Small Scale Industries -Prospects in A free economy

The Small Scale Industries occupy a very important position in any economy, Traditionally, they produce certain specialised items for which they enjoy virtual monopoly of skill and expertise developed over the years. Many items produced in the small scale sector are also used as raw materials in the large scale industry and thus small scale industries contribute to large scale production in no small measure.
However, in a free economy, the small scale industries will have to face stiff and challenging competition from the large scale industrial sector. In a controlled economy, the small scale industries are protected from competition from the large scale sector by means of subsidies, grants, monetary incentives from the Government, reservation of certain items of production in the small scale etc. In a free economy, the small scale industrial sector is not insulated from competition from the large scale sector and for their survival and growth, they will have to face competition from the large scale sector out of their own ingenuity and resources.
For this purpose, they will have to take effective measures in the following areas :
QUALITY CONTROL
The products of large scale industries are of high quality and precision. In a free economy, the products of the small scale industry can compete with those of the large scale sector only if high quality is maintained. To meet the competition from the large scale sector, the small scale industries should get a share of the export market for which also high quality products are essential. It would thus be necessary for the small scale industrial units to introduce quality control measures. If necessary, they can enlist the assistance of reputed outside agencies in this regard. In a competitive environment where low cost quality output is necessary, choice of technology assumes great importance. In a free economy, the small scale units would have to select that technology from among the available alternative which would generate cost-efficient and high quality optimal output. In order to ensure this, small scale entrepreneurs should preferably have a technical background or, at least, an understanding of the technical processes involved in production.
MARKETING ARRANGEMENTS :
Many small scale units have perished for their inability to sell what they produced. This happened because of lack of proper marketing arrangements. In a free economy, inadequate marketing arrangements would only accelerate the downfall of small scale units as they would have to counter competition from the large scale sector which enjoys ready market for its products.
The small scale units would be required to conduct systematic and continuous market research and make endeavours for making tie-up arrangements with the prospective buyers in order that the products of the small scale may be readily sold.
ADVERTISEMENT
The products of the large sector are widely advertised in TV, Radio and Newspapers and are well known. The small scale industrial units suffer from resource inadequacy and consequently, most of them, cannot advertise their products on mass media. As a result, the products of the small scale units are largely unfamiliar and they find it very difficult to attain their sales goals. But in a free economy, where the small scale units will have to thrive by competing with the large scale industries must make adequate publicity of their products. For publicity, some funds are to be set aside and although initially the profits may b low, such publicity expenditure will serve the cause of future profitability.
RECOVERY OF RECEIVABLES
The funds of many small scale industrial units are blocked in receivables. As a result, recycling of funds is affected and production suffers. In a competitive environment, it must be ensured that receivable dues are realised with utmost expedition. The small scale units will have to make special efforts for collection of their dues for their growth. They may have to utilise the services of factoring companies for the purpose.
PROFESSIONALISM IN MANGEMENT
Many small scale industrial units have suffered for proprietary management. Barring very tiny and small units, management of small scale industries has became complex, Hence, for managerial efficiency, which is a sine qua non for success of small scale enterprises, the small scale industrial units are to be managed by the professional managers in order to compete with the large scale sector which is professionally managed.
INVENTORY CONTROL
Proper Inventory Control is an essential pre-requisite for production of an industrial unit. yet, a large number of small scale units is not aware of this requirement and as a result, result, they are to remain content with a sub-optimal level of production affecting their profitability adversely. It is, therefore, imperative that small scale units familiarise themselves with inventory control techniques and introduce them particularly in the context of competition in a free economy from the large scale sector where modern inventory control techniques are widely adopted.
Many small scale units have become sick for neglecting the above mentioned areas. In Bengal Circle, the State Bank of India has financed 2,54,306 SSI units as on 30.9.1997 out of which 31,929 units are sick, which accounts for 12.55% of total number of units assisted.
The other causes of sickness of small scale industries are mainly as under :

Diversion of funds.
Dissension among partners.
Shortage of power.
Technological obsolescence.
Overdependence on purchases by Government.

The small scale units must properly look after these areas to guard against sickness.
India is now largely a free-enterprise economy. In India, despite a liberalised economy, the small scale sector is performing well. In the year 1996-97, the production of Village and Small industries sector increased to about Rs. 4,81,466 crores recorded in 1995-96, of which the share of SSI was nearly 80 per cent. The overall growth of the sector was 9.1 per cent during 1996-97. Employment in the Village and Small Industries Sector increased to 574 lakh persons as at March 1997 as against 5534 lakh persons as at March 1996. The sector has generated an incremental employment of nearly 20 lakh persons thereby registering growth of 3.6 per cent in employment in 1996-97.
The policies of the Government are also directed towards the growth of small scale industries. The Government has since enhanced the investment limit in plant and machinery from Rs. 60 lakh (Rs. 75 lakh for ancillaries and exporting SSIs) to a common limit of Rs. 3 crores. This would encourage modernisation of existing small sale industries with adoption of appropriate new technologies in the sector and stimulate the growth of new small scale units. The Government is also keen to provide adequate institutional credit to the small scale sector by ensuring that working capital limits of small scale units are fixed by the financial institutions at a minimum of 20 per cent of their projected turnover, as prescribed by Nayak Committee. The Government has plans to educate the small scale entrepreneurs about economies of scale, arrange for upgradation of skills and technologies and strengthen export capabilities for promotion of small scale industries. In India, the small scale industries are, therefore, poised for growth and development provided they adopt strategies as mentioned above to overcome competition from the large scale sector. Thus, the prospects of small scale industries in a free economy are quite encouraging provided the Government plays a supportive role and adequate measures are taken to meet the challenges thrown up by the large scale sector.