Monday, October 13, 2008

SMALL SCALE INDUSTRIES IN INDIA

SMALL SCALE INDUSTRIES IN INDIA
Since the time of independence, the small-scale sector in India has been a major contributor to country’s Gross Domestic Product (GDP). This traditional sector in India is considered to have huge growth prospect with its wide range of products. With 40 percent share in total industrial output and 35 percent share in exports, the small-scale industrial sector in India is acting as Engine of Growth in the new millennium. The definition for small-scale industrial undertakings has changed over time. Initially they were classified into two categories- those using power with less than 50 employees and those not using power with the employee strength being more than 50 but less than 100. However the capital resources invested on plant and machinery buildings have been the primary criteria to differentiate the small-scale industries from the large and medium scale industries. An industrial unit can be categorized as a small- scale unit if it fulfils the capital investment limit fixed by the Government of India for the small-scale sector.
As per the latest definition which is effective since December 21, 1999, for any industrial unit to be regarded as Small Scale Industrial unit the following condition is to be satisfied, Investment in fixed assets like plants and equipments either held on ownership terms on lease or on hire purchase should not be more than Rs 10 million. However the unit in no way can be owned or controlled or ancillary of any other industrial unit. The traditional small-scale industries clearly differ from their modern counterparts in many respects. The traditional units are highly labor consuming with their age-old 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. Nowadays 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 modern Small-scale 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.
India's immensely traditional and cultural past is instrumental for its vast textile heritage, where each state (and sometimes districts) of India has its own unique native costume and traditional attire. While traditional clothes are still worn in most of rural India, urban India is catching on to global trends fast. Fashion in India is still in its nascent stage and has not quite evolved like the more fashion industry in European countries. However India and Indian fashion has captured the imagination of all, the world over. From bindis to mehendi to kurtis and chikan kaari India is the new IT. Fashion in India is a growing industry with international events such as the India Fashion Week and annual shows by fashion designers in the major cities of India. The victories of a number of Indian beauty queens in International events such as the Miss World and Miss Universe contests have also made Indian models recognized worldwide. Fashion designers such as Ritu Kumar, Ritu Beri, Rohit Bal, Rina Dhaka, Muzaffar Ali, Satya Paul, Abraham and Thakore, Tarun Tahiliani, JJ Valaya and Manish Malhotra are some of the well known fashion designers in India.
Despite the brouhaha about the Indian fashion industry the media attention on the Indian fashion garments has not actually translated to tangible returns.The Lakme-sponsored India Fashion Week (IFW), held in April this year hailed of good looks, glamour and glitz in the fast-changing world of the Rs20, 000-crore Indian apparel industry. As the most important event of the Indian fashion industry, the economic prospects, revenues and profitability proffered by such an event need to be evaluated.The first IFW was orchestrated by the Fashion Design Council of India (FDCI) in August 2000. Ever since, the event not only exhibits the work of Indian designers but also promotes the fashion industry at large, within the country and overseas. The end of the quota regime as on January 1, 2005, signifies brightened vistas for the Indian apparel industry. A quota-free era forebodes growth in the textile business for countries such as India and its larger rival China. Both countries are one of the forerunners in the world garment and textile market. The quota regime limited free export of materials and garments from the developing countries, and provide a rather unfair edge to the developed ones, such as the US. The multi-fiber agreement (MFA) designed to protect textile producers in the industrial West from being swamped by low cost suppliers of the developing countries. The regime resulted in unfair trade practices, such as hoarding of licenses for quotas and their eventual sale in the black market, dumping, and exporting goods of inferior quality to meet contractual obligations. Thus there was little or no incentive for the manufacturers to upgrade and improve either their products or manufacturing processes.
The World Trade Organization Agreement on Textiles and Clothing (ATC) concluded the quota regime on January 1, 2005. The ATC is designated to incorporate the textile sector into the mainstream of multilateral rules, as applicable to other sectors. The end of the quota regime signifies the potential for widespread growth for the fashion industries of all the countries that had faced quota restrictions earlier. The Indian fashion industry has an edge over other countries as far as its growth prospects are concerned. The Indian textile industry clearly has many advantages. India is one of the biggest cotton producers in the world, it has a huge market, which creates the opportunity to exploit economies of scale, it has cheap skilled labor, and it has plenty of design skills. Still, the country's garment industry suffers from many structural weaknesses, unlike China's. Till some time ago Indian law decreed that garment manufacturing should remain a small-scale activity. The consequence: even today 80 per cent of the country's garment makers operate from tiny outfits with less than 20 machines per unit. A 2003 survey by the Confederation of Indian Industry, Introspecting Competitiveness of the Textile Sector, revealed that only 20 per cent of the manufacturers in the Rs28, 000 crore garment sector (with seven million workers) constitute the organized sector. Currently, three-fourths of the readymade garment exports, according to CMAI, are to the quota countries.
India is the third-largest cotton producing country in the world and also possesses an abundance of talented designers. Yet, the potential of the country's fashion industry remain unrealized. A study conducted by the management consultants KPMG expects the Indian fashion industry to grow from its current net worth of Rs180 crore to Rs1,000 crore within the next decade. Currently, the global designer wear market is estimated at $35 billion, with a 9 per cent growth rate. The Indian fashion industry contributes a mere 0.1 per cent of the international industry's net worth. According to estimates, the total apparel market in India is estimated at around Rs20, 000 crore. The branded apparel market's size is about a fourth of this at about Rs5, 000 crore. Designer wear, in turn, comprises just about 0.2 per cent of the branded apparel market.
The highest sales turnover within the designer wear segment currently is Rs25 crore, with other established names having smaller returns of Rs10-15 crore. Considering the potential of the Indian fashion industry for growth, the figures are not particularly favorable.
Small Scale Industries may sound small but actually plays a very important part in the overall growth of an economy. Small Scale Industries can be characterized by the unique feature of labor intensiveness. The total number of people employed in this industry has been calculated to be near about one crore and ninety lakhs in India, the main proponents of Small scale industries.

The importance of this industry increases manifold due to the immense employment generating potential. The countries which are characterized by acute unemployment problem especially put emphasis on the model of Small Scale Industries. It has been observed that India along with the countries in the Indian continent have gone long strides in this field.
Advantages associated with Small Scale Industries
This industry is especially specialized in the production of consumer commodities.
Small scale industries can be characterized with the special feature of adopting the labor intensive approach for commodity production. As these industries lack capital, so they utilize the labor power for the production of goods. The main advantage of such a process lies in the absorption of the surplus amount of labor in the economy who were not being absorbed by the large and capital intensive industries. This, in turn, helps the system in scaling down the extent of unemployment as well as poverty.It has been empirically proved all over the world that Small Scale Industries are adept in distributing national income in more efficient and equitable manner among the various participants in the process of good production than their medium or larger counterparts. Small Scale Industries help the economy in promoting balanced development of industries across all the regions of the economy. This industry helps the various sections of the society to hone their skills required for entrepreneurship. Small Scale Industries act as an essential medium for the efficient utilization of the skills as well as resources available locally.
Small Scale Industries enjoy a lot of help and encouragement from the government through protecting these industries from the direct competition of the large scale ones, provision of subsidies in the form of capital, lenient tax structure for this industry and many more.World stock markets explained, for large and small investors, including a discussion of securities, derivatives, and the general exchange of stocks around the globe. The importance and reach of stock markets and exchanges is as broad as it is extensive. The major areas global stock markets deal with are listed company stocks, as well as securities and derivatives. Company stocks are included in the list of the stock exchanges, and are freely traded in stock markets around the world. Around the world, business organizations, small to large investors, financial organizations, and governments of different nations are all major participants in stock market trading activities. For the business enterprises, corporations, and governments, the world stock markets constitute one of the major sources of funding – as well as being an openly visible indicator to investors with regards to the financial health of the business. Business entities that take part in stock market activities issue securities that may then be sold to the public. Capital is collected in this way, and these funds are primarily used for the expansion of a company’s business operations. The volume of transactions in any stock market depends on the liquidity of that particular market. Together, the performance of all the world’s stock markets is directly responsible for a significant amount of the world’s economic condition – whether it be healthy, ailing, or trending sideways. In general, stock market growth is a leading indicator that the state of an economy is flourishing, while declining trends indicate of economic slowdown. Commentators suggest that stock markets often predict what will happen in the economy of that country around six months later. Among the major stock exchanges of the world are the New York Stock Exchange (NYSE), the NASDAQ, the London Stock Exchange, the Bombay Stock Exchange, the Toronto Stock Exchange, the Hong Kong Stock Exchange, the Australian Stock Exchange, and the Euronext, among others. Stock symbols, popularly known as ticker symbols, are used to differentiate stocks of different business organizations listed in the stock exchanges of the world. The companies listed in the New York Stock Exchange are presented by three characters; whereas four letter symbols are used to represent the companies listed in the NASDAQ exchange. Participants in the stock market are institutions, and stock market operations may either be real, or virtual. If a stock exchange has a physical location it may execute stock trading through a process known as open outcry. Here, the stock prices are fixed by verbal bids. On the other hand, the buying and selling of stocks in many markets takes place over through closed computer networks or the internet. These are known as virtual stock exchanges. The world’s stock markets also serve as a ‘clearing house’ for stock trading activities. This financial market performs the role of a mediator for transferring the securities issued by a particular company to the prospective buyers. In this process, it also ensures timely transfer of money.

National Stock Exchange of India (NSE)
established in India in 1994 to provide a more transparent alternative to The Stock Exchange, Mumbai . The NSE is a national exchange integrating the country's stock markets through nationwide automated on-line screen operations and electronic clearing and settlement. The exchange's products include equities, exchange-traded funds, stock futures, index futures, interest rate futures and options. The S&P CNX Nifty, a diversified 50-stock index representing 23 sectors of the Indian economy, is among the exchange's major indices.
BOMBAY Stock Exchange of India(BSE)
An abbreviation of the Bombay Exchange Sensitive Index (Sensex) - the benchmark index of the Bombay Stock Exchange (BSE). It is composed of 30 of the largest and most actively-traded stocks on the BSE. Initially compiled in 1986, the Sensex is the oldest stock index in India.The index is calculated based on a free-float capitalization method when weighting the effect of a company on the index. This is a variation of the market cap method, but instead of using a company's outstanding shares it uses its float, or shares that are readily available for trading. The free-float method, therefore, does not include restricted stocks, such as those held by company insiders that can't be readily sold. To find the free-float capitalization of a company, first find its market cap (number of outstanding shares x share price) then multiply its free-float factor. The free-float factor is determined by the percentage of floated shares to outstanding. For example, if a company has a float of 10 million shares and outstanding shares of 12 million, the percent of float to outstanding is 83%. A company with an 83% free float falls in the 80-85% free-float factor, or 0.85, which is then multiplied by its market cap (e.g., $120 million (12 million shares x .$10/share) x 0.85 = $102 million free-float capitalization).