1st Five Year Plan
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Introduction || APPENDIX (CH-4) || APPENDIX (CH-9) || ANNEXURE (CH-12) || APPENDIX (CH-14) || APPENDIX (CH-24) || APPENDIX (CH-29) || Conclusion
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Chapter 25:

It is customary to refer to industries which are not required to be registered under the Factory Act as cottage and small-scale industries. There is no accepted line of distinction between cottage and small-scale industries and different definitions are adopted according to the object in view. The distinction frequently made between establishments which employ power and those which do not become less useful as electricity becomes more generally available. The number of workers employed in an establishment has only a limited value as a criterion for distinguishing large-scale and small-scale establishments. In addition to the test of numbers employed and the use of power, a further test may be whether a unit which may otherwise be regarded as small is owned by the worker himself or by a co-operative group. In implementing programmes which involve concessions or assistance for small-scale industries, the approach has to be flexible and it may frequently be necessary to evolve some practical criteria according to the aims in view which might be appropriate to the circumstances of each industry or group of industries.

2. In the preceding chapter we have considered the problems of those small industries which are, in the main, an integral part of the village economy. In this chapter we refer to the problems of the remaining small industries. These could be divided into two main groups, namely, those which represent traditional skills and crafts and those which are more recent and have an intimate connection with the corresponding large-scale industries. Village industries are at present of a rudimentary character but, with the progress of rural electrification, their character is likely to be transformed. Employment is as weighty a consideration in small industries and handicrafts as It is in village industries and in both it is of the utmost importance that the process of technical improvement should be hastened. Along with measures to create or maintain demand for the products of small industries, equal emphasis must be placed on the need to change methods of production and organisation.

3. Small industries derive part of their significance from their potential value for the employment of trained and educated persons. The field of public employment which a large proportion of those who receive education seek to enter is limited ; so also is the employment that may be available in large-scale industries or in allied fields. For those who have received some training and education, generally speaking, the most promising direction of activity appears to be the development of the smaller industries. Further, both small industries and handicrafts have great importance as means for providing employment for women in their homes as well as on a more organised basis.

4. During recent years a great deal of development in the field of small industries has taken place. During the war, for instance, new small industries sprang up throughout the country for the purpose of meeting defence requirements. A number of these have now disappeared wholly or partially. For this there may be several reasons. In some cases the difficulties may relate to the supply of raw materials or to the existence of capacity in excess of demand ;in others, the fact that the units are uneconomic or are unable to produce the quality or precision needed may account for their failure. Nevertheless, the experience of numerous small industries growing up during the war and manufacturing products which still continue to be obtained from other countries has significant lessons in the context of programmes under the Five Year Plan.

5. The information available on the subject of the existing small industries is extremely meagre. A large-scale sample was carried out recently by the National Sample Survey, but its results are not yet available. While surveys of individual industries or individual centres of small industry are available, often the information they furnish is not recent enough and does not throw sufficient light on the problems of an industry as a whole. The result is that there has been far too little formulation of policy on the subject of small industries, and executive action has been largely confined to such activities as the provision of power or the distribution of controlled materials. There have been hardly any considered and co-ordinated programmes of development and technical improvement, and a great deal of small industry has grown up without much direction and assistance from the Government. The growth of small industry over the past two decades has been an unplanned process which has been lacking in some of the elements that make for efficiency and stability. The planned development of small industry is a task of immense magnitude, of equal importance with the planning of agriculture or transport or industry. This task has been taken in hand by the Central Government and, as a first step, programmes for a few selected industries such as wool development, the manufacture of woollen goods, sports goods, brassware and bell-metal, artistic glassware etc., are under preparation in co-operation with the States concerned.

6. In this Chapter an attempt is made to indicate some of the problems which are involved in formulating substantial development programmes for small industries and handicrafts and the directions in which, both at the Centre and in the States, action has to be taken. In this field, the work of the Central Government as well as of the States is still in its preliminary stages. The Central Government's plan contains a total provision ofRs. 15 crores from which it should be possible to finance approved programmes and to render a fair measure of assistance to the States. Programmes for small industries and handicrafts call for a comprehensive approach in which, on the one hand, there is adequate co-ordination with large scale industries and research institutions and, on the other, the State Governments ensure that the artisans are sufficiently organised to be able to avail of technical and financial assistance and to provide as far as may be possible co-operatively for their essential requirements.

7. Skilled craftsmanship is the principal feature of handicrafts. For the greater part trade in handicrafts is in the hands of the middlemen, many of whom have been associated with handicraft production for generations. As a rule, these middlemen operate on a small scale and work to orders. They find their own finance and constitute a real link between the artisans, the exporter and the foreign buyer. There have been instances of improvement effected at the instance of these middlemen but by and large, the present organisation of handicraft industries does not make for efficiency or for improvement in quality or adherence to standards or, for that matter for planned increase in production. Nor are the middlemen in a position to ascertain sufficiently the requirements of foreign markets. The result is that, with some exceptions, the handicraft industries remain largely static in their methods and outlook.

8. There are numerous problems concerning handicraft industries which need close study and investigation. Some of these are known, but systematic enquiry is necessary if action on the part of the Government and scientific institutes is to be properly directed. A few of the problems which affect the volume and character of the export trade, which is undoubtedly an important element in their production. The measures which are calculated to increase the export demand as also likely to enlarge the internal market, could be mentioned by way of illustration. The foreign demand for brassware products from Banaras, Moradabad, Jaipur and Tanjore could be increased if more utility articles were manufactured and their shapes adapted to the requirements of customers. Similarly, uses of brocades and gold thread saris and other articles manufactured in Banaras could be greatly developed if the tastes of foreign buyers and the character of their needs were studied more closely and the necessary guidance passed on to artisans. The recent slump in the coir industry, which is no doubt due in part to exchange restrictions, is also to be traced to the decline in quality, lack of adequate organisation and failure to adapt production to market conditions.

9. These illustrations show that in the case of handicrafts there is an intimate connection between measures needed to improve production and supply and those required for stimulating demand. The internal demand for products of handicrafts is limited mainly by the low purchasing power of the population but, through the extension of State patronage in its various forms and greater emphasis on the use of indigenous handicraft goods in the home and elsewhere, the demand can be greatly extended. The external demand in many markets has varied considerably in recent years on account of exchange restrictions and the fact that a number of handicraft products fall under the description of non-essential goods. In markets like the United States where this difficulty does not exist, the demand for Indian handicrafts could be developed much more if certain minimum conditions could be fulfilled by the suppliers. Complaints are not infrequently made that in supplying goods samples are not adhered to and the quality varies a great deal. Lowering of quality cannot but affect future orders. Secondly, for a large market like the United States goods are required in bulk, but the middlemen who arrange for production in India are not able to finance more than a limited quantity of goods. Production programmes for handicrafts goods should be based on the study of the requirements of customers in foreign markets, not only of the wealthy but, increasingly, of the average citizen. In other words, as suggested earlier, in addition to meeting luxury demands for artistic wares, the utility possibilities of handicrafts should be developed as fullyas possible.

10. In improving the quality of handicraft products and in increasing the demand for them emporia can also play an important part, provided they are efficiently organised. Emporia should not only increase the sale of cottage industry products but should^ in turn, be the means of conveying to artisans information and guidance concerning new demands and new designs. A direction in which useful results are likely to be secured is the linking up of consumers' co-operatives with producers' co-operatives. To the extent such a development can take place. a stable internal demand can be created for the products of small industries and handicrafts. Similarly, in the sphere of foreign trade the Central and State governments could attempt increasingly to promote links between the producers in India and large buyers abroad.

11. The Central Government have recently constituted a Handicrafts Board to advise the Government generally on the problems of the handicraft industries, particularly with a view to improving and developing production and promoting sales in India and abroad. The board would also advise the Government on grants or loans to State Governments and private organisations and institutions for financing activities necessary for the development and improvement of handicrafts. The purposes for which grants or loans may be recommended by the Board may include introduction of better technique and improved equipment, prescribing .standards of quality and arrangements for their enforcement, training of personnel, promotion of research, publications on cottage industries, procuring and supply of raw materials for handicrafts, setting up handicrafts museums and conducting economic surveys, etc.

12. Not all handicraft production takes place in such established centres as Benaras, Mirzapur, Farukhabad, Jaipur, Hyderabad, Tanjore or Srinagar but, since skills in handicrafts are imparted by one craftsman to another, the growth of traditions and, consequently, of a measure of concentration is a fairly common phenomenon. The craftsman or the artisan himself works on a small scale and independently of others. As a rule, despite the fact that many craftsmen in the same trade may be working near one another, their common problems are seldom taken care of by a representative association, nor have many co-operatives been formed. If the artisan is to become less dependent on middlemen and technical knowledge and guidance are to be carried to him, the two lines of advance have to be: (a) formation of co-operatives and ( and ) formation of associations in each established handicraft centre with co-operatives as well as individual workers as members. The work of organising co-operatives is a responsibility of the industries departments in the States with the assistance, where necessary, of the co-operative departments. Some progress in this direction has already been made. For instance, taking all the States together the number of industrial co-operatives rose from 3,758 in 1949 to 5,305 in 1950 and, according to the current schemes of State Governments, it is expected to rise to about 8,000 by 1955. If it is remembered that not all these co-operatives are concerned with handicrafts and that their total membership is less than half a million, the need for accelerating programmes for organising artisans and craftsmen into co-operatives will be'readily appreciated. As regards the formation of associations in established centres of production, the essential object is to create well-organised agencies through which assistance by way of materials, equipment, technical guidance, new designs, etc., can be taken to the home of the craftsman.

13. The industries departments in the States, even with such assistance as the Central Government can provide, will not be able to organise the production of handicrafts on the lines suggested above and, in due, course, to replace the middlemen by co-operative associations, unless they are themselves equipped with the necessary knowledge and are in continuous contact with the technical and business problems of the producer and the artisan. In addition to finance and organisation, there are three directions in which research and investigation are needed. In the first place, standards for quality control should be established for all important lines of production. Enforcement of these standards will have to be undertaken as the associations mentioned above develop their marketing functions and through rules governing State purchase. Export trade also represents a field in which quality control can be enforced successfully, at any rate, for the major products. Secondly, the study of designs and materials needs to be organised. There is too little work in this direction at present, although in arts and crafts schools and elsewhere valuable experience exists which could be brought together and further developed. In respect of designs in particular, the country has scarcely begun to explore its own rich heritage. In the third place, there are no adequate arrangements at present for either discovering the technical problems which hamper the work of the craftsman or for solving them where they are known.

14. Research in handicrafts involves study of art, skill and tradition as well as the study of materials. The former have necessarily a local colour. For this and other reasons it is necessary to develop in different parts of the country a number of institutions in which research in some aspect or other of handicraft production is undertaken. The Central Government might also consider the possibility of establishing a central institute for the study and preparation of designs. Such an institution could Work in co-operation with arts and crafts schools, institutions like Shantiniketan and industries departments in several States.

Small Industries

15. The expression 'small industries' includes many newly organized industries which are worked with power, as well as some of the older industries such as handloom weaving, manufacture of locks, utensils etc. In the organization of the newer small industries, the middle-man trader has a less prominent part than in the older industries. A higher level of technique demands a higher level of training and, therefore, the newer small industries open out a most promising field for the educated young man who is prepared to make his way on the strength of his own skill and enterprise. In the organization of these industries, the State can give even greater help than in the older industries, because their planning is a part of the planning of the corresponding large-scale industries and also because it is possible for the Government to locate the new industries in a planned manner.

16. Apart from the distinction between the old and the new, small industries may be divided into three groups, namely,

  1. those in which small-scale production has certain advantages and is not affected by large-scale industry to any great extent.
  2. those in which small-scale industry is concerned with the manufacture of certain parts or with certain stages of production in a manufacturing- process in which the predominant role is that of large-scale industry and,
  3. those in which small-scale industry has to meet the competition of the corresponding large-scale industry.

The three types of industries could perhaps be described respectively as industries which exist independently or as units integrated with or as units competitive to large-scale industries.

17. Among the examples of small industries which are largely able to hold their own may be mentioned the manufacture of locks and padlocks, wax candles, buttons, chappals and badges. In these industries, while work may be done on an individual basis, it has to be organized through groups primarily to facilitate sale and marketing and the financing of production. To the extent to which such articles enter into State purchase, it is possible directly to promote improvement in quality.

18. In the engineering industries, there is considerable scope for allocating to small-scale production particular stages in the process of manufacture. Among the leading examples of this type of small industry may be mentioned the manufacture of cycle parts, electrical goods, cutlery, pottery and agricultural implements. During the war the smaller engineering units achieved valuable results but, subsequently, the shortage of iron and steel and their own weakness in organization have hit many of them. With improvement in the supply of pig iron and iron and steel generally, for which the Five Year Plan provides, it is expected that these industries will have an expanding field. This result cannot, however, be achieved without a reservation of spheres according to some central plan for an industry as a whole, supported by considerable assistance in finance, organisation and training on the part of the Central and State Governments.

19. Of the third type, namely, those which are seriously affected by competition from large-scale industry, the best example is the handloom industry. In 1951 it was reckoned that there were 3 million handlooms at work, in addition to about 23,000 power looms. Power looms are a comparatively recent development, which has brought to the fore the question of competition between the more advanced and the less advanced forms of small industry. This is a different problem from the competition between a large-scale industry and the corresponding small-scale industry. The entire subject of 'protection' for the handloom industry in relation to the textile industry is being reviewed by a committee which has been appointed by the Central Government. However, as an urgent interim measure for the relief of the industry the principle of reservation in favour of the handloom weaver has been recently extended. The importance of ensuring an adequate market for the handloom industry is well recognised. This is also required for the plan for the textile industry which postulates an increase of handloom production from 810 million yards in 1950-51 to 1700 million yards by 1955-56.

20. It will be seen, thus, that both for those small industries whose production has to be integrated with and form a part of the production of the large-scale industry as well as for those which have to be 'protected' in relation to the large-scale industry, policy has to be based on the premises that there should be a common production programme for an industry as a whole, including both the large as well as the small-scale units. The nature of the common production programme would of course have to vary with each industry. In some cases, as explained in the chapter on village industries, the essential points are that the supply of the basic raw-materials should be assured, a sphere of production earmarked and perhaps a small cess enforced on the large-scale industry, either with a view to reducing the difference in the cost of production or merely with the object of providing funds for improving the efficiency and organisation of small-scale units. In other cases, a common production programme takes the form of a closely integrated programme in which the large and the small units are essentially complementary. The principle of reservation of a sphere of work is implied in both cases.

State Purchase

21. Apart from the field of production for any small-scale industry which may be specified by a common production programme, there are two directions in which the demand for products of small industries could be deliberately developed. These are : (z) stores purchase and (u) replacement of imports. The question of stores purchase has been the subject of a recent decision by the Central Government. It has been agreed that where basic considerations like quality, delivery date etc. are comparable, the products of cottage and small-scale industry would receive preference for the requirements of the Governments over the products of other manufacturers. In those items in which cottage industry has advantages over large-scale industry or has established itself as a supplier to government on competitive terms, orders should be placed with cottage and small-scale industry to the fullest extent before orders are given to large-scale industry. In the case of other products, according to the circumstances and merits of each case, a price advantage and suitable relaxation as regards specifications would be allowed. It has also been provided that preference should normally be given only to offers made by cottage and small-scale industry through a co-operative society or through agencies approved by the Central Ministry of Commerce and Industry in consultation with State Governments. While, over a period, this stipulation will encourage the growth of co-operative organisations, in order to extend immediate support to small industry, it has been further agreed that price preferences would not be withheld from cottage industry products on the ground that purchases were made from a middle-man, provided that the middleman is a traditional employer, for instance a 'master weaver' or a 'master cobbler'. These decisions embody a considerable advance in policy and we suggest that they should be followed by those States which have not already adopted such a policy. It is important, however, that there should be machinery for the enforcement of these decisions and for reviewing their working from time to time If it is carefully employed, the stores purchase policy can be both a method of encouraging cottage industry and a means for raising its technical efficiency and improving its organisation.

22. A preliminary study of the possibilities of replacing by cottage and small-scale production articles which are now imported, has been made, but we suggest that the subject requires detailed examination by panels of technicians and businessmen in different trades. Such examination should be taken in hand and completed as a matter of priority. These panels could work out in detail the directions in which imported articles could be substituted and the stages in which the programme of production by cottage and small-scale industries could be organised.

New Centres Of Small-Scale Production

23. The scope for initiating the production of articles in replacement of those now imported is likely to be most considerable where the Government has the opportunity of organizing new centres of small-scale production. Thus, for instance, for the rehabilitation of displaced persons, especially those who had non-agricultural occupations or interests, it has been necessary to establish important townships such as Nilokheri, Faridabad, Phulia, Gandhi Dham etc. In the Punjab, new industrial areas have been added to a number of towns and, besides the provision of sites and the necessary social amenities, power has been made available. Independent artisans and small-scale entrepreneurs are being assisted with finance and technical guidance to establish production in selected lines. Among the community projects recently initiated there are a few, especially in West Bengal, in which the establishment of towns of local industries constitute the principal programme. In community projects of the rural type also, some provision has been made for the promotion of arts and crafts.

24. From these examples it would be apparent that by far the most important method of developing small-scale industries is to establish either new townships or, what might frequently be even more advantageous, to extend existing towns and provide sites, services, power, etc. It is hoped that from the funds provided in the Plan for cottage and small-scale industries, community projects as well as under certain other heads, it would be possible to promote and assist a number of centres for small industries. In the river valley projects, particularly when power becomes available, development of this kind will have a great deal of importance. The creation of such centres of industrial production is a development of such importance for the economy that if the programmes require additional financial provision in the later stages of the Plan, we recommend that this should be considered. It should be added, however, that progress in establishing new centres for industries is likely to be impeded, not so much by lack of finance for establishing them, as by the lack of capital for those who have to establish the enterprises, failure in marketing arrangements and by inadequate training of workers. The problems of marketing are already proving a source of anxiety in some centres which were started in connection with the rehabilitation of displaced persons. Frequently, acute problems of marketing develop because (a) in laying down lines of production sufficient study is not made of the prospects of future demand and (b) there is no overall planning in terms of common production programmes between large-scale and small-scale units. There are, therefore, dangers which have to be considered carefully in advance by the Government concerned before new industrial centres are established.


25. The question of training has received considerable emphasis in the Five Year Plan. The training centres maintained by the Central Government under the Directorate General of Resettlement and Re-employment have trained during the past few years 144,000 persons. The Ministry of Rehabilitation has so far arranged for the technical training of 52,000 persons from West Pakistan and at present 12,000 persons are under training, in addition to 8,000 trainees from East Pakistan. The plans of the State Governments provide for the following training programmes :

State Programmes of Training
  1950-51 1955-56
Number of industrial schools 365 456
Number of pupils trained 14,750 21,797
Number of technical and vocational institutions 260 407
Number of person trained 26,702 42,997

The Central Ministry of Education has also provided for substantial assistance to technical institutions engaged in imparting more advanced training. Technical training programmes should be so designed that they fit in with the overall plan for the development of village and small-scale industries in the country. The training should be directed towards those trades in which the prospects of stable employment are reasonably clear. There is need also for considerable emphasis on the training of artisans in the existing small-scale industries. Exhibitions of village and small-scale industries which are valuable in stimulating demand should also be utilised for providing instruction concerning new techniques and designs to artisans.

26. Research.—The importance of research for the development of village industries and of handicrafts has already been stressed. Small industries of the modern type have their own problems of research which can only be solved in close collaboration with the larger industries to which they are related. We suggest that the Central Government should arrange, in consultation with the State Governments, for the opening of special research sections for small industries in research institutes associated with individual large-scale industries. Where necessary, a measure of assistance could be afforded to enable an institution to expand its facilities. In view of the variety of problems which small industries of the modern type are likely to raise, it is doubtful if a single research institute will be sufficient.

27. Finance.—We have referred already to the need for finance. One suggestion may be made. Some States are likely to find it difficult to establish industrial finance corporations of an economic size because of their small resources or the undeveloped state of their industry. We suggest that the Central Government should consider the possibility of making regional arrangements for the establishment of industrial finance corporations for those States which may not be able, with advantage, to support independent financial institutions.

28. In conclusion, we may refer to a number of small industries which call for skill and training and, invariably, for the use of power. The growth of these industries is related closely to the development of heavy industry, including the manufacture of machinery in the country. The advance of technological education is of course a material factor in the progress of such small industries.

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