growth of small enterprises in...

CHAPTER - 8

GROWTH OF SMALL ENTERPRISES

IN KERALA

This chapter examines and analyses the growth and performance of small-

scale industries/MSMEs in Kerala.

8.1. Small-Scale Enterprises in Kerala under Different Five Year Plans

8.1.1. The First Five Year Plan (1951-56)

During the First Five Year Plan period there was no Kerala State, but only

Travancore – Cochin State. The allotment for industry in the First Five Year Plan

was only 112 lakh, and the actual expenditure was only Rs. 50 lakh (45% of the

outlay) (see Table 8.1 ). The Central Government did not make any investment in

the industrial sector of the State during the plan period. A comprehensive and co-

ordinated plan for the industrial development of the State was not formulated in this

plan. Consequently, the plan schemes under industries were confined mainly to the

coir co-operative scheme, a survey of small scale industries, the installation of an

electric tunnel Kiln in the Ceramic Factory at Kundara and the improvement of

Kerala Polytechnic at Kozhikode1. With the aim to overcome the problem of food

shortage, emphasis in the first plan was given to agriculture.

8.1.2. The Second Five Year Plan (1956-61)

The Second Five Year Plan gave more weightage to the industrial sector than

the First Five Year Plan. The outlay planned for village and small-scale industries

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was Rs. 582 lakh and the actual expenditure was only Rs. 425 lakh (see Table 8.1).

During this period, production in Kundara Ceramic Factory and Kerala Cycles

Private Ltd. was enhanced. In addition to this, some steps were initiated for

providing technical advice to the entrepreneurs, credit and other facilities to small

industries.

The Government of India started some important factories like the Iron and

Steel Plants at Durgapur, Bhilai, and Rourkela. In this plan also, Central investment

in the newly constituted State of Kerala was almost nil. As against the total

investment of a sum of Rs. 657.9 crore by the Govt. of India, in the Central sector,

the investment made in Kerala was a meagre sum of Rs. 78.00 lakh2.

8.1.3. Third Five Year Plan (1961-66)

The First and Second Plans gave emphasis to organize the handloom weavers

on a co-operative basis. But the Third Plan laid stress on improving the technical

and organizational efficiency of Industries. The financial target for village and

small-scale industries was Rs. 1265 lakh and only 674 lakh was spent for the

different programmes during the 3rd plan period (See Table 8.1 ). Some industrial

estates were started during this plan period with a view to providing common

facilities like water, electricity, better roads, banks, post offices etc. The industrial

estates at Pappanamkode, Kollakadavu, Ettumanoor, Palluruthy, Ollur, Olavakode,

West Hill and Palayad were started during the second plan period and in the early

years of the third plan period. In the 3rd plan period, action was also initiated for

founding developed plots for industries3.

In the central sector, two rural industries projects, one at Alleppy and the

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other at Kozhikode, were started. These projects have emerged as two of the best-

run rural industries projects in India4.

8.1.4. Annual Plan 1966-67 to 1968-69

The total outlay of the annual paln for village and small-scale industries was

Rs. 512 lakh, but the amount spent was Rs. 551 lakh during the period (see Table

8.1). The Industrial policy of 1967 was issued during this time, which laid down

that the State would function within the limits of the policy prescribed by the

Government of India5. During this plan period, the growth of the small sector in the

State was some-what satisfactory.

8.1.5. The Fourth Five Year Plan (1969-1974)

The Fourth Plan intended to take adequate steps for the growth of small-scale

industries in the State. The plan had an outlay of Rs. 1022 lakh for village and

small- scale industries, but spent only Rs. 1015 lakh. (See Table 8.1)

There were altogether 18 industrial estates in the State. It was proposed to

provide additional facilities in the existing industrial estates during the plan period.

Kerala Industrial and Technical Consultancy Organization limited (KITCO) was

established in 1972 with the objective of meeting the technical consultancy needs of

the industrial sector. The Industrial Policy of 1971 laid special emphasis on

attracting private enterprises to the industrially backward districts. Alleppy,

Trivandrum, Cannanore, Trichur and Malappuram were spotted out as industrially

backward districts in the State. The new units started in these districts were entitled

to financial assistance at concessional rates from the IDBI and the IFC6.

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During this plan period Cochin Refineries, Hindustan Latex, Hindustan

Machine Tools etc were established in Kerala under the Central sector. Thus the

fourth plan contributed more to the industrial sector than the previous plans.

8.1.6. The Fifth Five Year Plan (1974-78)

In the fifth plan period, the outlay for village and small scale industries was

Rs. 1604 lakh but the actual expenditure was Rs. 1825 lakh (See Table 8.1)

The Kerala State Small Industries Development Corporation Limited

(SIDCO) was formed in 1975 by merging the two units namely, the Kerala State

Small Industries Corporation (KSSIC) and the Kerala Employment Corporation

(KEPCo). The newly formed SIDCO combines the functions of the two

amalgamated Corporations with the added responsibility of implementing

government policies and decisions at a rapid pace to the benefit of the small

industries in the State7.

Forest-based industries including paper, pulp, plywood and packing cases

got special preference in the plan period. Moreover, some Mini Industrial Estates

were also started during the fifth plan period.

8.1.7 Annual Plan 1978-79, 79-80

The total outlay of the annual plan for village and small-scale industries was

Rs.891 lakh, but the amount spent was Rs.2528.93 lakh during the period ( See

Table 8.1 )

8.1.8. Sixth Five Year Plan (1980-85)

In the sixth plan period, the total outlay for village and small-scale sector

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was Rs. 4450.07 lakh and the expenditure was Rs. 4615.08 lakh (See Table 8.1).

The sixth plan set a target of starting 3500 modern small-scale industrial

units per annum. During the first four years of the plan (1980-84), 12143 small

units were registered8. The emphasis in the plan was on the distribution of

developed plots for setting up industrial units rather than on the expansion and

development of the conventional type of industrial estates. Moreover, the

Government introduced the provision of State investment subsidy to industrial units

started in the districts which were not eligible for Central investment subsidy9.

Owing to such incentives and support system, the total number of SSI Units nearly

doubled during this plan period

8.1.9. The Seventh Five Year Plan (1985-90)

An aggregate outlay of Rs.207crore was earmarked in the Seventh Plan for

Industry and Minerals, which constituted about 10 per cent of the total plan outlay.

The actual expenditure, however, was substantially higher at Rs. 258.78 crore

representing an increase of 25 per cent above the approved outlay10. The outlay for

village and small- scale industries was Rs.7040.50 lakh and the actual amount

expended was Rs. 7392.81 lakh (See Table 8.1)

Due to the thrust given in the plan to promote small-scale industries, it

achieved tremendous progress in terms of the number of units, production and

employment generation. The seventh plan targeted on the promotion of 20000 units

with an aggregate investment of 200 crore and provision of employment for 1.53

lakh persons with the estimated production, worth Rs. 710 crore. The plan made

significant achievements and exceeded all the targets set11.

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8.1.10. Annual Plans (1990-91 and1991-92 )

In between the seventh and eighth Five year plans, there were Annual Plans

(1990-92). The plan outlay for village and small-scale industries was Rs. 6555 lakh,

but only Rs. 5431.16 lakh (See Table 8.1) was spent during this plan period.

8.1.11. The Eighth Five Year Plan (1992-97)

The outlay and expenditure for village and small-scale industries during the

plan period were Rs. 32246 lakh and 36724.45 lakh respectively. (See Table 8.1).

The actual amount spent was more than the plan allocation

The Kerala Industrial Infrastructure Development Corporation (KINFRA)

was set up in 1993. The main activity of KINFRA is the development of Industrial

Parks/Zones. The plan gave more emphasis to the creation of more infrastructure

facilities like Industrial Development Plots, Industrial Estates, Growth Centres etc.

Enhanced incentives like investment subsidy, margin money loan, provision of

technical knowhow etc were proposed in the plan12. The Kerala Financial

Corporation (KFC) gave priority to sanctioning loans to the small-scale units which

were started in the industrially backward districts.

8.1.12. The Ninth Five Year Plan (1997-2002)

The outlay for village and small-scale industries in the plan was Rs.35013

lakh and the actual amount expended was Rs. 34635.04 lakh. (See Table 8.1). In the

plan period, priority was given for providing incentives and support to facilitate the

growth of SSI Units. Higher outlays were earmarked for the provision of investment

subsidy, seed capital loan and infrastructure development which together accounted

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for 78 per cent of the total budgeted outlay13. Single window clearance was

introduced through legislation during the year 2000. Efforts were made for the

creation of an environment conducive to attract private investment.

8.1.13. The Tenth Five Year Plan (2002-2007)

The outlay for village and small-scale industries in the plan was Rs.41565.42

lakh and the amount expended was Rs.40050.87 lakh. (See table 8.1).

The 3rd All India Census of Small-Scale Industries was conducted during

2002-03. The census revealed that out of the total registered units, only 146988

units were actually working14.

The cluster-based development approach to the growth of the SSI sector was

broadly adopted in the 10th plan period. As many as 60 clusters were identified and

32 clusters were developed and approved. The Coir Cluster at Alapuzha, Rubber

Cluster at Kottayam and Plywood Cluster at Perumbavoor were developed during

the plan period.

‘The Kerala Business to Business meet” conducted in 2004-2005, was a part

of the State’s effort, during the plan period, to promote SMEs in the global market

and to help the manufacturing sector to access larger markets for their products.

During the plan period, the Government of Kerala also drew up an investment

promotion programme named “Kerala Local Industry Promotion Programme”

(KLIPP) under the banner “PRATHYASA” through the District Industries Centres.

The Prime Minister’s Rosgar Yojana (PMRY) self-employment programme

achieved a very good performance in the plan period15.

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8.1.14. The Eleventh Five Year Plan (2007-2012)

The outlay proposed for the XIth Plan under village and small-scale

industries is Rs. 62614 lakh which constitutes 1.55% of the total state plan outlay of

RS. 40422 crore. Of this, Rs. 44383 lakh has been earmarked for the first three

years of annual plans16. The actual amount expended during this period (including

the anticipated expenditure for the year 2011-12) was Rs. 96,333 lakh (Table 8.1).

The major schemes implemented by the Directorate of Industries and

Commerce for the promotion of small-scale industries in the State are investment

subsidy, seed capital loan to small-scale entrepreneurs, infrastructure development,

technology development, cluster development, etc.

During the first three years of the plan, 344 units were provided seed capital

loan assistance against the target of 800 units. State investment subsidy of Rs. 20.19

crore was provided to micro and small enterprises17.

The different programmes and schemes framed by the State Government in

the industrial sector through the earlier five year plans were meant to create

employment opportunities and to promote decentralization and dispersal of

industries. But as per the earlier data, the achievements from the industrial sector

were not up to the expectation. While evaluating the budget allocations to the village

and small-scale industrial sector, it is seen that the share allotted to this sector was

not sufficient. It is very evident from the 11th plan, for only 1.55 per cent of the

State plan outlay was allotted for the development of village and small-scale

industries. Hence it is concluded that for the uplift of the MSME sector in the State,

the Government should increase the budget allocation for this sector.

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Table 8.1

Outlay and Expenditure for Village and Small-Scale Industries in Kerala Under Different Five Year Plans

Plan Period Outlay (Rs. In Lakhs)

Expenditure (Rs. In Lakhs)

First Plan 1951- 56 112.00 50.00

Second Plan 1956-61 582.00 425.00

Third Plan 1961-66 1265.00 674.00

Annual Plan 1966-67 to 1968-69 512.00 551.00

Fourth Plan 1969-74 1022.00 1015.00

Fifth Plan 1974-78 1604.00 1825.00

Annual Plan 1978-79,1979-80 891.00 2528.93

Sixth Plan 1980-85 4450.07 4615.08

Seventh Plan 1985-90 7040.50 7392.81

Annual Plan 1990-91 , 1991-92 6555.00 5431.16

Eighth Plan 1992-97 32246.00 36724.45

Ninth Plan 1997-02 35013.00 34635.04

Tenth Plan 2002-07 41565.42 40050.87

Eleventh Plan 2007-12 62614.00 96333*

Source: Plan Outlay and Expenditure, Kerala 1951 to 2007, Vol. I Page VIII & IX, October 2010 Plan co- ordination division, Kerala State Planning Board Trivandrum and Formulation of Twelfth Five Year Plan 2012-2017, A background paper on MSMEs, Industry and Infrastructure Division, State Planning Board, Trivandrum. P.3.

*Expenditure including anticipated expenditure for the year 2011-2012.

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8.2. Growth of Small Scale Industries/Enterprises in Kerala

Right from the first five year plan (1951), both the Government of India and

the Government of Kerala have brought about so many remedial measures for the

rapid and balanced development of small-scale industries in Kerala. The term

‘small-scale industry’ was in vogue from 1951 to 2006. Since 1954, the definition

of small-scale industry has been modified. The last definitional change occurred

with the enactment of the MSMED Act 2006. Registration of the SSIs was

compulsory until October 1st, 2006. However, after the shift into the MSMEs

pattern, the filing of Memorandum was made optional and hence the data only on

MSMEs which have filed Memorandum part I & Part II are available. There is a

significant difference in the total number of the SSIs registered up to 2006 and the

MSMEs which submitted their Memorandum. Hence the analysis relating to the

growth of the small-scale industries/enterprises in Kerala is undertaken in two parts,

ie, PART- A dealing with the growth of small-scale Industries in Kerala up to 2006

(Prior to the passing of the MSMED Act, 2006) and PART B describing the growth

of Micro, Small and Medium Enterprises (MSMEs) in Kerala during the period

2006 - 2011.

PART – A

8.2.1. The Growth of Small-Scale Industries in Kerala from 1996-97 to

2005-06

This part deals with the growth and performance of small-scale industries in

Kerala up to the passing of the MSMED Act, 2006

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8.2.1.1. Growth of the SSI Units in Number

The Table 8.2 shows the number of units registered each year (col.2) and the

total number of units in the respective years (col.4). As per the Table 8.2 , the total

number of the SSI units registered up to 31.03.1997 was 1, 60,544 and the same has

increased to 2,86,210 by the end of March 2006. The analysis shows that the overall

growth rate in the number of the SSI units registered is 78.28 per cent and the

compound growth rate is 6.63 per cent from March 1997 to March 2006.

While evaluating the growth rate, it is found that, the growth was above the

compound growth rate (6.63) up to 2001-2002 and began to decline from 2002-03

to 2005-06. Even though the total number of the SSI units registered has increased

from 1,60,544 in 1997 to 2,80,584 in 2005, the growth rate based on the previous

total during the corresponding periods has decreased from 12.18 per cent to 1.79 per

cent . There was a slight increase in the growth rate (ie, 2.01 per cent) in the year

2005-06.

As regards the number of new units registered during 1996-2006, the highest

number of units 20063 were registered in the year 2000-2001 and the lowest

number of units 4935 registered in the year 2004-05. The overall diminishing

growth rate based on the number of units , indicate that, the rate of increase in the

SSI units in Kerala from 1997 to 2006 is not a promising one. For details, see Table

No.8.2.

8.2.1.2. Growth in Employment Opportunities

As per the Table 8.3, there were 8, 39,596 persons working in the SSI sector

during 1996-97 and the number increased to 12, 88,135 during 2005-06. The

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compound growth rate of employment from 1997 to 2006 was 4.87 per cent.

During the first 5 years (1997-2002), the growth rate was higher than the

compound growth rate (4.87) and the figures of the following years show that the

growth rate is less than the compound rate. Moreover, a diminishing growth rate is

witnessed from 1997-98 to 2004-05. A positive growth rate (2.23) is shown only in

the year 2005-2006.

Table 8.2Number of SSI Units Registered in Kerala from 1996 – 97 to 2005-06

Year

No. of units registered during the

year

% change over previous

year

Total number. ofunits as on 31st March

% change over previous

total

1 2 3 4 5

1996-97 17,421 - 1,60,544 -

1997-98 19,547 12.20 1,80,091 12.18

1998-99 19,736 0.96 1,99,827 10.96

1999-00 20,006 1.36 2,19,833 10.01

2000-01 20,073 0.33 2,39,896 9.13

2001-02 18,114 -9.75 2,58,010 7.55

2002-03 12,334 -31.9 2,70,344 4.78

2003-04 5,305 -56.99 2,75,649 1.96

2004-05 4,935 -6.97 2,80,584 1.79

2005-06 5,626 14 2,86,210 2.01

Overall growth rate (1997-2006) 78.28%

Compound annual growth rate 6.6348%

Source : Economic Review, various issues, State Planning Board, Thiruvananthapuram.

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As regards the employment provided annually, between 1997 and 2006, the

maximum number was enlisted during 1999-2000 (72042 persons) and the

minimum during 2003-04 (21890 persons) The diminishing trend in the growth rate

based on total employment provided indicate that the SSI sector in Kerala has been

not providing employment opportunities as expected by the Government and the

industrialists. Details are given in Table No 8.3.

Table 8.3Details of Employment Created by the SSI Sector from

1996-97 to 2005-06

YearEmployment

provided in each year (Nos.)

% change over the previous

year

Total employment

provided (Nos.)

% change over the

previous total

1 2 3 4 5

1996-97 64,660 - 839596 -

1997-98 70,263 8.67 909859 8.37

1998-99 71,632 1.95 981491 7.87

1999-00 72,042 0.57 1053533 7.34

2000-01 60,957 -15.38 1114495 5.79

2001-02 55,587 -8.81 1173474 5.29

2002-03 42,058 -24.33 1215532 3.58

2003-04 21,890 -47.95 1237422 1.80

2004-05 22,585 3.17 1260007 1.82

2005-06 28,128 24.54 1288135 2.23

Overall growth rate from 1996-97 to 2005-06) 53.42%

Compound annual growth rate 4.87%Source : Economic Review, various issues, State Planning Board,

Thiruvananthapuram.

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8.2.1.3. SSI Units Registered in Kerala and Employment Provided by

this Sector

Generally, it is believed that the development of small-scale industrial sector

is a powerful instrument for achieving the twin goals of “accelerated industrial

growth” and “creating productive employment opportunities” in an economy.

But Table 8.4 illustrates that 5.22 employments (persons) per SSI unit in

1996-97 has been reduced to 4.48 persons per unit in the year 2003-04. A negligible

increase in the trend is seen only in the years 2004- 2005 and 2005-2006.

Even though the compound growth rate in respect of the total number of the

SSI units registered was 6.63per cent (from 1996-97 to 2005-06), the compound

growth rate in respect of employment during the same period was only 4.87 per cent.

From 1996-97 to 2003-04, the growth rates in employment were less than

the growth rates in the number of SSI units registered in Kerala. But, for two years

(2004-05 & 2005-06), the growth rate in employment has exceeded the growth rates

in the number of SSI units.

This over all evaluation points out that employment opportunity is not

increasing in proportion to the increase in the number of the SSI units. Details are

given in Table No. 8.4.

8.2.1.4. Investments Made by the SSI Sector

The success of any enterprise mainly depends upon the volume of

investments made in it. Table 8.5 points out the total amount of investment and the

yearly investment made by the small-scale enterprises from 1996-97 to 2005-06.

The compound growth rate in total investments was 9.75 per cent. During this

261

period only the years 1997-98 to 2000-2001 (4 years) witnessed growth rates above

the compound average (9.75%). Similarly, an increasing trend in growth rates based

on previous total is noticed only in the years, 1999-2000, 2004-05 & 2005-06. In

the other years diminishing growth rates are found.

Table 8.4SSI Units Registered in Kerala and Employment Provided

Year

Total no. of SSI units

registered as on 31st

March


year

Total employment provided by SSI sector (persons)


total

Employment per unit in

number

1 2 3 4 5 6

1996-97 1,60,544 - 8,39,596 - 5.22

1997-98 1,80,091 12.18 9,09,859 8.37 5.05

1998-99 1,99,827 10.96 9,81,491 7.87 4.91

1999-00 2,19,833 10.01 10,53,533 7.34 4.79

2000-01 2,39,896 9.13 11,14,495 5.79 4.64

2001-02 2,58,010 7.55 11,73,474 5.29 4.54

2002-03 2,70,344 4.78 12,15,532 3.58 4.49

2003-04 2,75,649 1.96 12,37,422 1.80 4.48

2004-05 2,80,584 1.79 12,60,007 1.82 4.49

2005-06 2,86,210 2.01 12,88,135 2.23 4.50

Compound annual growth rate 6.6348 4.87%


During the ten year period beginning from 1996-97, the highest amount of

investment (Rs. 428651 lakh) has been made in the year 1997-98 and the lowest

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amount (Rs. 12020 lakh) in the year 2003-04.

The growth rate of investment in the year 1997-98 was 22.29 per cent and it

decreased by 5 per cent in the year 2005-06. Even though the compound growth

rate of 9.75 per cent is somewhat attractive, the yearly growth rate has diminished in

most of the years. For details, see Table No. 8.5.

Table 8.5Investment Made by the SSI Sector from 1996-97 to 2005-2006

YearInvestment during the

year (in lakh)

% change over the

previous year

Total investment as on 31st March(Rs. in Lakhs)

% change over the

previous total

1 2 3 4 5

1996-97 33081 - 192269 -

1997-98 42865 29.58 235134 22.29

1998-99 30210 -29.52 265344 12.85

1999-00 39752 31.59 305097 14.98

2000-01 41665 4.81 347061 13.75

2001-02 25582 -38.60 372643 7.37

2002-03 18475 -27.78 391119 4.96

2003-04 12021 -34.93 403140 3.07

2004-05 19863 65.24 423003 4.93

2005-06 21170 6.57 444173 5.00

Overall growth rate from 1996-97 to 2005-06) 131%

Compound annual growth rate 9.75%Source : Economic Review, various issues, State Planning Board,

Thiruvananthapuram.

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8.2.1.5. Growth of Investments Based on the Number of SSI Units

Registered

Table 8.6 expounds the growth of investment based on the number of SSI

units registered. The average investment made per unit is Rs. 119761 as on

31.03.1997, which rose to Rs. 155191 at the end of March 2006. Even though the

investment per unit increased every year, the escalation in the amount of

investment is negligible.

Table 8.6

Growth of Investments Based on the Number of SSI Units Registered

Year

Total no. of SSI unit

registered as on 31st March

% change over

previous year

Total investments as on 31st March (Rs. In Lakhs)

% change over

previous total

Investment in Rs. per

unit

1996-97 160544 - 192269 - 119761

1997-98 180091 12.18 235134 22.29 130564

1998-99 199827 10.96 265344 12.85 132787

1999-00 219833 10.01 305097 14.98 138785

2000-01 239896 9.13 347061 13.75 144671

2001-02 258010 7.55 372643 7.37 144430

2002-03 270344 4.78 391119 4.96 144675

2003-04 275649 1.96 403140 3.07 146251

2004-05 280584 1.79 423003 4.93 150758

2005-06 286210 2.01 444173 5.00 155191

Compound annual growth rate 6.634% 9.75%


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The compound growth rate of increase in the number of units registered is

based on the data of the ten- year period from 1996-97 to 2005-06 is only 6.634 per

cent. But the corresponding increase in investment is 9.75 per cent. It shows a

positive trend because the average rate of increase in investment is greater than the

rate of increase in the number of SSI units registered in Kerala (See Table 8.6).

8.2.1.6. Value of Goods and Services Produced by the SSI Sector

Table 8.7 shows the total value of goods and services produced by the SSI

sector along with the yearly production from 1996-97 to 2005-06.

The total value of production increased from Rs. 6, 33,011 lakhs to

16,72,177 lakh during the period 1996-2006. The compound annual growth in the

production of goods and services made by the SSI sector during the period was

11.39 per cent. Yearly growth rates based on the total value of goods and services

showed a declining trend from 1996-97 to 2005-06 except during 2002-2003 and

2004-05.

While considering the value of production of goods and services each year

separately, the lowest production (Rs. 46670 lakh) was in the year 2003-04 and the

year 2002-03 showed the highest production (Rs. 186935 lakh) . Even though the

total value of goods and services had been increasing over a number of years, the

increasing trends were not steady but fluctuating. Details are given in Table No.

8.7.

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Table 8.7

Value of Goods and Services produced by the SSIs from 1996-97 to 2005-06

Year

Value of goods and services

produced during the year(Rs.in

lakhs)


year

Total value of goods and services

produced as on 31st March

(Rs.in lakhs)


total

1996-97 124143 - 633011 -

1997-98 111829 -9.92 744841 17.67

1998-99 115602 3.37 860443 15.52

1999-00 116622 0.88 977065 13.55

2000-01 122760 5.26 1099825 12.56

2001-02 121612 -0.94 1221438 11.05

2002-03 186935 53.71 1408373 15.30

2003-04 46671 -75.04 1455044 3.31

2004-05 116366 149.33 1571410 8.00

2005-06 100767 -13.40 1672177 6.41

Overall growth rate (1996-97 to 2005-2006) 164.16%Compound annual growth rate 11.39%

Source : Economic Review, various issues, State Planning Board , Thiruvananthapuram.

8.2.1.7 Growth of the SSI Sector in Terms of the Number of Units and

Value of Goods and Services Produced by the SSIs from 1996-

97 to 2005-2006

As per Table 8.8 the value per unit of production in the year 1996-97 was Rs.

3,94,291, and it increased to 5,84,248 in the year 2005-06. From this, it can be

understood that production per unit increased continuously from 1996-97 to

2005- 06, even though the rise is marginal. The compound growth rate in the case

266

of the number of SSI units registered over the 10 years from 1996-97 to 2005-06

was only 6.634 per cent and compound growth rate in production was 11.39 per

cent. The higher rate of increase in production over the increase in the number of

SSI units is a promising trend in the SSI sector. For details, see Table No. 8.8.

Table 8.8Growth of the SSI Sector in Terms of the Number of Units and Value of

Goods and Services Produced by the SSIs from 1996-97 to 2005-2006

Year

Total no. of SSI

units as on 31st

March


year

Value of goods and services produced ason 31st March (Rs. In lakh)


year

Production per unit (in

Rs.)

1 2 3 4 5 6

1996-97 160544 - 6,33,011 - 394291

1997-98 180091 12.18 744841 17.67 413591

1998-99 199827 10.96 860443 15.52 430594

1999-00 219833 10.01 977065 13.56 444458

2000-01 239896 9.13 1099825 12.56 458459

2001-02 258010 7.55 1221438 11.05 473407

2002-03 270344 4.78 1408373 15.30 520956

2003-04 275649 1.96 1455044 3.31 527861

2004-05 280584 1.79 1571410 8.00 560050

2005-06 286210 2.01 1672177 6.41 584248

Compound annual growth rate 6.634% 11.39%


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8.2.1.8. Growth in the Number Of SSI Units, Employment Created,

Investment Made and Value of Goods and Services Produced

Table 8.9 presents the comparative statement showing the growth in

respect of the registration of the SSI units, employment opportunities created, the

amount of investment made and the value of goods and services produced by the

small-scale sector in Kerala from 1996-97 to 2005-06. As per the data, the number

of units, employment created and investment made show a descending graph up to

the year 2003-04. A slight increase could be seen only in the years 2004-2005 and

2005-06 in respect of employment created and investment made. With regard to the

value of goods and services produced by the SSI sector, a diminishing trend is

noticed except in the years 2002-2003 and 2004-05.

While Examining the compound growth rate in respect of the number of the

SSI units registered (6.634%), employment opportunities created (4.87%),

investments made in the sector (9.75%) and value of goods and services produced

(11.397% ) , it is seen that the growth rate in employment opportunities created is

the lowest ( ie 4.87%). The compound growth rate is high in respect of the value of

the goods and services provided (ie.,11.397).

As the employment per person is low, a proper scrutiny is required. With the

introduction of the globalization and liberalization policy of the Government of

India, the MSME sector has been facing stiff competition from within and without

the country. To withstand this competition some of the MSMEs introduced new

machines and technologies. This may be one of the reasons for the low employment

in the SSI sector. For details, see Table No. 8.9.

268

Table 8.9

Trends in the Growth of the Number of SSI Units Registered, Employment Created, Investment Made and the Value of Goods and Services Produced from 1996-97 to 2005-06

No. of Units Employment (in person) Investments (Rs. in Lakhs) Value of goods and services produced (Rs. in Lakhs)

Year Total no. as on 31st

March

% change over the

previous year

Total no. as on 31st

March

% change over the

previous year

Total as on 31st March

% change over the

previous year

Total as on 31st March

% change over the

previous year

1 2 3 4 5 6 7 8 9

1996-97 160544 - 839596 - 192269 - 6,33,011 -

1997-98 180091 12.18 909859 8.37 235134 22.29 744841 17.67

1998-99 199827 10.96 981491 7.87 265344 12.85 860443 15.52

1999-00 219833 10.01 1053533 7.34 305097 14.98 977065 13.55

2000-01 239896 9.13 1114495 5.79 347061 13.75 1099825 12.56

2001-02 258010 7.55 1173474 5.29 372643 7.37 1221438 11.05

2002-03 270344 4.78 1215532 3.58 391119 4.96 1408373 15.30

2003-04 275649 1.96 1237422 1.80 403140 3.07 1455044 3.31

2004-05 280584 1.79 1260007 1.82 423003 4.93 1571410 8.00

2005-06 286210 2.01 1288135 2.23 444173 5.00 1672177 6.41

Compound annual growth rate(%) 6.634 4.87 9.75 11.39

Source : Economic Review, various issues, State Planning Board , Thiruvananthapuram.

269

8.2.1.9. Summary of Part A

Based on the analysis of secondary data ( From 1997-2006) under Part A ,

the following points are highlighted:

• Even though there was increase in the number of the SSI units registered in

Kerala from 1996-97 to 2005-06, the rate of increase was found ebbing

away- at i.e, the growth rate of 12.18 per cent during 1997-98 diminished to

2.01 per cent during 2005-06.

• Even though it is believed that the small-scale industrial sector provides

high employment opportunities, the above analysis shows that employment

opportunities did not increase in proportion to the increase in the number of

the SSI units.

• When the compound annual growth rate of the SSI units registered from

1996-97 to 2005-06 showed 6.634 per cent, the growth rate in investment in

the sector witnessed 9.75 per cent. It is a positive sign.

• The growth rates in respect of the total value of goods and services produced

by the SSI sector were declining from 1996-97 to 2005-06, except during

2002-03 and 2004-05.

• Comparing the compound annual growth rate in respect of the number of the

SSI units registered (6.634) and the growth rate of the value of goods and

services produced (11.39) by the same sector, it is found that the latter

discloses a higher growth rate. It is a promising trend.

270

PART - B

8.2.2. The Growth of Micro, Small and Medium Enterprises

(MSMEs) from 2nd October, 2006 to 31st March, 2011

Registration of Small-Scale Industries (SSIs) was compulsory only upto 1st

October, 2006. On 2nd October, 2006, the Micro, Small and Medium Enterprises

(MSMEs) Development Act was implemented all over India. It provides the first

ever legal framework for the recognition of the concept ‘enterprise’ in the place of

industry. As per the MSMED Act 2006, before the commencement of an enterprise,

an entrepreneur may file Memorandum Part I at the District Industrial Centre and

after starting the enterprise, he may file Memorandum Part II to avail himself of

some concessions and facilities from the various departments and institutions.

The year 2007-2008 is taken as the base year for identifying the trends in

growth rates in respect of number of new MSME units which filed Memorandum

Part II, employment created and investment made by the sector, because the period

2006-07 consists of a fraction, not a full year. (The MSMED Act was implemented

on 02.10.2006)

8.2.2.1 The Growth of MSMEs in Number

The Table No. 8.10 shows the number of new MSMEs which filed

Memorandum Part II in each year and the total number of new MSMEs in the

respective years. From 2nd October, 2006 to 31st March, 2007, only 1219 new

MSMEs filed Memorandum Part II. The Table shows that the total number of new

MSMEs which filed memorandum Part II upto 31st March 2008 is 6425, and the

271

number increased to 32089 by the end of March 2011. The analysis shows that the

overall growth rate in the number of new MSMEs which filed Memorandum Part II

within the State from 2008 to 2011 was 399.4 per cent and the compound annual

growth rate was 70.93334 per cent.

Table-8.10

Number of New MSMEs in Kerala Which Filed Memorandum Part II from 2nd

October 2006 to 2011 March 31.

Year

No. of units that filed

Memorandum Part II during

the year


year

Total no. of units as

on 31st

March


total

2006-07 (from 02.10.2006) 1219 - 1219 -

2007-08 5206 - 6425 -

2008-09 8421 61.8 14846 131.07

2009-10 8403 -.21 23249 56.60

2010-11 8840 5.2 32089 38.02

Overall growth rate 2008-2011 399.4

Compound annual growth rate 70.9337

Source : Subject Committee – IV, Demand No XXXV11,2011-12, page – 7, Directorate of Industries and Commerce, Vikas Bhavan, Thiruvananthapuram.

While evaluating the growth rate, it is found that the year 2008-09 showed

growth rate above the compound growth rate. Even though the total number of new

MSMEs which have filed Memorandum Part II increased from 6425 to 32089 from

2008 to 2011, the growth rate based on the previous total had decreased from

131.07 per cent to 38.02 per cent.

272

The diminishing growth rate from 2009-2011, based on the total new

enterprises that filed Memorandum Part II, indicates that the rate of increase in the

number of MSMEs in Kerala is not satisfactory. For details, see table No. 8.10.

8.2.2.2. Employment Created by the MSMEs

There were 55056 persons working in the MSMEs during 2007-08 and the

number of employees increased to 219588 during 2010-11. The compound growth

rate of employment from 2007-08 to 2010-11 was 58.5871 per cent. Even though

the total number of employment in the MSMEs increased from 55056 (in 2007-08)

to 219588 (in 2010-11), the growth rate in employment from 2008-09 to 2010-11

showed a decreasing trend.

Table 8.11Details of Employment Created by New MSMEs from 2006-07 to 2010-11

Year

Employment provided in each year

(Nos.)


year

Total Employment

provided as on 31st March

(Nos.)


total1 2 3 4 5

2006-07 (from 02.10.2006) 8687 - 8687 -

2007-08 46369 - 55056 -

2008-09 48111 3.8 103167 87.38

2009-10 48816 1.4 151983 47.31

2010-11 67605 38.5 219588 44.48




273

The diminishing trend of growth rate in employment as per column no. 5

indicates that the MSMEs in Kerala are not providing employment opportunities as

envisaged by the Government and the industrialists. For details see Table 8.11.

8.2.2.3. The Growth of Employment Provided by New MSMEs Based on

the Number of MSMEs Which Filed Memorandum Part II

Generally it is presumed that the MSMEs provide more employment

opportunities to the rural community. Data in Table 8.12 shows that 8.57

employment per unit in the MSME in 2007-08 came down to 6.53 persons per unit

in the year 2009-10. A slight upward trend is shown only in the years 2007-08 and

2010-11.

Even though the compound annual growth rate in respect of the number of

new MSMEs which filed Memorandum Part II from 2007-08 to 2010-11 was

70.9337 per cent, the growth rate in respect of employment during the same period

was only 58.58 per cent. It shows that employment opportunities in the MSMEs

sector are not increasing in proportion to the increase in the number of the MSMEs

in the State. Details are given in Table No. 8.12

274

Table 8.12Growth of Employment Based on Number of New MSMEs

Year

Total no. of MSMEs as

on 31st

March


year

Total Employment provided (in person)as on 31st March


total

Employment per unit

(persons)

1 2 3 4 5 62006-07

(from 02.10.2006)

1219 - 8687 - 7.13

2007-08 6425 - 55056 - 8.57

2008-09 14846 131.07 103167 87.38 6.95

2009-10 23249 56.60 151983 47.31 6.53

2010-11 32089 38.02 219588 44.48 6.84

Compound annual growth rate 70.9337 58.5871


8.2.2.4. Investment Made by the MSMEs

Table 8.13 shows the yearly investment (col.2) and total investment (col.4)

made by the new MSMEs from 2006-07 to 2010-11. The total investment in 2007-

08 which amounted to Rs. 985.20 crore increased to Rs. 3288.13 crore during 2010-

11. The compound annual growth rate during this periods was 49.4428 per cent..

The year 2009-10 showed a diminishing growth rate in respect of the investments

made by the new MSMEs compared to those made in 2008-09. But the year

2010-11 marked an increasing trend of growth rate in the case of investments. For

details, see Table No. 8.13.

275

Table 8.13

Investment Made by the New MSMEs from 2006-07 to 2010-11

Year

Investment during the

year Rs. (In crores)


year

Total investment as on 31st March (Rs. In crores)


total

1 2 3 4 52006-07

(from 02.10.2006)

161.15 - 161.15 -

2007-08 824.05 - 985.20 -

2008-09 565.95 -31.32 1551.15 57.45

2009-10 593.39 4.84 2144.54 38.25

2010-11 1143.59 92.72 3288.13 53.32



Source Subject Committee – IV, Demand No XXXV11,2011-12, page – 7, Directorate of Industries and Commerce, Vikas Bhavan, Thiruvananthapuram.:

8.2.2.5. Growth of Investments Based on the Number of New MSMEs

Which Filed Memorandum Part II

Table 8.14 shows the growth of investments in the new MSMEs based on the

number of MSMEs which had filed Memorandum Part II from 2007-08 to 2010-11.

The average investment per unit as on 31st March, 2008 was Rs. 15.33 lakhs and it

decreased to 9.22 lakh per unit on 31st March, 2010. A nominal increase was seen

only during 2010-11.

The compound annual growth rate in respect of the number of new MSMEs

which had filed Memorandum Part II from 2007-08 to 2010-11 was 70.9337 per

276

cent, but the growth rate in respect of investment during the same period was only

49.44 per cent

In the wake of globalization the MSMEs could become more competitive

only by producing quality products at minimum cost. For achieving these objectives

modern technologies have to be adopted by the MSMEs. For the introduction of

fast-changing modern technology, huge amounts have to be invested even by small

enterprises. But column No. 6 in the Table 8.15 shows a decreasing trend in respect

of investment per unit up to 2009-10. This, obviously, is not a positive symptom in

the growth of the MSME sector in Kerala. Details are given table No. 8.14.

Table 8.14

Investment Based on Number of New MSMEs

Year

Total no. of MSMEs as

on 31st

March


year

Total investment as on 31st

March (Rs. In crores)


year

Investment per unit (Rs. In lakhs)

1 2 3 4 5 6

2006-07 (from

02.10.2006)1219 - 161.15 - 13.22

2007-08 6425 - 985.20 - 15.33

2008-09 14846 131.07 1551.15 57.45 10.44

2009-10 23249 56.60 2144.54 38.25 9.22

2010-11 32089 38.02 3288.13 53.32 10.25

Compound annual growth rate 70.9337 49.4428


277

8.2.2.6. The Growth in Employment and Investment Through the MSMEs in

the State.

Table 8.15 shows a comparison in growth in respect of the number of new

MSMEs, employment opportunities created and investment made by the MSME

sector in Kerala from 2006-07 to 2010-11. As per the data the growth in respect of

the number of MSMEs and the growth in employment opportunities show a

diminishing trend from 2007-08 to 2010-11. Investment in the MSME sector also

shows a declining growth rate up to 2009-2010.

Table 8.15Trends in the Growth of the Number of New MSMEs, Employment

Created and Investment Made from 2006-07 to 2010-11.

Total Number of MSMEs

Employment( No of Persons)

Investment in Crores

YearTotal no. as on 31st

March


year

Total number

as on 31st

March


year

Total amount

as on 31st

March


year

1 2 3 4 5 6 72006-07

(from 02.10.2006)

1219 - 8687 - 161.15 -

2007-08 6425 - 55056 - 985.20 -

2008-09 14846 131.07 103167 87.38 1551.15 57.45

2009-10 23249 56.60 151983 47.31 2144.54 38.25

2010-11 32089 38.02 219588 44.48 3288.13 53.32

Compound annual growth rate 70.9337 58.5871 49.44

Source: Subject Committee – IV, Demand No XXXV11,2011-12, page – 7, Directorate of Industries and Commerce, Vikas Bhavan, Thiruvananthapuram

278

While comparing the compound growth rate, the growth rates in respect of

investment and employment opportunities are less than those in respect of the

number of MSMEs functioning in the State. While comparing columns 3,5 and 7,

in the table 8.15, it is clear that the compound annual growth rate in respect of

investment is the lowest. For details, see Table No. 8.15.

8.2.2.7. Summary of Part B

The analysis of Part B highlights the following:-

• The number of new MSMEs which filed Memorandum PART 11 during

2006-07 was 1219, and their number increased to 32089 during 2010-11.

• The total number of MSME units which filed Memorandum PART 11 upto

2007-08 was 6425, and it increased to 32089 units during 2010-11. Even

though the number of units increased, the increase was at a diminishing rate.

It indicates that the growth of the MSMEs in number (based on

Memorandum PART II filed with DICs) in Kerala is not satisfactory.

• The employment opportunities in the Small-Scale Sector(MSMEs) do not

increase in proportion to the growth in the number of MSMEs in the State.

• When the annual compound growth rate in respect of the number of MSMEs

was 70.93 per cent from 2007-08 to 2010-11, the growth rate in respect of

investment during the same period was only 49.44 per cent. This is not a

positive sign in the growth of the MSME sector in Kerala, because in the

era of globalization, the MSMEs have to invest huge amounts in order to

face stiff competition.

279

As per the analysis of the secondary data under PART B, the growth rate in

respect of investment and employment opportunities is less when compared to the

growth rate in respect of the MSMEs functioning in the State. Hence, the

government financial institutions and other stakeholders in the MSMEs have to take

more corrective steps to minimize the shortcomings in the above-mentioned area.

8.3. The Particulars of the MSMEs in Kerala and a Few Other States

Based on the Quick Results of the Fourth All India Census of the

MSME Sector.

Table 8.16 gives the details of some of the States which excel in the

MSME sector in India, based on the quick results of the Fourth All – India Census

of the MSMEs. It is evident that in terms of the total number of registered working

enterprises, Kerala stands in the 4th place (149846). The per unit employment (per

person) provided by the SSI sector at the National level is 5.93, whereas in Kerala it

is only 4.16.

The investment in plant and machinery at the national level is 7.81 lakhs per

unit and in Kerala it is 2.43 lakh. Kerala stands in the last place when compared

with the other states in the case of investment in plants and machinery.

The per unit market value of fixed investment is 32.26 lakh at the national

level whereas in Kerala it is only 11.88 lakhs which is nearly 1/3 of the national

figure. Kerala shows the lowest per unit market value of fixed investment when

compared to the other States in India. According to the survey, the per unit value of

net worth at the national level is 28.76 lakh and in Kerala it is 12.29 lakhs, which is

much less when compared with the other States.

280

Table 8.16

MSME Details of Some Leading States of India based on Quick Results of Fourth ALL – India Census of MSMEs, Reference year 2006-07

Characteristics All-India Tamilnadu Gujarath Uttarpradesh Kerala Karnataka

Total number of registered working enterprises

1552492 (100%)

233997 (15.07%)

229831 (14.80%)

187522 (12.08%)

149846 (9.65%)

139641 (8.99%)

Per unit employment (person) 5.93 6.25 5.42 4.14 4.16 5.83

Per unit original value of plant and machinery/Equipment (Rs. In Lakhs) 7.81 7.38 18.32 3.97 2.43 4.03

Per unit market value of fixed investment (Rs. In lakhs) 32.26 23.26 66.09 23.43 11.88 13.95

Per unit value of Networth (Rs. In lakhs) 28.76 19.79 11.53 32.13 12.29 15.26

Per unit gross output (Rs. In lakhs) 45.69 30.15 16.73 43.56 16.33 31.77

Number of units taken loan from institutional source or others 189924 11060 4189 12184 34779(18.3%) 19185

Number of units having loan outstanding 108238 6289 2509 8334 18091 (16.72%) 9239

Source : Quick results of fourth All India Census of MSME, Ministry of Micro, Small and Medium Enterprises, New Delhi.Page – 91-92, 360-362, 282-283, 170-171, 351-352, 326-327

281

The per unit gross output of the MSME sector in Kerala is only 16.33 lakh

against 45.69 lakh at the national level. This per unit gross output shows that Kerala

stands last when compared to other States.

Institutional financial support is very essential for the smooth functioning of

the MSME sector. The census report proves that 189924 enterprises had taken loans

worth Rs. 6612547 crore from institutional sources . Out of the total enterprises

(189924), 34779 MSMEs are in Kerala (18.31%)

At the national level, there were 108238 enterprises having loans

outstanding. Out of this, 18091 units (16.72%) were in Kerala. Kerala has the

maximum number of enterprises having loans and outstanding loans when

compared to other States in the Table.

The overall comparison of per unit performance of the MSMEs based on the

various parameters shown above shows that the position of small enterprise in

Kerala was neither promising nor prosperous at the end of March, 2007, compared

to some other States which excelled in the MSME sector in India

282

References

1. Government of Kerala, (1958), Second Five-Year Plan, Thiruvanathapuram: S.G.P. Government Press, p.31.

2. Government of Kerala, Third Five-Year Plan, Thiruvanathapuram: State Planning Board, p. Xiii.

3. Government of Kerala, Draft of Fourth-Five Year Plan of Kerala,, Thiruvanathapuram: State Planning Board, p.123.

4. Ibid., p.122.5. Sreekala, K. (1995), Problems and Prospects of Industrialisation and their

Impact on Environment with Special Reference to Kerala: A Gandhian Critique, Unpublished Ph.D. Thesis, Kottayam: M.G.University, p.45.

6. . Government of Kerala, Draft of Fifth-Five Year Plan of Kerala,A Dimensional approach, Thiruvanathapuram: State Planning Board, p.48.

7. Vinod, A. (2010), Entrepreneurship Development, Calicut: Calicut University Central Co-Operative Stores Ltd, p.96.

8. Government of Kerala, Draft of Seventh-Five Year Plan of Kerala and Annual Plan 1985-86, Thiruvanathapuram: State Planning Board, Vol.1, p.11.

9. Ibid., p.10.10. Government of Kerala, Draft of Eighth-Five Year Plan of Kerala and

Annual Plan 91-92,, Thiruvanathapuram: State Planning Board, Vol.1, p.10.11. Ibid., p.10. 12. Ibid., p.119. 13. Government of Kerala, Draft of Tenth-Five Year Plan of Kerala,2002-2007,

Thiruvanathapuram: State Planning Board, Vol.1, p.146.14. Government of Kerala, Draft of Eleventh-Five Year Plan of Kerala,2007-

2012, Thiruvanathapuram: State Planning Board, Vol.1, p.173.15. Ibid., pp.174-175.16. Government of Kerala, (2009), Eleventh-Five Year Plan of Kerala, Mid-

Term Appraisal, Thiruvanathapuram: State Planning Board, p.141.17. Ibid., p. 144.

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