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EMERGING OPPORTUNITIES IN SMALL SCALE INDUSTRIES
With the Government's policies and approach towards the globalisation measures becoming more clear and the realization that the multinational companies have not done any great harm to the progress of the Indian industries, the small scale industries are now in a position to formulate their priorities and programmes with greater understanding and confidence.
Ofcourse, in a liberalized economy with scope for lesser government intervention, the small scale industries in India have to necessarily reposition themselves. But, such repositioning need not mean loss of opportunities but actually can lead to improved prospects.
The striking feature of the globalisation measures is the strong emergence of the concept of outsourcing, where most of the medium and large scale units think that they must focus deeply only in their core functions and do it very well, leaving the non core or non essential jobs to be obtained by outsourcing.
Such developments have now opened enormous opportunities for small scale sector units, who would be able to skillfully position themselves to meet the requirement of the large organizations.
For example, several large units in recent times, make the products in bulk and leave it to the small scale industries to pack it in small containers and lots for distribution in the local regions to save transportation costs and to fulfill the local needs. Many organizations are even entering into research and development contracts to other smaller organizations.
The concept of contract manufacture or custom synthesis is a relatively recent one in India, where small units can make the product as per the specifications of the larger organizations, who would provide technology and raw materials and pay the small scale units conversion charges. There are also instances where small scale unit can specialize in one equipment or process and provide the services to large units who would require outsourcing services relating to specific process or equipment for production of their own goods.
For example, facilities such as super critical extraction can be set up by small scale units for extraction of active ingredient from several herbal or other agricultural products, along with facilities for application development. The services of super critical extraction, which is a highly specialized process technology with possible different parameters for different products, can be offered by small scale units to a number of large industries, with substantial mutual benefits for both the parties.
Similarly, the offer of highly specialised analytical and certifying laboratory facilities can provide tremendous business opportunities to small scale sector, as the larger units would like to avoid investments in such areas, which would involve only a few utilisation opportunities. The companies would like to confine themselves to carry out routine quality control laboratory tests during the production process, leaving the non routine tests towards certification requirement etc to outside organisation.
Another area of exciting opportunities for small scale sector is, what is known as "external maintenance services". Several industries would like to confine their maintenance activities only for attending to the breakdown maintenance and would like to leave the annual preventive maintenance activities to specialized external agencies. For the large industries, this would provide considerable advantages,as they do not have to employ highly specialized maintenance crew or procure machineries for the purpose.
In future, we are likely to find that more small scale units would not be end product oriented but would be services oriented, possessing expertise in specific systems of operation and catering to the outsourcing requirement of larger organizations.
While this scenario would effectively relieve the small scale units from the marketing burden or restricting themselves to one product or activity, at the same time it would make it necessary for them to acquire greater depth in skill and knowledge level.
The small scale units would find themselves operating in highly specialised areas, providing challenging opportunities, that can contribute enormously to profitability to the competent ones. This would also imply that the investment and operational opportunities for small scale units would increase enormously. The association with large players would lead to greater sophistication in the operations of the small scale units, which would do them lot of good in the long run.
This challenge and opportunities for small scale units call for more specialised training programmes for small scale entrepreneurs, with the possibility of academic training institutions emerging that would exclusively cater to the requirement of small scale sector.
At one time, small scale industries were considered as one of the main pillars of the national economy providing opportunities to young and talented persons to emerge as entrepreneurs, even though they may lack high investment capability. The financial institutions helped such entrepreneurs in a substantial manner in the past. However, the overall scenario with regard to the past performance of the small scale units in India cannot be considered as impressive, as several ventures failed and financial institutions were not able to recover the loan provided to many of them. With the measures for globalisation being implemented, the investment in the small scale sector came down considerably, particularly with the financing institutions becoming extremely reluctant to support them.
The government has to workout a new policy initiative to recognise the role of small scale sector in the emerging globalisation era and provide necessary incentives for their growth.
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News and Views 
January 2005
