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SSI AND AGRO & RURAL INDUSTRIES
The UPA Government completes one year on May 21, 2005. During this period, the Government has taken several important initiatives. Some of these are being brought out in the series ‘Major Decisions and Initiatives’.
The Small Scale Industries (SSI) and Agro & Rural Industries (ARI) sector have acquired a place of prominence in the economy of the country. It is one of the vibrant sectors of the Indian economy in terms of employment generation, the strong entrepreneurial base it helps to create and its share in industrial production and exports. SSIs are the backbone of the Indian economy. Over 40 per cent of India’s gross industrial production and 35 per cent of its exports, are generated by the small and medium sector. With over 3.20 million units in the country, the Central Government has recognised that rapid growth of this sector will help India in securing a prime position among growing economies.
In the National Common Minimum Programme (NCMP) it has been declared that the UPA Government will revamp the functioning of the Khadi and Village Industries Commission (KVIC) and launch new programmes for the modernisation of coir, handlooms, power looms, garments, rubber, cashew, handicrafts, food processing, sericulture, wool development, leather, pottery and other cottage industries.
The revamping of KVIC has been necessitated mainly because of the steep decline in employment and nearly stagnant sales of Khadi over the past six years, the need to take effective measures to introduce modern management practices in KVIC and make Khadi products competitive in the globalised economy and to generate more employment opportunities in the rural areas through various schemes, projects and other activities of KVIC. Towards these objectives the government dissolved KVIC with effect from October 14, 2004 and set up a ten member Expert Committee.
The small enterprises sector faces several problems which hamper in achieving its full growth potential. Some of the major problems faced by the sector are access to timely and adequate credit, technological obsolescence, infrastructural bottlenecks, marketing constraints and a plethora of rules and regulations. Some policy initiatives were taken during the year to help promote and develop SSI sector. The Government launched a new Scheme on Performance and Credit Rating of Small Scale Industries. The basic objective of the Scheme is to sensitise the SSI Sector to the need for credit rating and encourage the SSI Units to maintain good financial track record, which would help them earn higher rating for their credit requirements when they approach the financial institutions for their working capital and investment requirements. One time Government Grant will be provided to the SSI Units availing of the benefits of this Scheme. Some of the broad features of the Scheme are:
The rating by accredited Agencies will serve as a credible third party assessment of SSI Units’ capabilities and creditworthiness and generate better acceptance by Banks, Financial Institutions, SSI customers and buyers.
SSIs will be able to secure credit from Banks and Financial Institutions with comparative ease and at favourable interest rates.
Rating of the SSI Units would facilitate vendors/buyers in judging the capability/capacity of the SSI Units and deciding on finalisation of purchase contracts with them.
The Scheme will be implemented by the National Small Industries Corporation (NSIC) through its various branches and offices.
Reputed rating agencies have already been empanelled by NSIC in consultation with IBA. These include CRISIL, ICRA, CARE, DNB, Fitch and ONICRA.
The Scheme was launched by the Finance Minister, Shri P.Chidambaram, and the Minister of Small Scale Industries and Agro & Rural Industries, Shri Mahabir Prasad on April 7, 2005.
The UPA Government also took several other steps during the last one year to revitalise the SSI sector. These include setting up of a National Commission on Enterprises in the unorganised/informal sector in September 2004; de-reservation of 108 items from the list of items reserved for exclusive manufacture in the small scale sector ranging from textile products to agricultural implements to facilitate technology upgradation and enhance competitiveness, etc,. The investment limit (in plant and machinery) has been raised in October 2004 from Rs. 1 crore to Rs.5 crore in respect of seven items of Sports Goods reserved for manufacture in the small scale sector. The small and medium enterprises fund of Rs.10,000 crore was operationalised by SIDBI since April 2004. 80 per cent of the lending from this fund will be for SSI Units, at interest rate of two per cent below the prevailing PLR of the SIDBI.
The present trend indicates a positive outlook for industrial growth due to improved capacity utilisation, improved industrial climate, expanding external and domestic demand and ease in availability of credit. The strength of industrial growth during 2004-05 is particularly striking in view of shocks like Tsunami, a deficient monsoon, and a third oil shock. The increasing efficiency and competitiveness of domestic producers, liberalised trade and deregulated interest rate regime are critical contributors to both growth acceleration and macro-economic stability.
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RK:LV
PIB SF-37 (15.5.2005)
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