, goods,

transport and communication system and readymade work sheds.

Transport and Communication

Efficient, quick and cheap means of transportation and

communication are essential for the extension of trade, commerce and

industry. The entire economy is dependent upon road transport in the

absence of rail transport. The position of roads and road transport will

definitely improve in future.

Method of Solving Problems

The following Table 5.16 shown the nearly 60 per cent of the units

solve their problems by themselves and their respective associations

extend a helping hand to 25 per cent of the units. Just 11 per cent of

the units go in for interaction with Government officials and only four per

cent appoint consultants.

Of course self-help is the best help. However, if the entrepreneurs

are not aware of the appropriate techniques to be used to solve the

problems it will give a different dimension to the problems. There fore a

few of them consult the associations and their membership in such

associations plays a positive role. Only very few units go to Government

officials or directly appoint consultants. Associations may be the

cheapest source and therefore many prefer to utilize such sources.

248

The following Table 5.16 showed the method of solving problems

of the sample unit’s analyses by the researcher.

Table 5.16

Method of Solving Problems for the Various Categories of

Industries


Sample units

Taking

self Decisions

Consulting with the

association of

industries

Interaction

with Govt. officials

Through

engaging consultants

Agro based Industry

10 6

(60%)

2

(20%)

1

(10%)

1

(10%)

Forest based

industry 15

9

(60%)

4

(27%)

2

(13%) _

Mineral based

Industry

05 3

(60%)

2

(40%) _ _


30 18

(60%)

8

(27%)

4

(13%) _

Engineering based

industry

10 5

(50%)

2

(20%)

2

(20%)

1

(10%)

Chemical based

industry

10 4

(40%)

3

(30%)

2

(20%)

1

(10%)

Miscellaneous based

industry

20 15

(60%)

4

(20%) _

1

(5%)

Total

100

60

(60%)

25

(25%)

11

(11%)

4

(4%)


249

Industrial Sheds and Developed Plots

Most of the small-scale entrepreneurs are at present working in the

old structure, which requires repairs / renovation. All these provisions

and facilities are likely to meet the problems of industrial accommodation

of small-scale industries.

Demand Condition

Factor endowments, no doubt, determine the scope of industrial

development but it is the demand of the buyers for finished products,

which finally decides the degree of expansion of industries. The increase

in the income of an industry will push up the demand for products.

Analysis of the Prospects of small-scale industries

A challenge to the Indian economy and in particular to small-scale

industries. The process of development has its own problems, its own

challenges. Small sector, which entered the seventies in a relatively small

way.

1. The availability of credit to small enterprises can often be

increased by removing – or at least reducing – the rate of

interest.

2. Remove reform trade regimes according abuse of

licensing systems.

3. Increase labour skills and mobility of job-training.

4. Improve equipment and technology.

5. Domestic market should be competitive but protected

from foreign goods.

250

The problems faced by the small-scale industrial entrepreneurs

make the situation quite a difficult one. The gospel is better quality, and

better productivity. The process should start with the top and work down

to the middle management, first line management and finally to the first

line employees.

Whether in small industry or large, problems always exist. Some

face problems as if they are a challenge because that is the road to

advancement. It there is no problem or challenge are tends to feel

complacent. In fact, the small-scale industrialist is the kingpin of the

industrial spectrum.

The small– scale industrial sector has vast potential in terms of

employment, output, export promotion, expansion of base for indigenous

entrepreneurship and dispersal of industries and entrepreneurship skills

to rural as well as backward areas. A challenge to the Indian economy

and in particular to small-scale industries. Motivating and encouraging

planned small scale industrial development is a complex task.

A well designed Programme to provide equal incentives and access

to scarce resources for all small-scale enterprises has to be forced. We

have a ensure;

1. The availability of credit to small scale enterprises.

2. Raw materials replay should be guaranteed.

3. Increase the labour skills and mobility by supplement

among job training.

4. Access to new technology.

5. “Industrial estates” are valuable for small enterprises

and “sites and services” Programme has to be

implemented.

6. Markets should also be surveyed and catered to.

251

Prospects in the 21st century

The present trend does indicate qualitative and quantitative

growth in terms of industrial production and up gradation of technology,

etc., the next decade should witness certain changes in the structure of

small industries. The entrepreneurs should play a pivotal role in

accelerating the industrial process in the country. The process of

liberalization and economic reforms while creating tremendous

opportunities for the growth of small-scale industries, have thrown up

new challenges to the sector. Small enterprises started by groups of

traditional small businesses setup by sole proprietors in retail trade,

services and consumer industries have wrongly diversified. The

development process itself has given rise to new economic opportunities

for entrepreneurs. Small enterprises are able to successfully adapt the

rose less to the changing situations.

Competitiveness is the name of the hottest game now days.

Countries that are more competitive tend to grow faster. As India has

already entered the new millennium where the order of the day is

increasing economic liberalization across-the –borders and growing

globalization of world economy under the World Trade Organisation

(WTO) regime, the small-scale sector is going to face major challenges in

the form of intensified competition, both domestic and external. For its

existence it has to be competitive otherwise with present levels of

technology in use and infrastructural and environmental constraints, it

may find itself in a fierce battle for survival. Both the products and

producers need international exposure.

252

The sector has vast potential for being developed into a major

economic player but there is need for change in strategy adopted so far

for its survival and growth. This change in strategy calls for a shift from

individual industries to a cluster approach, linkages between large and

small units, use of state-of-art technology, efficient systems of delivery of

input and output with full support and active involvement of financial

institutions, associations and the government. It is also necessary to

adopt electronic commence which has brought about a revolution in the

field of marketing.

The strategy required has to be multi-dimensional. The present

mode of micro level production is becoming irrelevant in the present

global context. The future of international trade will primarily be based

on global product and trading chain. For being a part of a global village,

the industrial units will have to be part of the globalization. There are at

present two types of international production networks, (1) producer

driven commodity chains and (ii) Buyer driven commodity chains.

K.V.Ramaswamy in his article “Exporting in a globalized economy”-

published in the India Development Report 1999-2000 suggests that the

linkages with the global economy can be viewed as connected through

four export roles:

# Export processing assembly operations

# Component supply sub-contracting

# Original Equipment Manufacturing, and

# Original brand name manufacturing.

253

The newly industrialized economies of both East Asia and Latin

America have been engaged in this kind of labor-intensive production. A

country like Mexico, which has the world’s largest export processing

sector has extended the benefits of export processing by locating them in

the special zones. China has set up special economic zones within which

all-economic activities manufacturers, banking, export and import, and

foreign investment take place in a more liberal environment. The East

Asian experience in the electronics industry where firms gain entry by

OEM, and ‘secured’ a market channel and acquire technology is another

example worth consideration.

India has greater opportunities to assume and develop the export

role of assembly component supplier and OEM exporter. The main

avenue to enter the international network according to Ramasamy is

through foreign direct investment. Cross-country studies of foreign

direct investment indicate that infrastructure quality, labour cost and

domestic market size are predominant factors that influence

international investor’s vis-à-vis short-term incentives like corporate tax

rebates.

India has the advantage of a large domestic market but the

critical problem areas are in infrastructure and labour productivity.

Labour costs are rising in South Korea, Taiwan, Indonesia and

Singapore; foreign investors from developed countries could be looking

for cheap labour cost locations with macro-economic stability. If India

could improve its infrastructure and provide for relatively liberal

economic zones of China, it would be possible to attract large-scale

Foreign Direct Investment in India.

254

A study of India’s garments exports by K.V.Ramaswamy reveals

the absence of structural change and policy reforms. Buyers in world

markets are expecting more services in terms of minimum performance

standards. Delivery and service emerged as the main weaknesses of

Indian exports as perceived by importers in the E.U, Japan and the U.S.

Access to imported inputs, shipping facilities and proximity to fabric

sources have become more important determinants of outsourcing by

foreign firms than mere manufacturing capacity. In this context, the

policy of product reservation of garments also needs to be looked into

afresh.

The new slogan for development of small-scale industries should be

‘Export and Expand’ to help India become a global economic player in

the Twenty First Century. The production and marketing strategy

should change from, ‘I will sell what I make’ to ‘I will make what you

need’.

Date post:	29-Mar-2018
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CHAPTER V PROBLEMS FACED BY SMALL SCALE...

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