SSI Unit

"one where investment in plant and machinery where held on ownership terms or on lease or by hire purchase does not exceed Rs. 10 million (1USD=Rs.49) ". There also exists a definition for micro-enterprises, which are popularly known as “Tiny Units”.

Tiny Unit

A tiny unit is one where investment in plant & machinery does not exceed Rs. 2.5 million".
From about 80,000 units in the late 1940s to over 3.3 million units today, the sector has been proving its mettle time and again. The last decade of 20th century has been this sector maintaining its steady growth. The SSI sector in India can alone contributes 7% to India’s GDP. The performance of the Indian Small Scale Sector in terms of critical economic parameters such as number of units, production, employment.

SMEs have certain common characteristics, some of which are hilighted below:

Born out of individual initiatives & skills

SME startups tend to evolve along a single entrepreneur or a small group of entrepreneurs; in many cases; leveraging on a skill set. There are other SMEs being set up purely as a means of earning livelihood. These includes many trading and retail establishments while most countries continue SMEs to manufacturing services, others adopt a broader definition and include retailing as well.

Greater operational flexibility

The direct involvement of owner(s), coupled with flat hierarchical structures and less number of people ensure that there is greater operational flexibility. Decision making such as changes in price mix or product mix in response to market conditions is faster.

Low cost of production

SMEs have lower overheads. This translates to lower cost of production, at least upto limited volumes.

High propensity to adopt technology

Traditionally SMEs have shown a propensity of being able to adopt and internalise the technology being used by them.

High capacity to innovate export

SMEs skill in innovation, improvisation and reverse engineering are legendary. By being able to meet niche requirements, they are also able to capture export markets where volumes are not huge.

High employment orientation

SMEs are usually the prime drives of jobs, in some cases creating upto 80%. Jobs SMEs tend to be labour intensive per se and are able to generate more jobs for every unit of investment, compared to their bigger counterparts.

Utilisation of locally available human & material resources

SMEs provide jobs locally and hence utilise manpower available locally. Since it is available for them to transport materials over long distances, they often improvise with materials which are available locally.

Reduction of regional imbalances

Unlike large industries where divisibility of operations is more difficult, SMEs enjoy the flexibility of location. Thus, any country, SMEs can be found spread virtually right across, even through some specific location s emerge as ‘clusters’ for units of a similar kind. Nevertheless, the spread of SMEs is a fact which enhances their attraction from a national or regional policy.

Performance of Small Scale Sector

Year	No. of units (million nos.)	Production (Billion Rs.)(at current prices)	Employment (Million nos.)	Exports (Billion Rs.)(at current prices)
1993-94	2.38	2416.48	13.93	253.07
1994-95	2.57	2988.86	14.65	290.68
1995-96	2.65	3626.56	15.26	364.70
1996-97	2.80	4118.58	16.00	392.70
1997-98	2.94	4626.41	16.72	444.42
1998-99	3.08	5206.50	17.15	489.79
1999-00	3.21	5728.87	17.85	542.00
2000-01	3.37	6454.96	18.56	599.78

In some export segments, the contribution of SMEs is overwhelming the table below indicates there segments and the corresponding SME contribution. (Table 3)

The Indian Small Sector has been consistency

% of SSI in total exports

Product	% of SSI in total exports
Sports goods	100
Readymade garments	90
Woolen garments, knitwear	35
Processed foods	65
Marine products	29
Leather products	80
Plastic products	45
Cosmetic, basic chemicals &pharmaceutical products	55
Engineering goods	30

Outperforming the organized sector on crucial parameters such as growth in production and growth in employment. This is indicated by, table (4)
As the knowledge economy gains ascendance over the traditional smoke-stack economy, for better opportunities are emerging for the Indian small units in the service sector. In India,such units
are generally:

Increase in jobs per annum Table (3)

Period	GDP Growth per annum	Growth per annum		Increase in Jobs per annum
Period	GDP Growth per annum	Large industry	SSI Sector	Organised sector including Government	SSI Sector
1980-1990	5.7%	7.0%	10%	1.59%	6.7%
1991-1997	5.7%	6.2%	7.5%	0.86%	3.5%

Referred to as Small Scale Service and Business Establishment (SSSBES). Presently SSEBES upto Rs. 1 million investment are considered as small units in India. The sector is showing rapid growth and is able to build upon its basic skills helping it to emerge as a leader respect of software, servicing and communication. Various activities recognised as SSEBE include cable TV services, rope-ways, marketing and industrial consultency, auto repair, servicing of equipment, long distance, telecommunication kiosks, photographic labs etc. Increasingly, the service sector is helping to utilise the skills of a vast number of educated youth of the country. Developing SMEs in India.

GOVERNMENT'S DEVELOPMENT STRATEGY

Government’s development strategy for Small Business Enterprises in India has evolved around the following;

Protective discrimination e.g. Reservation, minority sector lending, etc.
Integration between Large and Small e.g. subcontracity ancillarisation and vendor development.
Institutional support through a network of testing centres, tool rooms, enterpreneurship development institutes etc

while the first two decades after Independence focussed on institutional support, the third decade saw the use of reservation of products for exclusive manufacturers in small sector as the preferred policy intervention. In the fourth decade, the endeavor was to promote linkages of SMEs with large units, specially the public sector units (PSUS).

In 1991, Industrial reform was initiated in a big way. Liberalisation of the domestic economy made it easy for fresh capacity came up in the form of large units across Industry segments. Despite substantial increase in the number of players in each industry segment, the Small Scale sector has managed to hold on its own and withstand the onslaught of competition. In certain cases, they have proved themselves to be extremely adopt at beating large industrial houses which were enable to respond promptly to changing market needs or innovate in time. With the removal of QRs from all items imported into India w.e.f.1st April, 2001, the Small Sector is facing much greater competition. Government of India responded to this situation. If announced to comprehensive policies package in August 2000 to strengthen the Small Scale Sector and enhance its competitiveness both domestically and globally. The policy package provides for easier access to credit, availability of collateral free composite loans upto Rs. 2.5 million capital subsidy for technology upgradation and improved infrastructure. This package along with other initiatives aim to address the concerns of the sector which are highlighted below.

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