Realising potential of SMEs

The holding of a small and medium enterprise (SME) fair for the fifth time this year since its introduction in 2002 cannot help giving a mixed feeling. Clearly the fair could not be arranged every year -a testament to the fact that despite its formal recognition as a thriving sector, not enough could be done to diversify it for realisation of its full potential. In fact, an overriding focus on the country's garments industry was responsible for this. Even today when this service sector is bearing the brunt of global economic meltdown, the kind of bold policy shift needed to adapt to the changing economic realities is not forthcoming. Whether it concerns textile products or materials for knitwear, the country's dependence on import instead of a revamped textile industry always makes the position of garments industry here somewhat vulnerable. Some of the raw materials cannot be produced locally for understandable reasons but then given the seriousness of purpose its backward linkage industries could be developed. Not that nothing has been done in this regard but the little that has been accomplished is far too inadequate to withstand any sudden trade upheaval. Nor there is any wisdom to depend on one manufacturing sector. Quantity-wise about 90 per cent of all industrial units fall into the SMEs category, generating 80 per cent of industrial employment. This is a cause for both celebration and concern. Celebration because, the main component of the SMEs, apparel industry employs 80 per cent of its workforce from among women; but it is a concern because the majority of employees are at the very low end of employment drawing a pittance for mere survival. This and the economic compulsion arising out of challenges from the point of view of a fast changing global economic order, first of all, to the need for diversification of SMEs and value addition to both labour and products. Larger investment, infrastructure development, skill development and introduction of compatible technologies can certainly catapult a number of small industries such as leather industry from the primitive mode of production to an advanced one. Based mostly outside the capital and other metropolitan cities, the SMEs moreover have the advantage of stopping rural migration towards cities. Some of the agro-businesses have expanded their manufacturing networks up to the level of growers, making the role of middlemen redundant. This is a positive development and farmers will be assured of a better price if productive units of different brands compete for the required produces. Service providers under the information, communication and technology (ICT) need no concentration in the city centres; they would be far better off to develop their skill and efficiency if separate industrial parks are established with all kinds of support system. Such non-traditional areas leave enough room for expansion as do a few of the proven areas like light engineering. Some private entrepreneurs have proved that in areas of solar power, cable manufacture and plastic units, the ventures can be quite profitable. What is important is that developed in a planned way, they can act as one another's backward linkage sectors. And this remains at the root of robust economic growth of a country like China.