SMALL SCALE INDUSTRY IN INDIA

ASSESSMENT OF GROWTH AFTER

LIBERALISATION

ALL INDIA MANAGEMENT ASSOCIATION

Executive Summary

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Introduction

In India, the small-scale industrial (SSI) sector has acquired a prominent place in the socio-economic development of the country
during the past 50 years. This sector constitutes 95% of the industrial units and contributes 40% to the total industrial output of
the country and 35% to direct export. According to the latest statistics, there are about 3.6 million SSI units in India and these
employ approximately 19.3 million people, which is second highest next only to agriculture.

This achievement has been possible due to the consistent and sustained policy support from the Government including policy of
reservation, investment ceiling for the SSI sector and priority lending. The economic reforms started in 1991 in India provided the
opportunity to SSIs to grow big. However, the formation of WTO in 1995 has started posing a major challenge to the SSIs in
India. There have been some sweeping changes which have taken place in the SSI sector in the last two years. The hitherto
protection of the SSI sector by way of reservations and quantitative restrictions have been removed. More than 160 items which
were reserved for the SSI sector have been de-reserved.

The higher rate of growth of SSIs during 1991-2000 period, compared to the overall industrial growth rate, does not offer much
satisfaction in the immediate future, unless concrete remedial measures are taken. Indian industry does not face any immediate
threat from developed countries but faces serious competition from neighbouring countries particularly from Chinese
manufacturers where productivity is 60-100% more than the Indian companies.

It has been concluded through previous studies on the SSI sector that Indian SSIs should remain competitive in the era of
globalisation. These studies have suggested that competitiveness is possible only if there is a technology up-gradation and
adoption of new technologies. There is a need to introduce new tools and equipments for production, changes in manufacturing
process, improvement in the quality of products and quality assurance, introduction of new designs and diversification, use of
new raw materials and usage of modern management and IT tools. There could, however, be other factors besides technology
which have impacted the growth of the SSIs.

There have been varied views which have been formed about the growth of the SSI sector post liberalisation and the features
which have acted as contributors or inhibitors for the growth. The vulnerable areas as experienced by the SSIs have been cited
as low capital base, difficulties in accessing technology, credit constraint, low access to business services, constraint of quality of
human resources, low market awareness, low lobbying capacity, Inspector-raj and infrastructural constraints. The factors which

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have been identified as aiding the growth of SSIs are advancement in generic technology of computers and telecommunications,
rise in electronic commerce, multilateral trading rules under agreements of World Trading Organization (WTO), mergers and
acquisitions, liberalisation of services/ infrastructure and ‘sourcing out’ of activities to outside firms.

The scope of the present study is to identify the growth trend of the SSIs and map out the reasons for the growth or decline as the
case may be. The study also seeks to prioritize the factors which have helped the growth and those which have hampered the
growth. It also ascertains whether there has been a difference in the growth pattern and factors helping and inhibiting growth with
respect to the geographical region, the type of industry, manufacturing or service or the size of the company. The training needs
felt by the SSI sector and the outlook for the sector has been enumerated.

The study provides an assessment of the SSI sector in terms of their current problems and means of overcoming those as
suggested by the SSIs. The findings can be used as inputs by the policy makers and institutional mechanism which exist for the
sector.

Objectives of the Study

To identify the growth pattern of the SSI sector and identify the reasons for success/failure
To evaluate the impact of liberalisation measures on SSIs.
To identify the barriers and constraints that SSIs are facing
To prioritize the growth challenges the SSIs are facing presently in the areas of marketing, exports, finance, technology,
alliances, human resources, identification of suitable opportunities etc.

Methodology Used
The study has been undertaken in two phases in order to capture the views of all the stakeholders involved as well as of different
industries in the SSI sector.

Phase One Qualitative Research with Policy makers and Institutions

Phase Two Structured Survey

The phase one consisted of interviews with Banks, Financial Corporations, Industrial Development Authorities, opinion makers
like Industry Associations, Regulatory Bodies and Ministry of Small Scale Industry.

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The information collected comprised of understanding the role of the institutions towards the development of the SSI sector and
their views on the reasons for the growth or decline of the SSIs in India.

The phase two consisted of a structured survey based on a questionnaire. The survey was conducted through face to face
personal interviews with the owners of the SSIs or decision-makers in the firm.

Qualitative Research with Policy makers and Institutions

The stakeholders were asked to identify the factors which were posing as constraints and those that were enabling the growth of
the SSI sector. Some salient views have emerged particularly on technology acquisition and adoption, ancillarisation as a strategy
for growth and market related barriers.

Technology Acquisition, Adoption and Upgradation

According to the policy makers, obsolete technology and management practices have been a major barrier for growth. This leads
to low scale economies as well as low quality. Technological awareness exists among the SSIs but they are not taking the
advantage of the same because they do not feel that there is a market at that cost. The SSIs feel that acquiring and applying
technology is a costly exercise which pushes up the manufacturing cost of the product and makes the price unviable in the market
to which the SSIs cater. In other words, the SSIs have a belief that they cater to only the low end of the market for which quality is
not a major requirement.

The National Productivity Council believes that SSIs are not willing to invest in experimentation to identify parameters of attention
and productivity improvement. The Technology Bureau of Small Enterprises also feels that SSIs have a tendency to compromise
on quality but at the same time the entrepreneur should understand what his needs are before investing in an imported or
indigenous technology.

According to the spokesperson and opinion makers of the industry, the situation on technology upgradation is in fact to the
contrary. Whenever, the SSIs feel the need, they are quick to take up technology upgradation and adopt it. However, it is felt that
the limit in investment in plant and machinery should increase if technology has to be upgraded. It should increase from the
present limit of Rs. 1 crore to Rs. 3 crore.

Ancillarisation as a strategy for growth

The Ministry of SSI feels that dependence of ancillary units on bigger companies results in their closure when a better technology

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product is available. However, Subcontracting has been the route for growth for most SSIs. This relationship needs to be
nurtured.

There is immense potential to be tapped towards ancillarisation that needs proper networking systems to be developed for
exchange of information, database, assignments and projects between bigger companies and SSIs. The Government could take
a lead on developing these kinds of systems.

Market related barriers

The policy makers feel that the SSIs should be driven by market forces rather than reservation of items. At times, somewhat
larger industries have been hindered in their growth plans because of the reservation of the product under small scale. Keeping
this in mind, the barriers have been removed and about 160 items have been de-reserved from SSI sector. This would also make
them more competitive.

The inputs from the qualitative research were used to frame the structured questionnaire in more detail.

Sample Profile of Structured Survey

A sample of 1000 companies in the SSI sector had been planned for the quantitative survey. The final number on which the
analysis has been conducted is 872. The companies in the Eastern region and the Northern region were not enthusiastic about
the survey, therefore the required sample size could not be achieved. The survey work was completed in a span of three months
from February 2003 to April 2003. 31% of the sample comprises of companies in the Northern region, 31% in the Southern
region, 23.5% in the Western region and 14% in the Eastern region.

The cities which were covered in each region were:

Northern region Dehradun, Delhi and NCR, Jallandhar, Kanpur, Lucknow, Ludhiana, Meerut
Western region Ahmedabad, Baroda, Jaipur, Mumbai, Pune
Eastern region Bhubaneshwar, Guwahati, Kolkata
Southern region Bangalore, Chennai, Coimbatore, Hosur, Hyderabad, Tirupur, Trivandrum

The sample comprised of 81% companies in the manufacturing sector and 19% companies in the services sector.
The ownership pattern of the companies in the sample was as follows:

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Sole Proprietor 53%
Partnership 22%
Private Ltd 22%
Public Ltd 3%

The sample comprised of 45% companies belonging to the pre liberalization era (pre 1991) and 55% of companies belonging to
the post liberalization era (post 1991).

Among manufacturing companies the industry sectors which were covered are

Textiles, Leather and Garments; Printing, Packaging and Paper, Plastic and Rubber, Machinery and Mechanical Products,
Electrical and Electronic products, Chemical Industry and Products and Automobile & Auto Products/Services.

The kind of companies which were covered in the Services sector are office automation, computer products and IT services;
consulting, architecture, interior decoration, retailing and insurance services and beauty and health services etc.

Growth of SSI sector

The cumulative growth rate for the 872 companies in the sample over the five year period 1998 to 2002 has been negative (-
5.18%). This is based on a sample of 350 companies out of the 872 which have been interviewed who have provided information
on their turnover figures for the last five years. The negative growth rate is primarily on account of the companies in the Northern
and Eastern region. The companies in the Southern region have recorded a growth rate of 25% in their turnover in the last five
years. For the period, 1999-2000 too the overall growth has been positive (8.48%) but this is because of companies in the South
alone. In case of companies in the North, East and West, it has been stagnant but the Southern region has reported a 24%
growth.

The apparent wide disparity in the growth pattern of the SSIs between the Southern region and the rest of India points to the fact
that SSIs in South had exploited the market opportunities better than others. So free market per se is not inhibiting growth, rather
attitude of the people to learn, to upgrade the skills of the manpower, being flexible enough to adopt new technology and market
practices are acting as hindrances.

The companies in the manufacturing sector have recorded a negative growth of 8.14% in the last five years while the companies
in
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the services sector have recorded a growth of 16.34% in the last five years.

The companies were asked to state their actual turnover for the last five years. The year-to-year growth was computed for the last
four year period based on these figures.

Accordingly, the years 1998-99 have witnessed a negative growth of -36.67% among the companies in the sample, which
improved to -3.82% in the following year. In the period from 2000 to 2001 the growth increased to 11.87% while it improved
further in the year 2001 to 2002.

However, the growth is more on account of the positive growth recorded consistently for the Southern region and for the Western
region in the last two years. The growth in the manufacturing sector has been slow but steady but in case of the services sector it
has shown a cyclical trend.

Impact of liberalisation on growth of SSIs

70% of the companies could respond to this question after explaining the meaning liberalisation. 24% felt that liberalisation did not
have an impact on the growth of the sector, 19% felt that it had adversely affected the sector, 17% felt that it had brought in new
opportunities while 9.5% opined that the market growth had become uncertain after liberalisation.

Barriers cited for growth of SSIs

The main reasons cited by the SSIs for the non growth of the sector have been market related (70%), finance related (25%),
Government policies and regulations (12.78%), worker inefficiencies (13.2%), power (14%) and technical (14.6%). The market
barriers included low sales & less demand for products, competitive market, stagnancy and market fluctuations.

Marketing support for SSIs is essential for identifying their target markets – SSIs are getting confused about the market they
should serve, there is the local regional unorganised player at one end selling cheap quality goods; imported Chinese and
Taiwanese goods on the other hand and the MNCs infiltrating into their domain on the other. As an example is the biscuit
industry; many of the local players had to shut down because of competition from small bakeries on one hand and large regional
players like Priyagold on the other and still larger national players like Britannia and Parle all of which offer similar products at
almost the same prices. The primary benefit offered by the local players is low price which is being eroded by the larger regional
players as well as the multinationals which have penetrated the market with lower prices to match the regional players. This has
been possible due to the economies of scale which enable the players with larger capacities to lower their prices.

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More companies in the Northern and Western region (nearly 75%) in comparison to companies in the South (65%) have
mentioned market as a constraint to growth. Companies in the South have been able to achieve higher sales volumes, more
demand for products and target growing markets much better than companies in other regions but they have been constrained by
market fluctuations and uncertainties.

Infrastructure bottlenecks like power and transportation have been cited as more important barriers for growth by companies in
the South. With better infrastructure facilities these companies are likely to fare even better.

In Eastern region government rules and regulations have been blamed much more than other regions while in the Western
region the mind set is more towards solving the problem through finance.

Measures adopted to overcome problems

The companies have resorted to internal measures like reducing the costs of production and increasing the productivity of their
existing workers or increasing the employee strength and also reducing raw material procurement and other costs. They have
also tried to increase the productivity by deploying generators and increasing shifts.

The companies in the Southern region have resorted to human resource measures as well as market expansion measures much
more than the other regions. In the Southern region, the effort has been to move out and target beyond local needs.

The services sector companies have deployed cost reduction measures, market expansion measures and solving power
problems and increasing working hours of existing employees much more in comparison to the manufacturing sector companies.

The manufacturing sector companies have primarily used measures of finance infusion or increasing manpower which is better
trained.

Exploitation of market opportunity

53% of the companies have mentioned that they could exploit the opportunity presented to them. This has been through better
utilisation of government policy and arrangement of funds. The remaining 47% could not avail of the opportunity because they
could not face the market conditions of sluggish growth and competition.

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The companies in the Northern region have been slower in responding to opportunities in the environment. In the remaining three
regions the responsiveness has been nearly 15-20% higher.

Confidence Index
The companies were asked to state to what extent they would be able to continue to perform in the present economic
environment. 60% of the companies have expressed a capacity to survive in the next five years, but 40% of the companies are
pessimistic. The most pessimistic view has emerged from the East which is mainly due to their overdependence on Government
policies to bail them out of their losses and their own inability to understand the market needs.

Maximum number of the companies in the South mentioned that they would be able to continue for the next 10 years. The
optimism was backed by their own capabilities of market readiness, harnessing resources and encouragement by the regulatory
and Government bodies. The confidence index for the next ten years was strongest in the South.

Factors which have helped growth

The respondents were provided with a list of selected factors and asked to rate them on a five point agreement scale where 1=
Completely disagree and 5 =Completely agree. The “Agree %” has been computed using the sum total of the “Agree somewhat”
and “Completely Agree”

Among the factors, which have contributed the most towards growth are market related factors and IT factors like rise in e-
commerce and usage of Internet.

The strategy of subcontracting/ ancillarisation and sourcing out has enabled the companies to grow. The usage of subcontracting
and ancillarisation or out sourcing has been deployed less by firms in the Southern region but has been predominantly in the
Northern region. The companies in the Southern region have been able to find their own independent markets rather than
depending on a parent company.

The common factors which have contributed towards manufacturing and service both are rise in e commerce and sourcing out.
Globalisation and Liberalisation policies have benefited the service sector more than the manufacturing sector.

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Institutional Support
The respondents were provided with different schemes and programs which have been offered through the institutional support
mechanism for the SSI sector. They were asked to state whether or not they have availed of these programs.
The SSI sector has used the Industrial Estates and Growth Centres and District Industry Centre the most. State Financial
Corporations and Cluster Development Schemes have also contributed towards the success of SSI sector. However, Preferential
Purchase Policy, Export Processing Zones, Software Technology Parks, SIDO, NSIC, SISI, SIDC, SIDBI have not lent much
support to the growth of the sector.

The manufacturing sector has received more support through cluster development schemes, preferential purchase policy,
industrial estates and District Industries Centre as compared to the service sector. The present system seems to be more geared
towards supporting manufacturing activities rather than service based companies. The services sector has received some
financial support only from the State Financial Corporations.

The institutions which have been recognised as providing support to the sector have to be given further impetus to improve their
systems and deliveries so that they can serve the sector better.

Marketing Constraints
The respondents were provided with a list of marketing constraints and asked to rate them on a five point agreement scale where
1= Completely disagree and 5 =Completely agree.

The market constraints which have been experienced are increase in the cost of manufacturing on the one hand and influence of
imported and Chinese goods on the other hand resulting in small markets to be addressed with lower margins and, therefore,
increasing the risk factor. They themselves have been unable to exploit global opportunities because of lack of consistency in
products.

The companies in the South have not been constrained as much due to competition from Chinese goods or lowering of import
duties as in the case of other regions but they have attributed the increase in cost of manufacturing as the main reason for the
lack of growth. Companies in South have been able to seize market opportunities despite competition.
While cost of manufacturing is a concern for the manufacturing sector and lack of product standardisation is a concern for the
service sector.

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Financial Constraints
The respondents were provided with a list of financial constraints and asked to rate them on a five point agreement scale where
1= Completely disagree and 5 =Completely agree.

This has been identified as the second most important constraint in the growth of SSIs. However, more companies in the West
and South have mentioned finance as a constraint in growth. All the financial constraints including bank credit for working capital,
documentation of bank loans, lack of collateral securities and delays in payments to ancillary are equally important. Financial
constraints have been identified as a major barrier towards growth more in the Eastern region.

All the constraints are equally important to both the manufacturing and services sector, however, lack of collateral securities has
been mentioned as more important by the manufacturing sector.

Human Resource Constraints

The respondents were provided with human resource constraints which have been identified by previous studies on the SSI
sector and asked to rate those on a five point agreement scale.

This has been identified as much as an important barrier as finance. There are regional differences as far the human resource
constraints are concerned. In the Northern region, stringent labour laws and cost of human capital have emerged as the more
important human resource constraints. In the Eastern region, all the constraints are important but the lack of training programs for
SSIs has emerged as more important. In the Western region too it is the lack of programs for the SSIs which have been
considered as an important constraint. In the Southern region human resources or lack of programs have not been considered as
a constraint.
Inadequate programs for the SSIs is more of a concern among the services sector in comparison to the manufacturing sector
while stringent labour laws as well as cost of human capital are barriers for growth in the manufacturing sector.

Infrastructure Constraints
The respondents were provided with few infrastructure constraints which have been identified by previous studies on the SSI
sector and asked to rate them on a five point agreement scale.

These have been identified to be as important as finance and human resource constraints. Infrastructure constraints like power
and lack of physical infrastructure like roads have emerged as crucial. In the Southern region as many as 47% companies

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consider power shortage to be important which implies that the Southern region could have fared better if these bottlenecks had
been eliminated.

Power has not emerged a main concern in the Western region implying that the policy of privatisation of power seems to be
working. In the North and East there have been major problems due to power constraints.

Infrastructure constraints have impacted the manufacturing sector more significantly as compared to the services sector.

Regulatory Constraints
The harassment of the industry by the Inspector visits has been mentioned as the primary constraint for growth (51.46%).
However, this is more rampant in North (78%) and East (61%) rather than West (53%) and lowest in South (19%) implying that a
healthy business environment is vital for the growth of the sector. The manufacturing sector is more troubled by the Inspector Raj
in comparison to the Services sector.

De-reservation of products has also been cited as a barrier for growth by 32% of the companies interviewed implying that nearly
one third of the companies in the SSI sector would like to continue to thrive in a protected environment.

Technological Constraints
36% companies have mentioned technological constraints as a hindrance to growth. The technological constraints which have
been identified as the main reason for non growth are technological upgradation, low productivity and lack of knowledge about
technology sourcing.

Companies in South are not concerned about technology being a constraint as they have been constantly upgrading. However,
those in the Northern and Western region have higher concern for technology upgradation and low productivity.

While technology up-gradation is a major constraint in both manufacturing as well as services sector, low productivity and
technology acquisition through licensing are more important constraints in case of the manufacturing sector.

Training Needs
51% of the respondents have expressed a need for marketing training, 33% for financial training and remaining 21.2% for
exports, 21.6% for human resources and 21.3% for information technology.

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The marketing training has been suggested for market development, planning customer promotional activities, global marketing
and dealer development and network. The financial training has been identified as necessary for obtaining loans, activity based
costing and financial policies. In case of exports courses for legal procedures country wise, help in finding importers and
Government assistance are needed.

In the area of human resources, it has been suggested that programs addressing industrial and labour law, improvement of
employee performance, team work management and motivational techniques can be introduced. Programs to develop skills of
knowledge management and data base, Internet and Internet based technology and improvement of communication can be
introduced for training in Information Technology.

Outlook for the Sector

The respondents were provided an outlook scale for the SSI industry, their industry sector and for their own company after five
years and asked to rate them on a five point survival scale where 1= More profitable than today and 5 =Cannot survive definitely.
The “Survive %” has been computed using the sum total of the “more profitable than today” and “Somewhat profitable than today”
and “Same as today”

A positive outlook has emerged for the SSI sector, each individual industry sector and the companies but it is inclined towards a
status quo and somewhat more profitability rather than much more profitability. 14% of the companies within the sample have felt
that they are likely to be more profitable in the next five years; on the other hand nearly 6% feel that they will definitely not survive.

The companies in the Southern (83%) and Eastern (84%) regions are more upbeat about the outlook of SSI sector, the industries
sector and their companies. Among the companies in the North 65% have shown a positive outlook whereas in the West 61%
have shown a positive outlook. Nearly 30% of the companies in the Southern region feel that they would be more profitable in the
next five years.

The companies operating in the services sector are more positive in their outlook for their growth as well as the growth of their
sector in comparison to those in the manufacturing sector.

Implications and Recommendations for the SSI sector

In the light of the findings from the survey some areas which are important for policy thrust have emerged. With the advent of
liberalisation, multilateral free trade regimes the SSIs are now subject to the dictum of the market forces. No longer they will be

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able to get the preferential treatment, subsidy, support, protection from the Government as well as from the institutional
mechanisms. So if they want to survive and prosper in this New World order, they have to be competitive.

The implications for the SSIs which have emerged from this study are:

Growth Pattern
The striking learning that has emerged out of the study is the difference in the growth of the SSI sector across regions. The
overall growth of the SSI sector in the last five years has been negative (-5.18%) contrary to the popular belief that the sector is
prospering.

The regional differences are stark; the growth in the SSI sector is led by the Southern region, which has shown a constant growth
of 25% in the last 5 years. On the other hand, companies in the North and East have recorded a negative growth while the
Western region has recorded a negligible positive growth. There are major learnings which other regions can derive from the
Southern success story.

The foremost implication which has emerged is regarding the perception of the role that the Government should play in the
growth of the SSI sector. In the other regions there has been a clear mindset to blame the government policies and lack of
support from the government as the reason for the dismal performance of the sector, however, in case of the entrepreneurs in the
Southern Region no such complaints have been recorded. On the contrary, they are supportive of the government policies and
feel that government has been a good facilitator.

There is also not much hindrance felt in the South from the regulatory point of view whereas in case of other regions, particularly
in the North the harassment caused by regulatory visits has been cited as a major bottleneck in growth. The state governments in
the region other than South could take lessons from the support mechanism instituted by the state governments of the Southern
states and apply it to their own conditions.

Market Constraints
Though previous studies have highlighted technology awareness, acquisition and adoption as the main reason for the slow
growth of the SSI sector, marketing related factors have been cited as the primary reason for the low performance of the sector
according to the present survey. Some of the salient constraints are inability to find a target market for the products due to
competition at either end of the quality spectrum. This points towards the following measures to be introduced:

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The SSI units need to be provided with market related information, new avenues for their products both domestically as well as
abroad, new production and business practices through trade fairs and workshops. The industry forum and association should
undertake publication and dissemination of such information in the form of bulletins and journals.

The emphasis should be on standardization, brand equity building and brand positioning strategy to develop a good market
presence for these products. This requires standards and code procedures to be available within easy reach of the SSIs.

The SSI owner is intrigued by the presence of Chinese and other cheap foreign goods in the market which lure their customer.
There is, therefore, a need to educate them about the effect of WTO on their business.

The cost of manufacturing for the SSIs goes up due to poor understanding of the supply chain resulting higher costs of raw
materials. Training on supply chain management needs to be introduced so as to reduce the intermediate cost of transaction and
marketing the product at the targeted area.

Subcontracting has emerged as the route to success for the SSI sector. This can be nurtured through better coordination and
cooperation mechanisms between small and large companies. There should be close-knit coordination between large industrial
houses and SSIs so as to reap the benefits of the small sectors in the production processes. This can be undertaken by
introduction of common exchange platform of projects.

The consortium approach has also been successful in increasing the bargaining power of the SSIs and making them stronger. In
the leading textile zone of Tirupur in Tamil Nadu, the hosiery manufacturers have approached the international labels like
Benetton for procuring orders for manufacturing on their behalf. They have assured them about the quality as well as delivery
schedules as well as the cost effectiveness of manufacturing through them. The consortium approach needs to be encouraged
through the cluster schemes.

Financial Constraints
The second most important constraint identified by the study after the market-related barriers is the financial constraints. It
includes both the procedural hassles as well as availability constraints. The recommendations which follow suggest introduction of
a resource pack containing details of government policies regarding the financial norms. These packs may be prepared and
distributed among the SSIs letting them know the details of financing and other schemes available to them.

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Human Resource Constraints
The human resource constraints ranked on par with financial constraints in terms of their importance. Some of measures which
need to be adopted to reduce these constraints are:

Labour laws should be made more flexible and simplified for the SSIs to give the entrepreneurs a free hand in the choice of
labour hiring and firing.

There should be training program from the industry associations to upgrade the skill of the workers and to make them acquainted
with the skills, compatible with the new technology. Poor productivity of the labour force being a major concern can also be
addressed through upgradation of skills.

Training programs in marketing have been most demanded particularly in the areas of market development, dealer networking
and exports.

Technology Constraints
Technology has not emerged as the main concern of the SSIs, however, this is due to the fact that they are not aware of the
ability of technology to translate into new markets or reduce costs. They feel that technology is essentially an expensive
proposition which should be deployed only if everything else stops working or if they are certain about the demand that it would
generate.
The SSIs in India are by and large viewed as units producing poor quality outputs using outdated technology. The growth and
development of SSIs in India greatly depends on a change in this perception and the reform process should include a strategy to
catalyze the change.

To this end some of the areas which could be addressed are:

Setting up of technology awareness & sourcing centres to enable entrepreneurs to access & buy the appropriate technology at a
reasonable price.

Develop project reports incorporating the latest proven technology for different sectors with buy back arrangements in order to
inspire confidence among the entrepreneurs. This approach would be particularly feasible in case of clusters.

Create awareness about the utility of technology upgradation and about the level when the entrepreneur should take a decision
about the same.
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Infrastructure Constraints
Improper roads and insufficient power supply have emerged as the leading infrastructure constraints.

Power shortage stood out as the most important constraint in the Southern region, the best performing SSI region. Power has not
emerged as a main concern for the Western region implying that the policy of privatization power seems to be working. So a lot is
needed to be done in the power sector reforms, mainly in the distribution of power.

The cluster approach has worked well and has been appreciated by entrepreneurs in all the regions. Schemes and programs
encouraging the use of clusters must be encouraged.

District Industries Centres have also received a positive feedback from the SSI sector. These need to be made stronger by
increasing their capacity to cater to the needs of the SSI sector.

The present research has been able to identify certain problems which occur at the ground level and are faced by the
SSIs in their day to day working and progress. The policy makers and institutions require to give due consideration to
these issues for optimising the potential of the SSI sector.

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