Tuesday, May 26, 2009

Examine the growth of SSI in the post-reforms period.

Examine the growth of SSI in the post-reforms period.

According to the committee of economic development USA, a small business
is one which possesses at least 2 of the following 4 characteristics:
Management of the firm is independent. Usually the managers are also the
Capital is supplied and the ownership is held by an individual or a small group.
The area of operation is mainly local, with the workers and owners living in one
home community.
The relative size of the firm within its industry must be small when compared with
the biggest units in its field. These measures can be of sales volume, number of
employees or other significant comparisons.
The basic of distinction between the large, medium, and small scale industries is
generally the size, capital resources and labour force of the individual unit.
SSI Sector in India creates largest employment opportunities for the Indian populace,
next only to Agriculture. It has been estimated that a lakh rupees of investment in fixed
assets in the small scale sector generates employment for four persons.

Generation of Employment - Industry Group-wise
Food products industry has ranked first in generating employment, providing
employment to 4.82 lakh persons (13.1%).
The next two industry groups were Non-metallic mineral products with employment of
4.46 lakh persons (12.2%) and Metal products with 3.73 lakh persons (10.2%).
In Chemicals & chemical products, Machinery parts and except Electrical parts, Wood
products, Basic Metal Industries, Paper products & printing, Hosiery & garments,
Repair services and Rubber & plastic products, the contribution ranged from 9% to 5%,
the total contribution by these eight industry groups being 49%.
In all other industries the contribution was less than 5%.
The small scale industries sector plays a vital role for the growth of the country. It
contributes 40% of the gross manufacture to the Indian economy.
It has been estimated that a lakh rupees of investment in fixed assets in the small scale
sector produces 4.62 lakhs worth of goods or services with an approximate value
addition of ten percentage points. The small scale sector has grown rapidly over the
years. The growth rates during the various plan periods have been very impressive.

The number of small scale units has increased from an estimated 8.74 lakhs units in
the year 1980-81 to an estimated 31.21 lakhs in the year 1999.
From the year 1990-91 this sector has exhibited a comparatively lower growth trend
(though positive) which continued during the next two years. However, this has to be
viewed in the background of the general recession in the economy. The transition
period of the process of economic reforms was also affected for some period by
adverse factors such as foreign exchange constraints, credit squeeze, demand
recession, high interest rates, shortage of raw material etc.
When the performance of this sector is viewed against the growth in the manufacturing
and the industry sector as a whole, it instills confidence in the resilience of the smallscale
The estimates of growth for the year 1995-96 have shown an upswing. The growth of
SSI sector has surpassed overall industrial growth from 1991 onwards. The positive
trend is likely to strengthen in the coming years. This trend augurs a bright future for
the small-scale industry.
Export contribution
SSI Sector plays a major role in India's present export performance. 45%-50% of the
Indian Exports is being contributed by SSI Sector. Direct exports from the SSI Sector
account for nearly 35% of total exports. The number of small-scale units that undertake
direct exports would be more than 5000.
Besides direct exports, it is estimated that small-scale industrial units contribute around
15% to exports indirectly. This takes place through merchant exporters, trading houses
and export houses. They may also be in the form of export orders from large units or
the production of parts and components for use for finished exportable goods.
It would surprise many to know that non-traditional products account for more than 95%
of the SSI exports. The exports from SSI sector have been clocking excellent growth
rates in this decade. It has been mostly fuelled by the performance of garment, leather
and gems and jewellery units from this sector.

Small industry sector has performed exceedingly well and enabled our country to
achieve a wide measure of industrial growth and diversification.

Economic Indicators
The Small Scale Industry today constitutes a very important segment of the Indian
economy. The development of this sector came about primarily due to the vision of our
late Prime Minister Jawaharlal Nehru who sought to develop core industry and have a
supporting sector in the form of small scale enterprises.
Small Scale Sector has emerged as a dynamic and vibrant sector of the economy.
Today, it accounts for nearly 35% of the gross value of output in the
manufacturing sector and over 40% of the total exports from the country.
In terms of value added this sector accounts for about 40% of the value added in
the manufacturing sector.
The sector's contribution to employment is next only to agriculture in India. It is
therefore an excellent sector of economy for investment.

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