6th Five Year Plan
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28 || Appendix

Chapter 12:

Small scale industries have how been redefined to include those manufacturing and repairing units as have investment in plant and machinery upto Rs. 20 lakhs (and in the case ancillary units upto Rs. 25 lakhs). With this as the upper limit, the village and small industries (VSI) sector consists broadly of (i) traditional industries (viz. handlooms, khadi and village industries, sericulture, handicrafts and coir) and (ii) modern small scale industries including 'tiny' units and powerlooms. While the traditional industries are generally artisan-based, located mostly in rural and semi-urban areas, involve lower levels of investment in machinery and provide largely part-time employment, modem small scale industries and powerlooms use mostly power-operated appliances and machinery, have some technological sophistication and are generally located close to or in the urban areas including the large industrial centres.


12.2 The objectives of the programmes for the development of these industries in the preceding Plan periods have been to generate large scale employment opportunities on a decentralised and dispersed basis, to upgrade the existing levels of skills of artisans as well as quality of their products, and to step up production both for mass consumption and export. To achieve these objectives, the earlier Plans envisaged, inter alia, promotion and development of entrepre-neurship backed by a package of consultancy services, improvement in production techniques, institutional support in respect of supply of credit and raw materials, formulation of common production programmes, various incentives for organising industrial cooperative societies, rebate on sales of handloom and khadi, etc.

12.3 While the precise impact of the various policy measures and development programmes cannot be assessed for want of adequate data, particularly in respect of the traditional village and household industries, the following table gives a broad picture of the progress made in this sector:

Table 12.1
Estimated levels of output, employment aaJ exports under different village and small Industries

Sl.No. Industry


(in Rs. crores) Employment coverage* (inlakh persons) Export
(Rs. crores)
Unit 1973-74 1979-80 1973-74 1979-80 1973-74 1979-80
(0) (1) (2) (3) (4) (5) (6) (7) (8)
A. Tradltional Industries :
Village Industries

Million Sq. Mtrs.




Million Metres Value .
Lakh Kgs. of raw silk Value

840, 29
63 1065

2900 1740 48

52.10 12.00
61.50 16.00



6 Coir
Sub-Total (A),

Lakh Tonnes of fibre
Value .









B. Modem Small Industries :
7 Small Scale Industries . Value 7200 19060 39.65 64.60 538 1050
8 Powerlooms . Sub-Total (B) :

Million Metres
Value .



10.00 49.65

11.00 75.60



C. Others : Value 2237 4206 24.50 25.00
  Total : VSI Sector Value            
  (i) at current prices 13600 30935 176.36 233.44 840 2225
  (ii) at 1979-80 prices   20885 30935      

Note:—Data for items 1 and 2 relate to units under the purview of the Khadi and Village Industries Commission (KVIC) ;
for item 7 with respect to units under the Small Industries Development Organisation (SIDO). Data for 'Others' shown (under C) relate to units not covered under the above specified industry-groups.
* Employment coverage includes both full-time and part-time.

In the six years period 1974—80, the estimated value of production registered a growth rate of 6.8 per cent per annum. The gross value added at factor cost rose from around Rs. 2800 crores in 1973-74 to Rs. 4100 crores in 1979-80 (at 1970-71 prices) registering a growth rate of 6.6 per cent.

12.4 On the basis of data and norms available from the National Accounts Statistics and Central Statistical Organisation, it has been estimated ill at in the year 1979-80, the share of the VSI Sector* in the contribution made by the manufacturing sector was around 49 per cent in terms of gross value of output and 51 per cent in terms of value added. As regards employment, this sector had offered employment opportunities to about 23.58 million persons* (both part-time and full-time) as against around 4.5 million persons estimated to be engaged on full-time basis in the large and medium industries sector. In the field of exports, this sector accounted for more than one-third of the total exports of the country.

* This comprises the whole of the unregistered manufacturing sector and certain portion of the registered manufacturing sector units which have investment in plant and machinery upto Rs. 20 lakhs (and in the case of ancillary units upto Rs. 35 lakhs) in terms of the revised definition of Small Scale Industries of July, 1980.

12.5 However, some of the important objectives set for the village and small industries sector are yet to be fully achieved. The dispersal of small scale units far away from the metropolitan areas and large cities has not taken place to an appreciable extent. Available data indicate that the industrially developed States along with Delhi accounted for nearly 67 per cent of the registered small scale units which had come up to 1976 and about 75 per cent of the employment generated by them. And within the developed States, there has been concentration of units in a few areas which are either metropolitan or large cities or industrial complexes. There has not been much improvement in the activisation of idle capacities of the units either. It has been estimated that capacity utilisation in different village and small industries has been ranging from about 45 to 60 per cent. Though there are varying estimates regarding the number of sick units in the VSI sector, there is general agreement about the enormity of the problem. In spite of credit expansion (from about Rs. 250 crores in 1973-74 to about Rs. 600 crores in 1979-80;, the share of the 'tiny' units with investment of upto Rs. one lakh has been very little. According to a survey conducted by the Reserve Bank of India, of the units assisted financially by the commercial banks upto June, 1976, about 69 per cent of the total credit flow was availed of by 11 percent of the bigger units in the small industries sector which accounted for 55 per cent of the production. Taking into account the units which could not have access to institutional credit the disproportionate supply of credit becomes more pronounced. The Entrepreneurial Development Programme has not made signilicant progress except in a few States like Gujarat etc. in widening the entrepreneurial base.

12.6 Low levels of tecnology resulting in poor productivity and inadequate returns have continued to characterise the traditional industries sector. Coupled with this, the problem of obtaining raw materials of desirable quality at reasonable prices and lack of marketing arrangements for selling their produce at fair prices have deprived the artisans of a good part of the earnings which should have accrued to them. The increased flow of institutional funds in favour of the decentralised industrial sector has not covered the artisan sector adequately which continues to depend, for a major part of its capital requirements, on non-institutional sources, often, at exorbitant rates of interest.


12.7 Promotion of village and small scale industries will continue to be an important element in the national development strategy particularly because of its very favourable capital-output ratio and high employment intensity. During the Sixth Five Year Plan, the programmes for the village and small industries sector would be so designed as to subserve the following objectives:—

  1. improvement in the levels of production, and earnings, particularly of the artisans, through measures like upgradation of skills and technologies and producer-oriented marketing, etc.;
  2. creation of additional employment opportunities on a dispersed and decentralised basis;
  3. significant contribution to growth in the manufacturing sector through, inter alia, fuller utilisation of existing insatalled capacities;
  4. establishment of a wider entrepreneurial base through appropriate training and package of incentives;
  5. creation of a viable structure of village and small industries sector so as to progressively reduce the role of subsidies; and
  6. expanded efforts in export promotion.


12.8 The targets of production and exports set for this sector and the employment to be generated during the 1980-85 Plan period are indicated in the following table:—

Table 12.2 Targets of output, employment and exports for different village and small industries

Sl No Industries Output (Value in Rs. crores) Employment Coverage (in lakh persons) @ Exports (Rs. crores)
Unit 1979-80 1984-85 1979-80 1984-85 1979-80 1984-85
(0) (1) (2) (3) (4) (5) (6) (7) (8)
A. Traditional Industries
1 Khadi Million Sq. Mtrs.
11.24 15.40
  2 Village Industries . Value 314 1000 18.21 35.10
  3 Handlooms Million Metres
61.50 87.00 261 370

4 Sericulture

Lakh Kgs. of raw silk




21.50 49 100
  5. Handicrafts . Value 2050 3200 20.30 28 00 835 1315
  6. Coir

Lakh Tonnes of fibre






Sub-Total (A) : Value 4419 7227 132.84 195.00 1175 1835
B. Modern Small Industries              
7 Small Scale Industries . Value 21635 32873 67.00* 89.00 1050 1850
  8 Powerlooms Million Metres






Sub-Total (B) : Value 24885 36973 78.00* 103.00 1050 1850
C. Others Value 4206 5035 25.00 28.00 ——
Total: VSI (A+B+C) : Value 33510" 49235 235.84* 326.00 2225 3685

Note : Data for Items 1 and 2 above relate to units under the purview of the KVIC, and for item 7 relate to units under SIDO, with reference to revised definition of SSI Units of July, 1980. Data for 'Other.}' (under C) relate to units lut co vered under the ibove specified industry groups.
@ Employment coverage includes both full-time and part-time. *The difference in these figures from those given in Table 1 (page 187) is explained in para 12. 66.

12.9 The incremental output target of Rs. 15725 crores in the terminal year 1984-85 would correspond to a growth rate of 8 per cent per annum against the annual growth rate of 7.6 per cent projected for die whole manufacturing sector. Within the village and small industries sector, white the traditional industries (including 'others'") would have a projected incremental output of Rs. 3637 crores with a growth rate of 7.3 per cent, the modern small scale industries including powerlooms would account for an incremental output of Rs. 12088 crores and a growth rate of 8.2 per cent. The export target of Rs. 3685 crores at 1979-80 prices for 1984-85 would mean a growth rate of 10.6 per cent per annum. The employment coverage (both full-time and part-time) is estimated to increase from about 23.58 million persons in 1979-80 to about 32.60 million persons in 1984-85, i.e., the additional employment generation during the Flan period would be of the order of around 9 million. Expressed in terms of standard persons-years, the employment coverage would roughly correspond to 17 million, 22 million and 5 million, respectively.


12.10 In the Five Year Plan 1980-85, a public sector outlay of Rs. 1780.45 crores would be provided. Its industry-wise break-up would be as follows:—

Table 12.3 Public Sector Outlay : Village and Small Industries
(Rs. crores)

Sl. No. Industry

1974-79 Outlays 1979-80 Outlays 1980-85 Outlays


States and UTs.


States and UTs.


States and UTs.

1. Khadi and Village Industries . 133.56 9.42 142.98 85.88 7.43 93.31 480.00 67.09 547.09
2. Handlooms 37.30 62.62 99.92 27.64 20.95 48.59 120.00 190.93 310.93
3. Sericulture 7.96 21.72 29.68 8.00 8.62 16.62 31.00 133. 56 164.56
4. Handicrafts 18.73 11.07 29.80 13.00 10.18 23.18 56.40 54.50 110.90
5. Coir . 2.93 4.73 7.66 1.12 1.20 2.32 15.00 11.72 26.72
Sub-Total (1-5) 200.48 109.56 310.04 135.64 48.38 184.02 702.40 457.80 1160.20
6 Small Scale Industries including Industrial Estates 92.88 128.86 221.74 40.00 64.81 104.81 220.00 396.10 616.10
7 Powerlooms 0.16 3.09 3.25 0.33 0.32 0.65 1.00 3.15 4.15
Sub-Total (6-7) 93.04 131.95 224.99 40.33 65.13 105.46 221.00 399.25 620.25
Total VSI Sector 293.52 241.51 535.03 175.97 113.51 289.48 923.40 857.05 1780.45

The Sixth Plan outlay would provide a step up of over 3.3 times the outlay during 1974-79. The break-up of the States' sector outlay of Rs. 857.U5 crores is indicated in the Annexure.

12.11 The VSI sector outlay of Rs. 1780.45 crores would be supplemented, to some extent, by the provisions made tor schemes in other sectors, like (i) the schemes of Industrial Development Areas, Spinning Mills, Investment Subsidy and Transport Subsidy for industrially backward areas, provided for in the programme for Large and Medium Industries sector; (ii) the schemes for development of industrial cooperatives, provided for under Cooperation; (iii) the scheme of Integrated Rural Development (LRD), TRYSEM; etc., provided for under Rural Development; (iv) scheme for Gobar Gas provided under Energy Sector, and (v) special programmes for scheduled castes and scheduled tribes.

12.12 It is estimated that of the total outlay, investment component would be about Rs. 1000 crores in the form of margin money assistance, capital subsidy, creation of infrastructure facilities and investment in the share capital of the financial, promotional and developmental corporations concerned with the development of village and small industries. Besides the public sector investment, it is estimated that private sector investment in this sector would be of the order of Rs. 12,600 crores which would be forthcoming from financial institutions, promoters' own resources and non-institutional sources.


12.13 According to the Industrial Policy Statement of July, 1980, "Government is determined to promote such a form of industrialisation in the country as can generate economic viability in the villages. Hand-looms, handicrafts, khadi and other village industries will receive greater attention to achieve a faster rate of growth in the villages." Laying emphasis on balanced and harmonious development of all sectors of industries, the Statement adds that "while making all efforts towards integrated industrial development, it is proposed to promote the concept of economic federalism with the setting up of a few nucleus plants in each district, identified as industrially backward, to generate as many ancillaries and small and cottage units as possible". Also, "Policy regarding marketing support to the decentralised sector and reservation of items for Small Scale Industries, shall continue to be in force in the interest of growth of the small scale indstries."

12.14 In the light of the above, the policy support for the development programmes relating to village and small industries during the Sixth Five Year Plan would be along the following directions:—

  1. integration of the promotional programmes in the sector with other area development programmes and adoption of a cluster approach particularly for the traditional industries;
  2. restructuring of the organisational base at the district level to make it more effective and result-oriented;
  3. development of appropriate technologies and skills; their effective extension and transmission;
  4. increased availability of raw materials including creation of buffer stocks particularly of critical raw materials;
  5. accelerated flow of institutional funds specially in favour of artisans, village industries and 'tiny' units and rationalisation of the interest rate structure;
  6. organisation of producer-oriented marketing both within and outside the country;
  7. selective reservation of items for exclusive production and purchase from the cottage and small industries;
  8. effective promotion of ancillaries;
  9. strengthening and extension of cooperative form of organisation particularly for the cottage and tiny units; and
  10. building up of a sound data base to facilitate proper policy formulation and evaluation.

12.15 The various policy measures have been spelt out briefly in the following paragraphs.

Industry-cum-area development approach

12.16 The existing programmes for the promotion ' of village and small industries which have been based mainly on an 'industry' approach have no doubt led to increase in production and employment, but have not helped in raising to an appreciable extent, the levels of income of the artisans. The rural artisans are scattered; thsy find it difficult to obtain credit and raw materials; the size of the market is small and even at places where there are clusters of artisans engaged in specific industries, their operations are not viable. A strategy based on industry-cum-area development approach leading to vertical and horizontal integration of the 'programme's can alone sustain the industries in rural areas. This calls for integration of beneficiary-oriented schemes with the overall 'area' development plans to be drawn up after taking the resource endowments into account. All types of industries cannot be developed everywhere; there are certain areas where clusters of artisans already exist; there may be certain other areas which have potential for the development of a specific industry. For such groups of artisans and craftsmen, the approach would be to provide a package of assistance including setting up of functional industrial estates so that the clusters couid turn into growth centres. In fact, the emphasis would be on selected industries with maximum potential rather than on spreading the efforts thinly on promoting all types of industries in the same area.

12.17 A beginning in this direction has already been made by inclusion of the 'Industry', 'Service and Business' component in the programme of IRD which has been extended to cover all the blocks in the country. Of the 600 families to be covered under the programme in each block every year, 100 families would be through village and cottage industries and another 100 families through 'service' activities. It is ex'p'ected that during the Plan period about 25 lakh families would get assistance in setting up rural industries and an equal number in the 'service' sector for self-employment.

Organisational arrangements at District and Sub-District levels

12.18 By March, 1980, 382 District Industries Centres (DICs) were sanctioned covering 392 districts with the objective of providing all the services and support facilities under a single roof. Although a two year period is too short for any proper evaluation of a new organisational structure, it l':is been felt that DTCs, by and large, have not made a very significant impact particularly in the traditional industries sector. The Industrial policy Statement of July, 1980 has observed that DICs have "not produced benefits commensurate with the expenditure involved" and that "more effective alternatives are being explored". It is, however, recognised that an industrial promotional structure at the district level seems unavoidable. Also, if the 'alternatives' were to assume larser responsibility for the promotion of traditional industries than hitherto, so'ne technical/extension staff at the sub District/ B'ock level would be necessary. During the Sixth Five Year Plan, it is envisaged that the industrial promotional agencies at the district level would play a catalytic role in generating opportunities for self-employment in close cooperation with the District Manpower Planning and Enroloyment Generation Council. It would also establish purposive linkages with the official and voluntary organisations engaged in the promotion of various traditional industries particularly at the sub-district and the Block levels, and effectively monitor the programmes of rural industrialisation.

Institutional Finance

12.19 Financial assistance to the village and small industries sector is available primarily through commercial banks, cooperative banks. Regional Rural Banks, State Financial Cor-ooration"!, under the overall guidance of Reserve Bank of Tndin and Industrial Development Bank ofIndia, etc. Over the 'p'eriod, various measures have been taken to accelerate the flow of credit to this sector. There has been a substantial increase in the number of bank branches covering semi-urban and rural areas; the sector has been included in the list of 'priority' sectors for commercial bank lendings. Because of the various policy and operational measures taken, there has been some increase in the flow of credit to this sector. Loans advanced by commercial banks (loans outstanding) increased from about Rs. 686 crores in March, 1973 to about Rs. 2,633 crores by December, 1979. In the case of cooperatives, the credit limits sanctioned under the Reserve Bank of India scheme of Handloom Finance increased from about Rs. 14 crores in 1973-74 to Rs. 58 crores in 1979-80. Assistance to other 22 groups of industrial cooperatives eligible for such facility, however, was not substantial. The Regional Rural Banks had by March, 1979, granted loans to Small bonowers to the extent of Rs. 45 crores of which, it is estimated that, the rural artisans would have availed of about Rs. 14 crores only. The State Financial Corporations had sanctioned medium and long term loans to the tune of about Rs. 702 crores and had disbursed about Rs. 451 crores by March, 1979. The sanctions by the IDBI of re-finance to eligible institutions (including State Financial Corporations and commercial banks) increased from about Rs. 10.5 crores in 1970-71 to about Rs. 300 crores in 1979-80. The RBI continues to operate the Credit Guarantee Scheme for small scale industries and the amount of outstanding guarantee's had gone up to Rs. 3289 crores by March, 1980.

12.20 While there has been a step up in the institutional credit flow to this sector, the beneficiaries have mostly been the larger among the smail scale units. The availability of finance to 'tiny' and artisan type units has not been commensurate with their needs and levels of production. Of the total limits sanctioned by commercial banks upto December, 1978, the craftsmen and other qualified entrepreneurs had accounted for about 4.2 per cent; the term finance availed of by the 'tiny' units was around- 10 'p'er cent of the amount sanctioned by the IDBI. The impact if the scheme of 'composite' loan has been very peripheral, to some extent, due to the reluctance of the bank managers in advancing loans without proper collateral security.

12.21 The target for 'priority' sector lendings by commercial banks has recently been increased from 33 to 40 per cent. The RBI have issued instructions that commercial banks should provide increasing nroportion of their total advances to village and small industries so as to reduce their dependence noon non-institutional source's, with the objective that no worthwhile project in this sector should be ; ejected for want of adequate security. It has been decided that under the Differential Rate of Interest (DRI) scheme, the cooperatives and institutions concerned with the promotion of SC/ST artisans would also be eligible for concessional assistance. Similarly, instructions have been issued to the cooperative banks to 'provide finance to individual artisans and village and cottage industries. More branches both of Commercial Banks and Rural Regional Banks are planned to be opened, mostly in the un-banked areas. The IDBI which has been charged with the task of coordinating, guiding and monitoring the entire range of credit facilities offered by various agencies to the sector, has opened a separate window to facilitate automatic re-finance of term loans to the primary lenders for loans upto Rs. 5 lakhs. It has also set up a Credit Committee for Small and Village Industrie's which over-views the credit needs and the measures taken to augment the flow of credit. It has recently been decided, in principle, to set up a National Bank for Agriculture and Rural Development which would among other activities discharge the functions of an apex institution for flow of credit to the artisan and cottage type units in rural areas.

12.22 While a number of important measures have been introduced recently, there is need for their effective implementation at the operational level. The liberalised scheme of credit to cottage and small industries for providing 'composite' loan upto Rs. 25,000 without insisting on margin money/collateral security would need to be made more effective through proper project formulation facilities, detailed district credit planning, provision of institutionalised support for raw materials and marketing, etc. Proper and continuous monitoring and attitudinal change in the field staff of lending institutions would go a long way in accelerating the credit flow and ensuring the adequacy thereof.

12.23 A related problem is the effective rate of interest for various industries and the concerned promotional institutions. At present, interest is being charged at varying rates from artisans, craftsmen, handloom weavers in the cooperative fold and those outside, the tiny units and comparatively large among the small scale units. A villnge industry unit with investment, of over Rs. 2 lakhs is eligible for funds at an effective rate of 4 ner cent under the KV1C programme, while artisans under the 'composite' loan scheme arc subjected to pay 9-1 per cent to 11 per cent* (depending on whether they are in backward or non-backward areas). Even in the modem small scale sector, an educated/engineer entrepreneur can ,eet funds at an effective rate of 7 per cent, the balance being subsidised from budgetary sources. On the other hand, various States' Development Corporations for handlooms, handicrafts, small industries, etc., are being charged 16 to 18 per cent, as these have 'paid-m equity exceeding Rs. 1 crore or so. This heavy interest burden virtually deters them from reporting to institutional finance and forces them to depend henvi'y on budgetary support, thereby restricting their commercial activities. Attempts would, therefore, be made to review/rationalise the interest rate structure so as to relate it to the economic status of the direct and/or ultimate beneficiary.

*With effect from July 1, 1980 the interest rates (inclusive of interest tax) hive heen raised to 10.25 and 11.85 respectively.

Appropriate Technology, Research and Development and Training

12.24 The need for appropriate technology to achieve better utilisation of locally abundant resources, substitution of raw materials available in plentiful supply in place of scarce and imported ones, development of simple processes and techniques with a view to reduce drudgery and fatigue and better the standard of living of artisans and entrepreneurs, is obvious. Such a technology does not necessarily visualise any reduction in the employment potential; rather it introduces a structural orientation and envisages adaptation of the industrial fabric in a manner conducive to enhancing the productivity and earnings of the small entrepreneurs, artisans and craftsmen. In other words, it contemplates a ;production process which is most •appropriate' under any given market input availability and given social conditions at a particular point of time.

12.25 The research and development efforts at present are being carried out by the various all India Boards and Organisations engaged in the field of village and small industries. The development of suitable tools and proto-types is being undertaken by Prototype Development Centres. Institutes engaged in research activity in the field of village industries are the Jamnalal Bajaj Research Institute, the Central Bee-keeping and Research Institute, and other organisations for pottery, ceramics, etc. The Sericulture Research Institutes and stations also attempt improvement in practices in mulberry cultivation and tasar food plantations silk worm rearing and reeling. Besides, a host of other organisations like the Council for Scientific and Industrial Research, Indian Council of Agricultural Research, Institutes of Handloom Technology, etc., are also involved in research activities. However, effective translation of these R and D efforts is still to be achieved and consequently, the impact remains insignificant. Also, even with the introduction of some of the newly evolved technology/techniques, the value added percentage in the final product though high, the gross value continues to remain quite small and the artisans despite being fully employed have remained below the poverty line.

12.26 In the Sixth Plan period, efforts would be made to identify a focal 'ptoint to coordinate the R and D activities of the various research organisations and boards engaged in the field of village and small industries. Identification of technical problems and areas of research wherein improved technology could yield better returns in relation to time and effort expended, would be done by the concerned industry-specific organisations. The focal point would then entrust the identified problems to specialised institutions and if necessary, meet then" financial requirements. In the process of evolving improved tools and techniques, care would be exercised to deter indiscriminate displacement of traditional crafts and skills or affect adversely their labour intensity but ensure an overall increase in the productivity and earnings of the artisans. The specialised institutions would also be required to examine the economic viability of the various alternatives available and undertake pilot scale/commercial experimentation of the optimal solution evolved. The focal point in conjunction with the organisations concerned would take care of the commercial production of the new technology/techniques, while transmission and disseminiation would be the sole responsibility of the specific agencies/boards in charge of the different industries.

12.27 Training is an effective vehicle for wider diffusion of technology and upgradation of skill of entrepreneurs and artisans. The existing training programmes under the aegis of various all India Boards, State Governments and other area development institutions cover entrepreneurs, craftsmen, artisans as well as supervisory staff. It is, however, felt that some of the existing training programmes are not result oriented. In some cases, trainees gravitate to the training centres for the stipend in the absence of anything else to do; as a result, very few persons engage themselves in the trade trained. Most of the training programmes lack post-training tie-up. During the Sixth Plan, the ongoing training programmes would be strengthened and programmes would be expanded in new areas and industries. Provision has also been made for skill formation under IRD and for strengthening and creation of training infrastructure under TRYSEM. While selecting trainees, due emphasis would be laid on the aptitude of the trainees for specific trades; the emphasis being on crafts-training under master-craftsmen rather than mere institutional teaming. Arrangements would be made to assist the trainees with a package of facilities consisting of tools and equipments, credit, marketing assistance, etc. Arrangements would also be made for a periodic review and evaluation of the training programmes to find out their impact on employment, productivity and earnings of the beneficiaries.

Supply of raw materials

12.28 The general policy in the past in regard to supply and distribution of raw materials to the small scale sector and artisan units has been to earmark specified quantities of raw materials from major suppliers and to route them through the State Small Industries Development Corporations for distribution to the small scale and cottage units. There have also been selective relaxations in the import policy in favour of the small scale sector for the import of certain raw materials both canalised as well as other items. Despite various Government measures, the small scale sector has been facing considerable difficulties on account of the overall shortage of essential raw materials and intermediates. In actual practice, the sector tends to get more or less a 'residuary' treatment in raw material distribution. In some cases, the quality has also been unsatisfactory. Another problem has been the fluctuation of prices which has affected particularly the artisan type units adversely as they lack holding capacity. The 'problem of raw material availability has also been among the important ractors responsible for under-utilisation of the capacities in the traditional and small industries sector. In spite of various regulatory measures taken by the Government, the handioom weaver has not been able to get hank yam of requisite quality and quantity from the spinning mills. In the case of handicraft artisans also some of the essential raw materials were either not available in adequate quantity or were available at exorbitant prices.

12.29 in order to overcome the difficulties with respect to availability of various raw materials, the Industrial Policy Statement has envisaged introduction of .a scheme for building up of a buffer stock of essential and scarce raw materials. For this, it is envisaged that the existing set-up of National Small Industries Corporation at the Centre and the Small Industries Development Corporations at the State level would be utilised. These Corporations would have to make a precise assessment of the present and future needs of raw materials of small scale units on some realistic norms, and arrange for distribution particularly at the places of concentration of units. The attempt would be to at least ensure that the impact of an overall scarcity is evenly spread among the large and medium and the VSI sectors. In the case of handlooms, a National Handioom Development Corporation would be set up to attend inter alia to the problem of yarn supply to handioom weavers at reasonable prices. For the North Eastern region, the problem of supply oŁ hank yam would be attended to by the North Eastern Handlooms and Handicrafts Development Corporation. The Rural Marketing Centres which have been set up on pilot basis at the block level would also arrange for supply of raw materials required by artisans and tiny units.


12.30 The marketing problems of cottage and small .industries flow from their scale of operation, lack of standardisation, inadequate market intelligence, competition from large-scale units and insufficient holding capacity. A large number of artisans and craftsmen continue to depend substantially on middlemen for supply of their inputs and market-inc; outlets who appropriate most of their profits. Sales of traditional industries' products like handlooms, handicrafts and khadi depend very much on the rebate allowed on them; the volume of inventories, when rebates are not operative, becoming quite large.

12.31 Market intelligence and assistance to small en^epreneurs, artisans and craftsmen are presently provided, to a very limited extent, by the National Small Ipdustr'.es Corporation, the Small Industries Service Institutes. State level Corporations for small industries, handlooms and handicrafts, the Central Silk Board and the retail outlets of the Khadi and village Industries Commission and Coir Board. All India Handloom Fabrics Marketing Cooperative Society, Apex Societies and netwoi'K of States emporia and Handlooms and Handicrafts Export Corporation. A Central Scheme of Rural Marketing Centres at block icvel was taken up on pilot basis in 1978-79 to cater lo marketing requirements of artisans and tiny units. uie Government has been providing marketing support to some extent through its scheme of stores purchase. As many as 379 items have been reserved for exclusive purchase from the small scale sector. The products 01 the small scale sector are also given price preference of upto 15 per cent over those of the large dnd medium industries in the rest of the items. All these are at best piecemeal and sporadic attempts in marketing promotion and it has not been possible to make any significant headway in this direction. Production targets continue to remain primarily supply-induced in the hope that what is produced, would be marketed.

12.32 During the Sixth Plan. it is proposed to evolve a well coordinated approach in the direction of demand forecasting, collection and collation of market intelligence aria to strengthen and expand internal marketing infra-structure with a view to making it producer-oriented. Producers of similar/same goods would be assisted to form groups and consortia so as to market their products under common brands in competition with large industry. The working of Rural Marketing Centres would be evaluated. It is proposed to evolve an integrated system of supply of raw materials and marketing of products through promotion of cooperatives and government sponsored agencies. In the field of government purchase, there is need for identifying more and more items for exclusive purchase from the small scale and developing a system for close monitoring at different levels. It has been decided to have graded reservation lists (at the rate of 100 per cent, 75 per cent and 50 per cent) to be identified on the basis of production and supply capabilities of the small scale units having regard to the actual supplies made by them in the recent past. The policy of price preferences to the products of small scale uni.ts would also be continued and implemented more vigorously. Tile Central public sector enterprises have been directed to fall in line with the policy of preferred purchases from the small scale sector followed by the Centre; the State public sector enterprises are also expected to do so.

12.33 For external marketing, a number of Export Promotion Councils for important manufactured products have been set up; there arc Export Promotion Councils for handlooms, gems and jewellery and leather products. It has also been decided t.o set up separate Export Promotion Council for Carpets and proposals for coir and silk are under consideration. While no separate Council to look after the interests of the small scale sector is visualised, a Steerino Committee has recently been set up for nromoting their exports. It is also proposed to assist setting up of consortia for small scale industries and establish international subcontract exchanges, undertake studies on exoor' potential, develop market intelligence, exchange trnds delegations, participate in trade fairs, cxhibi-^ons and organise seminars and workshops.

Reservation and other measures

12.34 Besides marketing assistance in various forms referred to above, certain areas of manufacture have been reserved for exclusive production in the decentralised sectors particularly in the handlooms and small scale industries. So far 12 items have been reserved for exclusive production in the handloom sector but there have been problems in the effective enforcement of the reservation orders. A Committee has been appointed to go into the question of devising ways and means to make reservation effective.

12.35 In the case of small scale industries, at present 834 items have been reserved for exclusive production. For want of adequate follow up and positive support, the policy of reservation has tended to be negative in character. No worthwhile attempt has been made to forecast demand for the reserved items and ensure that adequate capacity created to meet the likely demand and/or prevent supply demand imbalances. While no precise evaluation of the impact of the reservation policy has been carried out, some studies indicate that the growth of the reserved sector as a whole has not been appreciably faster than that of the non-reserved sector.

12.36 During the Sixth Five Year Plan, the approach would be that the sectors where efficient production can be secured on small scale basis would continue to be reserved for further expansion onb bv small scale units. However, if the social costs of production of the decentralised sector are to be contained within reasonable limits, there might be greater play of competition in the remaining sector? which are not reserved exclusively for the small scale industries. A high level official committee has been set up to periodically review the list of reserved items. Endeavour would be to pursue a policy of positive support in respect of those items which offer maximum growth and employment potential. What is intended is that the small scale sector acquires sufficient vitality to be able to compete on its own with the large and medium sector over a reasonable period of time. The question of extending legislative support to measures for the promotion of small and cottage industries would aiso be examined.

Development of ancillaries

12.37 Promotion of ancillary units provides good scope for the development of small scale industries as it facilitates offloading of the products of the sector and thus providing assured market. It is for this reason that even in the definition of small scale industries, ancillary units have been given a separate identity by relaxation of investment limit in plant and machinery unto Rs. 25 lakhs. Over the last several years, various measures have been taken to promote a healthy relationship between the ancillary small scale units and the parent unit. Inter-departmental teams have beer, set up to identify items which could be ta^en iin by ancillary units; plant level committees have been asked to work out the details of ancillary development programme; and 25 broad groups of industries have been identified for intensive development. The Bureau of Public Enterprises (BPE) have issued detailed guidelines to the public sector undertakings spelling out the measures to be adopted for the promotion of ancillary units. As a result of various promotional measures, the value of purchases from the small scale ancillary units made by the public sector undertakings, railways and defence establishments amounted to about Rs. 150 crores during 1978-79. While there has been increase in the purchases by the public sector undertakings from the ancillary units, still these account for an insignificant percentage in terms of their total turnover. There is need to enforce the guidelines of the BPE at the operational levels in the public sector enterprises.

12.38 'Ancillary' development has to be deemed as a mutually beneficial bipartite arrangement between the parent and the ancillary units. For its success, the parent units should assist in the transfer ox technology and in providing necessary technical guidance and arrange supply of quality raw materials so that the end-product of ancillary units comup to the requisite specifications. As regards timely payments by the parent unit for purchases froir the smal' scale units, the RBI have since evolvec' some measures of part payment in advance from out of the accounts of the parent units with the banks. The ancillary units, on their part, must manufacture the parts and components to specified standards and adhere to the delivery schedules; they must also demonstrate that such arrangements would be financially beneficial to the parent units in terms of the cost of production as compared to the in-house production.

12.39 The Industrial Policy Statement envisages. as already stated, a few 'nucleus' plants in each district identified as industrially backward to generate as many ancillaries and small and cottage units as possible. The 'nucleus' plants would concentrate on assembling the products of the ancillary units, producing the inputs needed by the smaller units and making adequate marketing arrangements.

Industrial cooperatives

12.40 In providing an institutional cover of a non-exploitative nature and creating self-employment, industrial cooperatives have been considered as an ideal form of organisation. In the case of traditional industries like hand-looms, coir and village industries, cooperatives occupy an important place. However, the present position of these societies is not satisfactory; between 50 to 60 per cent of them are lying dormant; of those that are active, only a small percentage is viable. The societies at the apex, central as well as primary 'evels are faced with a host of problems relating f6 their operation and management. During the Sixth Plan, it is proposed to revitalise the potentially viable and dormant societies and to link the programme of promotion of industrial cooperatives with targets of production, employment and improvement in productivity and earnings of the members. The stress would be on increasing the cooperative coverage in both traditional and modem small industries and to improve the economic viability of the societies.

Statistical data base

12.41 Lack of sound statistical data has been has been the main handicap in proper planning and formulation of the development programmes for village and small scale industries. The Annual Survey of Industries (ASI) covers only small scale units registered under the Factories Act. The data thrown up by the National Sample Survey (NSS), Economic and Population Census are not complementary to those of the ASI to get a total picture of the VSI Sector. The respective implementing organisations have carried out surveys which are also neither comprehensive nor comparable. In the case of handlooms and powerlooms, the estimates of production are being made on the basis of civil deliveries of yarn by mills in the form of hanks and cones and beams respectively. For small scale units, the data thrown up by the Census of Small Scale Industries carried out in 1972-73 are updated on the basis of 2 per cent sample only. In the case of Khadi and Village Industries, data pertain to units under the purview of the Khadi and Village Industries Commission and excludes a big chunk of village industries outside its purview. As for handicrafts, the estimates for production and employment are derived from the export-realisations reported by the DGCI and S. As such, the data flow is neither on a time series basis nor relates to a uniform reference period and/or coverage to facilitate their comparison, proper interpretation and projection.

12.42 In the context of the limitations referred to above, there is need for establishing channels for flow of data on a regular basis so as to enable more meaningful reviews and policy formulation. In the case of modern small scale industries under the purview of SIDO which account for more than two-thirds of the output in the village and small industries sector, it is proposed to increase the size of the sample from 2 per cent to 20 per cent for the annual revision of data and also to update data on census basis periodically. As regards traditional industries; it is proposed to strengthen the data collection machinery at the State level by extending fcianrial assistance for the purpose. The coverage of the NSS rounds meant for the unregistered manufac-'Tiring sector is proposed to be enlarged and their /requency increased.


12.43 The industry-wise review of progress and programmes for the Sixth Plan are discussed in the following paragraphs.

Khadi and Village Industries

12.44 The Khadi and Village Industries Commission (KVIC) implements its programmes of Khadi mainly through registered institutions and those of village industries through State Khadi and Village Industries (KVI) Boards. There are at present 25 KVI Boards, 735 registered institutions and about 27,800 cooperatives spread over 1 lakh villages. Besides khadi, there are 25 village industries, within the purview of the KVIC, the recent additions being lok-vastra, poly-vastra and processing of maize and ragi.

12.45 During the period 1974—80, the gross value of output registered annual rates of growth of 12.3 per cent in khadi and 8.9 per cent in village industries, the overall rate of growth being around 10 per cent at constant prices. The annual per capita value of output increased from Rs. 856 to Rs. 1263 and the per capita earnings from Rs. 217 to Rs. 381 at current prices during the period 1974—79. However, at constant prices, the increase is marginal. Some of the recent developments in the sub-sector are installation of about 1.1 lakh new model char-khas, and about 80,000 gobar gas plants mostly in rural areas, identification of new fibrous raw materials such as banana, screwpine, etc., and their use in manufacture of fancy and utility articles, diversification of activities 'such as preparation of papad, bakery products, neera collection and manufacture of irrigation pipes, glazed pottery articles, plastic match boxes, leather sports goods and garments and mixing of polyester fibre with cotton for producing blended fabrics. Coupled with these developments, the element of subsidy has also been reduced somewhat; the 20 per cent weaving subsidy on khadi was replaced five years ago by a lower subsidy of 10 per cent as rebate on sale of khadi. Further, loans advanced to village industries by the KVIC which earlier were interest free, are now being charged interest @ 4 per cent.

12.46 There have, however, been certain gaps in the implementation or the programmes. Even among the industries included within the KVIC purview. the coverage of artisans is low and the activities have remained confined to a few traditional States which account for bulk of the production and employment. A large number of cooperatives continue to remain dormant. The existing marketing infrastructure is unable to keep up with the increased level of activities and the inventories have remained at high levels. The productivity and earnings are low, which reflect the low standard of technology in this sub-sector. Some of the problems could be traced to the lack of effective coordination between the KVIC and the State Boards. There has also been inadequate linkage between the KVI programmes and the general programmes of area development.

12.47 During the Sixth Plan period, the value of output in this sub-sector is likely to grow by about 3 times, the annual rate of growth being 15 per cent in Khadi and 26 per cent in village industries and the employment coverage going up from 29.45 lakhs to 50.50 "lakhs. The achievement of targets of this magnitude would need structural changes in the organisational and implementational pattern. During the Plan, the strategy would be to develop and expand the KVI sub-sector both vertically and horizontally and link them with IRD and TRYSEM programmes at the block level. It is expected that about 50 per cent of the coverage target under the village and cottage industries component of IRD would be achieved through the KVIC. Recognising that the responsibility lor development of rural industries is primarily that of the States, efforts would be made to strengthen the State Boards through an input of professional and managerial expertise and by establishing organic and meaningful linkages with the KVIC. Greater participation and involvement of the State Governments in KVI programmes would also be aimed at. The KVIC would, however, concentrate on planning and policy formulation, technology development, training, marketing and implementation of programmes in such areas where the State Boards, in the short run, are not likely to be effective.

12.48 Programmes for Khadi would be reoriented to increase production particularly of woollen and silk and to introduce new cotton varieties like muslin khadi. Among the village industries, emphasis would be on gobar gas, village leather, cottage match, non-edible oil and soap, pottery, cane-gur and khandsari, etc. Efforts would be directed to have a dispersed development of these industries so that the non-traditional States have a larger share in the increased 'production and employment. Emphasis would be placed on programmes benefltting the weaker sections of the society; the share of Scheduled Castes, Scheduled Tribes and inhabitants of hill and border areas in the employment coverage through the KVIC is expected to increase from 23 per cent in 1979-80 to 36 per cent by 1984-85 and the share of women from 45 per cent to 47 per cent during the period.

12.49 During the Plan, greater emphasis would be laid on evolution and adoption of proper technology through research and development with a view to increasing productivity and earnings of artisans. A programme of the magnitude envisaged cannot obviously be implemented with more or less exclusive dependence on budgetary resources as at present. Effort's would, therefore, have to be made to accelerate the flow of institutional funds into the sub-sector. It has been envisaged that during the Plan period, around Rs. 500 crores of institutional credit would be available for development programme's in the sub-sector. To introduce an element of viability, loans for khadi would be advanced at 4 per interest rate. An aggressive and broad-based marketing strategy would need to be evolved with the objective of progressively reducing the volume of inventories and the rate of subsidy.

Handloom Industry

12.50 During the period 1974-80, production in the handloom industry is estimated to have gone up from 2100 to 2900 million metres. The' employment coverage increased from 52.1 lakh persons to 61.5 lakh persons and exports (excluding silk goods) from Rs. 77 crores tu Rs. 261 crores, respectively. These deveop-ments were made possible, to a large extent, by a package of support programmes that were implemented following the recommendations of a study team in 1973.

12.51 By March, 1980, of the 30.21 lakh hand-looms in the country 13.17 lakh looms had been brought under the cooperative fold. But the effective coverage is estimated at about 9.4 lakhs or 31 per cent as against the Fifth Five Year Plan target of 60 per cent. Under the RBI scheme of handloom finance for weavers' cooperatives for production and marketing, the amount of credit sanctioned was about Rs. 58 crores in 1979-80 but if fell short of the estimated requirement of Rs. 140 crores. Twenty-five Intensive Handloom Development Projects (IHDPs) with a coverage of a little more than 1 lakh handlooms and 21 Export-oriented Production Projects (EPPs) with a coverage of about 10,000 looms had been set up. But the performance of these projects has not been uniformly satisfactory. Weaknesses have been noticed in terms of poor coverage of looms; low productivity of weavers, static product-mix and inadequate institutional finance and marketing support. Nine new Weaver Service Centres were set up; the North Eastern region received special attention accounting for three Centres at Gauhati, Agartala and Imphal.

12.52 In keeping with the emphasis on development of handlooms during the Sixth Plan, its production is envisaged to increase from 2900 million metres in 1979-80 to 4100 million metres (including 500 million metres of Janata Cloth) in 1984-85 with a growth rate of 7.2 per cent per annum as against 5.2 per cent during 1974—80. The employment coverage is expected to go up from 61.5 lakh persons to 87 lakh persons and exports from Rs. 261 crores to Rs. 370 crores over the Plan period.

12.53 The major thrust of the programme would be on augmenting the supply of hank yam to weavers through setting up of additional spinning capacity, setting up of a National Handloom Development Corporation to facilitate, inter alia, the supply of hank yarn and other inputs at reasonable prices throughout the year, to bring 60 per cent of handlooms under effective cooperative coverage, increasing productivity through modernisation and renovation of looms, strengthening the technical extension systems for improving the quality and design of handloom products and reactivisation of looms in the North-East. In order to augment yarn supply, assistance would be given through the National Cooperative Development Corporation to promote new weavers' cooperative spinning mills and for expansion of the existing ones upto 50,000 spindles, according priority to areas deficient in spinning capacity but having a concentration of weavers. New and potentially viable cooperative societies would be assisted under a Central programme in the appointment of paid secretaries through managerial subsidy on a tapering basis. In selected areas, loomless weavers would be assisted to organise themselves into industrial-type cooperative societies with the ultimate intention of becoming loom-owners. In the establishment of processing facilities, emphasis would be laid on small dyeing and processing units on a dispersed basis and in backward areas. The All India Handloom Fabrics Marketing Cooperative Society would be assisted to expand their network of retail outlets, ensuring the procurement of goods, by and large, from primary produc-tion-cum-sale societies. A much larger flow of RBI funds is expected as a result of, extension of cooperative coverage and augmentation of share capital base of 'primaries and apex societies, the loom's outside the fooperative fold including those covered by the State Corporations looking forward to commercial bank credit on softer terms. An evaluation of the working of the existing IHDPs and EPPs would be undertaken with a view to strengthen their viability and to establish market linkages, including for exports.

12.54 Special efforts, including supply of yarn and marketing of products would be taken to reac-tivise a large number of dormant looms in the North East under the aegi's of the North Eastern Hand-looms and Handicrafts Development Corporation (NEHHDC). The NEHHDC would secure effective working 'participation of State Handloom Corporations and apex societies in the region. A new Institute of Handloom Technology would be set up at Gauhati to help diversified and commercialised production in the region based on its traditional designs and motifs.


12.55 Although all the four varieties of silk, viz., mulberry, tasar, eri and muga are produced in the country, mulberry silk accounts for 88 per cent of the total production of raw silk in the country. The production of mulberry raw silk has resistered a significant increase from an estimated 24 lakh kgs. in 1973-74 to 42 lakh kgs. in 1979-80. The growth in tasar and eri silk was marginal, the tasar production increased from 2.57 lakh kgs. to 2.81 lakh Kgs. and eri from 1.42 lakh kgs. to 1.83 lakh kgs.. but that of muga silk declined from 0.75 lakh kgs. to 0.42 lakh kgs over the same pferiod. The employment coverage i's estimated to have gone up from about 12 lakh persons to 16 lakh persons. The value of exports of silk fabrics and waste increased from about Rs. 14 crores to Rs. 49 crores over this period, but the export growth translated into physical terms, would not be equally appreciable.

12.56 The area under mulberry plantation rose From 1.10 lakh hectares in 1973-74 to 1.41 lakh hectares in 1978-79. The R and D programme was intensified during the period. Research Institutes and Stations were strengthened and training and extension facilities expanded. A scheme for the production of bivioltine industrial silk-worm seed was taken up in the multivoltine regions of Karnataka, West Bengal. Tamil Nadu and Andhra Pradesh in 1975-76. This had resulted in the increased production of bivioltine silk and brought highest returns to the sericulturists. To increase the supply of basic tasar seed in the traditional areas, pilot Extension-cum-Training Centres were organised in the States of Bihar, Madhya Pradesh and Orissa. For the temperate region, the Central Silk Board set up four oak tasar grainages in the North-East. Intensive Sericulture Development Projects (ISDPs) were taken up in the States of Karnataka, West Bengal, Tamil Nadu and Uttar Pradesh. Under the ISDPs, silk farms, grainages and chowki rearing centres were organised and assistance for digging of new wells, construction of rearing and reeling houses was provided. A Central scheme for stabiusing prices of mulberry raw silk was taken up in 1977-78; a similar scheme for tasar cocoons is also in operation for the benefit of tribal areas.

12.57 During the Sixth Plan, production of raw, silk is expected to increase from 48 lakh kgs. in 1979-80 to 90 lakh kgs. in 1984-85. Exports are expected to go up from Rs. 49 crores to Rs. 100 crores and employment coverage from 16 lakh persons to 21.5 lakh persons over this period. The targeted incremental production would be' achieved partly through extension of area and partly through increased per hectare productivity as a result of research and extension and bringing of larger area under irrigated conditions. The increase in productivity would call for reorganisation and intensification of R and D efforts with a view to moving nearer to international norms. Technical extension would be designed to ensure that laboratory results are, in fact, translated into the field. In the mulberry sector, the Karnataka State has taken up a project with World Bank assistance; as a result of its implemen-ta'jon, production of mulberry raw silk in the State is envisaged to double by 1984-85. Andhra Pradesh and Tamil Nadu would also launch programmes of substantial expansion of mulberry culture during the period.

12.58 The development of non-mulberry sericulture has not so far received adequate attention. An inter-St'ate Tasar Project for tropical tasar would, therefore, be taken up to benefit the tribal areas of the country. Eri and muga silk are specific to the North-East, though there is potential for mulberry silk also. In order to provide a fillip to these different varieties, three separate institutions, one each for mulberry, eri and muga would be set u'p' in the region. Further, price support operations which hitherto were applicable to mulberry raw silk and tasar cocoons, would be extended to cover muga cocoons as well.


12.59 During 1974—80, production of handicrafts is estimated to have increased from Rs. 1065 crores to Rs. 2050 crores. The growth in production in this sector has been substantially oriented towards exports, which increased from Rs. 195 crores in 1973-74 to Rs. 835 crores in 1979-80. Employment, full time and part-time, went up from about 15 lakh to 20.3 lakh persons. The activities of the All India Handicrafts board have been re-oriented towards increased production of selected crafts having export potential. Thus, a massive training pragramme in carpet weaving was launched in 1976-77. So far about one lakh persons have been trained in carpet weaving mostly in the States of U. P. and Jammu and Kashmir. Training centres in other important crafts such as hand printed textiles, art metalware and cane and bamboo have also been started. For internal marketing, a scheme of Rural Marketing Centres was taken up in 1978-79 on a pilot basis; about 220 Centres have been sanctioned, of which about 60 have become functional. These Centres have been set up at the block level to provide marketing facilities for handicrafts and other cottage industries and also to provide raw materials etc. The working of these Centres is being reviewed to determine their effectiveness.

12.60 During the Sixth Five Year Plan, production of handicrafts is envisaged to increase from Rs. 2050 crores in 1979-80 to Rs. 3200 crores in 1984-85, exports from Rs. 835 crores to Rs. 1315 crores and employment coverage from about 20.3 lakh to 28 lakh persons. The training centres for carpet weaving presently being run by the All India Handicrafts Board would be continued. But the training content of the programme would be reorient-ed to meet the changing demand patterns in the international market. The training centres would be suitably strengthened to impart training in processes like washing and finishing. Training faculties for hand printed textiles, cane and bamboo and art metalware would be expanded and new training programme introduced for gem and jewellery and wooden artware. Efforts would be made to ensure that training programmes are backed by a package of assistance for setting up of production centres so that persons trained engage themselves in actual production; nevertheless, some of the trainees would find absorption in the private sector. To conduct R and D for evolving new designs and techniques and 10 improve products and tools with the objective of increasing productivity, it is proposed to set up two National Institutes—one for carpets and the other for hand printed textiles. To promote cooperatives among the craftsmen, it is proposed to assist primary handicraft cooperatives and apex societies towards share capital, common facilities and appointment of paid secretaries. The equity base of the State Handicrafts Corporations would be strengthened to enable them to obtain larger institutional finance and to afford marketing assistance to craftsmen.

Coir Industry

12,61 India accounts for more than two-thirds of the world production of coir and coir products. Kerala is the home of Indian coir industry, particularly white fibre, accounting for 61 per cent of coconut production and over 85 per cent of coir products. Although India h'as a long coastline dotted with coconut palms, growth of coir indus-rry in olliei coastal States has been insignificant.

12.62 Net more than 50 per cent of the coconut husks is utilised in the coir industry, the remaining being used as fuel in rural areas. Production in the cooperative fold is not more than 20 to 25 per cent. The development programmes so far undertaken aimed at revitalisation of coir cooperatives, improvement in quality and products diversification. Efforts were also made for exploring wider export markets for coir and coir products. Judged from the increase in production and employment, the progress has been rather slow and exports in physical terms have; remained mere or lets static.

12.63 The problems of the coir industry have been reviewed by a high level Study Team; its recommendations are under consideration and Government decisions thereon would be taken shortly. During the Plan, the main thrust world be on revitalisation of existing cuir units/cooperatives particularly in Kerala and expansion of activities in the non-traditional States. Measures would be taken to strengthen the existing cooperatives and promote new viable cooperatives. Training, production and marketing infrastructure would be strengthened. Efforts would be made for greater utilisation of available husk commensurate with the economics of the cost of collection. Research activities would be intensified in the fields of retting, equipment for extraction, design, bleaching, dyeing and utilisation of raw material for new products.

Small Scale Industries

12.64 During the period 1974—80, the production in the small scale industries (under SIDO) went up from Rs. 7200 crores to Rs. 19060 crores; the growth rate works to 9.5 percent per annum. Employment and exports registered increase from 39.65 lakh to 64.60 lakh persons and Irom Rs. 538 crores to Rs. 1050 crores, respectively. The new programmes initiated during this period comprised entrepreneurial development, establishment of sub-contracting exchanges and modernisation of selected industries. The policy measures included: (a) increase in the number cf items reserved for (i) exclusive production in the small industry sector to 807 items; and (ii) exclusive purchase from this sector by the Government and related organisations to 257 items; (b) identification of 'tiny' units with investment upto R and . ! lakh in plant and machinery and located in town:' with population less than 50,000 for offering special incentives; (c) liberalisation of procedures and conditions of financial assistance from commercial banks and other institutions; (d) special facilities fix import of raw material and components; and (e) intensification of extension services through the Small Industries Service Institutes, Branch Institutes and Extension Centres a'part from Tool Rooms am! Regional Testing Centres. As staied earlier, District Industries Centres were introduced ;u the district level with the object of providing a!! the services required by the small scale and deccniraiised industries relating to pre-investment, investment ,wd post-investment stages, under one roof.

12.65 There have, n'-^ver, been certain weaknesses in the developn'i'nt process. The quality of goods in some areas of production has not always been upto the desired level and there has been lack of standardisation. There is also need for upgrada-tion and diffusion of new technology. The programme of modernisation has also not been able to make a significant dent so far. The small scale 'units continue to be plagued by the shortage of rasw materials leading to underutilisation of capacities. The ancillary development programme has yet to make much headway in terms of its share in the total production in the small scale sub-sector. The proportion of purchases from small scale sub-sector by the DGS and D has failed to register a significant increase over the years, although the number of reserved items has been going up.

12.66 It has since been decided to increase the limit of imestment (i) in the case of 'tiny' units from Rs. 1.00 lakh to Rs. 2.00 lakhs and (ii) small scale units iiom Rs. 10 lakhs to Rs. 20 lakhs; this may go upto Rs. 25 lakhs in the case of ancilla-rics. This revision, however, would remain, as before, subject to the proviso that no undertaking shall be a subsidiary of or owned or controlled by any other undertaking. If the value of production and employment of those units which now stand categorised as small scale were to be added to the output of those existing small scale units covered by the earlier definition, in the base year 1979-80, they svould add up to Rs. 21635 crores and 67 lakh persons respectively.

12.67 During the Sixth Five Year Plan production in this sub-sector is expected to increase to Rs. 32873 crores in 1984-85 with a growth rate of about 8.7 per cent per annum. Resultantly, employment is expected to go up to 89 lakh persons, while exports are expected to increase from ^s. 1050 crores to Rs. 1850 crores. Since more than 90 per cent of the existing small scale units are 'tiny' in terms of their investment in plant and machinery, endeavour during the Sixth Plan period would be to see that all kinds of budgetary support are primarily utilised for their promotion.

12.68 To achieve these targets, a pragmatic approach would be adopted. A carefully worked out time-bound programme for ancillary development v/ould be drawn up leading towards dispersal of industries and growth of entrepreneurship. It is proposed to establish 'nucleus' plants in industrially backward districts to generate a spread out network of small scale units. Efforts would be made to effect an attitudinal change on the part of large scale producers to increasingly off-load production of parts and components to ancillary units. For ensuring prompt payment, the question of a sub-limit in the account of large scale industries as well as penal rates of interest on amount outstanding would be examined. A buffer stocking scheme of essential raw materials would be devised to supplement the normal supply and distribution channels. In the field of marketing, ths policies of exclu'sive purchase from and price preference for the sub-sector in the Government purchases would be vigorously pursued. Public sector undertakings would be desired to adopt a similar preferential policy. Marketing assistance would be rendered to small scale units to form consortia to undertake aggressive marketing in same/similar items preferably under common brand name. Improvement in quality and standardisation of products would also be aimed at for improving their marketability. Exports from the small scale sector would be given added impetus by diversification of the product-mix. A Steering committee on Export Promotion has been set up to recommend measures lor boosting exports The National Smal! Industries Corporation would be revamped and strengthened to enable it to render effective raw material and marketing support and generate adequate financial resources internally for it' expanded role.

12.69 Although a number of measures have recently been taken to augment the flow of credit, it is proposed to further streamline the procedures and increase ths availability of funds especially to tiny units. To Eacilit-iic the flow of risk capital, the concept of 'limited i.artneiship' would be introduced through legislative measures. A scheme to improve and restore the boirowing capacity of small scale units through prevision of margin money, with other inputs and active invol\ ement of financial institutions would be evolved to deal effectively with the problem of sickness. The scope and content of the managerial train;ug and entrepreneurial development programmes wouid be redesigiltd to match tlie sophistication already achieved in regard to product technology and keeping in view the need tor a wider dispersal of entreprLncurship. Efforts would be made to constantly improve and upgrade the technology of the sub-sector. Tool rooms and regional testing centres would be strengthened and field testing facilities provided to cluster of units. Product and process development centres would be suitably strengthened for developing appropriate techno'ogy packages.

Industrial Estates

12.70 By March, 1979, there were 662 completed industrial estates wherein 13467 small scale units were functioning, accounting for an annual production of about Rs. 636 crores and providing employment to about 2.19 lakh persons. While the number of industrial estates and areas is fairly large, their functioning has not been unifor-maly satisfactory, the sheds and plots developed have not been fully occupied and become functional. The performance of semi-urban and rural industrial estates has been relatively less encouraging. In this Plan, industrial estates and area programmes would get added emphasis particularly in industrially backward areas. Location of new industrial estates would bs decided on purely techno-economic considerations. The size of the programme would be expanded by resorting to institutional tunds utilising the budgetary provisions as margin money. Functional industrial estates both for groups of artisans and small scale units would receive special attention. More effective measures including incentives and assured supply of raw material and power would be provided to induce the entrepreneurs to occupy sheds in the rural and backward areas. It would also be necessary to provide common service facilities, technical guidance, etc., to make a success of rural industrialisation programmes.

Power looms

12.71 During the Sixth Plan, the Production of powerloom cloth is expected to increase from 3450 million metres in 1979-80 to 4300 million metres in 1984-85 including cotton, artsilk and blended fabrics. With regularisation of unauthorised powerlooms, the loomage as at the end of December, 1979, is estimated to have gone up to 4.83 lakhs. The increase in production would be achieved primarily through fuller utilisation of the existing capacity.

12.72 Under a Central scheme, six Technical Service Centres are functioning in different parts of the country. It is proposed to set up 16 new Centres during 1980—85 in a phased manner in various parts of the country depending on the concentration of looms. The functions of these Centres are diversification of production and design development, improvement in the quality of fabrics, training of weavers in maintenance of powerlooms, and collection of statistics. The schemes included in the State Plans mainly relate to creation of processing facilities and assistance to cooperatives in various forms.


12.73 Over the period certain subsidies and differential tax rates have been given in favour of the village and small industries sector from the point of view of protecting and promoting the growth of employment-oriented production in the decentralised sector. While fiscal concessions are subjected to periodical review, as to whether those have served the purpose and also their cost benefit to the society, other subsidies like rebate on sale of the products of the decentralised sector and interest subsidy etc. have been continued without any such review.

12.74 While the volume of subsidies being giveQ to different village and small industries is not alarming, it is considered necessary to review the various incentives as to the need for their continuance in the present or modified form in the context of changed conditions. Broadly speaking, the programmes of development during the Sixth Five Year Plan period as outlined in the Chapter would make the village and small industries sector somewhat more viable and may facilitate some reduction in the nature and quantum of subsidies. It is, however, realised that subsidies would need to be provided selectively keeping in view the economic status of the beneficiaries, and capital subsidies would be preferred wherever possible over subsidies of a recurring nature.

Monitoring and Evaluation

12.75 The programmes taken up in the village and small industries sector are mainly promotional in nature rather than being project-oriented as in large and medium industries etc. The public sector outlay in the VSI sector plays the role of a catalyst to generate investment, employment and output in the private sector. It has been realised that ttiere have been significant gaps in planning and implementation of VSI programmes on account of various factors including the inadequacy of data base, poor monitoring and evaluation and information system. As regards inadequacy of data, the steps being taken and those proposed to be taken have been referred to earlier. As for monitoring and evaluation and information system, it has been noted that a large number of promotional schemes have been in operation for more than a decade or so and have not been subjected to any proper evaluation nor any monitoring of progress or identification of impediments in their implementation has been undertaken. Only recently some of the implementing agencies have set up monitoring cells but those are yet to become fully functional.

12.76 In the Sixth Five Year Plan, the thrust of efforts would be to monitor and evaluate the major programmes and policies so as to identify and remove constraints which impede progress. The concerned all-India organisations would take suitable steps for effective monitoring and periodic evaluation of the programmes to assess the impact of various measures taken for the promotion of these industries.

Annexure 12.1 Sixth Plan Outlays : Village and Small Industries- State/Union Territories

Sl. No. States/Union Territories Outlay
1 Andhra Pradesh 3000
2 Assam 3000
3 Bihar 4700
4 Gujarat 6150
5 Haryana 1946
6 Himachal Pradesh 905
7 Jammu and Kashmir 3470
8 Kamataka 7400
9 Kerala 4980
10 Madhya Pradesh 3340
11 Maharashtra 6026
12 Manipur 1250
13 Meghalaya 400
14 Nagaland 500
15 Orissa 2700
16 Punjab 2061
17 Rajasthan 1950
18 Sikkim 360
19 Tamil Nadu 8000
20 Tripura 850
21 Uttar Pradesh 12523
22 West Bengal 6000
total (States) 81511
Union Territories :
23 Andaman and Nicobar Islands 100
24 Arunachal Pradesh 275
25 Chandigarh 60
26 Dadra and Nagar Havell 55
27 Delhi 2564
28 Goa, Daman and Diu 250
29 Lakshadweep 30
30 Mizoram 400
31 Pondicherry 460
Total (U.Ts.) 4194
Grand Total 85705
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