CHAPTER:1:

INTRODUCTION

Chapter Index

Page No.

1 Introduction 2

2 Small Scale Industries : An overview 4

1.2.1 Definitions of Micro, Small and Medium Enterprises 6

1.2.2 The role of SSI's in Indian economy 7

1.2.3 Relevant aspects of the small scale sector 13

1.2.4 Measures to promote SSI's by Govt, of India 15

1.2.5 Problems of Small Scale Industries (SSI's) 19

3 Definitions of Industrial Sickness and their analysis. 24

1.3.1 Definition of Sickness 27

1.3.2 Industrial Sickness:-A Global scenario 29

1.3.3 Indian Context 31

1.3.4 Criteria for the identification of sickness 31

1.3.5 Analysis of definitions 32

4 Scope of the study 38

5 Objectives of the Study 39

6 Significance of the Study 40

7 Coverage of the study 45

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CHAPTER-1

1: Introduction:

In the developing countries like India, industrialisation has a special

importance. The main aim of industrialisation is to offer an opportunity for

occupational diversification on the one hand and generating higher incomes on

the other. Industrialisation is based on the division of labor and on the

specialization and uses mechanical, chemical and power driven as well as

organizational and intellectual aids in production.

The dictionary meaning of industrialisation is a process by which an

increasing proportion of a country's economic activity is involved in industry. It

is essential for economic development and largely responsible for the growth of

cities. It is usually associated with the modernization of developing countries,

beginning with the manufacture of simple goods that can replace imports. As

well as industrialisation is a process of social and economic change whereby a

human group is transformed from a pre-industrial society into an industrial one.

It is a part of a wider modernization process, where social change and

economic development are closely related with technological innovation,

particularly with the development of large-scale energy and metallurgy

production. Industrialisation also introduces a form of philosophical change,

where people obtain a different attitude towards their perception of nature.

In the late 20th century found that high levels of structural

differentiation, functional specialization, and autonomy of economic systems

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from government were likely to contribute greatly to industrial-commercial

growth and prosperity. Amongst other things, relatively open trading systems

with zero or low duties on goods imports tended to stimulate industrial cost-

efficiency and innovation across the board. Free and flexible labor and other

markets also helped raise general business-economic performance levels, as did

rapid popular learning capabilities. Positive work ethics in populations at large

combined with skills in quickly utilizing new technologies and scientific

discoveries were likely to boost production and income levels - and as the

latter rose, markets for consumer goods and services of all kinds tended to

expand and provide a further stimulus to industrial investment and economic

growth. By the end of the century, East Asia was one of the most economically

successful regions of the world.

Industrialisation through innovation in manufacturing processes first

started with the Industrial Revolution in the north-west and midlands of

England in the eighteenth century. It spread to Europe and North America in

the nineteenth century, and to the rest of the world in the twentieth.

In this situation India following the development pattern of combination

of capitalism and socialism, made adaptations in line with its own history and

culture, major size and importance in the world, made a great contribution in

the world canvas and making him significant player in today's world economy.

Meanwhile, India's government is investing in specific frontline economic

sectors such as bioengineering, nuclear technology, pharmaceuticals,

informatics and technologically-oriented higher education, openly overpassing

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its needs, with the goal of creating several specialisation poles able to conquer

foreign markets.

1.2 Small Scale Industries : An overview

The basis of distinction between the large-scale, medium-scale and

small-scale industries is generally the size, capital resources and labour of the

individual unit. The Micro, Small and Medium Enterprises (MSME) sector has

been recognized as engine of growth all over the world. The definition of a

small scale unit has evolved over the years and has undergone through a

number of modifications. During the 1950s, the concept of an SSI unit referred

to limit of Rs. 5 lakhs for capital investment and to the level of employment at

less than 50 persons, if using power and less than 100 persons without the use

of power. Since 1960, the reference to the size of employment has been deleted

and the limit on capital investment is retained as the only cut off point. In 1966,

it was stated specifically that the term capital investment i.e. investment in

fixed assets, meant investment in plant and machinery between 1966 & 1985,

the ceiling on capital investment in small scale units has been revised upward

as under:

1966 : Rs. 7.5 lakhs.

1974 : Rs. 10.00 lakhs.

1980 : Rs. 20.00 lakhs.

1985 : Rs. 35.00 lakhs.

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The concept of small scale units was modified. In 1977, small units with

a capital investment up to Rs. 1 lakh each (Raised to Rs. 2 lakhs in July 1980)

in plant and machinery and located in small towns and villages, were singled

out as units belonging to the tiny sector. Since the 1970s, a separate mention of

ancillary units has been made. The ceiling on capital investment in ancillaries

was Rs. 15 lakhs in 1974. This was raised to Rs. 25 lakhs in 1980 & to Rs. 45

lakhs in March 1985.

The definition of small scale industries has undergone changes over the

years in terms of investment limits in the following manner:-

YEAR INVESTMENT LIMITS ADDITIONAL CONDITIONS

Less than 50/100 persons with

1950 Upto Rs 5 lacs in fixed assets
or without power

1960 Upto Rs 5 lacs in Plant & Machinery No condition

1966 Upto Rs 7.5 lacs in Plant & Machinery No condition

1975 Upto Rs 10 lacs in Plant & Machinery No condition

1980 Upto Rs 20 lacs in Plant & Machinery No condition

1985 Upto Rs 35 lacs in Plant & Machinery No condition

1991 Upto Rs 60 lacs in Plant & Machinery No condition

1997 Upto Rs 100 lacs in Plant & Machinery

Many countries of the world have established a SME Development

Agency as the nodal agency to coordinate and oversee all Government

interventions in respect of the development of this sector. In the case of India,

also Medium establishment has for the first time been defined in terms of

separate Act, governing promotion and development of Micro, Small and

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Medium Enterprises (MSME) i.e. Micro, Small and Medium Enterprises

(MSME) development Act, 2006 (which has come into force from 02nd Oct,

2006) the Office of Development Commissioner (Micro, Small and Medium

Enterprises) functions as the nodal Developir ent Agency under the Ministry of

Micro, Small and Medium Enterprises (MSME).

1.2.1 Definitions of Micro, Small & Medium Enterprises

In accordance with the provision of Micro, Small & Medium Enterprises

Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises

(MSME) are classified in two Classes:

(a) Manufacturing Enterprises- The enterprises engaged in the manufacture

or production of goods pertaining to any industry specified in the first schedule

to the industries (Development and regulation) Act, 1951). The Manufacturing

Enterprise are defined in terms of investment in Plant & Machinery.

(b) Service Enterprises- The enterprises engaged in providing or rendering of

services and are defined in tenns of investrient in equipment. The limit for

investment in plant and machinery / equipment for manufacturing / service

enterprises, as notified, vide S.O. 1642 (E) daled 29-9-2006 are as under:

Manufacturing Sector

Enterprises Investment in plant & machinery

Micro Enterprises Does not exceed twenty five lakh Rs. (25)

Small Enterprises More than twenty five lakh Rs. but does not exceed five crore Rs. (25-5)

Medium Enterprises More than five crore Rs. but does not exceed ten crore Rs. (5-10)
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Service Sector

Enterprises Investment in equipments

Micro Enterprises Does not exceed ten lakh Rs. (10)

Small Enterprises More than ten lakh Rs. but does not exceed two crore Rs. (10-2)

Medium Enterprises More than two crore Rs. but does not exceed five core Rs. (2-5)

1.2.2 The role and performance of Small Scale Industries in Indian

economy

Small-scale industries have played an important role in India's industrial

and economic development. And it would be clear from the following points :

1. Expansion of small-scale sector and its share in industrial output.

The definition of the small-scale industries has changed over time and

therefore study of the expansion of small-scale sector units over a long period

of time is not possible. The investment limit was fixed at Rs 60 lakh for small-

scale sector and Rs 75 lakh for ancillary units in April 1991. These limits were

to Rs 3 crore in February 1997. Performance of the small scale sector over the

period 1991-92 to 1997-98 would be clear from the information contained in

above table.

The number of small-scale units stood at 20.8 lakh in 1991-92 and this

rose to 30.14 lakh in 1997-98. As it is clear from the table, the rate of growth

every year was between 5 to 8 per cent. As far as output of small-scale units is

concerned, it was Rs. 1,78,699 crore in 1991-92 and this rose considerably to
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Rs.4,65,171 crore in 1997-98 (the rate of increase exceeded 15 per cent per

annum over the period 1991-92 to 1996-97 but declined somewhat to 12.7 per

cent in 1997-98).

2. Employment generation.

The small-scale units employed 129.80 lakh people in 1991-92 and this

number has consistently risen to 167.20 lakh people in 1997-98. Within the

manufacturing sector itself, small and decentralized sector contributes about

four-fifths of manufacturing employment in India. Given the acute

unemployment problem in India with backlog of unemployment estimated at

around 17 million in 1992, creation of employment opportunities will depend

crucially on the development of small-scale and cottage industries. This would

be clear from the fact that while employment in the factory sector as a whole

(large scale, medium scale and small-scale) increased by only 2.21 per cent

annum over the period 1972 to 1987-88, employment in small-scale sector grew

at the rate of 5.45 per cent annum. Thus small-scale sector was able to generate

employment opportunities for about 2 million people over the period 1972 to

1987-88. As far as future prospects are concerned, the rural non-farm sector

accounting for about 22 per cent of rural employment can play a crucial role in

the further expansion of employment opportunities in the rural areas. An

important constituent of this sector is the manufacturing activity consisting

mainly of textile-based and agro-based products and units producing

construction materials. In the urban areas employment potential seems to be the

largest in the non-household, tiny sector segment of the manufacturing sector.

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3. Efficiency of Small-Scale Industries.

A controversy has raged in this country over the issue of efficiency in

the small-scale industries vis-a-vis large-scale industries. While some studies

have pointed out that small-scale industries are more efficient, other point out

that large-scale industries are more efficient.

4. Equitable Distribution of National Income.

One of the main arguments put forward in support of the small-scale and

cottage industries is that they ensure a more equitable distribution of national

income and wealth. This is accomplished because of the following two

consideration: (i) the ownership of small-scale industries is more widespread

than the ownership of large-scale industries, and (ii) they possess a much larger

employment potential as compared to the large industries.

Dhar and Lydall have pointed out that this argument is wrong.

According to them, workers in small-scale and village industries are

unorganized and cannot fight for their rights. As such, wages paid to them are

much less than the wages paid to workers in large industries (for instance,

wages in small-scale industries in India are just about half the wages paid in

large-scale industries). In all countries including England, USA, West

Germany, Japan and India, small industries have failed to achieve the objective

of equitable distribution of income and decentralization of economic power.

This argument cannot be defended since it lacks point (ii) made above.

We must not forget that the small-scale industries have a high employment
 10

potential and consequently they enable a vast majority of people to share the

fruits of economic development. In their absence, the only option before these

people would be to remain unemployed or seek still less remunerative jobs.

5. Mobilization of Capital and Entrepreneurial Skill.

The small-scale industries are at a distinct advantage as far as the

mobilization of capital and entrepreneurial skill is concerned. A number of

entrepreneurs are spread over small towns and village of the country.

Obviously, large-scale industries cannot utilize them as effectively as the

small-scale and village industries distributed over the entire length and breadth

of the country. Similarly, large-scale industries cannot mobilize the savings

done by people in areas far flung from the urban centers. But this task can be

effectively accomplished by setting up a network of small-scale and cottage

industries. In addition, a large number of other resources spread over the

country can be put to an effective use by the small-scale and cottage industries.

The rapid development of small-scale industries in the post-Independence

period is a proof that given the necessary credit power and technical

knowledge, a large quantity of latent resources of the economy can be

mobilized for purposes of industrial development.

6. Regional Dispersal of Industries.

In our discussion on industrial licensing policy in the chapter on

'Industrial Policy', we shall point that the tendency of massive concentration of

large-scale industrial developments has increased. Even within these

industrialized states, industries have tended to get concentrated in a few large

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cities like Mumbai, Calcutta and Chennai. As a result people in the large

number migrate into the cities from villages and lower order urban centers to

these centers of industrial development. This swells the population of slums

creating various social and personal problems. The whole urban environment

gets polluted. As against this, the small-scale industries are mostly set up to

satisfy local demands and they can be dispersed over all the state very easily.

They can also affect a qualitative change in the economy of a state. The most

glaring example of this phenomenon is the economy of Punjab which has more

small-scale industrial units than even in the industrially developed state of

Maharashtra.

7. Less Industrial Disputes.

Supporters of small-scale industries frequently argue that large-scale

industries are ridden with more industrial disputes than the small-scale

industries. Because of the 'tensions' in the relations between workers of large-

scale industries and the mill owners, such industries frequently face strikes and

lockouts. Against this, the small-scale industries are free from such hazards and

there is consequently less loss of output. However, this viewpoint is not totally

correct. In capitalistic form of production whether the unit is small or large, the

mill-owners do exploit the workers. This eads to tension and conflicts.

However, whereas the laborers working in large-scale industries are organised

and resort to collective action (in the form of strike), workers in small scale

industries are not organised and have no way of expressing their resentment.

Any worker who gives a vocal expression to his resentment is immediately

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thrown out. Therefore, apparently the relations between the employers and

employees in a small-scale unit seem to be harmonious while actually they are

not.

In the case of cottage industries, the question of disputes does not arise

at all since the main form of labour in these industries is family labour.

8. Contribution to Exports.

With the establishment of a large number of modern small-scale

industries in the post-Independence period, the contribution of the small- scale

sector in exports earnings has increased by leaps and bounds. What is

heartening to observe is that the bulk of the exports of the small-scale

industries (in fact, around 93 per cent) consists of such non-traditional items

like readymade garments, sports=goods, finished leather, leather products,

woolen gannents and knitwear, processed foods, chemical and allied products,

and a large number of engineering goods. The total exports of the small-scale

sector industry products increased from Rs.155 crore during 1971-72 to Rs.

43,946 crore in 1997-98. This meant an increase in the share of the small-scale

industries in the total exports of the country from 9.6 per cent 1971-72 to 34.8

per cent in 1997-98. The share of the small-scale sector in manufacturing

exports is about 45 per cent.

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1.2.3 Relevant Aspects of the small scale sector:

Some factors such as locational pattern, product range, state of

technology, ownership, management and the work force have a close

relationship with the state of industrial relations in the small scale industries

sector.

1) Location : Industrial activities show a tendency towards geographical

concentration in certain areas because they are availability of raw materials,

access to markets etc. In metro cities like Bombay. SSI have been for want of

land / space forced into galas in municipal or cooperative / private industrial

estates. At other locations SSI are set up in the industrial area / estates

developed by promotional institutions such as IDCs when provide plots / sheds,

approach roads, power, water etc.

2) Product Range : Small scale industries belong to different industry groups

for they produce a wide range of products varying from food products to

engineering items, chemical products and sophisticated electronic products.

3) State of technology: The state of technology in SSI has undergone changes

over the years and at present is widely diverse in different industries and also in

different units in the same industry. The differences in the state of technology

significantly influence the pattern of work, the work environment and the type

of work force that is employed in them.

4) Ownership : Many small scale units are run by the owners themselves. SSI

or entrepreneurs were in earlier years mainly financers belonging to a particular

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caste / community and were traders with investible surpluses. The small scale

industries which are proprietary concerns or one man shows, the owner /

manager is either a financier or technician. They differ considerably in their

background, motivation, attitudes and style of working in managing their units.

The other small scale units are those where financiers and technicians join

together to set up somewhat bigger SSI units as partnerships or limited

companies. The varied patterns of ownership exercise substantial influence

over employer - worker relationship in small scale sector.

5) Management : In SSI, the owners / partners perform the managerial

functions. The services of paid managerial personnel may be utilized by

somewhat larger SSI units in specialized areas or technical marketing,

production purposes, depending on the requirements of complex production

processes the competitiveness of market etc.

6) Ancillaries : Besides producing and products for final consumption, a large

number of SSI work as ancillaries by producing the components, parts, spares

etc required by large / medium scale units and / or render such services as

repair services. Public sector units all over the country have also helped in the

development of ancillaries.

7) Work force : The average size of employment in a majority of SSI units is

less than 10. In large / medium scale units, a relatively larger number of

workers work under one roof. In the small scale sector the work force is

scattered in the number of work places, each offering employment to a limited

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number of persons. The workers get employment usually in SSI following

recommendations by friends and relatives and introduction by existing staff

members and workers. Labour in the traditional resource based industries is

predominantly unskilled and even illiterate. The workers in the SSI units of

newer industry groups are literate and have acquired some level of skills.

1.2.4 Measures to promote small scale industries by govt, of India :

SSI have emerged in the country after independence. Earlier in the pre-

industrial era, there were artisans and craftsmen who used their hereditary skills

to make traditional products. During the war years many small scale

engineering units were set up. Since the 1950's SSI sector has grown in

response to the promotional work done, as a part of our planning strategy of

the government and govt, sponsored agencies. A major thrust of the industrial

policy perused during the era of economic planning has been the growth and

promotion of small enterprises along with large industries. Over the last four

decades, India has build up perhaps one of the most elaborate small enterprise

development programme for providing assistance to individuals and institutions

for setting up small scale industries both in the urban & rural areas.

The Govt, has established a number of agencies for the systematic

growth of SSI. Among these institutions the more important are the Small

Industries Development Organisation (SIDO), The National Small Industries

Corporation (NISC), Small Industries Corporation (SICs) etc. On May 20,

1986, a separate fund called Small Industries Development Fund (SIDF) was
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set up to facilitate development, expansion, modernisation, diversification and

rehabilitation of SSI. In 1987-88 the IDBI in association with the Govt, of India

constituted a 'National Equity Fund' (NEF) for providing equity support to tiny

and SSI. In 1991, Govt, of India announced a new package for the development

of SSI. During the nineties the primary objectives of small scale industrial

policy were a) Impetus to the growth of SSI to enable it to contribute to the

economy, particularly in terms of growth of output, employment and exports.

b) Deregulation and depureaucratisation of the sector with a view to remove all

letters on its growth potential, c) Encouraging modernisation and technological

up gradation to make them more competitive. The new policy outlined various

schemes for improving the resource position of SSI, development of

infrastructural support, improvement in marketing facilities and the

development of entrepreneurial skills to improve efficiency and productivity.

In the process of reshaping and developing the Indian economy under

the Five Year Plans, the neglected small scale sectors rapidly came into

prominence for the attention of the govt and the development authorities. Thus

the importance of the small scale industries came for consideration. It was

realized that these industries 1) Would not require much capital. 2) Would

provide employment opportunities 3) Would increase the supply of consumer

goods.

To achieve these objectives, the Karve Committee was appointed to

recommend a scheme, industry wise and if possible state wise. The five

principles laid down by the committee were later incorporated in the Ilnd five
 17

year plan. They were: 1) Decentralization 2) Gradual & regulated improvement

of techniques 3) Prevention of technological unemployment 4) Assured

marketing through co-operatives 5) Protective actions for small industries

should be kept within limits and positive promotional action should be

emphasized as much as possible. The committee did not recommend extension

or reservation of spheres of production or new subsidies.

In December 1947, the National Conference on Industrial Development

was held at Delhi. The national approach to the development needs of different

industries in the small sector was envisaged in this conference.

The attitude of the govt, of India towards the small scale sector was

categorically defined in the Industrial policy resolution dated 6th April, 1948.

The second Industrial policy resolution dated 30th April 1956 reiterated the

small scale industries as they provide immediate large scale employment, offer

a method of ensuring a more equitable distribution of the national income and

they facilitate an effective mobilization of resources of capital & skill which

might otherwise remain unutilized.

In 1954, an international team of experts on small scale industries was

invited by the govt of India through the courtesy of the Ford Foundation to

study the problems of small scale industries in India. The team recommended

among other things establishment of the Industrial Extension Service to provide

technical service and assistance, common service facilities, training etc,

provision of credit and finance and also the establishment of a small industries
 18

corporation for providing marketing facilities, particularly in the field of govt

indents. The major recommendations of the team were accepted by the govt.

As a result of this, 16 small scale industries services institutes in various

parts of the country, were established with 10 branch institutes, 55 extension

centers, 3 production centers & 2 training centers in different states under the

small scale Industries Development Organisation. In addition to these agencies,

the Govt, of India also set up an All India Small Scale Industries Board to

coordinate the activities of the small scale Industries Development

Organisation & state organizations. The Board consists of non officials

representing the interests of small scale industries, Members of Parliament and

officials of the central and state govt's including the directors of industries in

the. states. The Union Minister of Industry is the chairman of the Board. This

Board has helped in formulating correct policies and programmes at both

central and state levels and in creating enthusiasm among small scale

entrepreneurs.

With a view to promoting the indigenous production of machines and

tools required by small scale units, which were then being imported, a number

of prototype production cum training centers were set up in different regions in

collaboration with foreign countries. There centers were intended to develop

prototype machines and machine tools and pans them or, together with

specifications, drawings and technical knowledge how to selected

entrepreneurs in the small scale sector.

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1.2.5 Problems of Small-Scale Industries

The small- scale industries are plagued by a number of problems which

often force these units to close down. The second all-India census of registered

small-scale industrial units conducted in 1987-88 (results published in August

1992) showed that of the 9.87 lakh registered SSI units as on March 31, 1988,

but 3.05 lakh units constituting about 31 percent of total registered units had

closed down. Thus, almost one-third of SSI units had closed down. Of these,

1.49 lakh units (i.e. one half) had closed within five years of commencement of

operations. Not only this but a large number of small-scale units are sick. As at

the end of March 1997 about 2.35 lakh small-scale industrial units with

outstanding bank credit of Rs. 3.609 crore were sick. Let us now consider the

main problems that the small-scale units have to face.

1. Finance and credit:

The scarcity of finance and credit is the main obstacle in the

development of small-scale units. The position of cottage and village industries

in this regard is even worse. The capital base of the small industrial units is

usually very weak since they generally have partnership or single ownership.

The artisans or craftsmen running cottage industries either run their business

with whatever little capital they possess or take credit from the mahajans or the

traders who supply raw material to them. In many cases such credit is obtained

on very high rate of interest and is thus exploitative in character. The small-

scale industries are somewhat better placed. However, the profit earned by

them is often not enough for investment purposes.

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The main institutional sources for small industries are the following :

State Directorate of Industries, State Financial Corporations, Public Sector

Banks, SIDBI and other banks. Ever since the introduction of the social control

of banks in 1967, the commercial banks have liberalized their policy of

granting credit to small-scale and cottage industries. After the nationalization

of banks in 1969, the situation has improved still further. The change in attitude

of banks would be clear from the fact that whereas the amount of credit

outstanding (of public sector banks) to small-scale industries stood at only Rs.

251 crore in June 1969 it rose to Rs. 43,598 crore in March 1998.

Because of the importance of providing adequate and timely credit to the

small-scale industries for their development, the government has, over the

years, appointed a number of Committees to look into this problem. The latest

in this series was the High Level Committee appointed by the Reserve Bank of

India, headed by S.L. Kapur, which submitted its Report in June 1998. This

Committee has made in all 126 recommendations. Important recommendations

cover:

(i) delegation of more powers to branch managers to grant adhoc limits;

(ii) simplification of application forms ;

(iii) freedom to banks to decide their own norms for assessment of credit

requirements;

(iv) opening of more specialized bank branches for small-scale units;

(v) enhancement in the limit for composite loc.ns to Rs. 5 lakh;

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(vi) strengthening the recovery mechanism;

(vii) banks to pay more attention to the backward states;

(viii) special programmes for training branch managers for appraising small

projects;

(ix) banks to make customers grievance machinery more transparent and

simplified the procedures for handling complaints and monitoring thereof.

The Reserve Bank has decided to accept 35 recommendations. These

include, enhancement in limit of composite loan from Rs. 2 lakh to Rs. 5 lakh,

delegation of more powers to branch managers for granting ad-hoc facilities (to

the extent of 20 per cent of sanctioned limit), strengthening of recovery

mechanism, opening of more specialized bank branches for small scale

industries etc.

In an effort to increase the outreach of banks to the tiny sector, the

Finance Minister in his 1999-2000 Budget speech, announced the inclusion of

lending by banks to non-banking finance companies or other financial

intermediaries for purposes of non-lending to the tiny sector within the

definition of priority sector for bank lending.

2. Raw Material Availability:

The majority of the small-scale and cottage industries depend on local

sources for their raw material requirements. The handloom industry depends

for its requirement of cotton on local traders. These traders often supply cotton

on the condition that the weavers would sell the cloth only to them when it is
 22

ready. Thus the weavers are subjected to double exploitation at the hands of the

traders. The traders sell cotton to them at high prices and purchase the ready

cloth at low prices.

Earlier the small industries mostly produced items dependent on local

raw materials. Hence there was no significant problem in obtaining the

necessary raw material. However, ever since the modern small-scale industries

have appeared on the industrial horizons manufacturing a lot of sophisticated

and new products, the raw material constraint has emerged as a significant

constraint on their production efforts. Many small-scale industries use imported

raw material. Whenever there was a difficulty in obtaining this raw material

either on account of the foreign exchange or due to some other reason, these

industries had to suffer a severe setback.

3. Machines and other equipment:

Machinery and other equipment in many small industries has grown

obsolescent. On account of this while their costs of production are high, the

quality is inferior as compared to the large-scale units. Moreover, the small-

scale units often do not care about the changing tastes and fashions of the

people. Accordingly, modernisation and rationalisation are urgently required in

small- scale industries. This task can be accomplished only by a network of

technical assistance. Improved technology can help in increasing the productive

efficiency of small-scale units and encourage new product lines in response to

the change in attitudes and fashions of the people.

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4. Under-utilization of capacity :

Data presented in the second-all India Census point to considerable

under-utilization of capacity in the small-scale sector. For instance, in 1987-88,

capacity utilization was only 41 per cent in electrical machinery and parts, 58

per cent in leather products, 60 per cent in transport equipment and parts, 30

per cent in miscellaneous manufacturing industries and 32 per cent in metal

products. For small-scale units as a whole, capacity utilization was merely 48

per cent. This shows that half of the capacity of small-scale units is not utilized.

5. Problems of marketing:

One of the main problems faced by the small-scale units is in the field of

marketing. These units often do not possess any marketing organization and

consequently their products compare unfavorably with the quality of the

products of the large-scale industries. Therefore, they suffer from a competitive

disadvantage vis-a-vis large-scale units. Because of the shortage of capital and

financial resources, these units do not have adequate 'staying capacity' and are

often forced to sell their products at unremunerative prices.

To save small-scale units from competition with large-scale units the

government has reserved certain items for the small-scale sector. The list of

reserved items has continuously expanded from 77 to 124 in the Fourth plan to

500 in 1977 and subsequently to 836. The Trade Development Authority and

the State Trading Corporation help the small-scale industries in organizing their

sales. The national Small Industries Corporation set up in 1955 is also helping
 24

the small-scale units in obtaining government orders and locating export

markets.

6. Poor data base: Another weak link in the chain is the inadequate data base

for the small scale sector. The small scale sector produces as many as 8,000

items.

1.3 Definitions of Industrial Sickness and their analysis.

When industrialization suffers from low capital base and low levels of

technological and managerial knowledge, it is a kind of alanning sign of

Industrial sickness. Industrial sickness is a global phenomenon which is

common to all countries. In India in the recent years, it is a matter of great

concern particularly to the government financial institutions, commercial banks

and all those other agencies engaged in the task of industrial development.

Industrial sickness is spreading out to large scale as well as small scale

industries. In fact, industrial sickness has become a serious problem to the most

vital sector of an economy.

An industrial unit is labeled as a sick unit if it is persistently unable to

meet its outside obligations and its external as well as internal sources of

capital are so insufficient as to require the significant steps in tenns of

restructuring its assets. Finances and management to revive it. An industrial

unit is considered prone to sickness if there exists potential long run insolvency

as reflected in the persistent financial deterioration of the unit over several

 25

years in the past & an expectation of worsening trend in future unless drastic

actions are taken.

According to Sick Industrial Companies Bill (1985) "A sick industrial

company means an industrial company which has at the end of any financial

year accumulated losses equal to or exceeding its entire net worth and has also

suffered cash looses in such financial year and the financial year immediately

preceding such financial year."

In the recent years, there is a spurt in the number of sick units and the

consequent locking up of bank credit.

The causes of industrial sickness can be classified as 1) Internal and 2)

External. Internal causes are those over which the management has some

control whereas external causes are those which are unrelated to individual

management and are beyond their control.

External factors are such as non-availability of critical raw material,

change in the Government policy, market recession, and general labour unrest,

credit restraints, price controls etc.

Internal factors are such as lack of managerial competence, problems

related to production, inability to market the goods manufactured by it at

remunerative prices, lack of finance. As a consequence of the above factors, an

industrial unit tends to show the signs of financial weakness such as short term

liquidity problems, revenue losses, operating losses, moving in the direction of

over use of external credit unit until it is overburdened with debt.

 26

The non-financial symptoms are incapacity to produce according to

schedule, inability to market the goods produced, fast turnover of executives,

staff and labour, poor reputation in the market etc.

Any of the above symptoms indicate that there are problems affecting

the health of the unit. It becomes very much necessary to identify the root

causes and tackle them effectively.

As it is already mentioned that the modern industrial age is being

affected by an industrial sickness, the present analytical study tries to find out

the root causes and to suggest the preventive measures for the sick small scale

industries of Nashik. According to the recent estimate 40% of the total small

scale industries have become sick and special attention is being given to small

scale industries of Nashik city.

Nashik city is one of the important cities in the state of Maharashtra,

which is also emerging as a developing industrial city next to Mumbai, Pune.

Nashik has many large scale as well as small scale industries in Satpur and

CIDCO areas. In the recent period as there is an International recession, in

India many industrial units which are large scale as well as small scale are

badly affected. Nashik is also not an exception to it. Many small scale units and

large scale units in Nashik are sick and are in a bad condition. It is a serious

problem and is a great challenge for the government, financial institutions as

well as entrepreneurs and management.

In order to prevent these industrial units from going under sickness, an

objective analysis over time is needed so that sickness prediction system may
 27

be developed. From the national economic point of view also, rehabilitation of

sick units is vital as their revival will result in a higher gross national product.

If the efforts are properly channelized with zeal to achieve, the success can not

remain as a distant goal.

1.3.1 Definition of Sickness

1. The first attempt to define a sick unit was made by the State Bank of India

(SBI) in 1972. "A unit which is chronically irregular and requires a study to

evolve a nursing programme and close follow-up." This definition is based

on the operations of accounts in the Bank under cash credit facilities. But

this definition was major operations and a unit might have more than one

account in different banks. Hence, further attempt was made by S.B.I, group

(1975) headed by Shri. J. S. Varshneya to redefine the sick unit.

2. Study team of S.B.I, on small scale industries, 1975 (For advance above Rs.

2 Lakh) defines it as "sick unit is one which fails to generate internal

surplus on a continuing basis and depends upon its survival on frequent

infusion of external funds." This definition is usually accepted because it is

based on operational performance and gives importance to the adequacy of

internal generation surplus-funds on a continuous basis, and simultaneously

requirement of external funds for the life of a sick unit. But it need further

explanation as to what duration should be taken in to account in case of

failure of generation of internal surplus, besides, it does not also include the

indicators of sickness in the form of ratios, such as debt - equity ratio and

current ratio to define the sick unit.

 28

3. As per Reserve Bank of India, "Sick unit is one if it incurred cash losses for

one year and in the judgement of the banks, is likely to incur cash losses for

the current year as well as the following year and which has an imbalance

on its financial structure, such as current ratio less than 1:1 and worsening

debt equity ratio (total outside liabilities tc net worth)" This definition given

by R.B.I, is widely accepted in banking industry itself and also in other

organizations for the identification as well as rehabilitation of sick units.

Such, a definition puts too much emphasis on the past, present and future

cash losses for the determination of a unit in the sick category, and also puts

greater reliance on debt-equity and cuiTent ratios. Moreover, physical

performance of a unit is not taken into considerations while putting a unit

into the category of sick units.

4. Industrial Development Bank of India (I.D.B.I.) has comprehensively

categorized four symptoms of industrial sickness, whereas ICICI has laid

emphasis on adverse financial viability of a concern.

5. The Sick Industrial Companies Act, 1985 identified sick units by

mentioning that, 'a sick industrial company as an industrial company (being

a company registered for not less than seven years) which has at the end of

any financial year accumulated losses equal to or exceeding its entire net

worth and has also suffered cash losses in that financial year and in the

financial year immediately preceding it."

6. The Ministry of Labour, Government of India, has also expressed views in

this regard," An early warning of impending industrial sickness would be

 29

that the first occasion of the management defaulting in the payment of

workers dues (wages, P.F. contribution and E.S.I, dues) constantly for a

period of three months," 16.

7. Other definitions

Only such units may be considered as sick units where major part, say

50 percent of its equity and reserves, is eroded by cash losses, and in case of

entrepreneur scheme where there are no own funds, depletion of 15 percent of

total working funds may be considered indicative of sickness. Another school

claims that a sick unit is one which operates below 25 percent of its installed

capacity. At the level of the Govt, in India, sickness gets forced recognition

only when an enterprise closes its door or is on the brink of closure, creating a

serious unemployment problem.

1.3.2 Industrial Sickness: - Global Scenario.

Industrial sickness is a global phenomenon. Global market, growing

competition and changing international economic environment are the basic

factors. In India the magnitude of industrial sickness is enormous. It includes

industries from small, medium and large scale industries. Surprisingly it

includes some industries with good infrastructure as well as technology.

However sick units are more with reference to small scale industry. It is

contradictory at the same time that there is a considerable amount of increase in

the new small scale industry in our country. The sickness factor is slowly but

considerably prevailing in the medium scale industry also. This sickness is seen

over in the developing states of our country. Analytically small scale sectors
 30

have proved to be more competent and efficient than their large scale

counterpart (STDBI study 1980-96). The reasons of SSI to go sick could well

be analysed at various levels. At financial levels these units face extreme

obstacles in getting credit and that too when required urgently. Hence they face

infrastructural and competitive problems to cope up with the global market.

The government policy to encourage SSI in rural areas with lot of incentives

has its positive as well as negative impacts.

Industrial sickness is found in different degree in almost all countries.

Because of its disastrous effect on the national economy and transmitting

effect of the international level, the issue of industrial sickness or failure has

been debated all over the world. The combined effect of oil price like, energy

crisis, industrial recession, inflation, labour-unrest and fast change in

technology have resulted in the large scale bankruptcies and closure of

thousands of small and large industrial units all over the world. During the

recent time it has grown in alarming proportions both in developed and

undeveloped countries. The problem of sickness industries is very much

prevalent in the industrially advanced nations like the USA, UK, Japan. It is

reported that much larger number of companies are falling sicks. The dun and

boards business failure record of USA shows preliminary reporting (30000)

failure company during one year. According to the recent study, one out of four

companies listed in N.S. A stock exchange how revived sells during the

decade. In the U.S. Over 10,000 units are estimated fail each year are out of 5
 31

firm listed on the stock exchange turns sick. The business failure quadrupled

between 1992-95.

Growing competition and ever changing international economic

environment often lead high incidences of corporate failure in developed

market economies. However there economies have the resilience to absorb the

economic disturbances brought about the closer of Industrial Unit.

1.3.3 Indian Context:

In developing countries like India, the socio- economic consequences of

corporate failures are hard to absorb. The government can't treat them of

normal occurrences. Associated with the process of Industrial development and

diversification.

1.3.4 Criteria for the Identification of Sickness

The determination of appropriate criteria for the identification of

industrial sickness are considered to be of paramount importance due to

prevalence of varying definitions adopted by the various financing and other

organizations. Mostly, the definitions highlight the concept of industrial

sickness on the basis of only one point of view neglecting the other views. The

two features, among others, account for the lack of simple and generally agreed

definitions of sickness. First, sickness is a relative term, and one hardly finds in

their world an absolutely sick unit. Secondly, a given sickness manifests itself

in several forms: and at a certain point of time these forms may not throw-up
 32

unambiguous or clear cut signals, so that the sickness is found, understood,

interpreted and measured differently by individuals and even by institutions.

There is, perhaps, a greater need and also stronger feelings that the

definition of industrial sickness may be formulated in such a manner that it

could be adopted by all developmental agencies uniformly for the correct

identification of magnitude of sickness and for taking up the programme of

rehabilitation in a more coordinated and effective manner. Otherwise, a unit

considered as 'sick' may not be considered such by other organizations.

Walter and Donaldson have termed it as technical insolvency when a

firm is unable to meet its maturing obligations." Some writers restrict the

meaning of this term 'sickness' so called as real insolvency case, where the

total value of the firm's assets is smaller than liabilities. Business failure is also

interpreted in the legal sense as bankruptcy or liquidation when the firm ceases

its operations. In economic sense, an enterprise is said to have failed, if it

cannot earn a reasonable return on its capitol. Before coming up to an

acceptable definition based on appropriate criteria, various definitions, given

by the banks, financial institutions, government agencies.

1.3.5 Analysis of definitions.

Small and medium-size enterprises (SMEs) are normally perceived in a

wider perspective as an engine of growth in both the developed and the

developing countries. Despite the extraordinary synchronization of global

slump in some periods, SMEs act as prime movers in stepping up the industrial
 33

growth, poverty alleviation and economic sustainability to rural and semi-urban

centers where they are located.

Like in many other developing countries, SMEs in India play a very

crucial role in terms of balanced and sustainable growth, employment

generation, development of entrepreneurial skills and contribution to export

earning, These SMEs cover a wide spectrum of items that contribute

substantially in the overall economic growth of the country. Their actual

contribution is reflected in the 6.3 percent share of the gross domestic product

(GDP), 95 percent of all the industrial units in the country , 34 percent of the

total exports and 20 million jobs.

At the end of March 2004, there were around 3.6 million SSI units

which produced a large number and wide variety of items with associated

technology ranging from traditional to stats-of-the-art. This dynamic and

vibrant sector also acts as a nursery for promoting entrepreneurial talent and as

a catalyst in industrial growth. However, in the post-WTO era, there has been a

lightened concern about the future of SMEs owing to the most favored nation

(MFN) status and freer trading systems offered for some countries.

These issues coalesce into the central theme of creating space for SMEs

to coexist and provide an enabling environment for a level playing field,

providing them with a reasonable time frame and pace for adjustment and

adequate safeguards against unfair trade and investment practices to overcome

the travails of transition.

 34

The development of SSIs continues to be imperative with incremental

creation of 2.8 million jobs in the past four years and a stagnant employment in

agriculture and large industry sector. Despite the world fast shrinking into a

'global village' because of technological advancements and closer integration

of products and financial markets, India is still far from being globalized with

just 0.7 percentage share in world trade and annual foreign direct inflow (FDI)

at 0.3 to 0.4 per cent of global FDI/FII investments. SSI units are differently

perceived in different countries because of the different meanings implicit in

the term, owing to the size of the units acquiring credit under this category. A

manifold increase in the number of units blurs the distinction between small

and medium enterprises in various countries.

Thus, SMEs are defined differently in various countries due to the

significant differences in resource endowments, historical background and

socioeconomic development in each particular country. The parameters used by

different countries for classifying small industry are related to employment,

assets, sales, etc.

In line with the recommendations of a study group on the development

of small enterprises (Dr S.P. Guota Committee), the orbit of financing of

enterprises in India was enhanced from small to medium enterprises: the

artificial distinction between SMEs eliminated: and a three-tier definition for

tiny sector (up to Rs 10 lakh investment in plant and machinery (P&M), SSI

sector (above RslO lakh up to Rs 100 lakh in (P&M) and medium sector (Rs 1

crore to Rs 10 crore in P&M) was adopted.

 35

Therefore in the Indian Context, the definition of the SSI sector is

largely framed in terms of cumulative investment in plant and machinery while

most of the countries adopt the level of employment as the criterion for

defining the SSI sector. According to the adopted definition, the investment

limit up to Rs 10 million in plant and machinery is treated as the SSI sector.

However, in case of certain specified items such as hosiery, hand tools, drugs

and phannaceuticals and stationery items, the above investment limit in plants

and machinery stands enhanced up to Rs 50 million.

The basic features of SMEs can as well be analysed in terms of

qualitative criteria since standard quantitative yardsticks have not yet been

decisively established.

The Indian government authorities have traditionally assisted the SMEs

through favourable policy measures based on the industrial policy resolution of

1956. Some of these initiative have been taken against the backdrop of the

SME financing in a cross-country perspective. In view of their financial

problems, two broad approaches have been adopted at the national level, viz,

facilitating access of SMEs to sources of financing and developing new sources

of financing in terms of venture capital and business angle networks.

As far as the existing sources of financing are concerned, the trend was

towards reduced and more flexible loan schemes as well as loan guarantees.

With regard to newer/fresh sources of financing, India has to consider

liberalizing the rules pertaining to venture capital investment-diversifying

 36

venture investors, channeling venture capital to seed firms in growth sectors

and phase out government equity schemes as private markets develop.

Among the developing countries, India was the first to display special

consideration to SSIs. The basic focus of the Indian government has been on

employment generation in the context of India's labour surplus economy.

Small enterprises manufacturing labour-intensive products make

economical use of capital and absorb the abundant labour supply available in

the country. The policy initiatives in India have always recognized SSIs'

contributions to the economic progress of the country. Small firms are capable

of producing a larger quantum of consumer goods to meet the possible increase

in demand that would arise on account of the spurt in incomes, generated by

fresh investments in heavy and basic industries.

The various measures used for the promotion and development of SSIs

included product reservations, fiscal concession, preferential allocations of

credit and interest subsidy in a credit rationing framework, extension of

business and technical services by the government and preferential

procurement by the government. SSIs have been given preferential treatment

through the provision of lower interest rates as well as requirement for a

minimum credit allocation from the commercial banks.

In recognition of the contribution and the vast potential of the SSI sector

as well as its inherent infirmities, provision of adequate credit to this sector has

continued to be an important element of banking policy, even though economic

 37

and financial policies themselves have undergone significant transformation,

particularly after the initiation of structural reforms in 1991.

In the policy context, there has been a paradigm shift. From an inward

looking policy framework up to the 1990s, India has adopted an outward

oriented approach after globalization, liberalization, financial and real sector

reforms. At present, both the industrial sector in general and SSI sector in

particular are exposed to an international competitive environment.

However, the most significant aspect is that India has evolved a sound

institutional setup for financing of the SSI sector. A separate industrial policy

was announced as part of the structural reforms which not only eliminated

various controls on the industrial sector, provided a greater role for the private

sector and encouraged inflow of foreign investment and technology but also

contained specific initiatives for the development of the SSI sector in the form

of a comprehensive policy package which includes fiscal, credit, infrastructural

and technological policies.

The Reserve Bank of India (RBI) has also been emphasizing on the flow

of bank credit to micro enterprises in rural and semi-urban areas set up by

vulnerable sectors of society including women. A number of initiatives have

been taken in this regard and banks have been advised to provide maximum

support to self help groups (SHGs).

Small Industries Development Bank of India (SIDBI) was set up as the

principal financial institution for promotion, financing and development of the

SSI sector and for coordinating the activities of other institutions engaged in
 38

similar activities. The government of India has launched many schemes for

technological upgradation and modernisation, protection of workers affected by

technological upgradation and modernisation, infrastructure development,

entrepreneurship development, as well as increase in the investment limit (up to

Rs 50 million) for SSI units producing certain items.

It also sets up a new ministry for more focus on the development of the

SSI sector. Several expert committees had also been set up over the 1990s to

assess the problem of the SSI sector. Most of the recommendations of these

committees are related to the simplification of loan application forms,

launching of a new credit guarantee scheme, raising of composite loans, etc,

which have been accepted and implemented.

1.4 Scope of the study

The scope of the study of industrial sickness is so wide, varied which

covers all types of units i.e. large, medium and small, all industries traditional

and modern, public and private enterprise over all Indian States and Union

territories. It is, however, not possible to cover all facets of sickness due to

certain limitation and the constraints of time, money and labour. So, the

researcher has selected a leading industrial area in the State of Maharashtra i.e.

Satpur industrial area of Nashik with special reference to small scale industries.

This industrial area has been selected on the basis of increasing number of sick

industrial units in the Nashik region.

 39

The question may arise here that, why this study is based on particularly

industrial sickness of Satpur industrial area of Nashik alone. Although, it does

not mean that the malady of industrial sickness is not found in the Non-

industrial area of Nashik. But an intensive study in respect of the selected area

may be done because numerous small scale and ancillary industrial units

engaged in different lines of production have been established in various places

of Satpur Industrial area of Nashik.

1.5 Objectives of the Study.

This research study is mainly concerned with an inquiry and

investigation about the functioning of SSI Units in Satpur Industrial Area. The

emphasis is on financial as well as non- financial and human resource factors.

The objectives of the study are to throw light on the industrial sickness in

Satpur Industrial Area with special reference to Small Scale Industrial Units.

The Specific Objectives are as under:-

1. To analyze and verify the financial position of sick Industrial units.

2. To study the impact of globalization on Small Scale Units.

3. To ascertain the role of Government and other agencies in the development

of Small Scale Industries.

4. To evaluate SSIs in Satpur Industrial Area in respect of 'SWOT analysis'.

5. To study the availability of resources for the development of SSIs in the

Nashik district.
 40

6. To analyze the practice adopted by SSIs in Satpur in respect to Management

of Finance, Marketing, Production, etc.

7. To Study the future scope for industrial cevelopment in Satpur Industrial

area.

8. To find out the proper measures for preventing sickness and to suggest

remedial measures for the revival and rehabilitation of the sick units.

1.6 Significance of the Study

The wave of liberalization, globalization have been blowing strongly,

forcing countries and sectors to respond and adjust more importantly, the

World Trade Organization (WTO) has emerged and its conditionalities have

altered the basic principles of trade. T^ WJ^Q,

Amid so many changes, the general feeling is that the small enterprise

sector in India which has been playing significant role in terms of exports,

output and employment has remained relatively obvious to there change.

It is, therefore, a increased anxiety in the emerging scenario of LPG is

that SSI units will be swamped and in the wake of rapid competition many

units may also have to close down. This fear raises a major question. It has

become imperative for all the SSI's to be internationally competent enough,

even to survive in the domestic markets.

The researcher is sure that the work will be useful for the rehabilitation

of sick industrial units. The present study is a right indication to throw light on
 41

the development and improvement process of sick units. It is worth mentioning

that the research study will be helpful especially to-

a- The SSI Unit owners in the Satpur Industrial Area and SSI Unit owners in

India in general.

b- The various Government and non-governmental organizations, working for

the development of SSI Sector.

c- The various industrial organizations in the Country.

As the society is changing, marketing management has gained

tremendous relevance in many spheres of our activities. The use of tie concept

of marketing is made in furthering of products, services, institutions, cultural

norms, places and even thoughts. One of the most visible indicators of this

development is the tremendous increase in the number of newspaper,

television, advertisements, hoardings and publicity materials that we come

across each day, over the years.

While most of the large units have already professionalized their

marketing functions in these operations, a majority of small units are still to be

benefited from the use of a professional marketing approach. Most of the items

manufactured by the small units are such that they do not pose any great

difficulties in production ; however marketing of these remains a perennial

problem for the entrepreneurs.

Our industries have survived 45 years under conditions of high

protection, subsidies & misguided government policies. It was observed that,

inspite of all the help provided to this sector by the Govt, individual problems
 42

of each manufacturer to get better share of markets and to improve profits are

observed to have remained unsolved. Skilled entrepreneurs were there,

financial assistance was there, machinery was provided, products reserved but

inspite of all these aids the units continued to trail around the environment of

volatile changing markets. This problem of SSI units has been intensified &

gone more worst after liberation of Indian economy & onset of WTO region.

It is found that, not much attention was paid to the question whether the

units going into production had at all assessed as to whether the market needed

what it intended to produce & whether there was a real need in the market for

what it produced. It is the old concept of marketing which keeps marketing at

the end of the whole process. Now those days are gone. The market has

become the buyer's market and the needs of the consumer have become the

base of selecting the product itself. Those units which did not keep pace with

this concept failed and had to close down their shops. Thus, inability to market

their product (marketing) is found to be the major problem of SSIs.

Now, in this global era, it has become imperative to be internationallly

competitive even to survive in the domestic markets. In the given scenario, the

SSI also have no choice but to go global because international competition has

already arrived at our doorsteps. This has resulted in closing down of many SSI

units & increased rate of sickness in these units. Presently the rate of sickness

in Indian SSI's is about 39%. Among others one of the main reason for this is

the marketing weakness of these small units.

 43

The present research study may be helpful to the entrepreneurs to

consolidate ideas, human talent and facilities into one unified whole moving

towards management objectives. If the managers of the small business are

properly developed they could prevent the causes of sickness of small scale

enterprises among much are neglect, inadequate sales, competitive weaknesses,

invention difficulties, excessive fixed assets, heavy expenses etc.

Although the present research study was conducted on a selected

number of small scale sick industries of Satpur industrial area, Nashik. it has

relevance for all small scale industries in the state in planning the

developments, preventive and rehabilitationary measures likely to encourages

the growth of small scale industries.

Therefore, analysis of marketing practices of small scale industries &

development of enhancement strategies for SSI's towards making them

globally competitive form the basis of this study.

Small Scale Industries are considered as the backbone of the economy of

any nation. The last decade of the last century has witnessed rapid economic

changes. Information highways are shrinking the world into a global village.

The winds of liberization, globalization have been blowing strongly, forcing

countries and sectors to respond and adjust. More importantly, the World Trade

Organization (WTO) has emerged and its conditionalities have altered the basic

principles of trade.

Amid so many changes, the general feeling is that the Small enterprise

sector in India which has been playing a significant role in terms of exports,
 44

output and employment has remained relatively oblivions to there changes. So

far it has survived amids some what protected environment in the form of

product reservation, market reservation, priority sector lending, fiscal

exemptions / concessions etc. But such protection cannot continue for long.

There is therefore a growing fear that in the emerging scenario small

units will be swamped and in the wake of growing competition many units may

also have to close down. These fears raise a major question.

Is there not a way by which small units in India can traverse the entire

distance from using 'local content for local reach' to using 'local content for

global reach' is a question which needs to be addressed.

This research is an effect in the direction to address the above question

thereby enhancing global competitiveness of the Small Scale Industries in

India.

Satpur is one of the resourceful but backward region of the country.

Inspite of having all the necessary inputs for industrialization, the region is not

able to develop itself through industrialization. It has a large potential for

Industries but still very few industries are set up over here & also the region

researcher thought that it is important to find out the reasons for this

backwardness.

It is against this back drop that I decided to make a study of the Small

Scale Industries in Satpur. There could be hardly the opinions about the

imperative need for healthy small scale industries which are capable of

adjusting itself to the needs of the hour.

 45

The process of liberalization, while providing tremendous opportunities,

has thrown up new challenges for the Indian Small Scale Industrial Sector.

Having been hitherto nurtured in a sort of protective environment, with

industrial globalization, it now find itself vulnerable to cross-border enterprise

activities, which includes free international movement of goods, investment,

strategic alliances for product development, production, sourcing & marketing.

Hence, in this scenario, it has become imperative for all the SSIs to be

internationally competitive even to survive in the domestic markets.

This research aims at developing the suitable marketing strategies for

SSI units to make them globally competitive. At this point, it is worth

mentioning that the research study can be helpful specially to sick and ill

industries.

1.7 Coverage of the study

The present study was concerned with the industrial sickness in Satpur

Industrial Area. The main focus of the study was to find out the reasons behind

industrial sickness in industrial units and to suggest remedies for prevention of

industrial unit's sickness.

The study of industrial sickness is so wide. It covers all types of i.e.

large, medium, small and public as well as private enterprises. It is however not

possible to cover all facts of sickness due to certain limitations. There is a lack

of complete and accurate data on industrial sickness regarding SSI units in

Satpur Industrial Area. There is no such body that publishes statistical

information regarding the magnitude of sickness in industrial units. Hence, no

 46

accurate and sufficient data is available on regarding number of industrial units

were declared sick/closed at particular time period. But an intensive study of

sickness in Satpur industrial area has undertaken with a view to explore the

various factors causing sickness of different types of industrial units.

The gravity of industrial sickness and its consequences motivated the

researcher to undertake research study of sick SSIs in Satpur industrial area and

to find out reasons of sickness and to suggest measures to overcome it.

In some industrial units owners have shown a very less interest in

providing essential inforaiation. Bank managers showed hesitation to provide

essential information due to official instructions given by their top management

and their controlling officers. Some entrepreneurs have provided information in

strict secrecy and confidentiality.