Role of Small Scale Industries in Globalisation Era - vsrd ...

Available ONLINE www.visualsoftindia.com/journal.html 

VSRD-IJBMR, Vol. 1 (1), 2011, 64-70 

R E S E A R C H L E T T E R 

Role of Small Scale Industries in Globalisation Era 

1 Santosh Kr. Pandey* and 2 Pankaj Kant Dixit 

ABSTRACT 

Globalization refers to the process of integration of the world into one huge market. It provides several things to 

several people with removal of all trade barriers among countries. Globalization happens through three 

channels: trade in goods & services, movement of capital and flow of finance. Globalization in India is generally 

taken to mean ‘integrating’ the economy of the country with the world economy. The real thrust to the 

globalization process was provided by the new economic policy introduced by the Government of India in July 

1991 at the behest of the IMF and the World Bank. Globalization has led to an ‘Unequal Competition’- a 

competition between ‘giant MNC’s and dwarf Indian enterprises’. The small scale sector is a vital constituent of 

overall industrial sector of the country. The small scale sector forms a dominant part of Indian industry and 

contributing to a significant proportion of production, exports and employment. Therefore, the present study 

analyzes the impact of globalization on Indian Small Scale Industries. The main theme of the paper is to 

evaluate the performance of SSI, before and after liberalization and compare them with average annual growth 

rates, to know their impact of Globalization on the performance of SSI. The period of the study is 1973-2007 

and based on secondary information. 

Keywords : Globalization, Small Scale Industries, Exponential Growth, Production, No. of Units, Export and 

Employment. 

1. INTRODUCTION 

Globalization signifies a process of internationalization plus liberalization, in which the world has become a 

small village due to the concept of globalization. The competition has become intense in every field. Nations 

fight with game plan to sustain their economy, by introducing new policies and announcing incentives to 

support mainly their economic- indicators. After the world economy was open to attack, the Indian economy has 

initiate to concentrate on the development of small industrial base, which had contribute positively to the 

India’s GDP; India’s GDP growth is better than other developing countries with the developed small industrial 

____________________________ 

1 Assistant Professor, 2 Professor, 12 Department of Management, AXIS Institute of Planning & Management, Kanpur, Uttar 

Pradesh, INDIA. *Correspondence : skp_4588@yahoo.co.in

Santosh Kr. Pandey et. al / VSRD International Journal of Business & Management Research Vol. 1 (1), 2011 

sector. 

In order to impart more vitality and growth to small scale sector, a separate policy statement has been 

announced for small, tiny and village enterprises on 6thAugust, 1991. This policy statement was a leap-forward 

because it was the first time that Government had issued a separate policy statement for the small and 

decentralized sector. In the past, small scale sector merited only two or three paragraphs in the more general 

industrial policy statements. The fact that Government considered it necessary to make a separate policy 

statement for small enterprises was a welcome recognition to the dynamic and vibrant nature of the sector. This 

policy statement proposed some path-breaking measures to mitigate the handicaps that were faced up by small 

enterprises in respect. Government of India introduced a large number of innovative promotional measures to 

uplift the growth of small scale sector. Major features of the Small Industrial policy of 1991: 

1. Emphasis to shift from cheap credit to adequate credit. 

2. Equity participation by other undertakings (both domestic and foreign) upto 24 percent. 

3. Introducing of factoring services by banks. 

4. Marketing of mass consumption goods under common brand name. 

5. Setting up of sub- contracting exchanges. 

6. Establishment of technology development cell. 

7. Opening of quality counselling and technology information centres. 

8. New technology up gradation programmes. 

2. WHAT IS GLOBALIZATION? 

Globalization refers to an advanced stage of development where capital, technology, labour, raw materials, 

information and transportation, distribution and marketing are integrated or interdependent on a globe scale. 

This gives rise to the economy that works as a unit in real time on a planetary basis (Kuper and Kuper, 1996: 

345-46). Thus, globalization is a "process" of integration with the world economy; liberalization is the "means" 

of such a process and growth is the "end" of both liberalization and globalization (Shrestha, 1999: 170). 

Globalization is not a new phenomenon. In the immediate post-World War-II period, globalization was mainly 

driven by rapid growth in foreign trade while in the 1950s and 1960s, foreign direct investment (FDI) started to 

play an increasingly important role in this process. Over the last three decades and based on a global trend of 

trade and investment liberalization, the world economy has evolved into a highly integrated system. Today, 

globalization involves numerous features, but the following three seem to be the main engine driving global 

economic integration: 

a) Internationalization of production accompanied by changes in the structure of production 

b) Expansion of international trade in trade and services, and 

Page 65 of 70


c) Widening and deepening of international capital flows. 

3. FOREIGN TRADE GLOBALIZATION 

Foreign trade Globalization opens the economic borders of the countries and emphasizes to remove the trade 

barriers and curtail in import tariffs of the countries. In the context of globalization and being the member of 

WTO, the member should not discriminate the foreign product. The countries with the comparative advantages 

in the products can be benefited. But, in Nepal the trade balance is worsening year by year. Export is shrinking 

and import has been expanding nowadays. The trade deficit has been widened and the import/export ratio is 

about 3:1. The trade dependency has been significantly increasing with India comprising 61 percent of total 

volume of trade in fiscal year 2008/09 (Economic Survey, 2009/10). 

4. PRIVATIZATION AND INDUSTRIAL GROWTH 

Globalization always favors private sectors. Privatization and less role of state in business activities can increase 

the quality and working efficiency. It reduces the government burden on unnecessary economic activities and 

budget deficit. In Nepal, Privatization Act, 1993 has been introduced and 27 public enterprises have been 

privatized till the date. But, most of the privatized enterprises have not run efficiently, some have already been 

closed down. The process has somehow become irrational in Nepal. Globalization and liberalization in the 

industrial sector has negligible impact on industrial growth in Nepal. Manufacturing sector only contributes 7-8 

percent in GDP. In general, the private sector in Nepal has a trade-oriented character rather than an industrial 

character and hence it is reluctant to bear high risks. It seeks to harvest larger profits from a short period 

investment, often through small amount of share capital and big volume of institutional loans. Secondly, the 

private sector is in the form of family groups that has recently taken a shape of 'Business Houses'. 

5. PERFORMANCE OF SMALL SCALE INDUSTRIES IN THE GLOBALIZATION ERA 

SSI is considered as the backbone of the private sector all over the world, which assures their role in production, 

employment and sales. In addition to their role in economic development they play a vital role in social, 

political, and cultural development as well. However, the notable spread of SSI contributed to the increased 

severity of competition between these industries that often leads to the failure of these industries. Most SSI fail 

during the first year of establishment, and 90% of these industries are subject to failure during a period not 

exceeding their first 5 years. On the other side, the Mexican experience illustrates of the 200,000 small projects 

entering the market annually, no more than 70,000 projects continue in the market by the second year 

(Bencivenga, V. Bruce, S. and Starr,R. 1995). The relative importance of the SSIs in Jordan (1990-2006) 

Year No. of SSIs No. of All Industries Relative Importance 

1990 52496 58984 89% 

1991 54696 61388 89% 

1992 64752 74369 87% 



1993 66160 75920 87% 

1994 66100 80363 81% 

1995 74896 91520 82% 

1996 76468 93432 82% 

1997 78580 95856 82% 

1998 81856 98768 83% 

1999 92923 109532 84% 

2000 106730 118271 90% 

2001 103753 115820 89% 

2002 105662 118492 89% 

2003 130149 140338 92% 

2004 126196 141944 88% 

2005 132166 145699 90% 

2006 135732 150222 90% 

Source: Department of Statistics, Yearly Statistical Bulletins, Various Issues. 

As shown in table the number of the SSI increased from 52496 projects in 1990 to 135732 projects in 2006. 

These numbers illustrates the relative importance of the number of SSI of the total number of industries in 

Jordan is more than 80%. The SSI was distributed in Jordan into three districts as follows (Department of 

Statistics 2005): 

The northern district: 22% of the total small scale industries in Jordan. 

The middle district: 68% of the total small scale industries in Jordan. 

The southern district: 10% of the total small scale industries in Jordan. 

Furthermore, discrepancy in the relative importance of the spread of the SSI in the districts can be attributed to 

many factors. The most important factor is the demographic distribution that characterizes Jordan's districts, as 

well as to the nature of the concentration of the economic activities in these districts. However, the geographic 

distribution of the spread of the SSI may not relate to other economic indicators, but it is possible to accept it as 

an indicator to express the strength of most of these indicators in favor of the middle district. On the other hand, 



the lack of data and information about the geographic distribution of all the economic and social indicators 

concerning the SSI – such as investment , employment , production , sales …..etc. - led to making the analysis 

inclusive for all of Jordan without dealing with details at the district level. 

6. CONCLUSION 

The findings of this study revealed: 

1- Generally, the SSI plays an important role in achieving social and economic development. The average 

invested capital in these industries reached 4.8% of the total invested capital in all industries, during the period 

1990-2006. Also, the SSI provided 22% of the total job opportunities and contributed in achieving nearly 8.5% 

of the total value added. Lastly, their share of the total sales in the industrial sector was 4.8%, and most of the 

sales were in the domestic market. 

2- Despite the positive effects of the SSI in the Jordanian economy, the SSI still suffer from many weaknesses 

such as low average employment of women which is due to the socioculture. The percentage of women working 

in the SSI was only 1.7%. Also, the percentage of foreign labor in the SSI is relatively high. 

3- The financial institutions are characterized by their wide spread. There are 17 banks providing finance for this 

category of industry and more than 24 programs have been accredited. Some programs are oriented towards a 

specific age category such as youths, and some institutional activities are exclusively for specific district or 

specific geographic regions. 

4- There is an increase in the productivity of labor in the SSI, which indicates that the training programs directed 

towards these industries have increased. 

5- Increasing the investment in SSI by 1% lead to an increase of the value added by 0.78%, production growth 

by 0.81%, and employment by 0.67%. 

6- All the results of the statistical analysis of the SSI were statistically acceptable and no differences were 

noticed between the effect of SSI and other industries on the economic development of the Jordanian economy. 

7- Marketing has been identified as one of the major problem areas of the small scaleindustries and it has been 

ranked as the second most important reason for the closure ofsmall scale businesses. Accordingly, small firms 

will not be able to penetrate markets, national or international, even if marketing support is given by government 

agencies. 

7. RECOMMENDATIONS 

Based on this study's analysis and results, the following recommendations may contribute to increasing the role 

of development of SSI in the Jordanian economy. 

1- Establishing government centers in all districts in Jordan to provide the needed services and facilities to SSI 

in order to increase their role in the economic development of the Jordanian economy. 



2- Establishing specialized training centers for SSI to provide special training programs on how to establish a 

project and how to maintain the continuity of that project. 

3- Fostering technology development through either technology transfer or technological innovations or interfirm 

linkages should be emphasized in the light of dimensions of global competition and its negative fall out as 

well as positive opportunities, to SSIs entrepreneurs through seminars and workshops, at the local level. 

4- The financial infrastructure is needs, and an adequate inflow of credit to the sector should be ensured, taking 

into consideration the growing investment demands including the requirements of technological transformation. 

5- Limiting the establishment of small scale industries to designated industrial areas for better monitoring and 

periodic surveys, enabling the Ministry of Industry to make policy corrections from time to time 

6- Establishing strong relations between small and large firms. One of the major objectives of this scheme 

would be to provide reliable information by large-scale industries to the smallscale industries about new 

methods of marketing and how to participate in the international market. 

7- Increasing exports of smallscale industries with governmental aid by exhibiting their productions in 

International Exhibitions. 

8- To reap the benefits of SSI, Jordanian policy and decision makers have to enact and enforce the employment 

of Jordanian workers in the SSI. 

9- It is highly recommended that Jordanian policy and decision makers to work in cooperation with other 

interest groups to train and encourage SSI to employ more Jordanians women. It is obvious that a large portion 

of unemployed in Jordan is among women. 

8. REFERENCES 

[1] Smith, A. (1998), Training and Development in Australia. 2nd ed. 261. Sydney: Butterworths. 

[2] Richard Arvid Johnson. Management, systems, and society : an introduction. Pacific Palisades, Calif.: 

Goodyear Pub. Co.. 

[3] Richard Beckhard (1969). Organization development: strategies and models. Reading, Mass.: Addison- 

Wesley. pp. 114. I 

[4] Wendell L French; Cecil Bell. Organization development: behavioral science interventions for organization 

improvement. Englewood Cliffs, N.J.: Prentice-Hall. 

[5] Weisbord, Marvin. (1987). Productive Workplace: Organizing and managing for dignity, meaning and 

community. Jossey-Bass Publishers, San Francisco. 

[6] Richard Arvid Johnson (1976). Management, systems, and society : an introduction. Pacific Palisades, 

Calif.: Goodyear Pub. Co.. pp. 

[7] Bradford, D.L. & Burke, W.W. eds, (2005). Organization Development. San Francisco: Pfeiffer. 

[8] Bradford, D.L. & Burke, W.W.(eds), 2005, Reinventing Organization Development. San Francisco: 

Pfeiffer. 

[9] deKler, M. (2007). Healing emotional trauma in organizations: An O.D. Framework and case study. 



Organizational Development Journal 

[10] Kurt Lewin (1958). Group Decision and Social Change. New York: Holt, Rinehart and Winston. 

[11] Richard Arvid Johnson (1976). Management, systems, and society: an introduction. Pacific Palisades, 

Calif.: Goodyear Pub. Co.. 

[12] Wendell L French; Cecil Bell (1973). Organization development: behavioral science interventions for 

organization improvement. Englewood Cliffs, N.J.: Prentice-Hall.

Role of Small Scale Industries in Globalisation Era - vsrd ...

Create successful ePaper yourself

Delete template?

Save as template?