Impact of Globalization and Liberalization On Ssi
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