(Smes) in HARYANA STATE of INDIA
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ZENITH International Journal of Multidisciplinary Research Vol.1 Issue 6, October 2011, ISSN 2231 5780 AN APPRAISAL OF SMALL AND MEDIUM ENTERPRISES (SMEs) IN HARYANA STATE OF INDIA ANISHA SAHAPATHI*; DR PARUL KHANNA** *Research Scholar, Singhania University. **Associate Professor and Dean R&D, Institute of Management & Technology, Faridabad. ABSTRACT For the socio-economic development of any country, a strong Industrial base is desirable. The natural resources need to be developed and utilized both as input to industrial production and as direct products for the social well being of the citizenry. Since India‟s Independence in 1947, industrialization has been recognized as the critical factor to the economic transformation of the country. To achieve the desired result, Government had, focused in its industrial policy mainly on the promotion and establishment of large-scale industries (LSIs) in pursuance of import substitution process. The promotion of Small and Medium Industries (SMEs), on the other hand, received relatively low direct Government investment, and was left to the initiatives of the private entrepreneur. ___________________________________________________________________________ INTRODUCTION In today‟s India, industries, particularly small and medium – sized manufacturing industries (SMEs), operate under various conditions and constraints, which stand on the way to the achievement of organisational goals. There are, for example, high cost and shortage of materials, shortage of funds, inability to recruit competent staff. Due to its size, the individual firm neither has control over input factor costs or the prices at which it sells its output with the result that inefficient and high cost firms are forced out of business. This makes cost saving devices essential for economic survival. Gone were the days when owners of the businesses concerned themselves with returns, or employees with salaries and wages only; their interests are now also focused on the efficient operation of the business and utilisation of invested resources. other hand, a section of the organized private sector contends that the various policies, incentives and strategies, so far put in place for the industrial sector, have either not been implemented or have been inconsistent or are inappropriate, to address the problems of the SMEs sub-sector, or to stimulate growth and enhance performance of the SMIs. SMEs IN INDIA With the advent of planned economy from 1951 and the subsequent industrial policy followed by Government of India, both planners and Government earmarked a special role for small-scale industries and medium scale industries in the Indian economy. Due protection was accorded to both sectors, and particularly for small-scale industries from 1951 to 1991, till the nation adopted a policy of liberalization and globalization. Certain products were www.zenithresearch.org.in 312 ZENITH International Journal of Multidisciplinary Research Vol.1 Issue 6, October 2011, ISSN 2231 5780 reserved for small-scale units for a long time, though this list of products is decreasing due to change in industrial policies and climate. SMEs always represented the model of socio-economic policies of Government of India which emphasized judicious use of foreign exchange for import of capital goods and inputs; labour intensive mode of production; employment generation; non-concentration of diffusion of economic power in the hands of few (as in the case of big houses); discouraging monopolistic practices of production and marketing; and finally effective contribution to foreign exchange earning of the nation with low import-intensive operations. It was also coupled with the policy of de-concentration of industrial activities in few geographical centres. It can be observed that by and large, SMEs in India met the expectations of the Government in this respect. SMEs developed in a manner, which made it possible for them to achieve the following objectives: High contribution to domestic production Significant export earnings, Low investment requirements, Operational flexibility Location wise mobility Low intensive imports Capacities to develop appropriate indigenous technology Import substitution Contribution towards defence production Technology – oriented industries Competitiveness in domestic and export markets At the same time one has to understand the limitations of SMEs, which are: Low Capital base Concentration of functions in one / two persons Inadequate exposure to international environment Inability to face impact of WTO regime Inadequate contribution towards R & D Lack of professionalism www.zenithresearch.org.in 313 ZENITH International Journal of Multidisciplinary Research Vol.1 Issue 6, October 2011, ISSN 2231 5780 In spite of these limitations, the SMEs have made significant contribution towards technological development and exports. SMEs have been established in almost all-major sectors in the Indian industry such as: Food Processing Textile and Leather and Garments Leather Goods Agricultural Meat Products Inputs Major Sectors of SME Chemicals and Bio-Engineering Pharmaceuticals Engineering & Sports Goods Electricals Electro-Medical Computer Plastic Products Equipments Software FIGURE 3: MAJOR SECTORS OF SME’s SMEs have been playing a pivotal role in country‟s overall economic growth, and have achieved steady progress over the last couple of years. From the perspective of industrial development in India, and hence the growth of the overall economy, SMEs have to play a prominent role, given that their labour intensiveness generates employment. The SME segment also plays a major role in developing countries such as India in an effort to alleviate poverty and propel sustainable growth. They also lead to an equitable distribution of income due to the nature of business. Moreover, SMEs in countries such as India help in efficient allocation of resources by implementing labour intensive production processes, given the abundant supply of labour in these countries, wherein capital is scarce. www.zenithresearch.org.in 314 ZENITH International Journal of Multidisciplinary Research Vol.1 Issue 6, October 2011, ISSN 2231 5780 The enactment of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 was a landmark initiative taken by the Government of India to enable the SMEs‟ competitive strength, address the issues and challenges and reap the benefits of the global market. SME policy initiatives at the national and state level are aimed at strengthening the role of SMEs at the base as well as at the higher level. TABLE1: TOTAL NUMBER OF MSME’S1 No. of SME Units (In Million) Financial Year (FY) Registered Unregistered Total 2003 1.6 9.3 10.9 2004 1.7 9.7 11.4 2005 1.8 10.0 11.9 2006 1.9 10.4 12.3 2007-Present 2.0 10.8 12.8 With globalisation, all forms of production of goods and services are getting increasingly fragmented across countries and enterprises. With large players adopting different models of business that include involvement of the their traditional partners, suppliers or distributors at a different level, SMEs now are now experiencing a new model of functioning in the value chain. TABLE 2: TOTAL EMPLOYMENT IN SME’S AND PRODUCTION PER EMPLOYEE2 Total Employment of SME’s and Production per Employee Financial Year (FY) Employment (In Million) Production per Employee 2003 26.37 116 2004 27.53 122 2005 28.76 130 2006 30.0 140 1 Source: Office of the Development Commissioner (MSME) www.zenithresearch.org.in 2 Source: Ministry of Micro, Small & Medium Enterprises Government of India. 315 ZENITH International Journal of Multidisciplinary Research Vol.1 Issue 6, October 2011, ISSN 2231 5780 2007-Present 31.25 151 PRODUCTION AND INVESTMENT IN SMEs The total production of the SMEs showed a phenomenal growth in FY07 as compared to the previous year. The production at current prices experienced a growth rate of around 18% against 15.8% in the previous year, thereby raising its share to India‟s GDP up to15.5% during the year. SMEs constitute an important segment of India‟s industrial production with a contribution to 33% of its exports www.zenithresearch.org.in 316 ZENITH International Journal of Multidisciplinary Research Vol.1 Issue 6, October 2011, ISSN 2231 5780 The composition of export basket of SME‟s in India, it has both traditional and non-tradition commodities in nature. There are few commodity groups which are exclusively exported by SMEs such as sports goods, cashew, Lac etc. In the commodity group of engineering goods, SMEs constitute around 40% of the total exports of this commodity group. Similarly, SMEs in basic chemicals & pharmaceuticals finished leather and leather products and marine products account for around 44%, 69% and 50% of the export share in their respective commodity groups. In view of the Government of India‟s ambitious target of average GDP growth rate of 9% during the 11th Five Year Plan, SMEs have to play a vital role in achieving this target. It is imperative for the government to address the major issues plaguing the sector and take further inclusive growth oriented policy initiatives to boost the sector. HARYANA – A HOUSE OF INDUSTRY The “Green Land of India” the State of Haryana came into being on 1-November-1966. Haryana can be divided into two natural areas, sub-Himalayan Terai and Indo-Gangetic Plain. It has an agriculture-based economy. The state also has a strong industrial base. It is also well known for its Handloom products all over the world. Haryana is comparatively smaller is size and younger in years but historically it has been great importance all-through. Starting from the days of Maha Bharat in Kurukshetra, the scene of the epic battle between the Kauravas and the Pandavas, the state was the home of the legendary Bharat‟s dynasty, which has been given the name „Bharat‟ or „India‟. The area of Haryana is 44212 Sq. KM with a population of 21.08 millions. The density of population is 477 per sq. KM. The literacy rate is 68.59 and its capital is Chandigarh. Area wise it stands at 20th place out of the 28 states, biggest being Rajasthan and smallest being Goa.