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The Small Scale Industries and Agro & Rural Industries sector have been crucial for the Indian economy in terms of employment generation, their share in industrial production and exports. 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, it has been recognized that the rapid growth of this sector will help India secure a high place among growing economies.
Revamping KVIC
The Government is working on the revamping of the Khadi and Village Industries Commission (KVIC). Programmes for modernising the coir, handlooms, powerlooms, garments, rubber, cashew, handicrafts, food processing, sericulture, wool development, leather, pottery and other cottage industries are also being launched.
KVIC’s revamping has been necessitated primarily 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 the Khadi products competitive in the globalised economy. Towards these objectives the government dissolved the KVIC on October 14, 2004 and set up a ten-member Expert Committee.
The small enterprises sector also faces several problems which impede 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 last one year to help promote and develop the SSI sector. The Government launched a new scheme on the performance and credit rating of the 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. Here a one-time government grant will be provided to units availing themselves of the benefits of this scheme.
De-Reservation of Items
The Finance Minister had announced in his Budget speech that 108 items would be de-reserved after consulting the stakeholders and on the recommendations of the Advisory Committee constituted under the Industries (Development & Regulation) Act,1951. Accordingly, the Ministry of Small Scale Industries issued a notification on March 28, 2005 de-reserving 108 items including ten sub items ranging from textile products to agricultural implements from the list of items reserved for exclusive manufacture in the small scale sector. The objective of the de-reservation is to enhance competitiveness in manufacturing these products by freeing them from the limitations of investment. With the deletion of these items the number reserved for exclusive manufacture now stands at 506. The small and medium enterprises fund of Rs.10,000 crore has been operationalised by SIDBI since April 2004. Eighty per cent of the lending from this fund will be for SSI units, at interest rate of 2 per cent below the prevailing rates of SIDBI.
Outlook
The present trend indicates a positive outlook for industrial growth due to improved capacity utilization, improved industrial climate, expanding external and domestic demands and ease in availability of credit. The strength of industrial growth during 2004-05 is particularly striking despite disasters like Tsunami, a deficient monsoon, and the rise in petroleum prices. The increasing efficiency and competitiveness of domestic producers, liberalized trade and deregulated interest rate regime have largely contributed to the growth of the SSI sector.
*Information Officer, PIB, New Delhi
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