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The share of manufacturing in GDP, which was 9 percent in —, rose to 18 percent in — Manufacturing is divided into two sectors: Traditional industries are home-based, use simple tools and equipment, depend on family labor, and are completely manual.
Modern SSIs may have a separate workplace, employ outside labor, and use machines and power.
Nearly all of the traditional industries and a very large number of modern SSIs fall into the unregistered category, so the GDP of these industries will be roughly equal to the GDP of the unregistered sector.
The share of modern SSIs has improved greatly both in production and employment between — and — Over the same period, the share of traditional industries declined: An SSI is currently defined as an enterprise with investment in plant and machinery up to 10 million rupees original value.
The subperiods —, —, —, and — witnessed deceleration of growth on all the three measures. In SSIs producing metals and electrical equipment had the largest share in the number of units, employment, and fixed assets and production, 43—49 percent.
Other manufacturing, food, textiles, and services followed, in that order. In —, other manufacturing was first in each of the above categories, with a share of 35—42 percent, followed in each category by metals and electricals, food, textiles, and services.
The share of food and textiles increased and that of metals and electricals declined, both substantially. Support and Incentives SSIs enjoy some advantages, but they also suffer from handicaps relative to large-scale industries in the marketplace.
On balance, they are in a weak position. However, they have an appeal in terms of socioeconomic objectives and have, therefore, a strong case for state support. In India, capital is scarce and labor abundant.
SSIs are thought to have lower capital-output and capital-labor ratios than large-scale industries, and to therefore better serve growth and employment objectives.
Additionally, entrepreneurship has been restricted in India to certain castes, communities, and language groups, and has been male-dominated. It is the policy of the Indian government to widen this base by promoting entrepreneurs from other groups.
It is on these considerations that various assistance programs and incentives have been devised for SSI development. Since independence inespecially since the late s, development has been wide-ranging, both in terms of programs and regions.
The programs include information and technology services, entrepreneurship development and training, modernization and technology support, industrial facilities, assistance in procurement of raw materials price preferences, finance, and nursing of "sick" industrial units.
To operate these programs and to monitor their progress, new agencies and institutions have been set up, and the existing ones strengthened at the national, regional, state, and lower levels.
There is also a special bank for SSIs. The SSIs have their own associations, and are also represented in the national- and state-level associations of large-scale industries.
An attempt was made to estimate the value of incentives on SSI production.
The study examined nine programs or incentive schemes for six industries in seven states. It was estimated that the value varied from 70 percent in cosmetics and toiletries to 33 percent in gases.
But there are also areas of concern in the policies and programs, arresting further progress. What are these concerns, and how do they influence the outcome? And what is needed by way of corrections? Overcrowding and failure The capital and skill required to start and operate an SSI are small, and product is undifferentiated.
These easy entry conditions have led to overcrowding of the SSI sector. Assistance programs make entry easier. Also, officials administering assistance may tend to be overgenerous, as more assistance improves their service record, adding to overcrowding. It is therefore not surprising that a substantial number of SSIs close their doors within a short span of operations.
The — census reported that of someunits that closed, one-half were closed within 5 years of the start of operations: Evidently, there is a case for a more focused and selective approach to assistance.
A presumption of the SSI policy is that SSIs have low capital-output and low capital-labor ratios relative to large-scale industries. Thus, they are in tune with factor proportions, and thus, they serve growth and employment objectives better.
Considerable evidence casts doubt on that presumption, and some studies have pointed to capital-output and capital-labor ratios being higher in SSIs than in large-scale industries.
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2. Small Scale Enterprise: Manufacturing enterprises in which investment in plant & machineries is more than Rs lakhs but does not exceed Rs crores and service sector industries in which investment in equipment is more than Rs lakhs but does not exceed Rs crores are termed as small-scale enterprises.