A Critical Evaluation And Liberalization Effects on Small Scale Industries

Globalization signifies a process of internationalization plus liberalization, in which the world has become a small village. It led to an ‘Unequal Competition’- a competition between ‘giant MNC’s and dwarf Indian enterprises’. The small scale sector forms a dominant part of Indian industry and contributing to a significant proportion of production, exports and employment.Small scale sector merited only two or three paragraphs in the more general industrial policy statements. The fact that Government considered it necessary to make a separate policy statement for small enterprises was a welcome recognition to the dynamic and vibrant nature of the sector. This policy statement proposed some path-breaking measures to alleviate the handicaps faced by small enterprises in respect. Government of India introduced a large number of innovative promotional measures to uplift the growth of small scale sector. A Critical Evaluation and Future Outlook, Liberalization Effects on SSI, Issues and ProspectsIn the context of the emerging scenario of liberalisation and the financial sector reforms the development banks need to gear themselves to meet the varied requirements of the small and medium scale sector. They need to create new products that are relevant and have more impact. In the new economic scenario, the role of technology has emerged as a strategic variable influencing manufacturing system of the industrial units who need to reorient their strategies to meet the challenges of the competition. With the upward revision of the investment ceiling, much potential has now been created for technological upgradation and the vertical integration of the industrial units so as to derive advantage from economies of scale. The liberalisation regime has also opened the doors for a large number of entrepreneurs to embark upon the setting up of venture with innovative technologies and their commercial applications with a high risk high return profile, which requires assistance through the venture capital route. Many development banks have, therefore, taken steps to provide sector specific Venture Capital funds to the small and the medium sectors. Various State Governments have already launched the Venture Capital fund scheme for the targeted sectors.All across the world, the MSMEs have been accepted as the engine for promoting equitable economic development. In India, the MSME sector constitute 95% of all enterprises and plays a pivotal role in the overall industrial economy with 40% contribution towards manufacturing output and 33% towards total exports. It employs a total of 60 million people spread over 26 million enterprises. The MSME sector in India is heterogeneous, dispersed and mostly unorganized. They continue to face a number of common problems, which, accordingly to the ‘Report of the Prime Minister’s Task Force on Micro, Small and Medium Enterprises’ (2018), are:•Lack of availability of adequate and timely credit;•High cost of credit;•Collateral requirements;•Limited access to equity capital;•Problems in supply to government departments and agencies;•Procurement of raw materials at a competitive cost;•Problems of storage, designing, packaging and product displays;•Lack of access to global markets;•Inadequate infrastructure facilities, including power, water, roads, etc.;•Low technology levels and lack of access to modern technology;•Lack of skilled manpower for manufacturing, services, marketing, etc.;•Multiplicity of labour laws and complicated procedures associated with compliance of such laws;•Absence of a suitable mechanism which enables the quick revival of viable sick enterprises and allows unviable entities to close down speedily; and•Issues relating to taxation, both direct and indirect, and procedures thereof.