SSIs leave sickness behind, head for export market

New Delhi, Jan 31 | Updated: Feb 1 2006, 05:30am hrs
Heres reason to cheer for the small scale industry (SSI). A study by the Indian Institute of Foreign Trade (IIFT) and Indian Market Research Bureau (IMRB) has found that the sector is on the revival path, with the number of sick units now constituting less than 1% of the total number of units in the country.

While the number of units has increased by 70% in the past decade and a half, the major reasons for sickness have been declining. A robust GDP growth has ensured that there is no shortage of demand from SSI units, even as liberalisation and globalisation have opened up new opportunities and geographies for this sector.

Shortage of working capital, once a bugbear for small firms, no longer haunts them. This is true of sectors like auto, pharma, textiles etc. The general feedback we get from members is that there is no dearth of capital, says Vishnu Mathur, director of the Automotive Components Manufacturers Association.

In the study, which covered over 300 companies spanning both manufacturing and services, it was found that 73% of respondents are buoyant on industry growth as well as their business growth. This optimism is strongest among medium sized companies (70%).

It also translated into business action with 42% of the respondents expressing intent to enter new markets and 29% aiming to increase production capacity, even as 11% said they were planning to commence exports. But these future expansion plans are dissimilar across categories.

While companies with lower turnover are keen to enter into new marketboth domestic and export, SMEs with relatively higher turnover want to enter export market and increase production capacity.

But all is not hunky dory for the sector with only 18% of SMEs reporting a fixed client base. Over 59% rank competition as the greatest challenge they face, while 48% are concerned about improving operational efficiencies.

Over 52% of the respondents felt that they were ill-equipped to understand government policy, particularly in the areas of taxation, regulatory process etc. For tiny units, the primary area for concern was need for information in quality, technology and product manufacturing process.