In the first quarter of current fiscal, the Small Scale Industry (SSI) sector of the country seems to have succumbed to the economic slowdown as its contributions to manufacturing and employment generation slipped by 10% and 7% respectively, compared to the corresponding quarter of last fiscal. On the other hand domestic large and medium scale industries have commenced sourcing their inputs through cheaper imports, according to an Assocham survey.
The large and medium industries have resorted to imports to overcome the aftereffects of slowdown syndrome since SSI?s have not been able to assure their old time vendors supplies at affordable rates because majority of them could not upgrade their machinery and equipment due to high cost of borrowings. Due to this, their competitiveness has eroded to a great extent, reveals the chamber analysis on ?Latest Prospects of SSIs?.
?The SSIs have been encountering a gloom period, beginning first quarter of current fiscal as its contribution to manufacturing has come down to 35% as compared to around 45% a few months ago?, said Sajjan Jindal, president, Assocham.
The number of SSI units in 2007-08 was estimated at 44 lakhs with employment capacities for nearly 238 lakh workers with their output to manufacturing, measured at Rs 14 lakh crore. As a result of deceleration that the SSI sector has been witnessing, the number of units in SSIs have come down to around 40 lakh by now and employment generation has shrunk to 225 lakh workers and their output to manufacturing has come down to Rs 12 lakh crore, pointed out Jindal.
Since, not many favourable policy decisions such as reduction in inspector raj, credit extension etc at concessional rates are coming through, their export potential which used to be between 40-45% for the last many years would decline by 7-8% in the current fiscal because the inputs produced by entire SSI sector are costing 12-15% higher to their supplier.
Jindal said, ?Medium and large industries are sourcing their supplies from economies of scale at much cheaper price and the trend will continue as customs and import tariffs for most of inputs would fall and until SSIs upgrade themselves technologically, their contribution to exports as well as manufacturing would fall substantially?. He added that the credit extension is at very high cost and their delivery mechanism too is faulty. As long as these impediments continue, the SSIs would find it extremely difficult to compete with their counterpart.
