Prospects
of the Small Scale Industries 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 because 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 contributed 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 sector 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 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 good 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 <%-2>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 alternatives 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 sector may be readily sold.
Advertisement
The products of the large scale
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
sector, the small scale industries must make adequate publicity of their
products. For publicity, some funds are to be set aside and although initially
the profits may be 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 Management
Many small scale industrial units
have suffered for proprietory 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 optimum production of an industrial unit. Yet, a large
number of small scale units is not aware of this requirement and as a result,
they are to remain content with a sub-optimal level of production affecting
their profitability adversely. It is, therefore, imperative that the 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.
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.
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 scale
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 tecnologies 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. |