31501002 small scale industries and thier impact on indian economy (1)

7/31/2019 31501002 Small Scale Industries and Thier Impact on Indian Economy (1)

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Title Page

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Acknowledgment

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Table of Content

Serial

No.

Topics PageNo.

1. Abstracts 4-5

2. Introduction (6-7)

2.1 Background and Rationale 6

2.2 Aims and Objectives 6-7

2.3 Research Questions 7

3. Literature Review (8-21)

3.1 Introduction 8

3.2 Role of SMEs in Economy 8-10

3.3 Role of SMEs in Indian Economy 10-12

3.4 SMEs and Employment Generation 12-16

3.5 SMEs and Export Growth 16-20

3.6 Summary 20-21

4. Research Methodology (22-26)

4.1 Aims and Objectives 22

4.2 Research Questions 22

4.3 Research Approach 22-23

4.4 Research Method 24-25

4.5 Data Collection 25-26

5. Findings and Analysis (27-47)

5.1 Introduction 27

5.2 Analysis of Findings 27-46

5.3 Summary 46-47

6. Conclusion (48-49)

6.1 Introduction 48

6.2 Summary of Findings 48-49

7. Bibliography 50

8. Appendix (51-54)

8.1 Questionnaires 51-54

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ABSTRACT

The sole objective of this research was to study the contribution and responsibilities of small scale

industries for the sustainable development of Indian economy, and to accentuate their potential.

Following objective has been achieved:

To perform a literature review to analyze the contribution and responsibility of small scale

industries towards the overall development of economy in the context of employment

generation and export promotion

To carryout a field studies to observe contribution and responsibly of small scale industries

towards the overall development of economy in the context of employment generation and

export promotion

The research has answered following research questions:

What is the contribution and responsibility of small scale industries towards the

development of Indian economy in the context of employment generation?


development of Indian economy in relation to export growth?

Whether the potential of Indian small scale industries have been underestimated or

exaggerated.

To answer these set of questions, data was collected using both secondary and primary sources.

Secondary data comprises of literature review and primary data was collected through first hand

questionnaire survey. Following are the major findings of the research.

There is no doubt in the highly creative role of small scale industries in economic restructuring and

development of India. Majorly their contribution can be said to be employment generation and

export growth which lead to economic development of India. Government followed a

discriminatory policy for small scale industries in India comparing large scale industries.

Government of India very effectively dealt with financial constrains and labor issue which lead to

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healthy growth of small scale industries. Globalization had a average favorable (not highly

favorable) for the augmentation of small scale industries. Unquestionably small scale industries

have lead to employment generation in India. It is said, small scale industries are the greatest

employment creators in India and as well greatest employment destructors in India as it lack

providing effective training to the employees. As a result it leads to a detrimental effect on our

knowledge based economic activity. To overcome this and to achieve a faster growth, small scale

industries in India should conform the policies of labor market reforms. Small scale industries role

in export growth of India is very commendable, this is due to active support of export promotion

agencies and government incentives.

Indisputably if India wishes to augment its export performance then the export policy should be

more oriented toward the small scale industry. Generally small scale industries role in Indian

economy is undermined.

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Chapter 1

INTRODUCTION

1.1 BACKGROUND AND RATIONALE

India witnessed a remarkable growth of small-size enterprises in India since independence. In

manufacturing sector Small and Medium Enterprises (SMEs) have a vital position because of their

creative role in employment generation and earnings and struggle against provincial inequalities.

SMEs policies have witnessed change due to New Economic Policy 1991, but even in the early

1980s SMEs policies were revised so to adapt with changing external environment. Change in

policies accentuated on significance of the globalization of commerce and mutual dependence in

many areas such as modernizing functions, teaching, promotion and commercial course of action.

To achieve equality in growth, SMEs have played an active role as they create massive

employment opportunities in the rural and semi-urban area and thus minimize inequalities in

different state and provinces. Small scale industries have served domestic as well as international

market at a realistic cost. Indian government to protect its newly developed indigenous industries

and to minimize import, Indian official embarked a route of trade and industry reforms of

correction in its economic policy but unremitting to shelter its small-size enterprises. This new

strategy focused on external accustom, contest and partnership with internal and external

organizations, the strategy outline confirms the latest noticeable variation in spotlight.In view of

these assumptions, we try to find out the contribution of small-size enterprises in growth of Indian

economy and to ascertain if their prospects are weakened or strengthened.

1.2 AIMS AND OBJECTIVES

The aim of this research is to study the contribution and responsibilities of small scale industriestowards the development of Indian economy and to understand whether their potential is

underestimated or exaggerated. The research have accomplished following objectives:

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export promotion

1.3 RESEARCH QUESTIONS






exaggerated.

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Chapter 2

LITERATURE REVIEW

2.1 INTRODUCTION

SMEs are becoming one of the important contributors in the national wealth of the country and its

importance is increasing day by day. SMEs include many small enterprises that are more labor

intensive and are more reluctant to face the external uncertainties. The SMEs working is such that

it attracts both foreign direct investments and exports of the country. It also makes significant

contribution towards increasing the employment of the countries as well.

2.2 ROLE OF SMES IN ECONOMY

Small size enterprises have significant contribution in the economic growth of the country. Big

organizations pose some challenges for the SMEs because of its small size. Its working is greatly

affected by the range of agents. To overcome this constitution of cooperatives can be made that

will encourage SMEs more effectively. Being organized is one way by which SMEs can be more

competitive and can also enhance their negotiation power. The growth of small enterprises cannot

be overlooked in both developed and developing countries as it is linked with employment andcreates opportunities for new jobs. Expansion of SMEs has now become very important as the

numbers of jobless people are increasing and there is a great need to provide employment to these

new entrants.

It is widely recognized that the SMEs, particularly those enterprises which have inherent ability for

rapid development, are an important contributory factor in creation of employment opportunities

and play a significant part in modernization and generation of competitive capabilities (Doi and

Cowling, 1998). Moreover, the growing small enterprises are mainly targeted by financiers,

advisors and management consultants.

The working of small enterprises is not that easy and they face some serious challenges by big

organizations. For an economy facing complex political and economic challenges it is important

for small enterprises to undertake some new and risky projects improving the economic condition

of the country. SMEs are somehow not able to meet these challenges and are finding it hard to

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survive upfront. They are considered to be a dynamic source of employment generation and as

soon as the barriers to their progress are removed they will become sizeable input for the economy.

SMEs made significant contribution in the growth of the economy. It creates job opportunities for

both rural and urban people. The dependency of people on SMEs is quite large and is increasing

rapidly. Many big organizations were once small enterprises which have developed themselves and

grown with time. Insecurity, novelty and progression are the three basic differences between small

and large scale enterprises. On the basis of the size of the SME it can be divided into three broad

categories- very small enterprises, small enterprises and medium enterprises. Its only when

economy starts getting industrialized the Small and medium enterprises evolve. SMEs also help

economy in division of earnings, tax proceeds, opportunities of jobs, well-organized deployment of

assets and steadiness of wages and income.

A small and medium enterprise absorbs more labor as compared to big enterprises and thus creates

more employment opportunities. SMEs also make some good contribution in changing the

agriculture based economy to industry based economy. This helps in accelerating the rate of

growth of the economy. Small and medium enterprises also assist in establishing links between

small and large businesses in the economy. This helps in attracting businesses from other

countries.

Big organizations are more economic stable and they can sort out their difficulties on their own on

the other hand SMEs do not have that much competency that can help them to continue their

operations smoothly. Although small enterprises do not face direct legal or governmental bias but

they are found to be the victims of unequal dealings that results in non competitive working

atmosphere.

In Pakistan the Small and medium enterprises faces various hurdles such as governmental

volatility, social insecurity, economic limitations, unreliable power supply, excise and duty

problems, workers unrest, dearth of management and absence of normal information flow system

between organizations, etc.

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SMEs are transforming endlessly these days due to the internationalization and liberalization and

to make them more powerful tool clear cut government policies and more enhanced regulatory

system should be adopted.

2.3 ROLE OF SMES IN INDIAN ECONOMY

The small and medium industries have good command in the overall Indian market. The presence

of creative entrepreneurs adds new dimensions in the small and medium industry. They are

competitive and offer goods at the minimum operating costs. One more distinctive feature of

SMEs in India is their ability to work in groups that helps them to evolve according to their field of

offerings.

The SME sector is one of the important parts of the Indian economy. It accounts for about 40% of

the manufacturing sectors value while around 95% of the industrial units. It absorbs

approximately 80% of the workforce of the manufacturing sector. The SME sector is the second

largest employment providing sector in India after agriculture. It also accounts for around 35% of

the total Indian exports. The Indian economy is growing at a good rate of 8% and is targeting a

growth rate of more than 9 % in the time to come. To do this SME sector would be the prime focus

for the economy as it smooth the progress of the small size units into medium and large

organizations.

The small enterprises have variety of products and huge offerings but due to the fact that the goods

produced in the small enterprises are not of superior quality and are made mainly for Indian rural

and semi urban population so its contribution to the total exports is not defensible. The goods in

the small enterprises are mainly from artisans, handicrafts, handlooms etc.

The biggest limitation for the small enterprises is the lack of favorable credit policy. The Reserve

Bank of India (RBI) and the Ministry of Finance has taken some steps to encourage the small

enterprises. They have given directives to the commercial banks to ease credit facility for small

scale enterprises. But this step is not working for small enterprises since banks are controlled by

RBI and the nature of instructions posed by RBI and the absence of an incentive system based on

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accomplishment of proactive bankers is not allowing the commercial banks to smoothen the credit

policy for small enterprises. According to a study there are strong structural underpinnings to the

inadequate flow: the organizational structure of banks, and processes within them, have taken them

far from task orientation, and have created a specific bias against small loan portfolios (Morris et

al., 2001: 11). The small scale enterprises are finding it difficult to take loans from the banks due

to the tight RBI directives. Although some commercial and other financial organizations are

helping SMEs by introducing some loan assurance schemes for them.

The policy in which some items were completely meant to be manufactured by the small

enterprises has now become obsolete and uncompetitive. Examining the results the effect of this

greatly contentious scheme, researchers have pointed out the problem of practical incompetence of

goods produced under reserved class in contrast to the non-reserved class of goods

(Balasubrahmanya, 1995; and Morris et al., 2001). Studies have also proved the irrationality and

irrelevance of putting some goods in the category that is meant to be completely manufactured by

small enterprises.

A number of the usual matters concerning the reserve list are: (i) repeated revision (addition and

deletions) of listed goods were not reasonable every tome and believed to have been manipulated

by political considerations; (ii) attempts to make policy wide-based were careless because

investigations have revealed that broad-basing, as surveys found that manufacturers of reserved

products did not have any inkling about the policy; (iii) the medium and large scale units were also

engaged in producing some reserved items as they were manufacturing them before their

inclusion in the list; and (iv) in most of the cases the quality of items which were reserved was

substandard (Das, 2006: 116-117).

SMEs in India are not competitive enough when it comes to international market due to several

reasons. These are- they are not easily adhered to the laws, lack of suitable knowledge regardingmeasures for global subcontracting, unfamiliarity with complex routine processes relating to

external trade on international front and making use of e-commerce for executing deals. For

increasing the awareness of MNEs towards increasing their investments in India particularly in the

fields like garments, automobiles, electronics, chemicals, etc a decent change in the norms

concerning FDI is made. This change is quite different from the earlier policies. Some

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administrative steps are also been taken so as to establish strong link between SMEs and foreign

business.

The objective of SMEs has changed over a period of time. It was known for creating job

opportunities earlier but now SME sector is developing in such a way so that it becomes more

competitive in the international market. The SME sector in India is moving towards a new

direction where it is positioning itself in the bigger and fresh market. Currently the proficiencies,

raw materials and huge market to target are the three main advantages for the SME sector. Seeing

the growth of the market the people who will be associated wit this sector will surely be benefited.

2.4 SMEs AND EMPLOYMENT GENERATION

The job generation capacity of the small scale enterprises were focused by two studies in 1970s.

The first study made use of cross sectional data for calculating the job share of small units and

found some appealing proof that shows that the relevance of small scale units is increasing because

of the reduction in the share of big enterprises in the total employment. On the other hand the

second study uses size and area of the enterprises for calculating the same. (Acs and Audretsch ,

2001).

These two studies show that the job generation capacity of small unit enterprises is increasing

rapidly. Economists at that time use various tools to prove this point. They counted the number of

people employed in the same category in two different periods. This line of analysis was based on

the presumption that movement between different classes was insignificant. On the other hand,

according to study done by Birch it was found that the increase in the total employment is due to

the conversion of small units into large enterprises. Birchs method of analysis was later

challenged by Davis, Haltiwanger and Schuh in 1996.

The increase in the employment in small units may be reflected in two ways- By the reduction inthe jobs opportunities in the big enterprises or increase in the job opportunities in the small

enterprises. Hence a careful analysis of generation of jobs at the unit levels should be done so as to

find the reason behind the increase in job opportunities. Despite of higher .job generation rate in

small enterprises its contribution to the overall scenario is small as compared to bigger

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organizations. Furthermore these studies also help in analyzing the factors that creates differences

in the generation of jobs between small and big enterprises.

While designing the policies for the SMEs the output and the business environment should be kept

in mind. The data based study is more effective in the establishment and development of the

SMEs. This study is based on the fundamental principle that the small enterprises are the only job

creating sector for the industrialized economy even in the times of recession.

We cannot apply our understanding of enterprises to the whole economy as there are differences in

the industrial and service sector enterprises. The number of job changes in the service sector is

quite higher as compared to the industrial sector. Other factors that cause differences between these

two sectors are manpower requirements, rates of entry and exit, periodic variations in demand,

differences in the capability of facing external competition.

In some other region it has been stated that elsewhere that jobs generation business replacement

(settled businesses) is a lot higher (lower) significant in businesses of service sector compared to

the manufacturing one (Armington and Acs, 1999; and Audretsch et al. , 1998). In order to

confirm whether the overall scenario is similarly applicable in all segments, we proceed to work

out the provision to job generation and part of small enterprises in total number of jobs in different

sectors such as manufacturing, construction and services.

According to Audretsch (1995), Audretsch and Thurik (2001) and Acs and Audretsch (2001) the

businesses these days are now more technology driven due to internationalization and technical

changes. The business involving information technology has become more beneficial and the main

attention in these businesses is on the person and not on the company. This is due to the fact that

the lack of regularity in the knowledge results in the varied opinions by the company and the

person. This kind of situation led the person to make a shift from the company where he is working

to his own business. This is the evolution stage of entrepreneurship where a person applies his

knowledge which he earns in one company into his own business. The small and big enterprises in

the service segment differ in the pattern of creation of jobs.

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According to the conclusion drawn from the study it was found that for the generation of jobs both

big and small size enterprises are important. The rapid increase in the employment of the small

sector in other industrialized economy makes it more important part of the economy and distinctive

approach should be adopted while making policies for this sector. As it is known that small

enterprises acquire relatively higher price towards organizational hindrance as compared to big

organizations so it is important for small units to follow governmental guidelines. The financial

procedures should also need to be eased in order to provide easy credit to small units so that they

can meet their business requirements effectively

According to the previous studies it can be seen that the job generation and the business size are

inversely related to each other. Likewise, Hohti (2000) discovers that in Finland total jobs

generation and jobs obliteration are in inverse proportion to the size of businesses. On the basis of

data Finnish manufacture business between 1980-1994, Hohti (2000) has established that the rates

of per year job flow, in terms of births and deaths, is alike to what Broesma and Gautier (1997, p.

216) come across for Dutch manufacturing businesses and by Klette and Mathiassen (1996)

identified for Norwegian manufacturing firms. Job generation and job destruction both have a high

proportion in the new enterprises. This way, the experience of Finland, equally as of Sweden and

the Netherlands, shows analogous commercial activity as discovered in North America. Similarly,

facts confirm that during some preceding years small businesses in Germany, as in other

industrialized economies, are rising as the main force of employment generation. For instance,

Haid and Weigand (1998) discover that family owned small and medium sized businesses creates

more jon opportunities as compared to the big businesses that are managed by administrators.

According to the study conducted by Weigand and Audretsch (1999) on the non science category it

was found that the number of employees in big companies who works in stock exchanges reduces

at a rate of minus 1 percent. Per annum. The SMEs also shows the reduction of 3.97% per annum

in the number of jobs. In case of non listed big companies this rate was 4.60% while for SMEs

(non listed) it was 1.26%. Hence it was observed that in Germany there is a reduction in the

number of jobs in the sectors like- big science-based businesses, big non-science based businesses,

and small non-science based businesses. Apart from this reduction in the number of jobs there is

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one sector which experienced the increase in the number of employees that sector is science based

small and medium sized businesses.

Thus from the above data it can be inferred that the entrepreneur business creates different job

opportunities in Europe and United States. On both shores of the Atlantic Ocean small and new

businesses play a pivotal role as motive force of jobs generation (European Commission, 2002). It

can also be said that the employment opportunities of any business varies according to its size and

its age.

The process of globalization is altering the pattern of vying for all activities of enterprises, making

it necessary to adopt a worldwide growth plan to affirmatively influence their long-standing

development and endurance (Karagozoglou and Lindell, 1998). The small enterprise segment

business sector has grown to be more significant as it has risen to become a leading power

influencing the development of financial systems of countries (Shridhar, 2006). In the process of

their change to a global milieu SMEs confront many intrinsic drawbacks (Chen and Huang, 2004).

SMEs often faces lack of resources and unavailability of capable workers due to their small size.

With worldwide economic integration and the fall in barricades of international trade, globalization

of SMEs is getting more and more consideration (Lu and Beamish, 2001; Knight, 2001). The

enterprises are becoming more competitive due to the rapid increase in the number of enterprise in

the global trade arena. More rivalry in the markets causes decrease in the capability of SMEs to

have power over the course of their own growth (Etemad et al., 2001). In an extreme cutthroat

situation, it becomes imperative to recognize and appreciate aspects that affect global functioning

(Kuivalainen et al., 2004). SMEs symbolize a segment of increasing significance and make a vital

contribution in the progress of developing countries particularly in the fields of jobs generation and

accelerating economic advance (Kula and Tatoglu, 2003). Initially any industry is tiny and have

limited resource base but it grows with time and always tries to transform itself from tiny to largeindustry. Competition, technical variations and legislative guidelines are some of the factors that

are important for both industrialist and policy creator.

Indian SMEs are also growing at a very good rate. The growing success of information technology

has helped Indian SMEs to grow at a faster rate in the modern era of globalization. India is

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providing very good opportunities for setting up new commercial enterprises. Administrative

measures are important to determine the extent to which India can go on to make improvements in

the information sector. Indian government is making constantly making some new agendas and

policies that need to be worked on properly so as to decide the effectiveness of the policies. It will

also help in analyzing as to how much efforts needs to be put on the Indian SMEs sector.

SME sector is one of the important sectors in the Indian economy and it has contributed a lot

towards the national wealth of the country since independence. Its contribution in the net domestic

product of the country is about 60% and that in the total employment is 92%. It is facing number of

difficulties after the economic reforms of 1992 but still manages well to provide good growth to

the country. And the SMEs are expected to perform better in the future because in big enterprises

job creation is very sluggish and flexibility of employment is shallow and waning (Papola, 2004).

Hence, SMEs can now enter in the market that was earlier meant for big enterprises only.

Furthermore schemes like elastic manufacture schemes and use of sub contracting for the division

of their manufacturing activities also helps SMEs a lot to make their operations more organized

and competent.

Measures like decrease in the degree of protection and abolition of the job safety section are part of

the labor market modifications and can make the job problem more serious in big enterprises

(Nagaraj, 2004). Further, liberalization of economy and abolishing licensing system has paved the

way of the casualisation and feminisation of labor (Mitra, 2001).

It is shown through various studies that the liberalized policies that were initiated during the

economic reforms have greatly influenced the manufacturing sector of the country. Due to the

policies of reforms manufacturing sector experienced a decline in the employment growth rate

during 1990s (Nagaraj, 2004). But, these reforms have both favorable and unfavorable effects on

the manufacturing enterprises. Several steps such as abolition of licensing system in industry andimport, elimination of limits on production capacity, tariff decline and permission for foreign

investment has helped industrial enterprises to enter into the sector which was earlier meant only

for informal sectors. Informal sector have some limitations and the economic reforms of 1990s

were also not proved much advantageous to this sector which results in the decline in its

efficiency. The use of obsolete technologies in the production process of the informal sector is one

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of the main reasons behind its declining efficiency. So in order to increase the productivity of the

informal sector more focus needs to be given to the technology and skills.

2.5 SMEs AND EXPORT GROWTH

According to Ruzzier and Lu and Beamish economic advancements and wide employment

opportunities are the main areas of interest for small and medium enterprises. Earlier most of the

theories were focused on the globalization. It is only after the publication of the article titled

Towards a theory of international business studies by McDougall and Oviatts (1994) that

importance of internationalization of SMEs or international entrepreneurship were recognized.

Later on Sharmas work in 2004 and Cerratos works in 2007 also provided deep knowledge on the

internationalization from various socio-economic environments

Johanson and Mattson in 1998 suggested the network approach to support internationalization

theory in which he explains the process of globalization through social exchange theory. Rutihinda

in 1996 and Ahokangas in 1998 introduced Resource-based Internationalization framework in

which he uses resource based view of the firm to put together strategic aspects with the

globalization processes. This research was proved to be quite important as companies are

constantly working towards the expansion in the international market because of increased

competition. Factors such as government incentives and support (like low interest loans) and

export development bodies helps SMEs to find new markets to penetrate.

Sharma and Erramilli suggests SMEs to attempt various entry routes to penetrate the foreign

market while Peng and York suggested two options for an exporting firm that are either to reach

the foreign customer directly or through a mediator. Fletcher, in 2004, defined it as the means

whereby small firms are involved in exporting, sourcing or distribution agreements with

intermediary companies who manage, on their behalf, the transaction, sale or service with overseas

companies. Peng and York emphasize further on the pivotal role of export mediators by linking

individuals and organizations that would otherwise not have been connected. Trabold views this

indirect conjugation holds platform for successful transactions and Balabanis feels they often help

their clients to identify customers, financing and distribution infrastructure providers. Mediators

plays vital role by bringing in their expertise of working in foreign countries thus reducing risks

related to international operations. Li suggests it would be a better idea to appoint export

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mediaries, having a much better knowledge of the consumer demography to look after low cost

exportation to the said country. We may cite Peng and Ilinitch who feel conducting market

research and negotiation costs would be so high that manufacturers would be more likely to

appoint the assignee before entering the unexplored market.

Peng and York further added that Export mediators would also helps in saving costs related to

customer mapping and costs incurred in monitoring the enforcements of contracts.

Notwithstanding the potential negative outcomes like loss of control over the assignee

(Blomstermo and Sharma, 2006) or additional costs transaction expenses and rent extractions

(Acs and Terjesen, 2006), the overall benefits of using the intermediary stand out. Mediators could

either be the agents or the distributors who are settled within the same country or the foreign

country (Peng and York, 2001) and could also be the local subsidiaries of existing Multinationals.

According to Dunning : Multinational Enterprises by the virtue of their operational nature

minimize costs through mass production. Kuemmerle puts forward the strategic linkages of SMEs

with larger foreign firms.

Dated SME export research, like Cavusgils and Nevins in 1981, focuses on the direct approach

by including product uniqueness as the focal point. In contrast to this, the study on the role of

external factors, such as government support for internationalization (Wilkinson, 2006),

environmental turbulence (Westhead, Wright and Ucbasaran, 2004), and the characteristics of

foreign markets and domestic markets develops and tests two theories of external environment

factors: resource dependency and institutional theory.

Sherer and Lee further works on these two theories and specified the common points of the same.

According to them both the theories were restricted to the nature of relationship between the firm

and its environmental factors, both the theories are regulated by external factors , and that

organizations are concerned with building legitimacy and acceptance vis--vis external

stakeholders, and hence conclude the two theories may prove to have greater predictive potentialwhen used together. Resource dependency theory further explains how lack of resources forces the

organization to look for new and unconventional resources. Institutional theory, Scott defines,

organizational practices that accepted and legitimized within the specific organization. Both the

theories described the impact of external factors on the organization. The difference between

resource theory and institutional theory is that where resource theory focuses on the presence of

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other factors that are directly proportional to resource accessibility institutional theory gives more

importance in imitating the behavioral norms of other factors in the organizational field.

Autio, Sapienza and Almeida later investigated upon the effect of resources on the export

activities without giving much emphasis on the availability of the resources. It can be concluded

from the resources theory that the export capacity of SMEs is very much affected by the market in

which it operates.

It is found that SMEs working in the home markets which are endeavoring through direct mode

are more successful as compared to other SMEs which are working in other environment. This is

because of favorable production costs, intellectual property rights protection, government

regulation and the presence of related and supporting industries in the home market.

A firm targeting export market is also influenced by export-entrepreneurial orientation. According

to Ibeh and Young a firm with high export-entrepreneurial shows greater innovation and higher

proactivity in initiating exportation. Analyzing the correlation between owners degree of

entrepreneurial orientation and the organizations competitive accomplishment Kazem and Van der

Heijden (2006) arrive at the juncture from where exporters are perceived to be better self-starters

than non-exporters. The study by Francis and Collins- Dodd (2000) indicates the fallacy of

conservative approach in the unstable environment and goes on to reflect that high proactive

approach proves effectual in enhanced export performance. Studies spanned over couple of years,

by Ibeh, 2004; Marino and Weaver, 2002 also concluded the strong relation of high SME

orientation, including that of the owner or manager works directly in proportion with export

performance.

According to Suarez-Ortega, the financial resources that restrict the timely accumulation of

internal resources need to be given some attention by the internal resources of the firm. Some other

barriers as suggested by Suarez-Ortega are Knowledge gap, or knowledge barriers. Furthermore

lack of adequate knowledge about the potential market and that of the availability of the

assistances in the market also leads to the deterioration in the export market.

SMEs in India are quite advantageous as it generates employment at low capital investment,

increases the availability of skilled and semi-skilled workforce and also helps in reducing the gap

between the rich and the poor. The studies done by Kazem and Ven der Heijden (2006) have

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shown the importance of SMEs in any nation as its development results in industrialization and

economic development. Despite of the fact that SME sector is very significant sector for any

economy and various studies has tried to make a linkage between the export competitiveness and

SME development in the western countries it has not received much focus by researchers in the

Indian sub-continent.

In India SMEs plays vital role in the development of the economy and provides several economic

benefits. These are: (i) Higher employee to capital investment ratio, thereby generating higher

employment with lesser investment (ii) Low time and money required for establishment (iii) Niche

focus on smaller markets; (iv) Development of a pool of skilled and semi-skilled workforce; (v)

Bridging the divide in income disparities by creating value for the lower and lower-middle class;

(vi) Facilitate innovation and entrepreneurialism at a large scale; and (vii) Ensures better utilization

of capital and low-skill manpower resources

The whole SME industry is based on three main hypotheses as per the study conducted by

UNIDO. These are: focus on overall economic upliftment of the country and not just economic

development; generation of employment opportunities so as to provide support to large scale

sectors; and support needed for the development of SMEs in order to overcome the disadvantages

that SMEs face because of its small size. SME sector in India is becoming competitive day by day

as country is liberalizing. As such SMEs dont get any financial support from the government due

to deregulation but in order to develop this sector and to make it competitive with the

multinationals government needs to develop some policy based institutional support for the SME

sector. The institutional based support that SMEs needs from the government is: advancement in

technologies and backing of their working capital needs. SMEs also require government support in

order to increase co-operation within the SMEs and to share resources that are common to SMEs

while working with other organizations. The UNIDO report also explores some of the hurdles in

the development of SME cluster. These are : due to the cultural differences there is little co-

operation between individual companies as well as larger organizations; higher spending on

developing suitable tie-ups and building partnerships; unavailability of the government support in

terms of financial incentives that is needed in order to implement common projects. Although

these challenges poses some problem for the SME industry but there are positive signs which

indicates that the SME cluster is stabilizing and is moving towards SME growth in the country.

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2.6 SUMMARY

SMEs sector is one of the fastest growing sectors of the country. It provides huge employment

opportunities and its presence is very important for the emerging countries like India. The

contribution of SME sector to the economy is increasing day by day. It is second largest

employment provider sector of the country after agriculture. The contribution of SMEs in the total

export is also significant which is one-third of the total exports of the country Apart from all these

contribution SME sector still faces some adverse treatment from the big organizations.

SME sector in India is becoming competitive day by day as country is liberalizing. As such SMEs

dont get any financial support from the government due to deregulation but in order to develop

this sector and to make it competitive with the multinationals government needs to develop some

policy based institutional support for the SME sector. SMEs today are in the transformation phase

and for the better development of the sector various administrative measures and policies need to

be studied carefully. Now is the time to plan some long term strategy for the development of the

SMEs so that it continues to contribute more to the economy in a more effective way.

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Chapter 3

RESEARCH METHODOLOGY

AIMS AND OBJECTIVES

The aim of this research is to study the contribution and responsibilities of small scale industries

towards the development of Indian economy and to understand whether their potential is

underestimated or exaggerated. The research have accomplished following objectives:






export promotion

1.3 RESEARCH QUESTIONS






exaggerated.

RESEARCH APPROACH

In this project report Inductive research is used, which focuses on generalizing specific form of

observation. It give a general view to the researchers. Researchers have to make an assumption if

they want to analyze any form of observation in the society and then conduct an experiment based

on survey so to check his assumptions to reach toward a certain conclusion. Other than this

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Deductive research is also used, by which deductive thought can change the ordinary theory into

new hypothesis. The researchers thought goes from general to the specific to observe facts and to

collect the data to come to a certain conclusion. His primary objective is to form a new thinking to

test the hypothesis. If the data helps this thinking then we can assume that his theory is correct.

The Inductive method with its generalized approach explains about the workings of thought in a

pure, unemotional and neutral way, rather than on pre implicit notions. It believes the fundamental

form of science starts with observing ideas which can be derived from the real happening of

senses. Thus it explains the relationship between sensory experiences and the object of those

experiences. Its conclusion helps in indentifying new areas of research which is beyond the limit of

actual experience.

Critics argue that this method is a descriptive and does not explain anything and fails in

establishing a clear generalized view. They further their point by stating that there is no such

logical inductive method which can make a universal statement from a singular set of opinion and

its a ardent task to make the infinite observations and prove them universal in all case.

To make research flawless all the major dominant factors which affect the method of raw data

collection are identified. Key themes are often left obscured and unorganized as the flaws in the

method of data collection and analysis forced by deductive data testing and making hypothesis onthat.

For data analysis in various type of quantitative approach inductive approach is used and is very

obvious. Some researchers have described their approach explicitly as inductive while many

others use the approach without giving an explicit label to it.

Thegeneral inductive approach suggests an appropriate way ofanalyzing the qualitative data for

research purposes. Analysis derived from it are in discrete from those perception derived from a

general views for data collection. Many researchers are engaged in finding a general inductive

approach for traditional and quantitative approach of data analysis.

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Silverman, D. (2002), Doing qualitative research: A practical handbook, London: Sage,Remenyi,

D, Williams, B, Money, A, Swartz, E (2000),Doing Research in Business and Management An

Introduction to Process and Method, London, Sage, Ketchen, D.J. and Bergh, D.D. (2006),

Research Methodology in Strategy and Management, JAI Press, Greenwich

RESEARCH METHOD

Qualitative research has its origin in social science and is more concerned with understanding the

approach of how people behave in regards to their knowledge, beliefs, fear and attitude etc. It trend

to find the estimated differences between various groups by calculating things. This method

provides valuable information which might have been missed by any other method and thus it

increases the area of quantitative research methods.

Focus groups

In this method the group size is kept precisely small, so that its members can freely express their

views on any topic. Before the actual implementation of thought into action a solution guide is

always prepared. This ensures that various aspects of the topic can be explained in a convenient

way. The discussion can be frequently tape-recorded for further use and analysis.

Direct observation

This method is very effective when a researcher want to understand the values and belief of the

population under study. Researcher becomes the part of the population so that they can find out the

details. The collected information in the form of data can be stored by an external observer or it

can be collected by a participant observer.

In-depth interviews

Basic purpose of interviews is to enquiry about predetermined set of questions which helps in

conducting a quantitative survey. The interviewees express their views and feeling over the

concern topic. In critical incident study interviewees are asked to give their views on real events

which are later generalized. Thus it helps in focusing more about the beliefs behavior and attitudes.

Quantitative Method:

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Its a research method which rely more on the case studies and subjective report and method like

interviews, observations and questionnaires are of less importance. Quantitative research on

other hand relies much more on interviews and case studies. It creates reliability among user. It

help researcher for the study of the population in an unbiased manner. The designing of

questionnaire helps in predetermining the hypotheses. The research part is supposed as an outer

part of actual research, aid to conduct research.

Qualitative research methodologies explore the interaction of culture situation so to come at the

desired result. On the other hand qualitative methods are used for social marketing which helps in

the depth study which includes interaction of culture situation of observations among focused

groups. Hypotheses are made on the basis of data collection and its analysis explains the trend of

market. Under this approach, the researches become more goal oriented in terms of datacollection, and results which may vary from researchers to researchers.

Quantitative methods are advantageous as it furnishes detailed information over the particular

subjects and their behavior. Only drawback of this method is the ample amount of labor intensity

and time-consuming. Thats why this method is not generally accepted by the mainstream public

health units. Researchers might find it more difficult and confusing for outside people in the

practice of social marketing.

Neuman, W. L. (2004), Social research methods: Qualitative and quantitative approaches. 6th ed,

Allyn & Bacon, Boston, MA.

Creswell, J . W. (2002). Research Design: Qualitative, Quantitative, and Mixed Methods

Approaches. Thousand Oaks, CA: Sage Publications

Patton, M. Q. (2002). Qualitative evaluation and research methods (3rd ed.). Sage Publications,

Inc., Thousand Oaks, CA.

Punch, K.F. (2003), Survey Research: The Basics, Sage Publications Ltd., London

DATA COLLECTION

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The method by which the results of our research are checked and the way it is applied in our

decision making it is very important. Researcher will have information about how the data

collection, planning, and its implementation will help in analyzing the potentiality of a method for

decision making. Material level problem can be collected through secondary method, but it is not

effective for collecting the information for the existing data.

Primary information is collected mainly by observation and is gathered mainly to help the users

whom you are addressing. There is multiple way of data collection but this method is more flexible

way to get data from its desired group of audiences.

Observation is the process through which methods and information for reference materials are

examined, or the amount of time it would take to complete a certain phase of work.

Surveys Interviewing is one of the method by which a survey is conducted. Written questionnaires

are another method which is commonly used for gathering information. There are various other

methods by which we can gather information and response from audience.

Depending upon the population size and information type we can choose different sampling

method. If the target audience is too large then by choosing a small number of people to represent

mass population is the most suitable method for it or you can also try to remove the biasness

approach by using: (i) Random sampling; (ii) Stratified sampling; and (iii) Quota sampling .

Sekaran, U. (2003), Research Methods for Business: A Skill Building Approach, John and Wiley

Inc., USA.

Robson, C. (2000)Real World Research. Blackwell Publishers, Oxford

Easterby-Smith, M. et al. (2002), Management Research An Introduction, 2nd edition, London:

Sage

Perakyla, A. (1997) Reliability and Validity in Research Based on Transcripts. In: D. Silverman,

ed., Qualitative Research: Theory, Method and Practice. London: Sage, 201-220.

Bryman, A and Bell, E (2003)Business Research Methods Oxford University Press

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Chapter 4

FINDINGS AND ANALYSIS

4.1 INTRODUCTION

This research was purposed to answer the following research questions: What is the contribution

and responsibility of small scale industries towards the development of Indian economy in the

context of employment generation; What is the contribution and responsibility of small scale

industries towards the development of Indian economy in relation to export growth; Whether the

potential of Indian small scale industries have been underestimated or exaggerated. Both primary

and secondary data were collected in order to answer these research questions. Secondary data

were in the form of literature review and primary data were in the form of data collected through

questionnaire survey. This chapter analyses the collected both secondary and primary data.

4.2 ANALYSIS OF FINDINGS

Small scale industries & economic restructuring and development

This research literature emphasized on small scale industries and it is consider very vital from the

employment generating, lessening indigence and making contribution to economic growth point of

view. In the developing economies small-size enterprises are generally considered as the dynamicsource of employment generation, which is a engine of growth. (Lunsche and Barron, 1998). In an

economy which faces complex political and economic challenges their willingness to undertake

new or risky projects is regarded as very vital. Both willingness to undertake new or risky projects

and small-size enterprises are crucial for taking economy to a higher level (Glass and Drnovsek,

2001). In such a situation small scale industries are said to be very vital and they are very crucial

for economic restructuring. Empirical data was collected in this research to establish as how the

role is played by small scale industries in economic restructuring and development of India, which

conform our hypothesis. The empirical data collected reveals that small scale industries have

played very commendable role in economic restructuring and development of India. (see table and

figure 4.1).

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Table 4.1: Small scale industries & economic restructuring and development

From the table it is evident that for the larger part of the total respondents (57% of the total 30),

small scale industries have played highly creditable role in economic restructuring and

development of India; for a considerable part of the total respondents (33%), small scale industries

have played reasonable role in economic restructuring and development of India; for the

remaining small part of the respondents (10%) small scale industries have played negligible role

in economic restructuring and development of India. Thus it can be concluded that these data have

played highly creditable role in economic restructuring and development of India.

Contribution of small scale industries in economic development

The research literature shows a positive contribution in the growth of an economy is made by small

scale industries. Their contributions can be expressed in diverse way: their is ample opportunities

for the new entrant in labor market both in urban and rural areas with the upcoming of small and

medium enterprises; they have an active role in the modernization for the whole economy.

Dependency ratio of people over small scale industries is very large. Todays big enterprises were

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earlier small and medium enterprises which have grown with time. There are three main

differences between Small scale industries and large scale enterprises. Small and medium

enterprises can be segregated on the basis of their size, such as very small enterprises, small

enterprises and medium enterprises. Inception of small and medium enterprises originates with the

industrialization of an economy (Fida, 2008). Small scale industries also influences the economy in

many other considerable ways like division of earnings, tax proceeds, opportunities of jobs, well-

organized deployment of assets and steadiness of wages and income. Empirical data was collected

to establish a relation between small scale industry contribution and their economic development

of India. Employment generation and export growth are the most creditable contribution of small

scale industries in economic development of India as reveled by the empirical data. Research

participants conclude that employment generation and export growth are the most creditable

contributions of small scale industries in economic development of India (see table and figure

4.2).

Table 4.2: Contribution of small scale industries in economic development

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The data account in this table illustrates that for the greater part of the total respondents (70% of

the total 30), employment generation (40%) and export growth (30%) are the most

commendable contributions of small scale industries in economic development of India; and for

the remaining small part respondents (30%), entrepreneurial and other innovation (17%) and

desirable sustainability (13%) are the most commendable contributions of small scale industries

in economic development of India. To conclude these data reveled that employment generation

and export growth are the most commendable contribution of small scale industries in economic

development of India.

Government policies are discriminatory for small scale industries

It is evident from the research literature that small scale industries need due consideration as it act

as distinguishing foundation of the economy. As compared with large enterprises small scale

industries face unfavorable treatment. This is due to the fact that big organizations are much

familiar with economic environment thus they can deal with and crack their difficulties. On

contrary, small scale do not have competence because of their small extent and the consequential

oddities which become hurdle in their smooth operation. Though there is no straight legal or

governmental bias for small and medium enterprises but they are victim of disparate dealings

which leads to deformed and non-competitive working atmosphere. In the light of these

propositions empirical data was collected in this research to establish as whether government

policies are discriminatory for small scale industries in India comparing large scale industries. It

reveals that government policies are discriminatory for small scale industries as compared to large

scale industries in India. As the greater part of the total research participants conclude thatgovernment policies are discriminating for small scale industries in India comparing large scale

industries (see table and figure 4.3).

Table 4.3: Government policies are discriminatoryfor small scale industries

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From the data enlisted in the table it can be easily comprehended that for the greater part of the

total respondents (73% of the total 30), they find yes that government policies are discriminating

for small scale industries in India comparing large scale industries; and for the remaining part

respondents (27%), they find no that government policies are not discriminatory for small scale

industries in India comparing large scale industries. overall, these data conclude that government

policies are discriminating for small scale industries in India comparing large scale industries.

Growth of small scale industries and problems

From the research literature it can be easily understood that small and medium enterprises are more

labor-intensive which require more workers compared to big enterprises. As a result, create more

employment opportunities and play a vital role in poverty alleviation by providing earnings. Small

scale industries brought a transition from agriculture base economy to industry-based economy by

providing basic favorable conditions for systematic operations. This leads to channelizing of

resources and accelerates the rate of growth. Small and medium enterprises create a link between

small and large businesses in the economy as it assist in attracting fruitful assets. This in turn

results in inflow of investment from other countries. However, there are as well some latent and

obvious problems which becomes a hurdle in the path of growth of small scale industries and these

are political instability, law and order situation, financial constraints, energy crisis, taxation

problems, labor issues, lack of coordination and regular information exchange mechanism among

institutions, etc (UNIDO, 2006). Empirical data collected in this research shows growth of small

scale industries in India and problems which are requires to be most effectively dealt with by the

government in the country. Growth of small scale industries in India, financial constraints and

labor issues are some of the problems which are require to be most effectively dealt with by the

government in the country. As in accordance with the larger part of the total research participants,

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for the growth of small scale industries in India financial constraints and labor issues as problems

require to be most effective dealt with by the government in the country (see table and figure 4.4).

Table 4.4: Growth of small scale industries and problems

From the given data which is described in the table for the larger part of the total respondents (63%

of the total 30), for the growth of small scale industries in India, financial constraints (33%) and

labor issues(30%) as problems require to be most effective dealt with by the government in the

country; and for the remaining part respondents (37%), for the growth of small scale industries inIndia, taxation problems (17%), law and order situation (13%) and energy crisis (7%) require

to be most effectively dealt with by the government in the country. From a holistic point of view,

the growth of small scale industries in India, financial constraints and labor issues as problems

require to be most effectively dealt with by the government in the country.

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Globalised business environment and small scale industries

As from the research literature it can be inferred that their has been a transformation in small scale

industries as a reaction to the various necessities of internationalization. In the emerging countries

the prospects of neo-localism having been greatly highlighted. Small scale industries have been arich source of employment but now it seems less important objective compared to new policies of

attracting foreign inclination, achievement of comparative productive capacities and becoming

distinguished performer in the world (Das, 2007). It is indispensable to concentrate over this issue,

which act as a limitation for small scale industries for foreign inclination and a worldwide

viewpoint for the sector. Empirical data was collected keeping in mind these propositions to

establish ashow favorable has been globalised business environment of India for the growth of

small scale industries. The empirical data collected reveals that overall globalised business

environment of India has been average favorable (not highly favorable) for the growth of small

scale industries. As in accordance with the larger part of the total research participants, globalised

business environment of India has been reasonably favorable for the growth of small scale

industries (see table and figure 4.5).

Table 4.5: Globalised business environment and small scale industries

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The data detail in this table illustrates that for the larger part of the total respondents (53% of the

total 30), globalised business environment of India has been reasonably favorable for the growth

of small scale industries; and for the remaining part respondents (47), globalised business

environment of India has been either highly favorable (30%) or not favorable (17%) for the

growth of small scale industries. So, to conclude it can be said that overall globalised business

environment of India has been average favorable (not highly favorable) for the growth of small

scale industries.

Small scale industries and employment generation

In agreement with the research literature there are two studies that determine job generationcapacity of small enterprises. In the first one cross-sectional data are used to calculate job share of

small units, while in the second one classification of the enterprises is done on the basis of size and

area. From the first study it is concluded that small units were increasing their significance because

share of big enterprise in total employment was decreasing. Second study categorized enterprises

according to their volume and location in the base year with the help of a database (Acs and

Audretsch, 2001). Taking these propositions empirical data was collected for this research to

conclude whether small scale industries have played a substantial role in employment generation in

India.Findings from theempirical data collected reveals that unquestionably small scale industries

have played role in employment generation in India. As per the greater part of the total research

participants, they find that small scale industries have played a substantial role in employment

generation in India (see table and figure 4.6).

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Table 4.6: Small scale industries and employment generation

The data detail in this table shows that for the greater part of the total respondents (60% of the total

30), they find yes that small scale industries have played a substantial role in employment

generation in India; and for the remaining part respondents (40%), they find no that small scale

industries have not played a substantial role in employment generation in India. To conclude about

the finding it can be said that indisputably small scale industries have played role in employment

generation in India.

New employment in small scale industries

For the research literature, the studies revealed the real picture as published labor data statistics had

been used by the economists at that time and most of the time their study revealed that the largest

size category were producing most of the new jobs. In this method analysis was done by counting

the number of persons employed in the same category with in a period of two year. Presumption

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for this analysis was based on the movement between different classes was insignificant. Birchs

studies on the other hand made it clear that the development of small units before becoming large

enterprises was a major reason in influencing increase in total employment. Critics of Birchs

method challenged its analysis (Davis, Haltiwanger and Schuh, 1996), an acknowledged fact is that

in small enterprises not only gross job generation but job destruction is also high, which is more

significant. Empirical data were collected keeping these propositions in mind. The main purpose of

empirical data is to establish a relation as whether increasing share of small scale industries in

Indias total employment is due to a net employment decline of large scale industries than new

employment in small scale industries.From the finding it can be concluded that there is an increase

in share of small scale industries in Indias total employment, due to a next employment decline of

large sale industries than new employment in small scale industries. As per the greater part of the

total research participants, they either strongly agree or just agree to the fact that increasing

share of small scale industries in Indias total employment is due to a net employment decline of

large scale industries than new employment in small scale industries (see table and figure 4.7).

Table 4.7: New employment in small scale industries

The data enlisted in this table describes that for the larger part of the total respondents (67% of the

total 30), they either strongly agree (40%) or agree (27%) to the fact that increasing share of

small scale industries in Indias total employment is due to a net employment decline of large scale

industries than new employment in small scale industries; and for the remaining part respondents

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(33%), they either disagree (20%) or strongly disagree (13%) to the fact. On a whole, these

data conclude that unquestionably there is an increase in share of small scale industries in Indias

total employment which is due to a next employment decline of large sale industries than new

employment in small scale industries.

Small scale industries as employment creators

As per the research literature, Hohti in the year 2000 discovered that there is an inverse proportion

to the size of businesses between jobs generation and jobs obliteration in Finland. Hohti (2000) on

the basis of Finnish manufacture business data between 1980-1994 has established that the rates of

per year job flow, in terms of births and deaths which is alike to what Broesma and Gautier (1997,

p. 215-216) come across for Dutch manufacturing businesses and by Klette and Mathiassen (1996)

identified for Norwegian manufacturing firms. It is commonly agreed that new enterprises, havethe highest rates for both job generation and job obliteration. Thus experience shown in North

America is analogous to Finland, Sweden and the Netherlands. So to prove whether small scale

industries are greatest employment creators in India and as well greatest employment destructors in

India empirical data were collected. It reveals that this is undoubtedly a fact that small scale

industries are the greatest employment creators in India and as well greatest employment

destructors in India. As per the larger part of the total research participants they find that small

scale industries are greatest employment creators in India and as well greatest employment

destructors in India (see table and figure 4.8).

Table 4.8: Small scale industries as employment creators

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The data enlisted in this table describes that for the larger part of the total respondents (63% of

total 30), they find yes that small scale industries are greatest employment creators in India and

as well greatest employment destructors in India; and for the remaining part respondents (37%),

they find no that small scale industries are not greatest employment creators in India and as well

greatest employment destructors in India. So on the whole; it can be comprehended from the data

that small scale industries are greatest employment creators in India and as well greatest

employment destructors in India.

Small scale industries lacking and training employees

As per the research literature, the advocators of internationalization and technical changes,

Audretsch (1995), Audretsch and Thurik (2001) and Acs and Audretsch (2001) have concluded

that businesses based on information technology relatively more advantageous. In those businesses

person who carries information is of more important than the company. The argument is that lack

of symmetry in knowledge and ambiguity about the prospective value of that knowledge lead to

diverse assessment by company and person. This in turn leads the person to quit from the current

company to start a company of his own business taking commercial advantage his knowledge. This

is where; entrepreneurship is getting a novel meaning as it becomes an important instrument by

which knowledge earned in one institution (for example an university or business enterprise) is

implemented for profit in a new company. The distinction amid small and big enterprises in service

segment is the creation of job by little net entry. It is observed from the data that in the big job

generation very tiny enterprises firms influences the size sharing of enterprises in both sectors.

Empirical data was collected to establish the proposition as whether small scale industries in India

lack in providing training to the employees in order to efficiently take part in knowledge based

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economic activity. It can be comprehended from the empirical data that in India small scale

industries certainly lack in providing training to the employees in order to make them efficient to

take part in knowledge based economic activity. For the larger part of the total research

participants they find that for the greater part of the total research participants either strongly

agree or just agree that small scale industries in India lack in providing training to the employees in

order to efficiently take part in knowledge-based economic activity (see table and figure 4.9).

Table 4.9: Small scale industries lacking and training employees

The data enlisted in this table shows that for the greater part of the total respondents (70% of the

total 30), they either strongly agree (37%) or agree (33%) that small scale industries in India

lack in providing training to the employees in order to efficiently take part in knowledge-based

economic activity, and for the remaining part respondents, they either disagree (20%) or

strongly disagree (10%) to this fact. To conclude it can be certainly said that small scale

industries in India lack in providing training to the employees in order to efficiently take part in

knowledge based economic activity.

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Small scale industries in India and the policies of labor market reforms

For the research literature, the new economic policy of liberalizing has made small scale industries

very vulnerable. However, it cannot be understood that for Small scale industries the path ahead is

totally lifeless. On contrary they are expected to perform better because big enterprises are very

sluggish in job creation (Papola, 2004). It is implicit that small scale industries are more cost

advantageous and can compete to achieve high rate of development. Thus given a liberalized

milieu small scale industries can penetrate huge markets which is untapped by them and were

specifically reserved for big enterprises. Small scale industries are flexible in their manufacturing

schemes and division of manufacturing activities by sub-contracting can help them to achieve an

increase growth rates. Problems for big enterprises can become serious if there is degree of

protection and abolition of the job safety section are part of the labor market modifications

(Nagaraj, 2004). Auxiliary to it, liberalization and abolishing licensing in the economy has lined

the way of the casualisation and feminization of labor (Mitra, 2001). The era of liberalization has

opened new opportunities and broadens the awareness about the informal segment. To find out

whethersmall scale industries in India wish to achieve a faster growth and add more contribution

in the economy, they should comply with the policies of labor market reforms, empirical data was

collected for the same. It shows that small scale industries in India wish to achieve a faster growth

and add more contribution in the economy, they should comply with the policies of labor market

reforms. As per the greater part of the total research participants they find that if small scale

industries in India wish to achieve a faster growth and add more contribution in the economy they

should comply with the policies of labor market reforms (see table and figure 4.10).

Table 4.10: Small scale industries in India and the policies of labor market reforms

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The data enlisted in this table illustrates that for the greater part of the total respondents (77% of

the total 30), they find yes that if small scale industries in India wish to achieve a faster growth

and add more contribution in the economy, they should comply with the policies of labor market

reforms; and for the remaining part respondents, they find no that if small scale industries in

India whish to achieve a faster growth and add more contribution in the economy, they do not need

to comply with the policies of labor market reforms. So to conclude it can be said that small scale

industries in India wish to achieve a faster growth and add more contribution in the economy, they

should comply with the policies of labor market reforms.

Small scale industries and export growth

For the research literature, according to Ruzzier et al (2006) small and medium size enterprises

have played a vital role in both economic advancement and augmenting the employment

opportunity. In the field of internationalization globalization has always been the focus area of

most scholars, particularly focusing on big enterprises, until the publication of McDougall and

Oviatts (1994) recognized the significance of the internationalization of small scale industries or

international entrepreneurship. However, contemporary works (Sharma, 2004, Cerrato, 2007)

shows the impact of location on small scale industries internationalization seeking more in-depth

research on the study of internationalization from various socio-economic environments. Empirical

data was collected in to study whether small scale industries have played a significant role in

export growth of India or not.Findings from the empirical data reveal that small scale industries

have played a significant role in export growth of India. As per the larger part of the total research

participants, they find that small scale industries have played a significant role in export growth of

India (see table and figure 4.11).

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Table 4.11: Small scale industries and export growth

The data enlisted in this table shows that the larger part of the total respondents (67% of the total

30), they find yes that small scale industries have played a significant role in export growth of

India, and for the remaining part respondents (33%), they find no that small scale industries have

not played a significant role in export growth of India. On the whole these data conclude that

small scale industries have played a significant role in export growth of India.

Export promotion agencies and government incentives for promoting small scale industries

To integrate strategic aspects with globalization process, the Resource-based Internationalization

structure (Rutihinda, 1996 and Ahokangas, 1998) which is based upon the resource-based view of

the firm is used. As the domestic market reaches the saturation level this would eventually lead

companies to seek expansion over international arena; which in turn will make competition tougher

every day and only solution for this is innovation and efficiency for companies to survive the rat-

race. Government patronage in term of favorable situations of the local market namely government

incentives and support (like low interest loans) and existing supporting institutional framework e.g.

export development bodies, which act as a big inspiration to the Small scale industries to explore

alternative markets. Empirical data collected in this research shows how supportive have been

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export promotion agencies and government incentives for promoting small scale industries led

export growth of India.Findings from theempirical data reveals that generally export promotion

agencies and government incentives are average supportive for promoting small scale industries

led export growth in India. As per the larger part of the total research participants , export

promotion agencies and government incentives are reasonably supportive , they find that small

scale industries have played a significant role in export growth of India (see table and figure

4.12).

Table 4.12: Export promotion agencies and government incentives for promoting small scale

industries

The data detail shows that for the larger part of the total respondents (53% out of the total 30),

export promotion agencies and government incentives are reasonably supportive for promoting

small scale industries led export growth of India, and for the remaining part respondents (47%),

export promotion agencies and government incentives are either highly supportive (17%) or not

supportive (30%) for promoting small scale industries led export growth in India. To conclude it

can be said that generally export promotion agencies and government incentives are average

supportive for promoting small scale industries led export growth in India.

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Export challenge of small scale industries

According to Sharma and Erramilli (2004) to penetrate in the foreign market small scale industries

may attempt various entry routes, depending upon the benefits and costs associated by various

alternatives. Peng and York (2001) suggested two options for exporting firms: Reach the foreign

customer directly or going through some mediator. For an Indirect path to trans-nationalization

direct approach was well-discussed and much addressed. Fletcher (2004), elaborated it as the

means whereby exporting, sourcing or distribution agreements are done by small scale industry

with intermediary companies who manage, on their behalf, the transaction, sale or service with

overseas companies. The pivotal role of export mediators was explained by Peng and York (2001)

which emphasize on linking individuals and organizations that would otherwise not have been

connected. Trabold(2002) views this indirect conjugation holds platform for successful

transactions and Balabanis feels they often help their clients to identify customers, financing and

distribution infrastructure providers. The mediators bring in the expertise of operating in another

country and reduce the risks related to international operations. Li (2004) favored appointment of

export intermediaries who is well acquainted with consumer demography so to look after low cost

exportation. Empirical data was collected so to establish a relation between export challenge of

small scale industries in India to be effectively dealt for enhancing their role and contribution in

export. From the data collected it can be concluded that risk operation and knowledge gap as

export challenges of small scale industries in India need to be effectively dealt for enhancing their

role and contribution in export. As per the greater part of the research participants risk of

operation and knowledge gap as export challenges of small scale

31501002 small scale industries and thier impact on indian economy (1)

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