Indian Industrial Position After Independence PDF

Introduction Indian Industrial Position after the Independence Two independent countries namely India and Pakistan came into existence at the time of Independence; which earlier lived, grew, and developed economically and industrially as one country, especially during the British rule over India (18...

Introduction Indian Industrial Position after the Independence Two independent countries namely India and Pakistan came into existence at the time of Independence; which earlier lived, grew, and developed economically and industrially as one country, especially during the British rule over India (1818-1947). Different parts of undivided India were supplying raw materials and markets to the other parts of the country. Partition of undivided India into two independent countries brought about a complete disruption of the industrial and economic system. At the time of independence, the Indian economy showed all the signs of stagnation. The partition of the county in 1947 had far reaching economic and industrial consequences. A totally new environment had a great impact on India’s future in industrial development. As a consequence of partition, India’s share in total industrial activity was around 91 percent of the total industrial establishments, and 93 percent of total industrial workers. At the time of partition, India had a great diversity in the industrial sphere as it possessed industries like cement, matches, glass, chemicals and hides and skins, etc. as regards industrial employment, in India there were industries such as cotton ginning, spinning and weaving, jute manufacturers, engineering, railway–workshops and ordinance, which employed more than one lakh workers at that time. During the immediate post-partition period, industrial production continued to be hampered by the lack of confidence among industrialists because of various pronouncements of political leaders during the period of national struggle, and also partly due to the non-availability or scarcity of machinery and equipment, shortage of raw materials (especially cotton and raw jute), transport bottlenecks and industrial disputes and disturbed industrial relations as a result of the prevalence of inflation and the possible fear of unemployment with the ending of wars as now many goods and services will not be in demand. Since 1951, the growth rate of industrialization is not uniform. There was a steady growth of 8 percent during the period of 14 years from 1951- 1965s. Among the consumer goods industries, industries such as sugar, matchbox, paper and pared board, electrical fans and electric lamps all recorded substantial increases during 1951 compared to their output in 1950. Basic industries like coal and steel also showed increasing output. In sixties (1961-70) average growth of industrial output was estimated 5.5 percent and in the seventies (1971-80) average growth rate was about 4 percent per annum. Even during 1980-85, the growth rate of industrial production was 5.5 percent per annum. Basic fact remains that the rate of industrial growth had been slowing down. The progress of industrialization during the last 60 years has been a striking feature of Indian Economic development. The progress of industries was launched under the Industrial Policy Resolution of 1951 and it was rigorously implemented under the successive five year plans, involving heavy investments in building up capacity, over a wide spectrum industries. Presently World Bank estimates that one third of the global poor reside in India. At the time of Independence, 72 percent of the workforce was employed in agriculture sector and it contributed to nearly 50 percent to the national income. Industrialization was at a very low level with only 2 percent of the workforce employed in industries. In addition to this there was hardly any investment in industries. The only industries which existed were cotton and jute industries. They also suffered a major setback, as at the time of partition as major jute producing areas went to Pakistan. Thus at the time of independence, low agricultural output, little industrialization, low national income, high poverty and unemployment, slow income were the features of Indian economy. In the post-independence partition India started to develop different types of industries with the help of economic planning. Evolution of Small Industries was the dream of Mahatma Gandhi, father of our nation. He supported the growth of small scale industries in India, because he had faith that it would help the poor people of India to come up. He perceived that Indian small scale industrial would play a vital role in the economic progress of the country and had immense potential for employment generation. Developing small scale sector would also result in the decentralized industrial expansion, better distribution of wealth and will encourage investment and entrepreneurial talent. The small scale industries, which play a key role in the indian economy in terms of employment and growth, have recorded a high rate of growth since Independence. Till 1956, the total number of small scale undertakings were 6195. Today it stands at 35.72 lakhs. The small scale sector occupies an important position in the industrial structure of our country. In a country like India, wherein on one hand there is the acute problem of unemployment and on the other hand scarcity of capital, it is only the small scale sector which can help in solving many problems confronting our economy because it has various inherent advantages like reduction of regional imbalances, low investment, greater operational flexibility, low cost of production, high capacity if innovate and export, greater geographical dispersal, utilization of local material and human resources. Small and Medium Enterprises in India in Modern Era Prior to independence, the small scale industries in India occupied an almost insignificant place in the national economy. The commonly used term was cottage industry/ handicrafts which were located in rural area. They were therefore, ‘Indigenous’ and were often regarded as a part of our heritage. During the period of freedom movement, national leaders did try to protect and promote the indigenous industries but nothing significant could be done in this regard. Till independence, only cottage industries, village industries, rural industries or agro based industries were considered to be small scale industries. The first attempt to study the position, problems and prospectus of village and small scale industries at national level was made by the National Planning Committee (NPC) set up by the Indian National Congress in 1938 under the Chairmanship of Sh. Jawaharlal Nehru. Pandit Jawaharlal Nehru was of the view that cottage industries and small scale industries should be treated as two separate entities and later should necessarily overlap both with former and the large industries. The small industrial sector was in his mind, the middle sector of our industrial structure involving modern small scale industries. This group of industries took its place between cottage and village industries on one hand and large scale industries on other hand because they employ modern techniques of production and management as against traditional technology and method of production in cottage and village industries. Soon after independence, the National Congress convened an industries conference in Dec. 1947. The conference divided small scale and cottage industries broadly into three categories, namely, those which are ancillary to large scale industries for eg. Manufacturer of heralds and reeds, pickers, motor cushions etc. those which are engaged in supply of repair services, for eg. Motor repair, locomotive workshop and other small engineering establishments and those which are engaged in the manufacturing of finished goods such as brass, copper and aluminium wires , furniture, cutlery, iron boundaries, hosiery, soap making, paper baskets, coir rope, preservers, pickles, papad etc. On the recommendation of the industries conference, a cottage industry board was set up for promoting small scale industries. Later on it was felt that a single board was inadequate to deal with the problems of the village and small industrial sectors which covers a wide variety of industries varying in the nature of products produced by them, techniques and scale of production, location, pattern and marketability channels. Separate boards were set up for each group of industries during 1952-53 and it was provided that the industries which did not pertain to any of the other five groups of industries will fall in the purview of small scale industries. This group of industries took its place between village and cottage industries on one hand and large scale industries on other. In 1972, the Government appointed a committee for drafting legislation regarding small scale industries. The committee suggested the small industrial sector may be classified into following three categories: Tiny, Small scale industries, Ancillary industries. Ever since the official recognition of small-scale industry by independent India in 1950, the definition of small- scale industry has been revised several times taking into consideration the emerging changes in economic and industrial environment of the country. A brief review of small industry definition over the years since 1955 brings to light the changes effected with regard to the scope of small industry. In 1955, the Small-Scale Industries Board defined small industry as a unit employing less than 50 persons (if using power), less than 100 persons without use of power, and with capital assets not exceeding Rs. 5 lakhs (FYP, 1955).  Table 1 Definition of Small Scale Industries Since 1950 Year Investment Limits Additional Conditions 1950 Up to Rs. 5 lakh in fixed assets Less than 50 persons with power, 100 persons without power 1960 Up to Rs. 5 lakh in Plant & No condition Machinery 1966 Up to Rs. 7.5 lakh in Plant & No condition Machinery 1975 Up to Rs. 10 lakh in Plant & No condition Machinery 1980 Up to Rs. 20 lakh in Plant & No condition Machinery 1985 Up to Rs. 35 lakh in Plant & No condition Machinery 1991 Up to Rs. 60 lakh in Plant & No condition Machinery 1997 Up to Rs. 300 lakh in Plant & No condition Machinery 1999 Up to Rs. 100 lakh in Plant & No condition Machinery 2001 Up to Rs. 100 lakh in Plant & No condition Machinery 2006 Up to Rs. 500 lakh in Plant & No condition Machinery Source: Compiled from various Acts and Notifications Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 According to the Micro, Small and Medium Enterprises Development Act, the concepts related to these enterprises are as below: i) A micro enterprise, where the investment in plant and machinery does not exceed Rs. 1 crore and turnover does not exceed 5 crore. ii) A small enterprise, where the investment in plant and machinery is more than Rs. 1 crore but does not exceed Rs. 10 crore and turnover does not exist Rs. 50 crore, and iii) A medium enterprise, where the investment in plant and machinery is more than Rs. 10 crore but does not exceed Rs. 10 crore and turnover does not exceed Rs. 100 crore. The traditional small-scale industries clearly differ from their modern counterparts in many respects. The traditional units are highly labour consuming with their old-age machineries and conventional techniques of production resulting in poor productivity rate whereas the modern small- scale units are much more productive with less manpower and more sophisticated equipments. Khadi and handloom, sericulture, handicrafts, village industries, coir, bell metal are some of the traditional small-scale industries in India. The modern small industries offer a wide range of products starting from simple items like hosiery products, garments, leather products, fishing hook etc. to more sophisticated items like television sets, electronics control system, various engineering products especially as ancillaries to large industrial undertakings. Now-a-days, Indian small-scale industries (SSIs) are mostly modern small-scale industries. Modernization has widened the list of products offered by this industry. The items manufactured in modem small-scale and medium service & business enterprises in India now include rubber products, plastic products, chemical products, glass and ceramics, mechanical engineering items, hardware, electrical items, transport equipment, electronic components and equipments, automobile parts, bicycle parts, instruments, sports goods, stationery items and clocks and watches. Growth of Micro, Small and Medium Enterprises during the Five Year Plans In India, after independence, policies for the growth of SMEs were formulated during the five year plans. This has resulted to a systematic evolution of comprehensive 'Industrial Policy' which was absent during the pre- independence of the country. Industrial development plays an important role in the growth and promotion of an economy especially in the developing economy. India has been striving to develop its industrial base since independence. It has framed policies aimed at development of various industries in the public and private sectors. Special emphasis has been laid on small-scale industries and cottage industries in the process. This sector has received attention even from policy makers. The policy makers access the requirements of small industries from time to time regarding marketing, technology, financial assistance, infrastructural support etc. The small scale sector is protected from both internal and external competition. Table 2 Development of SSIs during the Plan Periods Plan and Plan Period Promotional Activities for Development of SSI First Plan (1951-56) Recommended the establishment of ‘All India Boards’ to advise and assist in the formation of the programme for development of SSI including Sericulture and Coir. Second Plan (1956-61) Steps were taken to provide a more assured market for the goods produced in SSI sector. Reservation of production of certain varieties of clothes and certain types of agricultural implements. Third Plan (1961-66)  Improved the productivity of workers and reduced cost of production by enhancing facilities such as skill, advice, credit, etc.  Reduced the role of subsidies and rebates.  Promoted the industries in rural areas and in small towns.  Development of SSIs as ancillaries to large industries.  Organized artisans and craftsman on co-operative lines. Annual Plans (1966-69) To increase the flow of institutional credit to the small sector, the RBI introduced refinance facility to scheduled commercial banks and SFCs at concessional rates. Fourth Plan (1969-74) Development of village and small industries in the programme for the community development, rehabilitation of displaced persons and development of special areas. Fifth Plan (1974-79) The industrial development programmes were formulated with the objective of self-reliance and growth with social justice. This included:  Development and promoted entrepreneurship.  Fuller utilization of skills of those already employed.  Improved selected growth centres in semi-urban, urban and backward areas. Sixth Plan (1980-85) In this plan, the targets were set with the objectives of structural diversification,  modernization and self-reliance. This included:  Improvement in production levels, earning through upgradation of skills and technologies, and producer oriented marketing.  Creation of employment opportunities.  Full utilization of existing installed capacities.  Establishment of a wide entrepreneurial base through appropriate training and packages of incentives.  Reduced the role of subsidies progressively.  Expanded effort in export promotion. Seventh Plan (1985-90) Seventh FYP had the following objectives for development programmes and policies in industrial sector:  Ensure adequate supply of wage goods and consumer articles at reasonable price and quality.  Effective utilization of resources and through improved productivity and upgradation of technology.  Providing infrastructural facilities especially power.  Self-reliance in strategic fields. Annual Plan (1990-91) Emphasized on the modernization and technology upgradation and enhanced the contribution of small scale industries to exports. Annual Plan (1991-92)  Remove location restrictions.  Adequate flow of credit on normative basis. Eighth Plan (1992-97)  Supported tiny sector on continuing basis.  Enlarged the scope of small scale sector with service and Business Enterprises.  Give recognition to non-government and industrial association in policy- making.  Shift the concentration from regulation to promotion of quality, technology and efficiency. Ninth Plan (1997-2002) Reviewed the list of reserved items. Motivated financial institutions to offer factoring services to small enterprises. Enlarged the coverage of Prime Minister Rozgar Yojana. Tenth Plan (2002-2007) It focused on creating an industrial policy environment in which private companies could become more efficient and competitive; and for the growth of industrial sector special emphasis given on infrastructural development and export-oriented units. Eleventh Plan (2007- Ministry of MSME established a Technology Mission to promote new and 12) emerging technologies, assess present levels of technology and their upgradation, set up technology information centres/ data banks and an IT portal for information dissemination to carry out detailed technology audits.  Source: Planning Commission, Government of India (https://www.india.gov.in/website-planning-commission) Research and Methodology The present study examines the problems faced by SSIs established before or after 1991. The research methodology applied in the present research is as under: Need of the Study Small-scale industries are directly related to the economic development of a country. Despite, the global and domestic recession, small scale sector registered a higher growth rate than the overall industrial sector in terms of units, production, employment and exports. Thus, the development of a country highly depends upon using its resources adequately generating ample employment opportunities, and increasing the exports. These factors contribute to increase the gross domestic product ratio of a country. Thus, the increase in GDP depends on the development of small-scale sector. A number of studies have been conducted on the various issues related with small-scale sector but none of the studies described the impact of new industrial policy, 1991 on the performance of small-scale industries and also the various problems faced by these institutions. Undoubtedly, SSIs are growing but the growth is not as much as it is anticipated in the era of globalization. With the removal of quantitative restrictions, goods from the outside world are now marketed in India. This has raised the basic questions about the role of small scale industries. Since independence till the nineties in the twentieth century Government had protective and restrictive policy towards small scale sector. Small scale sector in India was not able to compete at the international level with the well pruned small scale sector in China and other South East Asian countries. The small scale industries, which can be developed in the peripheries as well as in the cities, are facing lot of problems. Small and medium scale sector is thought to be the largest employer after agriculture. This sector is much more labour intensive as compared to large sector and hence need to be protected. In the present condition while India is one of the important parts of globalised economy as producer and consumer. It has to focus on small scale sector to compete with the giant economies of China, USA. From this perspective it is very important to identify the problem areas in the era of open economy along with the globalization to enhance the scope of small scale industries. Besides these economic issues to overcome the problem of unemployment, regional disparities, gap between rural and urban, rich and poor; sustainable development, it is inevitable to overlook the small scale sector. Objectives of the Study The main objectives of the study are:  To study the growth and performance of small-scale industries in India with special reference to Punjab.  To analyse the financial performance of Small and Medium enterprises.  To empirically analyse strategies and problems related to financial, marketing, production and infrastructural status of Small and Medium enterprises.  To analyse the causes of the slow growth of SMEs. Profile of Selected Industrial Units Distribution of Industrial Units According to Establishment Period, Location, Registration and Nature of Operation The data has been collected from 390 units, out of which 33.84 percent units have been established before 1991 and 66.16 percent are established after 1991. Usually, an entrepreneur selects a site for location, which is primarily based on the convenience or cost. Yet, the entrepreneur must choose the best plakhe that meets the requirements of location of the industry (i.e. access to raw materials and resources) and business conditions (infrastructure facilities). For the purpose of the present study, the information has been collected from the three districts of Punjab viz. Jalandhar, Ludhiana and Kapurthala. Out of these three districts, two districts Jalandhar and Ludhiana are the industrially developed districts of the State. They have large number of export units of sports goods and the hosiery products. The third district, Kapurthala has majority of the industrial units which are agro-based. Keeping in mind the diversity of the nature of industries and their output, the study was purposely confined to the three districts. Table 3 depicts that out of the total selected units, the majority of the units i.e. 63.84 percent are located in Jalandhar followed by Ludhiana (19.2%) and Kapurthala, (16.96%) districts. The small-scale industries have to register themselves with the Directorate of Industries. This section shows whether the selected units are registered with the Directorate of Industries or not. Out of 390 units, as shown in the Table 3, 60.76 percent are registered and 39.23 percent are not registered. The operations performed by the units may be seasonal (i.e. whose raw material may be available in particular season only or product may have the usage in particular season only) and perennial (i.e. production or operation continued throughout the year) The Table 3 shows that out of 390 units, the nature of operation of 83.08 percent units is perennial in nature and 16.92 percent are seasonal. Table 3 Distribution of Industrial Units According to Establishment Period, Location, Registration and Nature of Operation Number of Units Percentage Before 1991 132 33.84% Establishment Period After 1991 258 66.16% Jalandhar 249 63.84% Location Ludhiana 75 19.2% Kapurthala 66 16.96% Registration of Yes 237 60.76% Industries No 153 39.23% Seasonal 66 16.92% Nature of Operation Perennial 324 83.08% Source: Data Compiled from Questionnaire Forms of Industrial Units The different forms of organization including sole proprietorship which means there is only one owner or partnership within joint family or with outsiders where there are at least two partners who are running the business jointly or Private or public company where management and ownership are in separate hands or co- operative societies. Various forms of organizations on the basis of their incorporation have different legal status and enjoy different benefits as per the respective laws under which they are incorporated. Table 4 show that 58.46 percent of the industrial units fall under sole proprietorship category whereas 31.54 percent units are under partnership/ joint family form of organization Furthermore, 9.4 percent industrial units are registered under public/ private limited category.  Table 4 Distribution of Units According to their Form Type No. of Units Percentage of Units Sole Proprietorship 228 58.46% Partnership/ Joint Family 96 24.64% Partnership - Other 27 6.9% Private/ Public Limited 36 9.4% Co-operative ----- ------ Any Other 3 0.78% Total 390 100% Source: Data Compiled from Questionnaire Nature of Industrial Units Scope of business includes industry and commerce. Industry covers the activities related with the conversion of raw material into finished goods whereas commerce includes trade and aids to trade. Table 4.3 highlights that whether the units manufacture the finished goods at their own or purchase the finished spare parts as a raw material and assemble them. Table 5 depicts that out of 390 units which are classified into six broad categories, 89.23 percent are dealing in manufacturing activity and very few units are dealing in other activities like assembling, repairing etc. Table 5 Industrial Activities- wise Distribution of Units Industrial Activities Number of Units Percentage of Units Manufacturing 348 89.23% Assembling 18 4.7% Repairing 3 0.76% Job Work 3 0.76% Others 15 3.85% Manufacturing & Assembling 3 0.7% Total 390 100% Source: Data Compiled from Questionnaire Financial Performance of SMEs Capital structure of a company refers to the composition of its capitalization and it includes all long-term capital resources. The capital structure is made up of debt and equity securities and refers to the permanent financing of a firm. Financing the firm's asset is very crucial for every business and as a general rule, there should be a proper mix of debt and equity capital in financing the firm's assets. Capital structure can affect the share of earnings available for equity shareholders. Optimum capital structure refers to the capital structure or combination of debt and equity that leads to the maximum value of the firm. It maximizes the value of the company and hence the wealth of its owners and minimizes the company's cost of capital. These all influence the financial performance of the business. In this chapter, the information regarding capital structure has been collected and financial performance of the selected units under study has been analysed. Equity and Borrowed Capital: Product Wise Equity as well as borrowed capital are the determinants of identifying the managerial skill and efficiency of the financial management to deal with finance. It is pertinent that small entrepreneurs, especially in rural areas, do not have adequate resources of their own and they have to depend upon external sources also. Attempt has been made here to examine equity and borrowed capital mix of the selected industrial units as under: Table 6 Equity and Borrowed Capital: Product Wise Equity Capital Borrowed Capital Debt-equity Total (Rs. In Per Unit Total (Rs. In Per Unit Ratio- Product Lakhs) Lakhs) Borrowed Funds/ Equity Funds Valves and nuts 33414.09 484.26 36431.46 527.99 109.03% (59.99%) (60.33%) Hosiery goods 4132.62 125.23 4214.4 127.70 101.97% (7.42%) (6.97%) Auto parts 5720.1 158.89 6293.16 174.81 110.01% (10.27%) (10.42%) Sports goods 1356.36 37.67 1576.11 43.78 116.21% (2.42%) (2.60%) Packing 730 40.55 804 44.66 110.13% material (1.32%) (1.33%) Electric goods 653.25 31.10 711.18 33.86 108.87% (1.18%) (1.18%) Agriculture 1402.65 51.95 1386.66 51.35 98.84% products (2.52%) (2.31%) Pipe fitting, 5397.33 54.51 5783.19 58.41 107.15% hand tools and (9.70%) (9.58%) metal product Others 2876.7 56.40 3186.45 62.48 110.78% (5.17%) (5.28%) Total 55690.26 142.79 60389.16 154.84 (100%) (100%) Source: Data Compiled from Questionnaire. Figures in parentheses denote percentage. The Table 6 shows that almost every type of unit from the nine categories is depending both on equity as well as borrowed sources to meet their financial requirements. They are not totally self- financed. To run their business without any disturbance, they have to depend upon external sources rather they depend more on external sources than the owned capital. Debt- quity ratio which expresses the relation between external and internal funds highlights that almost every type of unit depends more on external sources. Generally 50 to 55 percent of this ratio is considered to be satisfactory i.e. almost equal proportion of external and internal funds are considered to be better but in all categories this ratio is quite high than this ratio claim of outsiders in the business are greater than that of owners which involves the great amount of risk to the business as far as long term solvency position of the units is concerned. Composition of Assets and Liabilities: Product Wise Fixed assets involve the long term investment whereas current assets refer to the assets which are in the form of cash or equivalent or which can be converted into cash within a year and current assets are being used to pay the current liabilities i.e. the liabilities which are being paid within a year. The table shows the position of fixed and current assets and current liabilities of these nine categories. Table 7 Composition of Assets and Liabilities: Product Wise Fixed Assets Current Assets Current Liabilities Product Total (Rs. In Per Unit (Rs. Total (Rs. In Per Unit (Rs. Total (Rs. In Per Unit Lakhs) In Lakhs) Lakhs) In Lakhs) Lakhs) (Rs. In Lakhs) Valves and 1408.83 20.41 2196.69 31.83 1805.76 26.17 nuts (2.42%) (4.52%) (6.79%) Hosiery goods 5911.89 179.14 12761.16 386.70 3673.26 111.31 (10.17%) (26.3%) (13.8%) Auto parts 1619.82 44.99 2205.66 61.26 1924.8 53.46 (2.78%) (4.54%) (7.24%) Sports goods 1699.17 47.19 1401.54 38.93 1019.01 28.31 (2.92%) (2.88%) (3.83%) Packing 600.9 33.38 927.3 51.51 643.2 35.73 material (1.03%) (1.91%) (2.42%) Electric goods 520.77 24.79 1027.71 48.94 669.39 31.87 (0.89%) (2.11%) (2.52%) Agriculture 6307.8 233.62 3094.2 114.6 1970.55 72.98 products (10.85%) (6.37%) (7.41%) Pipe fitting, 22209.87 224.34 23910.72 241.52 10552.47 106.59 hand tools and (38.21%) (49.2%) (39.68%) metal product Others 17848.29 349.96 7656.96 150.13 4331.58 84.93 (30.71%) (15.76%) (16.29%) Total 58127.34 149.04 48591.87 129.59 26590.02 68.18 (100%) (100%) (100%) Source: Data Compiled from Questionnaire. Figures in parentheses denote percentage. The Table 7 shows the status of fixed assets, current assets and current liabilities. In each category the current assets are more than current liabilities. It has been analysed from the data that there is a perfect ratio between current assets and current liabilities of nearly 2:1 (124.50; 68.18) of all the selected industrial units in the State. However, there has been found an extreme variation as hosiery goods units have registered the ratio exceeding 3:1 followed by pipe fitting units which have accounted for ratio of current assets to current liabilities of 2.4:1 against all other units which have recorded the ratio of current assets to current liabilities less than 2: 1. This analyses that in accordance to the current liabilities of the great majority of the industrial units under study, are not keeping substantial current assets which indicates risk bearing and inefficient financial management of the majority of the industrial units so far as the current assets and current liabilities are concerned. Working Capital and Current Ratio: Product Wise Table 8 shows the position of short term solvency position of the various categories of industrial units of the present research:  Table 8 Working Capital and Current Ratio: Product Wise Working Capital (in Category Per Unit Current Ratio lakhs) Valves and 390.93 (2.92%) 5.66 1.21 nuts Hosiery goods 9087.9 (68.03%) 275.39 3.47 Auto parts 280.86 (2.10%) 7.80 1.14 Sports goods 382.53 (2.86%) 10.62 1.37 Packing 284.1 (2.12%) 15.78 1.44 material Electric goods 358.32 (2.68%) 17.06 1.57 Agriculture 1123.65 (8.41%) 41.61 1.57 products Pipe fitting, 13358.25 (100%) 272.61 2.26 hand tools and metal product Others 3325.38 65.20 1.76 Total 22001.85 56.41 1.82 Source: Data Compiled from Questionnaire. Figures in parentheses denote percentage. Table 8 depicts the status of working capital and current ratio. Working capital in all the cases is positive but the current ratio is not satisfactory. The thumb rule to judge the status of current ratio is 2:1 i.e. current ratio is considered to be good only when the current assets are at least double to the current liabilities because current assets include certain items which are doubtful i.e. which may or may not realize. Position which is indicated from the table is that the current ratio of almost in every category is less than 2 except in case of hosiery goods and pipefitting, hand tools etc. because of which the current ratio of total 390 units is 1.82 i.e. less than 2 which means the current ratio or short term solvency position of the units is not satisfactory. Gross Turnover: Product Wise The main objective of every business unit is to earn profitability which is directly related with the quantum of sales or turnover. In a perfect competitive market, to capture the market or to increase the sales of their product, they try to create time, place and form utility in their product also follow various promotional strategies. The Table 9 shows the product wise position of sales of various categories of units from the year 2006-07 to 2010-11: Table 9 Gross Turnover: Year Wise 2006-07 2007-08 2008-09 2009-10 2010-11 Product Total Per Total Per Total Per Total Per Total Per Average Unit Unit Unit Unit Unit Valves and 2230.11 32.32 2578.62 37.37 2785.11 40.36 3016.98 43.72 3628.59 52.58 41.27 nuts Hosiery 62.91 1.91 64.35 1.95 74.34 2.25 110.25 3.34 107.52 3.26 2.54 goods Auto parts 51 1.42 69.63 1.93 143.13 3.97 159.27 4.42 257.91 7.16 3.78 Sports 115.35 3.20 147.75 4.10 197.37 5.48 397.32 11.03 375.42 10.42 6.9 goods Packing 1044.39 58.02 1105.38 61.41 1291.02 71.72 1894.65 105.25 1843.86 102.44 79.77 material Electric 45.54 2.17 54.09 2.57 481.83 22.94 297.45 14.16 255.27 12.15 10.79 goods Agriculture 10.31111 0.38 12.84 0.47 15.546 0.57 36.588 1.35 178.15 6.60 1.87 products Pipe fitting, 169.35 1.71 339.66 3.43 735.78 7.43 16.68 855.12 8.63 0.17 4.27 hand tools and metal product Others 1005.45 19.7 1262.67 24.75 1233.93 24.19 904.14 762.63 14.95 17.73 20.26 Mean 13.43 15.33 19.87 22.98 23.61 S.D. 18.85 20.29 22.20 31.42 37.47 C.V. 1.40 1.32 1.12 1.36 1.58 Source: Data Compiled from Questionnaire. As shown in the above table, gross turnover of the selected industrial units has recorded an increase over the years under study. It has been analyzed that the per unit turnover has doubled over the years under study. On the contrary, it has been analyzed that the variation from mean has also increased from 153.34 to 216.83 which indicates that the inconsistency per unit of turnover has increased. However, in the initial years of the study period, the standard deviation was comparatively high than it was in the later years which indicates that in the former period of the research, the inconsistency in turnover was high than that in the later years. Despite of a high degree of disparity in the turnover of the different categories of the SMEs under study, it has been analyzed that the per unit sales in all the categories has increased during the research period. The position of Gross Turnover of the SMEs established during the pre and the post liberalization period is as under: Table 10 Establishment Period and Gross Turnover Pre Liberalization Post Liberalization Years Gross Turnover Per Unit Turnover Gross Turnover Per Unit Turnover 2006-07 38516.82 291.79(100) 17173.44 66.56(100) 2007-08 45238.17 342.17(117.26) 22150.99 85.85(128.98) 2008-09 45054.84 341.32(116.97) 25971.09 100.66(151.23) 2009-10 51548.31 390.51(133.83) 54176.91 209.98(315.47) 2010-11 59403.51 450.02(154.22) 76786.17 297.62(447.14) Total 239761.65 1815.81 196258.6 760.67 Average 47952.31 363.16 39251.72 152.13 Source: Data Compiled from Questionnaire. Table 10 reveals that gross turnover as well as the per unit turnover of all the categories has increased. It has been analysed that the rate of growth of turnover of the units established during the post liberalization period is more than the growth of units established during the pre-liberalization period. Based upon the results of gross turnover as well as the per unit turnover of the selected industrial units in the pre and post liberalization period of the study area, it is clear that the growth in terms of gross turnover and the per unit turnover of the units of post liberalization period is much higher in comparison to the other units. Profitability Position of Industrial Units Profitability position of the industrial enterprises has an immense role to know about its reputation and financial position. Table 11 highlights the profitability position of the units established during the pre and the post liberalization periods as per the analysis taken for the period from 2006-07 to 2010-11. Table 11 Profitably Position of Industrial Units: Year Wise 2006-07 2007-08 2008-09 2009-10 2010-11 Product Per Per Per Average Total unit Total unit Total unit Total Per unit Total Per unit Valves and nuts 2230.11 32.32 2578.62 37.37 2785.11 40.36 3016.98 43.72 3628.59 52.58 41.27 Hosiery goods 62.91 1.91 64.35 1.95 74.34 2.25 110.25 3.34 107.52 3.26 2.54 Auto parts 51 1.42 69.63 1.93 143.13 3.97 159.27 4.42 257.91 7.16 3.78 Sports goods 115.35 3.20 147.75 4.10 197.37 5.48 397.32 11.03 375.42 10.42 6.9 Packing material 1044.39 58.02 1105.38 61.41 1291.02 71.72 1894.65 105.25 1843.86 102.44 79.77 Electric goods 45.54 2.17 54.09 2.57 481.83 22.94 297.45 14.16 255.27 12.15 10.79 Agriculture products 10.31111 0.38 12.84 0.47 15.546 0.57 36.588 1.35 178.15 6.60 1.87 Pipe fitting, hand tools and metal product 169.35 1.71 339.66 3.43 735.78 7.43 16.68 855.12 8.63 0.17 4.27 Others 1005.45 19.7 1262.67 24.75 1233.93 24.19 904.14 762.63 14.95 17.73 20.26 Mean 13.43 15.33 19.87 22.98 23.61 S.D. 18.85 20.29 22.20 31.42 37.47 C.V. 1.4 1.32 1.12 1.36 1.58 Source: Data Compiled from Questionnaire. It is clear from the Table 11 that average profitability of the SMES during the period under study has increased. It has been analysed that the profitability of the individual industrial units recorded a mixed trend of their profitability position in some of the years under study. However, the growth, as some of the selected industrial units have recorded decline in overall results clearly indicate that the average profitability of these units has increased. It is worth to mention that the values of standard deviation were high with high degree of growth during these years which indicates that the position of profitability of these units is not consistent. Moreover, the value of Coefficient of Variance proves that the inconsistency does not remain in the same fashion as the values of CV changed over the years under study. Basis of Sales Three types of basis of sales have been considered which are cash, credit and both; cash as well as credit. The following table analyses the basis of sales of the selected industrial units: Table 12  Basis of Sales Basis of Sales Number of Units Percentage of Units Cash 29 7.43% Credit 91 23.33% Both 270 69.23% Total 390 100% Source: Data Compiled from Questionnaire. The Table 12 represents that out of 390 units, 69.23 percent sale their product on both cash and credit basis, followed by 23.33 percent units which sale their product on credit basis and 7.43 percent sale on cash basis. This analyses that cash sales of the selected industrial units is quite scanty which is a matter of concern for these industrial enterprises. Moreover, it is obvious that the blend of both; cash and credit has contributed to sustain these units as a great majority of sales is through both of them. Marketing Strategies for Attracting the Customers In the today's competitive world only those units can survive which can satisfy the customer. So the products are being produced according to the requirements of the customers. Customers prefer those products which are of better quality and also are available at cheap rate. To attract the customers companies follow the various strategies like improve quality, reduce cost, attractive packing, attractive advertisement etc. Table 13 states the various marketing strategies followed by small scale industries to attract the customers. Table 13 Marketing Strategy to Attract Customers Units Established Units Established (Post Marketing (Pre Liberalization) Liberalization) Total Improve quality 84(63.63%) 159(61.62%) 243(62.30%) Reuce cost 15(11.36%) 15(5.81%) 30(7.69%) Attractive packing 6(4.54%) 21(8.13%) 27(6.92%) Advertisement 6(4.54%) 3(1.16%) 9(2.30%) Improve quality & Attractive packing 12(9.09%) 9(3.48%) 21(5.38%) Improve quality, reduce cost & attractive packing ---- 9(3.48%) 9(2.30%) Improve quality & Reduce cost 9(6.81%) 30(11.62%) 39(10%) Improve quality, reduce cost, attractive packing & advertisement ----- 9(3.48%) 9(2.30%) Reduce cost & Advertisement ------ 3(1.16%) 3(0.76%) Total 132(33.84%) 258(66.15%) 390(100%) Source: Data Compiled from Questionnaire. Figures in parentheses denote percentage. It is clear from the Table 13 that out of 390 units, 62.30 percent units improve the quality of their product to attract the customers. Out of total units established before 1991, 63.63 percent improve the quality of their product, and also 61.62 percent of the units established after 1991 concentrate to improve the quality of their product So from the table it is clear that most of these units find that customers are now more conscious about the quality of their product. That is why the most of units try to improve the quality of their product to attract the customers. Strategies Related to Product The product is the tangible and important part of the marketing mix. Without a product, there is nothing to price, nothing to promote and nothing to distribute. Good products are key to market success. Products represent a bundle of expectations to consumer and society. Product implies not only the physical attributes but includes services both before and after sale and prestige that go long way in increasing the consumer satisfaction. Table 14 represent the various strategies related with the product. Table 14 Designing of Product Designing of Product Units Established (Pre Units Established (Post Liberalization) Liberalization) Total Manually 27 (20.45%) 42 (16.28%) 69 (17.69%) Fully Automated 12 (9.09%) 42 (16.28%) 54 (13.84%) Both 93 (70.46%) 174 (67.44%) 267 (68.47%) Total 132 (33.84%) 258 (66.15%) 390 (100%) Source: Data Compiled from Questionnaire. Figures in parentheses denote percentage. The Table 14 represents that out of 390 units, 6847 percent units design their products both manually and fully automated and only 17.69 percent units design their products manually, Out of the units established before 1991, 70.46 percent design their product by both the ways i.e. manually and fully automated and 20.45 percent units design their product manually and out of total units established after 1991, 67.44 percent design their product by both the ways. So the conclusion derived is that most of the units design their product by both manually and through machines. Product Identification Product identification is that important part of product management under which some selected marketing activities (i.e. branding, Packing and Labelling) are performed which makes easy the product identification. There are several products of the same kind but from the different manufacturers. Every manufacturer wants to differentiate his product from the products of other manufacturers with an intention to make it identified to the customers and for this he followed various techniques of product identification like product branding, packing, labelling etc. Table 15 Product Identification Units Established (Pre Units Established (Post Product Identification Liberalization) Liberalization) Total Product branding 78(59.09%) 156(60.46%) 234(60%) Product labelling 9(6.81%) 21(8.13%) 30(7.69%) Product packing 27(20.45%) 39(15.11%) 63(16.15%) Any other 9(6.81%) 18(6.97%) 27(6.92%) Product branding & packing 6(4.54%) ---- 6(1.53%) Product branding, labelling & packing 3(2.27%) 6(2.32%) 9(2.3%) Product branding & labelling ---- 12(4.65%) 12(3.07%) Product branding & other ----- 3(1.16%) 3(0.76%) Product branding, labelling, packing & other ------ 3(1.16%) 3(0.76%) Total 132(33.84%) 258(66.15%) 390(100%) Source: Data Compiled from Questionnaire. Figures in parentheses denote percentage. The Table 15 shows types of decisions taken by the SMEs to increase the sales of the product. 60 percent of the total units are focusing on product branding to increase the sales of their product as customers are more brand conscious these days. The same policy is followed by the two categories of units i.e. established before and after 1991 also. 59.09 percent units in case of units established before 1991 and 60.46 percent units from other category are concentrating on the product branding followed by 20.45 percent and 15.11 percent units respectively on product packing. So it is clear that customers are more brand conscious these days. They demand the branded products. Product Labelling Labelling is a very important means of product identification. It is the act of attaching or tagging labels. A label is anything- may be a piece of paper, printed statement, imprinted metal, leather-which is either a part of a package or attached to it, indicating value of contents of price of the product name and place of producers. It carries verbal information about the product, producer or such useful information to be beneficial to the user. Table 16 represents the type of product labelling used by SMEs. Table 16 Types of Product Labelling Types of Product Units Established (Pre Units Established (Post Labelling Liberalization) Liberalization) Total Grade label 6(4.54%) 39(15.11%) 45(11.53%) Brand label 96(72.72%) 165(63.95%) 261(66.92%) Descriptive label 21(15.90%) 27(10.46%) 48(12.30%) Any other 9(6.81%) 6(2.32%) 15(3.84%) Brand & Grade label ---- 9(3.48%) 9(2.30%) Brand, Grade & Descriptive label ---- 6(2.32%) 6(1.53%) No response ----- 3(1.16%) 3(0.76%) Total 132(33.84%) 258(66.15%) 390(100%) Source: Data Compiled from Questionnaire. Figures in parentheses denote percentage. Table 16 indicates the type of product labelling used by the selected units under study. More than two third units (66.92%) use the brand labelling, 12.30 percent use descriptive labelling and 11.53 percent units use the grade labelling. From the units established before 1991, 72.72 percent units use brand labelling and 15.90 percent use descriptive labelling and from the units established after 1991, 63.95 percent units use the brand labelling, 15.11 percent use the grade labelling and 10.46 percent use descriptive labelling. So as it has been already discussed that the customers are brand conscious, maximum units use the brand labelling to attract the customers. Packing Strategy Packing is concerned with formulating container or wrapper for the product. Its main aim is to provide convenience in handling, ensure freshness and quality and to prevent adulteration. It also helps in distinguishing the product of the company from that of competitors. Packing plays an important role in buying decisions by the consumers. Many times products are demanded because of their good looks and useful packages. Packaging acts as a multi-purpose arrangement such as: protection to the product, acts as a silent salesman, facilitates more sales, ensures quality, helps in advertising, increases standard of living, ensures price stabilization etc. Table 17 Packing Strategy Units Established (Pre Units Established (Post Packing Strategy Liberalization) Liberalization) Total Family packing 27(20.45%) 60(23.25%) 87(22.30%) Multi packing strategy 60(45.45%) 75(29.06%) 135(34.61%) Source packing strategy 18(13.63%) 27(10.46%) 45(11.53%) Ecological packing strategy 21(15.9%) 57(22.09%) 78(20%) Any other 3(2.2%) 9(3.48%) 12(3.07%) Family & multi packing strategy ---- 9(3.48%) 9(2.30%) All above strategies ----- 6(2.32%) 6(1.53%) No response 3(2,27%) 15(5.81%) 18(4.61%) Total 132(33.84%) 258(66.15%) 390(100%) Source: Data Compiled from Questionnaire. Figures in parentheses denote percentage. The Table 17 represents the type of packing used by selected units for a products More than one third (34.61%) of the total selected units follow multi packing strategy followed by family packing (23.30%), 20 percent ecological packing and 11.53 percent follow reuse packing strategy. Hence, it can be inferred that the different types of strategies are followed by different organizations. Same strategy is followed in two categories individually also i.e. in both the categories most of the units follow the multi packing strategies followed by family packing and reuse packing strategy. Pricing Strategy Price of the product is a very important factor to attract the customers. Customers always prefer that product only which is available to them in best quality but at cheap rate also. It is the price factor only which can shift the competitors' customers to you or also your customers to the competitors. So every type of organizations formulates their pricing policies very carefully toping in mind their status in the market. Pricing Policy It depends upon competition whether a firm will be the price setter or the price follower in the market. If their product does not have any competitive product then they can charge any price. In that case they will be price setters but if they have to face the competition in that case in order to stay in the market they must be price followers i.e. they can charge the price prevailing in the market or the price charged by their competitors. Table 18 shows the pricing policies followed by the selected SMEs. Table 18 Pricing Policy Effective Pricing Policy Units Established (Pre Units Established (Post Liberalization) Liberalization) Total Price Setters 35 (26.51%) 65 (25.19%) 100 (25.64%) Price Followers 91 (68.93%) 184 (71.31%) 275 (70.51%) Any other 6 (4.54%) 3 (1.16%) 9 (2.30%) No response ---- 6 (2.32%) 6 (1.53%) Total 132 (33.84%) 258 (66.15%) 390 (100%) Source: Data Compiled from Questionnaire. Figures in parentheses denote percentage. The Table 18 shows that whether these units are price setters or price followers. It is clear from the table that more than two third of the units (70.51%) are the price followers i.e. they do not fix the price of their product on their own rather they follow the price which prevails in the market followed by 25.64 percent units which are the price setters i.e. they charge the price which they like. This status also exits in both categories i.e. units established before 1991 and after 1991. In both the cases maximum units are price followers. Criteria for Fixing Price Table 19 highlights the criteria followed by SMEs for fixing the price. As it has been already discussed that most of the units are price followers, Table 19 shows the base which they consider for following the price i.e. whether they follow the competitors' price or general price existing in the industry and if they are price setters they whether they set the price according to the demand and supply of their product. Table 19 Criteria for Fixing Price Units Established (Pre Units Established (Post Criteria for Fixing Price Liberalization) Liberalization) Total Industry rate 14(10.60%) 47(18.21%) 61(15.64%) Demand and supply 32(24.24%) 62(24.03%) 94(24.10%) Competitor's price 71(53.78%) 121(46.89%) 192(49.23%) Any other 6(4.54%) 3(1.16%) 9(2.30%) Demand & supply & Industry rate ---- 3(1.16%) 3(0.76%) Industry rate & Competitor's price ---- 5(1.93%) 5(1.28%) Demand & supply & Competitor's price 9(6.81%) 7(2.71%) 16(4.10%) Demand & supply, Industry rate & Competitor's price ---- 4(1.55%) 4(1.02%)  No Response ---- 6(2.32%) 6(1.53%) Total 132(33.84%) 258(66.15%) 390(100%) Source: Data Compiled from Questionnaire. Figures in parentheses denote percentage. The Table 19 shows that how these units fix the price of their product. Out of total selected units, 49.23 percent units follow the competitors' price followed 24.10 percent units who are price setters and charge the price according to the demand and supply of their product and 15.64 percent units follow the industrial rate. In both the cases of units established before and after 1991 also the same situation prevails. Promotion Strategy Only manufacturing of a good quality product is not sufficient but it is very essential to promote that product in the market efficiently so that consumer must know about the product only then they would be able to purchase the product. There are various methods of promoting the product like advertisement, salesmanship etc. Table 20 Promotion Strategy Units Established (Pre Units Established (Post Promotion Strategy Liberalization) Liberalization) Total Audio/Visual media 0(0.0%) 45(17.44%) 45(11.53%) Print media 39(29.54%) 69(26.74%) 108(27.69 %) Personal selling 51(38.63%) 93(36.04%) 144(36.92 %) E-marketing 15(11.36%) 18(6.97%) 33(8.46%) Any other 0(0.0%) 3(1.16%) 3(0.76%) Audio/visual & E- marketing 3(2.27%) 3(1.16%) 6(1.53%) Print media & Personal selling 3(2.27%) 3(1.16%) 6(1.53%) Print media & E- marketing 6(4.54%) 0(0.0%) 6(1.53%) Audio/visual & print media 3(2.27%) 6(2.32%) 9(2.30%) No response 12(9.09%) 18(6.97%) 30(7.69%) Total 132(33.15%) 258(66.84%) 390(100%) Source: Data Compiled from Questionnaire. Figures in parentheses denote percentage. It is clear from the Table 20 that out of 390 selected units, almost one third units follow the personal selling method followed by 27.69 percent units who are following the print media to promote their product and 11.53 percent units adopt audio/visual media. It can be concluded that most of the units consider the personal selling to be the effective advertisement media which affect a lot to increase the sales. Overall Marketing Strategies In the today's competitive only those firms can survive which will provide something extra than others. Keeping in mind this aspect various other strategies are also adopted by the units to attract the customers like distributing their products as a free sample or gifts, home delivery, discount facility etc. Table 21 indicates the various marketing strategies followed by SMEs. Table 21 Overall Marketing Strategies Units Established (Pre Units (Post Methods of Marketing Liberalization) Liberalization) Total Credit facility 75(56.81%) 123(47.67%) 198(50.76%) Discount facility 30(22.72%) 45(17.44%) 75(19.23%) Gifts 6(4.54%) 21(8.13%) 27(6.92%) Free samples 0(0.0%) 15(5.81%) 15(3.84%) Home delivery 6(4.54%) 12(4.65%) 18(4.61%) Credit, Discount & Gifts 0(0.0%) 9(3.48%) 9(2.3%) Credit & Discount 3(2.27%) 12(4.65%) 15(3.84%) Credit & Free samples 3(2.27%) 0(0.0%) 3(0.76%) Discount & Free Samples 0(0.0%) 3(1.16%) 3(0.76%) Discount & Home delivery 3(2.27%) 3(1.16%) 6(1.53%) Credit, Discount, Gifts & Free samples 0(0.0%) 6(2.32%) 6(1.53%) Credit & Free samples 6(4.54%) 3(1.16%) 9(2.3%) Credit, Discount & Home delivery 0(0.0%) 3(1.16%) 3(0.76%) No response ----- 3(1.16%) 3(0.76%) Total 132(33.84%) 258(66.15%) 390(100%) Source: Data Compiled from Questionnaire. Figures in parentheses denote percentage. 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