GROWTH PERFORMANCE OF SMALL SCALE INDUSTRIAL …shodhganga.inflibnet.ac.in/bitstream/10603/10675/11/11_ chapter 4.pdf · 93 Chapter – IV GROWTH PERFORMANCE OF SMALL SCALE INDUSTRIAL

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Chapter – IV

GROWTH PERFORMANCE OF SMALL SCALE

INDUSTRIAL SECTOR IN PUNJAB AND HARYANA

- AN INTER TEMPORAL ANALYSIS

Indian economy embarked on the path of economic reforms after 1991

fiscal crisis with the objective of lifting the economy from slow growth to a

market driven economy with optimum resource utilisation. A drive for

diversification of economy through rapid industrialisation particularly in the small

scale industrial sector was, therefore, considered necessary for ameliorating the

population out of poverty by providing employment, raising standards of living,

improving the balance of payment situation and attaining self-sufficiency in the

economy. Therefore, small scale industrial sector which had been growing under

the protective umbrella since independence now, been left open to the invisible

hands of the market forces. The sphere of competition has increased manifold,

both horizontally and vertically at national and regional level where the fittest will

survive and inefficient will be weeded out. The basic objective of economic

reforms was to improve productivity growth and competitiveness of Indian

economy. These reforms were aimed at making Indian manufacturing sector in

general and small scale industrial sector in particular, more efficient and

technologically updated, with the expectation that these changes would enable this

sector to achieve higher and sustainable growth both at national and regional level.

In this context, an attempt has been made to analyse growth performance of

small scale industrial sector in Punjab, Haryana vis-a-vis All India during the

reformed era. To fulfill this objective, the present chapter has been divided into

four sections. Section-I provides an overview of the small scale industrial sector of

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Punjab and Haryana, whereas, Section-II discusses the growth performance of the

small scale industrial sector in India during entire period (1971-72 to 2006-07),

pre reforms period (1971-72 to 1990-91) and post reforms period (1991-92

onwards). Section-III enlightens the growth performance of small scale industrial

sectors in Punjab and Haryana during the respective periods. The last section

concludes the discussion along with the policy implications.

Section-I

At the time of the partition of the Indian sub continent in 1947, Punjab was

bifurcated into two parts: West Punjab (Pakistan) and East Punjab (India), of its

3,59,179 square kilometers and 29 districts, only 1,52,649 square kilometers and

13 districts were left with Indian Punjab. The two Punjab’s were partitioned on

religious grounds and the most prosperous and developed western part went to

Pakistan and the relatively backward eastern part remained in India. In 1956, at the

time of the reorganisation of states on linguistic basis, the former Patiala and East

Punjab States Union (PEPSU) territory was merged with Punjab. However, in

1966, the State was further reorganised under the Reorganisation Act, 1966. The

Punjabi speaking areas were carved with erstwhile Punjab, the Hindi speaking

areas in the north were merged with Himachal Pradesh and the southern Hindi

speaking areas were constituted into a new state of Haryana.

Industrial Progress in Punjab

On the eve of independence, Punjab had been relatively an industrially

backward state, but state activity for the rehabilitation of migrants, traders,

entrepreneurs and workers involving large investment in infrastructural sectors

created necessary environment for industrial development which continued

through the 1950s and 60s. However, industrial sector got a fillip after the Goa

conflict, Chinese aggression and Indo-Pak war, for fulfilling the defense needs in

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TABLE 4.1

DISTRICT WISE DISTRIBUTION AND TYPES OF

INDUSTRIES IN PUNJAB

District District Wise Concentration of Industries

Amritsar Power Loom Weaving, Wood & Machine Screws, Radio & Transistors,

Agricultural Implements, Paints & Varnishes and Dyes, Electric Fans,

Pharmaceuticals, Printing machinery, Textiles, Chemicals, Soap, Acids

Barnala Small Cutting Tools, Threads by Spinning Mills, Chemicals, Paper,

Towels, Combines, Tractors, Electric Scooty, Bulldozers, Cranes and

their Components, Agricultural Industries.

Bathinda Cotton Ginning and Processing, Pharmaceutical, Flour mills.

Faridkot Agricultural Implements, Cottonseed Oil, Rice Bran Oil.

Fatehgarh

Sahib

Steel re-rolling, Pump Parts, Sewing Machine Parts, Truck Body

Building.

Ferozepur Cotton Ginning and Processing, Grey board, Flour Mills, Agricultural

Implements, Millboard.

Gurdaspur Agricultural Implements, Conduit Pipes, Machine Tools, Soap and

Chemical Products, C.I. Castings, Brassware.

Hoshiarpur Rosin & Turpentine Oil, Paints & Varnish, Sugar, Agricultural

Implements, Pressure Cookers, Paper and Paper Board

Jalandhar Surgical Instruments, Sports Goods, Hand Tools, Automobile Parts,

Cocks & Valves, Pipe Fittings, Bus Body Building, Leather Tanneries,

Ball Bearings, Publication, Switch & Switch -Gears and Rubber Goods

Contd...

96

Kapurthala Agricultural Implements, Pressure Cookers, Fans, Wood & Machine

Screws, Electrical Goods, Rice Mills, Rubber Goods, Bolts & Nuts and

Diesel Engines.

Ludhiana Bicycles and Bicycle Parts, Automobile Parts, Hosiery Goods, Sewing

Machine & Parts, Home Appliances, Machine Tools, Readymade

Garments, Hosiery Needles, Rubber goods, Labels (Metal & Cotton),

Chemical Goods, Oil Engines, Agricultural Implements, Electronic

Goods, Tractor Parts, Cycle Tyres/Tubes, Plastic Goods.

Mansa Agricultural Implements, Cotton Spinning

Moga Agricultural Implements, Milk Products.

Muktsar Cotton Yarn, Rice Bran Oil, Paper

Patiala Automobile Parts, Sewing Machine Parts, Enamelled Copper Wire,

Electrical Goods, Bakery Machinery, Cutting Tools, Biscuits, and

Shoes.

Rup Nagar Agricultural Implements, Pharmaceuticals, Tractors & Parts, Electronic

Components, Electrical Components.

Sangrur Agricultural Implements, Tractor Parts, Cycle Parts, Sewing Machine

Parts, Milk Products, Chilled Rolls.

Shahid Bhagat

Singh Nagar

Light Commercial Vehicles, Pharmaceutical, Yarn, and Sugar

Tarn Tarn Agro Base Industry; Sugar Mill, Spinning Mill, Poultry Farm.

Source: Director of Industries, Punjab

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woolen textiles, hosiery sector, machine tools and the automobile sector. Further,

in 1960s, with the advent of the green revolution, the increasing demand from the

rapidly growing agriculture sector combined with a rise in export demand boosted

the process of industrialisation. The industries that witnessed boom were agro-

processing, agro- input and consumer industries like textile, woolen products, food

product, metal products, engineering and agricultural machinery. Most of these

industries were set up in the small scale sector and Punjab made fairly rapid

progress in industrial development especially in the small scale segment.

In Punjab, the primary sector contributes 31.23 percent, secondary

27.57 percent, and tertiary sector 41.2 percent of Gross State Domestic Product

(GSDP) in 2007-2008 (Statistical Abstract of Punjab, 2010). In terms of location

small scale industrial groups concentrate in different districts as, hosiery and

garment units are in Ludhiana, basic metal product industry in Mandi Gobindgarh,

Ludhiana, Batala, Jalandhar and Amritsar, and textile units in Ludhiana, Amritsar

and Dera Bassi. Further, various industrial groups including food products, leather

products, chemical products, metal products and machinery etc. are widespread in

the state. Ludhiana leads in Industrialisation and produce 28 percent of the total

industrial output of Punjab and having highest number (166) of large and medium

scale units. Amritsar and Jalandhar were traditionally more advanced, whereas,

Sangrur was declared as centrally backward district. The major small scale

industry in Punjab is hosiery industry, which contributes 91 percent of the total

hosiery goods produced in India, 10 percent of the total production and 48 percent

of total employment of small scale industrial sector in Punjab, whereas, it provides

employment to 54 thousand persons (Statistical abstract of Punjab, 2010). Table

4.1 shows the district-wise distribution and concentration of industries in Punjab.

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Industrial Progress in Haryana

Haryana is one of the progressive state in India and contributed

significantly to India's socio economic development over the last four decades. At

the time of its formation in 1966, it was industrially backward and predominately

agriculture dominated state. Although state is small in size, covering only

1.37 percent of the total land area of the country and less than 2 percent of the

population but have impressive infrastructural facilities and communication

network. Haryana is a landlocked state in northern India, surrounded by Punjab

and Himachal Pradesh to the north and Rajasthan to the west and south. Its eastern

border touches Uttaranchal and Uttar Pradesh which is defined by river Yamuna.

The State also surrounds Delhi on three sides, forming the northern, western and

southern borders of Delhi. A large area of the State is included in the National

Capital Region (NCR) and two emerging cities Gurgaon and Faridabad are close

to Delhi and are major hubs for information technology and software industry.

Within the State, the cities of Panipat, Rohtak, Gurgaon, Faridabad and

Sonepat have special potential for accelerated socio economic development.

Geographical location of the state provides easy and inexpensive access to

domestic consumer markets. Moreover, the availability of land suitable for

industrial use makes Haryana an ideal location for industry. Haryana’s relatively

small size makes it easier to govern, and its efficient and responsive administration

ensures a minimum of red tape and bureaucratic interference. Moreover, Haryana's

new economic policy approach is to identify ‘target sectors’ in the following

industries: i) Electronics; ii) Automobiles and automobile components;

iii) Handloom, hosiery and textile; iv) Food and agro-based industries; v)

Amusement parks; and vii) Information technology parks.

On the production front, Haryana produces four-fifths of the passenger cars,

two-thirds of the tractors and motor cycles, one-half of the refrigerators, one-

fourth of the sanitary ware and one out of every four bicycles manufactured in

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TABLE 4.2

DISTRICT WISE DISTRIBUTION AND TYPES OF

INDUSTRIES IN HARYANA

District District Wise Concentration of Industries

Ambala Hosiery, Scientific and Surgical Instruments, Metal Casting, kitchen

Mixer Grinders, Submersible Motor Pumps, Textiles

Bhiwani Textiles

Faridabad Tractors, Motorcycles, Switch gears, Refrigerators, Footwear, Tyres,

consumer durables

Fatehabad Sports Goods, Cotton Canvas Manufacturer and Exporter of Automotive

Exhaust Flex Connectors, Annular Corrugated Stainless Steel Flexible

Hoses, Hose Assemblies and end Fittings, Solar power plant,

Gurgaon IT/ITES, automobiles, automobile parts, hardware, Sports goods, Rubber

products, Readymade Garments, Telecommunication Equipments, Food

items, Air Conditioners, Electrical Goods, Light Engineering Goods,

Pharmaceuticals, Footwear, Chemicals

Hisar Stainless Steel, Automobile Repair, Textiles, Handlooms, Pipes, Food

processing, Cotton Ginning and oil, Engineering components, Leather goods

Jhaggar Glass, Hardware, Somany Tiles, Parle Biscuits, Steel Pipes, Footwear.

Glazed Tiles, Sanitary Ware products.

Jind Agro based Industries, Sugar Mills, Live-Stock based Industries, Woollen

Blankets, Foundry

Karnal Textiles, Agro-Based Industries, Leather Products, Floriculture, Electronic

Motors, Wooden and Steel furniture

Kaithal Food Processing, Manufacture of Cycles, Clinical Laboratory

Thermometers and Water Pipefitting, Radio and Electrical good,

Fabrication of Cement Jallis, Soap and Candles

Kurukshetra Tourism, Plywood/board, Wooden/Steel Furniture, Metal clad Switches,

Nut bolts, Milk Chilling plant, Rigid PVC pipes, Glass Ampoules & Vials,

Jute Bags, Aluminum Utensils, Mono-block motors, Portable TV, Paint &

Contd....

100

Smocem, Submersible Pumps, Rotary Rigs, Carpets, PVC Water Tanks,

Inverters, Craft paper, Pharmaceutical Products, Paper Cones, Chlorinated

Paraffin Wax, Oxygen Gas & Mosquito Repellents

Mahendra

Garh

Marble Industry, Mini Cement Plants, Mineral Grinding Units, Slate

Cutting, RCC Spun pipe, Wire Netting, Mosaic Tiles, Marble/Granite

Cutting and Policy, Oil Expellors, Wooden Furniture.

Mewat Chemicals or Processing Industries, Tyre and Tube Industries, Cement

Industries, Two wheeler Industries

Palwal Textile Industries, Marble Industries, Concrete industries

Panchkula H.M.T., Electronic product, Tractor and Power Operated Agricultural

Implements.

Panipat Cotton Yarn, Staple Yarn, Terry Towels, Soft drinks, Hatcheries,

Handloom Goods, Foundry Products, Urea, Petrochemicals, Power,

Handloom, Power Loom, Dyeing/ Processing, Agro Based Industries,

Foundries, Textile Machinery, Nuts and Bolts

Rewari Cold Rolled Copper Brasses Sheets, Plates, Coils & Foils, Hero Honda,

Sony, YKK, Suraj Maltings, Exide, TVS, Anantraj Industries, National

Metal & Engg. Works, JGB Industries

Rohtak Pottery, Stone dressing, Leather Tanning, Handloom Weaving, Glass

Bangles, Phulkari, Utensil Making and Salt Making.

Sirsa Seed Processing, Wrapping Papers, Milk Chilling, Rice Shelling,

Chemicals, Iron and Steel Fabrication, Agriculture Implements, Leather

Goods, Hard and Straw Board.

Sonipat Atlas Bicycle and Hub of Mushroom Growers in the Country, Leather,

Pharmaceuticals Chemicals, Domestic Electrical Appliances, Herbal

products (Shampoo & Hair Dyes), Syrup and Tablet manufacturing.

Yamuna

Nagar

Metal industry, Sugar, Wood Based Industries, Cement, Steel, Stone

Crushing.

Source: Directorate of Industries, Haryana

101

India (Statistical Abstract of Haryana, 2009). Further, State has adopted a

farsighted industrial policy under which special incentives are offered to the agro

based, food processing, high tech and export oriented industries. Due to its

attractive industrial policy, Haryana is a favoured destination for foreign

investments. Haryana is known for its strong small scale industrial growth from a

modest 4,500 units in 1966-67, to 74298 units in 2008-09 (Directorate of

Industries, Haryana). Many of these small scale industrial units are equipped with

modern machinery and are engaged in manufacturing a wide range of motor cars,

motorcycles, agricultural implements, handlooms and textile items, kitchen

appliances, rubber and plastic products, hand tools and electrical and electronic

components. Haryana’s major exports are motor cars, motorcycles, bicycles, auto

parts, chemical and allied products, electrical and electronic goods, handlooms,

leather goods, rice, pickles, other agricultural products, scientific instruments

including laboratory equipment and manufactured garments. These products are

exported to more than 70 countries worldwide. In Haryana, the primary sector

contributes 22.2 percent, secondary 30 percent and tertiary sector 7.8 percent at

factor cost to Gross State Domestic Product at current prices in 2007-2008

(Economic Survey of Haryana, 2010). Table 4.2 shows the district-wise

distribution and types of industries in Haryana.

Comparative Growth Behaviour of Small Scale Industrial Sector

The growth of small scale industries in India during the last five decades

has been nothing short of a revolution. Consequent to its spectacular growth, the

small scale industrial sector has come to occupy a position of unique importance

in the national economy. Punjab and Haryana, two growing states of India, have

also achieved a phenomenal growth in the field of small scale industrial sector. At

the time of independence, composite Punjab had only a few hundred units

including food grains, processors cotton ginning and bricks kilns. But after

102

independence, especially after the reorganisation of Punjab and Haryana, their

development was carried out in phased manner. In 1960’s with the advent of green

revolution, resource based and foodgrain industries were encouraged and

agricultural implement industries came into existence in Punjab and Haryana. In

seventies, the main stress was on export based and sophisticated items, however,

in the 1980’s, importance was given to energy and agro based industries. But in

the Punjab state, the pace of industrial development received a setback due to the

disturbed conditions. After that in both the States, the growth pattern of small

scale industrial sector changed rapidly with the emergence of knowledge based,

pharmaceutical, services, information and technology industries etc.

The main industrial centres in the state of Punjab are Ludhiana, Jalandhar,

Amritsar, Mandi Gobindgarh, Batala and Mohali. Ludhiana is known for hosiery

and readymade garments, bicycle and bicycle’s components, sewing machine and

its parts, machine tools, auto parts, industrial fasteners, electrical and electronics

industries etc. Jalandhar is famous for hand tools, pipe fittings, valves and cocks,

rubber chappals and shoes, leather products, sports goods etc. Mandi Gobindgarh

popularly known as steel town of Punjab is having more 300 steel re-rolling mills

despite being situated at a place far from the natural resources. Batala is famous in

the country for production of machine tools, whereas, Amritsar is known for food

products, chemicals and chemical products, paper machinery and is also famous

for textiles. Mohali is presently known as a town of electronics and information

technology industry (State Industrial Profile, Punjab, 2001).

From a relatively backward and predominately agriculture dominated state

at the time of its formation in 1966, Haryana has steadily risen to its pre-eminent

position in the industrial sphere as well. Despite various constraints, small scale

industrial sector in the state has responded positively and plays an important role

by supplementing and complementing the large/medium industries. In Faridabad,

Ballabgarh, Sonepat and Gurgaon , this sector has played a vital role in ancillary

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development of tractors, automobiles, electrical and electronic goods,

hand/machine tools, bicycle accessories etc. Small scale industrial sector in

Yamunanagar, Jagadhri and Rewari have taken up stainless steel, aluminum and

brass utensils in a big way and earned a good name for the state not only in

national but in international market also. The same is the case with the small scale

instruments and manufacturers of mixer and grinders in Ambala, agricultural

implements in Karnal, textiles and handlooms in Panipat, Basmati rice in Karnal,

Kurukshetra and Kaithal and sanitary wares in Bahadurgarh. Many of these small

scale industrial units are today equipped with modern machines producing

qualitative products of international standards. It is to be added here, that 20

percent of the country’s total exports of scientific instruments is from the small

scale industrial units in Ambala. The small scale industrial units of Yamunanagar

meet 60 percent of demand of ammunition boxes of the country’s defence forces

and the units located in Panipat boast of supplying 75 percent of the total need of

the woolen blankets to the Indian army (State Industrial Profile, Haryana, 2001).

Haryana’s small scale industrial sector also enjoys the reputation of manufacturing

largest number of electrical mixies and gas stoves in the country, whereas, district

Karnal tops in the production of agriculture implements and tools in the country.

Section – II

The ongoing economic reforms in India started in 1991, with widespread

doubts and concern as to how these changes would effect the functioning and

sustenance of small scale industrial sector. In this context, present section aims to

assess the impact of economic reforms on the growth performance of small scale

industrial sector in India by making a comparative analysis of average annual

growth rates of units, production, employment and investment during pre reforms

and post reforms period. Since small scale industrial sector in India is diversified

in nature and comprises of tiny household enterprises on the one hand and modern

104

small scale industrial units on the other hand, therefore, it is imperative to analyse

the growth performance of above mentioned indicators so that this sector be made

sustainable in the post reform era.

Table 4.3 reveals that there has been a phenomenal growth of small scale

industrial units in India. It has been observed that total number of units increased

tremendously from a mere 3.18 lakhs in 1971-72 to 128.4 lakhs in 2006-07,

thereby, recording an overall growth rate of 11.81 percent per annum for the entire

study period. Further, small scale industrial sector is not genuinely small as the

word, and small scale industry in India has nothing to do with the scale of

operation. Small scale industrial units deliberately stay as small units by

fragmenting production, to avail of fiscal (excise) concessions and to stay outside

the purview of strict labour laws. It causes the low rate of graduation (small units

to medium units) and the high growth rate in terms of number of units in the

organised segment. Further, it has been observed that after the deregulatory

policies came into force, the growth rate of the total number of small scale

industrial units slipped to the level of 3.99 percent per annum in the post reforms

period from 11.10 percent per annum in the pre reforms period. The data reveals

that though in terms of total number of small scale industrial units there has been

an increase, yet in terms of growth rates deceleration has been noticed in the post

reforms period as compared to the pre reforms period. This deterioration in the

growth of number of small scale industrial sector units may partly be attributed to

the emergence of highly competitive environment in the wake of liberal entry of

multinationals, phasing out quantitative restrictions on imports, and lowering tariff

rates on imports.

On the production front small scale industrial sector plays a vital role as it

contributes almost 40 percent of the gross industrial value added in the Indian

economy. Table 4.4 provides information about the growth of small scale

industrial sector on production front at constant prices (base 1993 = 100) during

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TABLE 4.3

GROWTH OF UNITS IN INDIAN SMALL

SCALE INDUSTRIAL SECTOR

(Lakhs)

Year Units

1971-72 3.18

1972-73 3.62

1973-74 4.16

1974-75 4.98

1975-76 5.4

1976-77 5.92

1977-78 6.70

1978-79 7.34

1979-80 8.05

1980-81 8.74

1981-82 9.62

1982-83 10.59

1983-84 11.55

1984-85 12.40

1985-86 13.53

1986-87 14.62

1987-88 15.83

1988-89 17.12

1989-90 18.23

1990-91 67.90

Contd...

106

1991-92 70.60

1992-93 73.50

1993-94 76.50

1994-95 79.60

1995-96 82.80

1996-97 86.20

1997-98 89.70

1998-99 93.40

1999-00 97.20

2000-01 101.10

2001-02 105.20

2002-03 109.50

2003-04 114.00

2004-05 118.60

2005-06 123.40

2006-07 128.40

AAGR of Entire Period

(1971-72 to 2006-07)

11.81***

AAGR of Pre reforms Period

(1971-72 to 1990-91)

11.10 ***

AAGR of Post reforms Period

(1991-92 to 2006-07)

3.99***

Note: *** represents that coefficient is significant at 1 percent level of significance.

AAGR stands for Average Annual Growth Rate in Percent

Source: Author’s Calculations

107

TABLE 4.4

GROWTH RATES OF VALUE OF PRODUCTION IN INDIAN SMALL

SCALE INDUSTRIAL SECTOR

(Rs. Crore)

Year Production

1971-72 29800

1972-73 32000

1973-74 34200

1974-75 36100

1975-76 42500

1976-77 46800

1977-78 52800

1978-79 58200

1979-80 66400

1980-81 72200

1981-82 78300

1982-83 84700

1983-84 93500

1984-85 104600

1985-86 118100

1986-87 133600

1987-88 150500

1988-89 169900

1989-90 189900

1990-91 84728

Contd...

108

1991-92 87355

1992-93 92246

1993-94 98796

1994-95 108774

1995-96 121175

1996-97 134892

1997-98 146263

1998-99 157525

1999-00 170379

2000-01 184401

2001-02 282270

2002-03 306771

2003-04 336344

2004-05 372938

2005-06 418884

2006-07 473339


(1971-72 to 2006-07)

6.52***


(1971-72 to 1990-91)

9.15***


(1991-92 to 2006-07)

11.88***

Note: *** represents that coefficient is significant at 1 percent level of significance.


Source: Author’s Calculations

109

the period 1971-72 to 2006-07. It has been observed that the production of small

scale industrial sector rose to Rs. 473339 crore in 2006-07 from Rs. 29800 crore in

1971-72, thereby registering an average annual growth rate of 6.52 percent during

1971-72 to 2006-07, which is quite remarkable. However, the growth rate of

production at constant prices in the post reforms period has been found to have

increased by about 2.74 percent per annum i.e. from 9.15 percent in the pre

reforms period to 11.88 percent in the post reforms period. It is worth mentioning

that much of growth in the number of units is due to the changes in the definition

of the small scale undertaking from time to time and as a result, a good number of

erstwhile large and medium scale units shifted to the category of small scale

industrial sector. Thus, the growth rate of production at constant prices be

considered as a more reliable indicator of growth performance than the growth in

number of units.

The small scale industrial sector in India generates lot of employment

opportunities and has special significance because of its low investment

requirements. As per the census report of the year 2001-02, employment generated

by small scale industrial sector per Rs.1 Lakh investment was 1.39, while

employment generated by large scale industry was 0.35, implying that large scale

industry requires an investment of Rs. 3 lakh to generate employment for one

person whereas small scale industrial sector generates employment for four

persons with same investment. Thus, the small scale industrial sector provides four

times more employment with the same level of investment in large scale industrial

sector. In the manufacturing sector itself; small and decentralised sector

contributes about four-fifth of manufacturing sector employment in India. The

performance of small scale sector in generating employment opportunities is, thus,

really, a matter of great concern. Keeping in view the acute unemployment

problem in India, creation of employment opportunities would depend crucially on

the development of small scale industrial sector. It would be clear from the fact

110

that while employment in the industrial sector as a whole (large scale, medium

scale and small scale) increased by only 2.21 percent per annum over the period

1972 to 1987, whereas, employment in small scale sector grew at the rate of 5.45

percent per annum thus. Small scale industrial sector can play a crucial role in the

generation of employment opportunities in future also (Goldar, 1993).

The performance of small scale industrial sector of India on employment

front has been presented in Table 4.5. It has been observed that small scale

industrial sector absorbed 158.3 lakh workers in 1990-91 as against only 32.4 lakh

in 1971-72. The results indicate that employment in small scale industrial sector

grew at a rate of 7.46 percent per annum during the pre reforms period. However,

it has been noticed that small scale industrial sector engrossed 312.5 lakh workers

in 2006-07 in comparison to 1.66 lakh in 1991-92, therefore, the results indicate

that employment opportunities in this sector increased at rate of 4.15 percent in the

post reforms period. Further, employment in small scale industrial sector of India

grew at a rate of 6.53 percent per annum during the entire study period. Hence,

data reveals that though there is an increasing trend in terms of number of persons

provided employment, yet in terms of growth rate of employment, a decelerating

trend in employment generation has been observed since 1991. This is

corroborated by a fall in average annual growth rate of employment which

dropped from 7.46 percent per annum during 1971-72 to 1990-91 to 4.15 percent

per annum, during 1991-2007. Thus, on employment front, the reform process has

failed to augment the employment generation process in Indian small scale

industrial sector.

Table 4.6 provides information on fixed investment in small scale industrial

sector of India over the period 1971-72 to 2006-07. It has been noticed that fixed

investment has increased from Rs. 1678 crore 1971-72 to Rs. 93555 crore in 1990-

91 and the annual growth rate worked out to be 14.55 percent per annum.

111

TABLE 4.5

GROWTH OF EMPLOYMENT IN SMALL SCALE INDUSTRIAL

SECTOR OF INDIA

(Lakhs)

Year Employment

1971-72 32.4

1972-73 35.7

1973-74 39.7

1974-75 40.4

1975-76 45.9

1976-77 49.8

1977-78 54.0

1978-79 63.8

1979-80 67.0

1980-81 71.0

1981-82 75.0

1982-83 79.0

1983-84 84.2

1984-85 90.0

1985-86 96.0

1986-87 101.4

1987-88 107.0

1988-89 113.0

1989-90 119.6

1990-91 158.3

Contd...

112

1991-92 166.0

1992-93 174.8

1993-94 182.6

1994-95 191.4

1995-96 197.9

1996-97 205.9

1997-98 213.2

1998-99 220.6

1999-00 229.1

2000-01 240.9

2001-02 252.3

2002-03 263.7

2003-04 275.3

2004-05 287.6

2005-06 299.9

2006-07 312.5


(1971-72 to 2006-07)

6.53***


(1971-72 to 1990-91)

7.46***


(1991-92 to 2006-07)

4.15

Note: ***represents that coefficient is significant at 1 percent level of significance.


Source: Author’s Calculations.

113

TABLE 4.6

GROWTH OF INVESTMENT IN SMALL SCALE

INDUSTRIAL SECTOR OF INDIA

(Rs. Crore)

Year Fixed investment

1971-72 1678

1972-73 1937

1973-74 2296

1974-75 2697

1975-76 3204

1976-77 3553

1977-78 3959

1978-79 4431

1979-80 5540

1980-81 5850

1981-82 6280

1982-83 6000

1983-84 7360

1984-85 8380

1985-86 9585

1986-87 10975

1987-88 12621

1988-89 15229

1989-90 18196

1990-91 93555

Contd..

114

1991-92 100351

1992-93 109623

1993-94 115785

1994-95 123790

1995-96 125750

1996-97 130560

1997-98 133242

1998-99 135482

1999-00 139982

2000-01 146845

2001-02 154349

2002-03 162317

2003-04 170219

2004-05 178699

2005-06 188113

2006-07 192511


(1971-72 to 2006-07)

15.65***


(1971-72 to 1990-91)

14.55***


(1991-92 to 2006-07)

4.03***




115

However, during the post reform period it increased from Rs. 100351 crore

in 1990-91 to Rs. 192511 crore in 2006-07 with 4.03 percent growth rate per

annum. Hence the comparative analysis shows that the growth of investment

fallen by about 10.52 percent during the post reform period in comparison to pre

reform period. Moreover, a huge reduction in growth of investment is the major

reason behind the fall in employment opportunity in Indian small scale industrial

sector.

Thus, the comparative analysis of growth pattern of key parameters

between pre and post reforms periods reveals that reform process has failed to

influence the growth of small scale industrial sector in terms of number of units,

production (both at current and constant prices), and more importantly

employment in an impressive way. From the perspective of policy formulators, the

performance of small scale sector in generating employment opportunities can be

considered quite commendable. However, a fall in the growth rate of the number

of units and consequently a thinning down in the employment growth after reform

process is a matter of serious concern for the policy makers and planners.

Section – III

The biggest challenge confronting small scale industrial sector both at

national and regional level is not only to survive but also to grow and compete on

a sustainable basis. The small scale industrial sector fulfills the twin objectives of

growth and equity and a vital catalyst for development of growing states like

Punjab and Haryana. In this context, the present section analyses the impact of

economic reform process on the growth performance of small scale industrial

sector in Punjab and Haryana.

Table 4.7 shows trend of expansion in small scale industrial units in Punjab

and Haryana during the period of 1971-72 to 2006-2007. It has been observed that

number of small scale industrial units increased from 12795 to 191639 in Punjab

116

and 8250 to 72509 in Haryana during the entire period. Further, the comparison of

the growth rates of number of small scale industrial sector units in Punjab and

Haryana, shows that in Punjab it grow at the rate of 8.43 percent per annum in

comparison to 6.51 percent per annum in Haryana in the entire period, which

reflects that its growth rate in Punjab is faster than Haryana. The major reason of

slower growth rate in Haryana is closer of small scale industrial units from 1997

onwards. If we compare the growth rate of small scale industrial units in two sub

periods, it can be observed that during the pre reforms period growth rates in

Punjab and Haryana are 14.41 and 14.16 percent, respectively, whereas, during

post reform period, it has been observed that growth rate in both the states

declined drastically. Although, the growth rate of number of small scale industrial

units in Punjab is positive during post reform period, but less than unity, however,

a negative growth rate (-) 4.42 percent per annum was observed in Haryana.

Table 4.8 represents trends in the growth of output produced by Small

scale Industrial sector in Punjab and Haryana during the period of 1971-72 to

2006-07. It has been observed that the production of small scale industrial sector

of Punjab rose to Rs. 3327316 crore in 2006-07 from Rs. 30434 crore in 1971-72,

thereby registering an average annual growth rate of 13.77 percent per annum

which is quite remarkable. In case of Haryana production of small scale industrial

sector increases to Rs 509827 in 2006-07 from Rs 117420 in 1971-72, whereas

annual growth rate of production is 8.6 percent in the same period of time. Further,

the growth rate of production in small scale industrial sector during the post

reforms period in Punjab and Haryana increased by 9.53 percent and 4.83 percent

per annum respectively in comparison to growth rate of 16.62 percent and 14.85

percent per annum respectively in the pre reforms period. It has been observed that

growth rate of output in the two sub periods as well as in the entire period, in

Punjab is higher than that of Haryana but the growth of output in both the states

has decelerated during the post reforms period.

117

TABLE 4.7

TRENDS IN HORIZONTAL EXPANSION OF SMALL SCALE

INDUSTRIAL SECTOR IN PUNJAB AND HARYANA

Year Units in Punjab Units in Haryana

1971-72 12795 8250

1972-73 14308 9652

1973-74 16438 12447

1974-75 18114 12377

1975-76 20271 13069

1976-77 22298 14341

1977-78 24281 15209

1978-79 27509 17450

1979-80 33716 20761

1980-81 43338 26706

1981-82 54021 33901

1982-83 64901 41352

1983-84 76588 48810

1984-85 88271 56732

1985-86 97517 65200

1986-87 108913 74100

1987-88 119888 80100

1988-89 132962 86100

1989-90 146443 92405

1990-91 160368 98996

Contd..

118

1991-92 176378 106011

1992-93 181563 112481

1993-94 184875 119128

1994-95 188187 125775

1995-96 191025 131618

1996-97 193332 137111

1997-98 195383 92501

1998-99 197344 71899

1999-00 199071 73232

2000-01 200603 74170

2001-02 201736 74643

2002-03 202537 74962

2003-04 203224 72427

2004-05 203984 70326

2005-06 204522 71095

2006-07 191639 72509


(1971-72 to 2006-07)

8.43***

6.5***


(1971-72 to 1990-91)

14.41***

14.16***

AAGR of Post reforms

Period (1991-92 to 2006-07)

0.78***

-4.42***




119

TABLE 4.8

GROWTH RATES OF VALUE OF PRODUCTION IN SMALL SCALE

INDUSTRIAL SECTOR OF PUNJAB AND HARYANA

(Rs.Crore)

Year Production in Punjab Production in Haryana

1971-72 30434 117420

1972-73 36527 119346

1973-74 42472 120325

1974-75 48390 122370

1975-76 56757 136896

1976-77 633 145944

1977-78 70150 154584

1978-79 77881 163736

1979-80 92360 178881

1980-81 111844 186717

1981-82 134266 235073

1982-83 158552 278571

1983-84 178607 332028

1984-85 195792 370780

1985-86 215099 391800

1986-87 235864 444600

1987-88 268153 480600

1988-89 310859 516600

1989-90 350410 554430

1990-91 404984 503976

Contd..

120

1991-92 443745 636066

1992-93 534512 674886

1993-94 707495 714768

1994-95 873782 754650

1995-96 971394 789708

1996-97 1110622 822666

1997-98 1305774 555006

1998-99 1444448 431142

1999-00 1661085 439140

2000-01 1832450 444762

2001-02 20338.55 452116

2002-03 2252405 459401

2003-04 2498383 466250

2004-05 2847351 474604

2005-06 3087357 480694

2006-07 3327316 509827


(1971-72 to 2006-07)

13.77***

8.60***


(1971-72 to 1990-91)

16.62***

14.85***


(1991-92 to 2006-07)

9.53***

4.83***




121

Table 4.9 presented the trends in growth of employment in small scale

industrial sector of Punjab and Haryana and it can be seen that small scale

industrial sector of Punjab absorbed 938684 workers in 2006-07 as against 85176

workers in 1971-72. The result shows that annual growth rate of employment in

Punjab during the entire period is 7 percent per annum in comparison to 11.47

percent and 1.96 percent per annum during pre reforms and post reforms period.

However, in Haryana number of worker employed in small scale industrial sector

increased from 117420 in 1990-91 to 509827 workers in 2006-07. The results

shows that employment increased at the rate of 4.80 percent and 9.51 percent

during the entire period and pre reforms period, however, a negative growth rate

of employment has been observed to the tune of (-)3.53 percent during the post

reforms period indicating that reforms process adversely affected the employment

scenario in Haryana. The results showed that though there is an increasing trend in

terms of number of persons employed, yet in terms of growth rate of employment,

it is dismal. Thus, on employment front the reforms process has failed to augment

employment opportunities in the small scale industrial sector of Punjab and

Haryana.

Table 4.10 provides information on fixed investment in small scale

industrial sector of Punjab and Haryana over the period of 1971-72 to 2006-07. It

has been observed that fixed investment in Punjab has been increased from 77.94

crore 1971-72 to 1348.78 crore in 1990-91 at the growth rate of 15.2 percent per

annum. However, during the post reform period investment increased from

1348.78 crore in 1990-91 to 5502.94 crore in 2006-07 at the growth rate of

investment 9.27 percent per annum. Further, it has been observed that investment

growth rate in Punjab during the entire period is 12.42 percent per annum. Hence

the comparative analysis of growth of investment during the pre and post reform

122

period in Punjab reveals that the growth rate of investment fallen by about 6

percent during the post reform period in comparison to pre reform period. Thus,

the overall growth rate of 12.42 percent imitates that double digit growth rate in

the pre reform period is the major contributor in overall growth rate of small scale

industrial sector in Punjab.

In case of Haryana, it has been noticed that fixed investment has been

increased from 85.80 crore 1971-72 to 1962.95 crore in 2006-07. Further, the

annual growth rates of investment in small scale industrial sector of Haryana grow

at the rate of 7.91 percent per annum in the entire period in comparison to 16.81

percent and (-) 2.22 percent, per annum respectively during the pre and post

reforms period. Hence, the comparative analysis of growth of investment in

Haryana, during the pre and post reform period divulges that the rate of growth of

investment descended drastically during the post reforms period in comparison to

pre reforms period. However, during the pre reform period the growth of

investment in small scale industrial sector of Haryana is higher than that of Punjab

but during the post reform period inverted u-shape trend has been noticed in small

scale industrial sector of Haryana.

Thus, in both the states under study, the comparative analysis of growth

pattern of key parameters between pre and post reforms periods reveals that the

reform process has failed to influence the growth of small scale industrial sector in

terms of number of units, production, employment and investment. However small

scale industrial sector of Punjab dominates the small scale industrial sector of

Haryana in terms of number of units, employment, investment, and production,

therefore, appropriate policy packages must be designed to rehabilitate the small scale

industrial units in both the states so that they can meet the challenges of globalisation.

123

TABLE 4.9

EMPLOYMENT GROWTH IN SMALL SCALE

INDUSTRIAL SECTOR OF PUNJAB AND HARYANA

Year Employment

Punjab

Employment

Haryana

1971-72 85176 117420

1972-73 92217 119346

1973-74 111419 120325

1974-75 122162 122370

1975-76 136334 136896

1976-77 152638 145944

1977-78 163134 154584

1978-79 186197 163736

1979-80 223979 178881

1980-81 264869 186717

1981-82 304155 235073

1982-83 339972 278571

1983-84 378846 332028

1984-85 424478 370780

1985-86 464809 391800

1986-87 503397 444600

1987-88 545560 480600

1988-89 594354 516600

1989-90 633964 554430

1990-91 668845 503976

Contd..

124

1991-92 711417 636066

1992-93 732580 674886

1993-94 755883 714768

1994-95 777070 754650

1995-96 802329 789708

1996-97 821170 822666

1997-98 840568 555006

1998-99 864592 431142

1999-00 883005 439140

2000-01 897642 444762

2001-02 909266 452116

2002-03 920077 459401

2003-04 930036 466250

2004-05 943664 474604

2005-06 951318 480694

2006-07 938684 509827


(1971-72 to 2006-07)

7.00***

4.80***


(1971-72 to 1990-91)

11.47***

9.51***


(1991-92 to 2006-07)

1.96***

(-) 3.53***




125

TABLE 4.10

TRENDS IN GROWTH OF INVESTMENT IN SMALL SCALE

INDUSTRIAL SECTORS OF PUNJAB AND HARYANA

(Rs. crore)

Year Investment in

Punjab

Investment in

Haryana

1971-72 77.94 85.80

1972-73 100.24 107.81

1973-74 118.26 149.36

1974-75 133.91 157.19

1975-76 153.35 176.43

1976-77 169.21 205.08

1977-78 194.72 229.66

1978-79 224.54 277.46

1979-80 272.73 344.46

1980-81 332.12 469.68

1981-82 401.63 613.61

1982-83 491.71 781.55

1983-84 571.96 956.68

1984-85 656.31 1107.33

1985-86 738.94 1142.75

1986-87 830.02 1296.75

1987-88 943.49 1401.75

1988-89 1084.21 1506.75

1989-90 1217.72 1617.09

1990-91 1348.78 1732.43

Contd..

126

1991-92 1498.8 1851.90

1992-93 1620.98 1968.42

1993-94 1763.61 2084.74

1994-95 1981.35 2201.06

1995-96 2216.16 2303.31

1996-97 2491.33 2399.94

1997-98 2859.99 1618.77

1998-99 3360.67 1257.50

1999-00 3793.62 1280.83

2000-01 4109.14 1297.22

2001-02 4373.79 1359.43

2002-03 4641.39 1421.49

2003-04 4815.91 1509.25

2004-05 4973.06 1584.41

2005-06 5105.79 1604.71

2006-07 5502.94 1962.95


(1971-72 to 2006-07)

12.42***

7.91***


(1971-72 to 1990-91)

15.20***

16.81***


(1991-92 to 2006-07)

9.27***

(-) 2.22***




127

Section – IV

Small scale industrial sector is a major contributor to production, export

and employment, therefore, it becomes imperative to study its growth performance

in the post reforms period. In light of this view a comparative analysis of average

annual growth rates for the pre and post reform periods has been carried out for

the key parameters like number of units, production, employment and fixed

investment. The analysis shows Liberalisation, privatisation and globalisation

have failed to mark a significant dent on small scale industrial performance. The

impact of economic reforms on all these indicators has not been as encouraging as

expected and thus reflects that it has failed to contribute much towards the growth

of small scale industrial sector in Punjab, Haryana vis-a-vis India. The analysis

reveals that though in terms of absolute number, units have been increase, yet in

terms of growth rate, deceleration has been noticed in the post reforms period as

compared to the pre reforms period at national as well as regional level. The fall in

the growth rate of the number of units has been observed in small scale industrial

sector and this may partly be attributed to the emergence of highly competitive

environment in the wake of liberal entry of multinationals, phasing out of

quantitative restrictions on imports, and lowering of tariff rates on imports.

The comparison of the growth rates of number of small scale industrial

sector units in Punjab, Haryana vis-a-vis All India, shows that at All India level it

grew at the rate of 11.81 percent per annum in comparison to 8.43 percent per

annum in Punjab and 6.51 percent per annum in Haryana in the entire period.

Further, in the pre reforms period it grew by 11.10 percent at All India level and

14.41 percent, 14.16 percent in Punjab and Haryana respectively. However, in the

post reforms period it declined to 3.99 percent at All India level, 0.78 percent in

Punjab and (-) 4.42 percent in Haryana. The growth rate of production in the post

reforms period at All India level increases by 11.88 percent per annum in

comparison to growth rate of 9.15 percent in the pre reforms period, whereas, in

128

Punjab and Haryana in post reform period, it increases by 9.53 percent and 4.83

percent per annum respectively in comparison to growth rate of 16.62 percent and

14.84 percent per annum respectively in the pre-reforms period. Further, the

analysis reveals that there exist 6.53 percent, 13.77 percent and 8.60 percent, annual

growth rate of production at All India, Punjab and Haryana respectively during the

entire period. It has been observed that growth rate of output in Punjab in the two

sub periods and in the entire period under study is higher than that of Haryana.

With regard to employment, the study reveals that though there has been an

increase in the absolute number of employed in small scale industrial sector of

India, yet in terms of growth of employment, a decelerating trend in employment

generation has been observed since 1991. The results shows that annual growth

rate of employment increased at the rate of 6.53 percent, 7.46 percent and 4.15

percent per annum during the entire period, pre reforms and post reforms period

respectively at All India level. However, in Punjab and Haryana, a decelerating

trend in employment has been exhibited since 1991. The annual growth rate of

employment in Punjab during the entire period was 7 percent per annum in

comparison to 11.47 percent and 1.96 percent per annum during pre reforms and

post reforms period. In case of Haryana, reforms process adversely affected the

employment scenario. The results showed that employment increased at the rate of

4.80 percent and 9.51 percent during the entire period and pre reforms period,

however, a negative growth rate of employment has been observed to the tune of

(-)3.53 percent during the post reforms period. Thus, on employment front the

reforms process has failed to augment employment opportunities in the small scale

industrial sector both at national and regional level.

The comparison of the growth rates of investment in small scale industrial

sector of Punjab, Haryana vis-a-vis All India, shows that at All India level it grew

at the rate of 15.65 percent per annum in comparison to 12.42 percent per annum

in Punjab and 7.91 percent per annum in Haryana during the entire period. Further,

129

it has been observe that investment growth rate in pre reforms period were 15.20

percent per annum, 16.81 percent per annum and 14.55 percent per annum,

respectively in Punjab, Haryana and at All India level whereas, in post reforms

period it declines to 9.27 percent per annum, (-) 2.22 percent per annum and 4.03

percent per annum respectively in Punjab, Haryana and at All India level.

Hence, economic reforms and liberalisation process fails to bring

significant improvement in the performance of small scale industrial sector in

terms of number of units, employment, production and fixed investment in Punjab,

Haryana and at All India level. From the perspective of policy formulators, the

role of this sector in generating employment opportunities can be considered quite

laudable, however, a thinning down in employment growth after reform process is

a matter of serious concern for the planners and policy makers. Moreover, with the

slowing down of some of the major economies of the world and ever increasing

competition from Chinese economies, some corrective steps are required on the

part of the Centre and State governments to make this sector vulnerable.

Therefore, technologically vibrant and internationally competitive small scale

industrial sector needs to be encouraged to make it sustainable both at the national

and regional level in the reformed era.

************

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