The Hindu : Create hassle-free environment for small units

Online edition of India's National Newspaper
Tuesday, Jun 25, 2002

Business

Business

Create hassle-free environment for small units — CII

By Our Special Correspondent

NEW DELHI JUNE 24. To enable small industry to remain competitive after the withdrawal of quantitative restrictions (QRs) and to achieve a higher rate of growth, the Government needs to urgently reduce the cost of capital, remove procedural bottlenecks and increase research and development support. In addition, it needs to help such units upgrade technology by more exposure to international markets through industrial interaction.

This is the assessment of a survey carried out by the Confederation of Indian Industry (CII) covering over 200 small enterprises and which has analysed the impact of removal of QRs on small scale industry.

The survey, covering sectors such as pharmaceuticals and chemicals, clocks and watches, garments, machine tools, ice-cream and toys, has revealed that small industry is gaining awareness about the benefits of the World Trade Organisation (WTO) along with the limitations they have been facing in the era of closed economy. In fact, a number of small scale companies are striving hard to achieve the ISO/BIS certifications and tightening their belts against cheap imports from China, thereby reducing their cost of production.

However, the overall finding of the survey was that the Government needs to create a hassle free environment for small industry entrepreneurs, thereby enabling them to concentrate on improving their quality of products and cost reductions to meet challenges of the WTO regime. Though the Government has enacted some defensive mechanisms to support industry such as the agri-export zones (AEZs), market access initiative, special economic zones (SEZs) and peak custom duties to provide a level playing field to domestic players vis-a-vis imports, the CII feels there is a need to create an awareness about these policies among industrial units through various means.

The survey also revealed that most players in the small scale sector feel there is need for increased involvement of representatives from the industry, in the process of policy formulation by the Government.

Among the sectors covered, it was revealed that there has been an average increase in exports by 8 per cent since last year in the pharmaceuticals and chemical sectors, while imports went up only marginally. As Indian companies continue to increase their research and development investment, there was a possibility of developing India as a major manufacturing hub.

According to the survey, in the clocks and watches sector, the industry has shifted its focus to importing only the clock movement, dials and other accessories as other parts are manufactured in India.

The garment industry enjoyed the benefit of reservation for the small scale sector earlier and with the removal of QRs, many international brands have now established their manufacturing units in India. However, the CII survey has found that it has also led to the establishment of many domestic brands with India gaining a recognisable share in garment industry around the globe.

According to the survey, the machine tools and instrumentation sector has organised and formed clusters at regional level, thereby enjoying the advantage of economies of scale by bulk imports.

On the other hand, organisations such as Mother Dairy and Amul, sourcing their material from a number of cooperative societies and dominated by small entrepreneurs, have started marketing their products aggressively and increased their sales, thereby increasing the profit of their small suppliers throughout the country. On the toy industry, the survey finds that it has been improving on the quality and regularly updating the technology so as to compete from Chinese imports.

India maintained QRs ever since 1947 on balance of payments grounds under GATT, to which it was a signatory. After the WTO agreement in April 1994, India continued to maintain QRs on BOP grounds as per provision of Article XVIII-B of GATT, but began shifting items from the restricted list to Open General License. The process started in 1995-96 with 6,161 items and was completed in 2001 by dismantling QRs on 715 items.

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