IMPACT OF LIBERALIZATION, PRIVATIZATION, GLOBALIZATION (LPG) ON SSI

Liberalization, Privatization and Globalization started in India in July ,1991 that had changed the face of the industry. It has attracted new areas of development, foreign direct investments and new business areas which were unheard before 80's. This made Indian Economy to grow to new heights. Past 3 years Indian economy is growing at an average steady rate of 5% of per-capita income. The exports have increased. Liberalization has made import of scarce and non-available raw materials easy. This has lead to many new openings. New entrepreneurs have started many new SSIs which otherwise was not possible due to non availability of certain raw materials and resources, liberalization helped getting them from abroad and use them. The best example for effect of liberalization is electronic and computer industries that have seen enormous growth in the past two decades. Privatization also helped in the growth of inustries in a big way. Earlier certain products/services were produced only by the government organizations and no competition existed. With privatization it threw open to many challenging entrepreneurs to produce similar goods and service at much competitive prize and of better quality. One example of production of privatization was production of telephones. Earlier only Bangalore based Indian Telephone Industries(ITI) was producing telephones . With the Privatization many players like TATA, RELIANCE, AIRTEL entered the in to production of telephones with additional facilities. Before the introduction of new economic reforms in 1991 following the inevitable globalization, the SSI sector was overprotected. The small scale industry never had a strong desire to grow to medium and large scale because of the benefits of protection given to it. Many of the policies also discouraged the growth of small scale units into large ones and had a stunting effect on manufacturing, employment and output growth. With the globalization, the SSIs are now exposed to sever competition both from largescale sector, domestic and foreign and MNCs. The effect of globalization can be summarized as below. (1) The new policies of the government towards liberalization and globalization without ensuring the interest or priority of small-scale sector resulted in poor growth rate of SSI sector. The SSI sector has suffered because of the lending institutions and promotional agencies, whose main agenda is to serve big units and multinationals. (2) The problems of SSI in liberalized environment have become multidimensional delay in implementation of project, inadequate availability of finance and credit, marketing problems, cheap and low quality products, technological obsolescence, lack of infrastructural facilities, deficient managerial and technical skills,

to name some. (3) Globalization resulted in opening up of markets, leading to intense competition. For example, the World Trade Organization (WTO) regulates multilateral trade, requiring its member countries to remove its import quotas, restrictions and reduce import tariffs. India was also asked to remove quantitative restrictions on import by 2001 and all export subsidies by 2003. As a result every enterprise in India whether small-scale or large scale has to face competition. The process was initiated for small-scale units by placing 586 of its 812 reserved items on the open general license list of imports. (4) With the removal of restrictions of foreign direct investment, multinational companies entered India which further intensified the competition in the domestic market. The 1990s witnessed the entry of multinational companies in areas such as automobiles, electronics and IT based sectors. In the changed environment after globalization and liberalization, the policies and projects for the SSI sectors will have to be effective and growth oriented (not just protecting) so as to achieve competitiveness. In order to protect, support and promote small enterprises, a number of protective and promotional measures have been undertaken by the central government. The promotional measures cover the following: Industrial extension services Institutional support in respect of credit facilities Provision of developed sites for construction of sheds Provision of training facilities Supply of machinery on hire purchase terms Assistance for domestic marketing as well as exports Special intensive for setting up enterprises in backward areas Technical consultancy and financial assistance for technological upgradation

IMPACT OF WTO/GATT ON SSI GATT

After second world war the forward looking thinkers in trade and industry felt that political disputes and problems could be solved by coming together and signing agreements, similar idea was extended to business, commerce and industry. With British and USA initiatives and discussions GATT was formed. GATT (General Agreement on Trade and Tariffs) was a treaty signed by a group of 123 nations agreeing in principle to promote trade among members in 1947. GATT was a multilateral global initiative. It was an important milestone in global trade.

WTO
ORIGIN AND OBJECTIVES OF WTO The World Trade Organization (WTO) was established on 1st January 1995 as a successor to the GATT.. The Marrakesh Declaration of 15th April 1994, affirmed that the results of the Uruguay Round would Strengthen the world economy and lead to more trade, investment and employment and income growth throughout the world. The WTO is the embodiment of the Uruguay Round Results and successor to the GATT. From 1947 to 1994, General Agreement on Trade and Tariff (GATT) was the forum for negotiating lower customs duty rates and other trade barriers. When the GATT came into WTOs umbrella, it has annexes dealing with specific sectors such as agriculture and textiles, and with specific issues such as State Trading, Product Standards, Subsidies and Actions taken against dumping. WTO aims to develop the countrys economy by encouraging its export among the member countries.

FUNCTIONS OF WTO
1 The WTO is the umbrella organisation responsible for overseeing implementation of all agreement-multilateral (signed by all WTO members) and plurilateral (signed by a group of members for specific issue) that have been negotiated under Uruguay Round or will be negotiated in future. 2.It is to provide a forum for further negotiations on matters covered by the agreements as well as on new issue. 3.It is responsible for settlement of disputes among member nations. 4.It is responsible for periodic reviews of Trade Policies of the member nations. The small-scale sector has grown rapidly over the years. The growth rates during the various plan periods have been very impressive. The number of small-scale units has increased from an estimated 0.87 million units in the year 1980-81 to over 3 million in the year 2000.

Positive impact of WTO on SSIs 1. After the origin of WTO, the SSIs in India enjoy the following privileges: 2. Enabling India to export goods to the member countries of the WTO with fewer restrictions. 3. Reduction of tariffs on the export products to India i.e., Tariff based protection has become the rule. 4. Export in India has been increased from Rs.13883 crores in 1992 to Rs.53975 crores in the year 2000 in SSI sector. Growth in India's exports has been marginally above the growth in world exports.

5. Prospects in agricultural exports as a result of likely increase in the world prices of agricultural products due to reduction in domestic subsidies and barriers to trade. 6. Greater Market orientation Radical trade in SSI sector opened new investment opportunities thereby the acceleration of economic growth. 7. Availability of modern technologies from the other countries at reduced cost.

Negative impact of WTO on SSIs 1. Developing countries will have greater opportunities in sectors in which they have cost based comparative advantages e.g. textiles, agriculture etc. the developed countries to benefit by opening up of service sector and tightening of Intellectual Property (Patents, Copyrights) Regime. 2. Export Markets will become tougher because of competition among developing countries with similar comparative advantages. 3. Products from developing countries are to face tougher quality standards in developed markets 4. Domestic markets will be increasingly threatened because of lowering of tariffs, leading to free entry of foreign goods and because of foreign companies establishing manufacturing base locally.

Supporting Agencies of Government for SSI

The ministry of small scale industries is the administrative ministry in the Government of India for all matters relating to small scale and village industries which designs and implements policies and programmes for promotion and growth of small industries. The Department of small-scale industries was created in 1991, in the Ministry of Industry to exclusively formulate the policy framework for promoting and developing small-scale industries in the country. It initiates appropriate policy measures, programmes and schemes for promotion of SSI. The policy measures include setting up of a network of institutions to render assistance and to provide a comprehensive range of services and common facilities for SSIs. The range of services cover consultancy in techno-economic and managerial aspects, training, testing facilities, and marketing assistance through the agencies created for the specified functions. These activities are supported by a host of other central/state government departments, promotional agencies, autonomous institutions, non-government organizations and so on.
The institutios providing assistance to SSI are broadly classified in to three categories broadly classified as 1. Central/ All India Institutions 2. State level Institutions 3. Fund based Institutions Central Level Institutions

1. Small Scale Industries Board (SSIB) 2. Khadi and Village Industries Commission (KVIC)

3. Small Industries Development Organisation - SIDO 4. National Small Industries Corporation (NSIC) 5. National Science & Technology Entrepreneurship Development Board (NSTEDB) 6. National Productivity Conucil (NPC) 7. National Institute for Micro, Small and Medium Enterprises (NI-MSME) 8. National Institute for Entrepreneurship and Small Business Development (NIESBUD) 9. Indian Institute of Entrepreneurship(IIE) 10. Entrepreneurship Development Institute of India (EDI) State Level Institutions 1. State Small Industries Development Corporations (SSIDC) 2. State Directorate of Industries (SIDs) 3. District Industries Centers (DICs) / Single Window Concept Fund Based Institutions 1. Small Industries Development Bank of India (SIDBI) 2. Commercial Banks 3. State Financial Corporations (SFCs)