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  • Impact of Globalization and Liberalization On Ssi

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    Indrajith Thulaseedhar
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    Before economic reforms in 1991, India's small-scale industries (SSI) sector was highly protected from competition. This protection discouraged growth into medium and large industries. After reforms, SSIs faced intense competition from domestic large industries, foreign companies, and multinational corporations (MNCs) due to liberalization and globalization. The government's policies favored larger industries over SSIs, resulting in slower growth. SSIs now struggle with many issues such as financing, marketing, technology, and skills in the more competitive environment. Globalization led to reduced trade restrictions and quotas, further increasing competition for all Indian industries. The entry of MNCs after foreign direct investment rules changed also raised competition levels. To support SSIs,

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    Before economic reforms in 1991, India's small-scale industries (SSI) sector was highly protected from competition. This protection discouraged growth into medium and large industries. After reforms, SSIs faced intense competition from domestic large industries, foreign companies, and multinational corporations (MNCs) due to liberalization and globalization. The government's policies favored larger industries over SSIs, resulting in slower growth. SSIs now struggle with many issues such as financing, marketing, technology, and skills in the more competitive environment. Globalization led to reduced trade restrictions and quotas, further increasing competition for all Indian industries. The entry of MNCs after foreign direct investment rules changed also raised competition levels. To support SSIs,

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    61 views2 pages

    Impact of Globalization and Liberalization On Ssi

    Uploaded by

    Indrajith Thulaseedhar
    Before economic reforms in 1991, India's small-scale industries (SSI) sector was highly protected from competition. This protection discouraged growth into medium and large industries. After reforms, SSIs faced intense competition from domestic large industries, foreign companies, and multinational corporations (MNCs) due to liberalization and globalization. The government's policies favored larger industries over SSIs, resulting in slower growth. SSIs now struggle with many issues such as financing, marketing, technology, and skills in the more competitive environment. Globalization led to reduced trade restrictions and quotas, further increasing competition for all Indian industries. The entry of MNCs after foreign direct investment rules changed also raised competition levels. To support SSIs,

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    IMPACT OF GLOBALIZATION AND LIBERALIZATION ON SSI

    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 large scale 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 1990’s 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

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