Professional Documents
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Lord Krishna College of Engineering, Ghaziabad-245304 (Affiliated to U.P.T.U., Lucknow) for the partial fulfillment of the Degree of Master of Bussiness Administration
SUBMITTED BY: ADITYA SINGH KACHHWAHA Student, MBA (4th Sem.) LKCE,Ghaziabad SESSION: 2007-2009 ROLL NO: 0722470004 1
DECLARATION
I hereby declare that this research report entitled IMPACT OF GLOBAL CRICES IN INDIA is the result of individual efforts and has been completed under the guidance of Mr.. AMIT PANDEY (ASSISTANT PROFESSIOR (ASSISTANT COLLEGE OF ENGINEERING). The finding and interpretation in the report are based on the data collected by me and the report is not a reproduction of any other project submitted for similar purposes. OF LORD KRISHNA
Acknowledgement
This research report will be incomplete if I do not mention the saga of the contribution and unconditional support I received from all those who helped me through this journey of rises and falls, a journey of continuous learning. It would have been just another project but this project has twisted and turned many times during its inception and development before taking this final shape.
I am happy that I got the support from my Guide Mr AMIT PANDEY (ASSISTANT (ASSISTANT PROFESSIOR OF LORD KRISHNA COLLEGE OF ENGINEERING).
who has given his support and his valuable insights into this topic. Finally I express my deep gratitude towards all those people who have helped me with their support. They have become an inseparable part of this project. I thank them all for their gesture.
ADITYA SINGH KACHHWAHA Student, MBA (4th Sem.) LKCE,Ghaziabad SESSION: 2007-2009 ROLL NO: 0722470004
PREFACE
A research project report is the very important part of any management programme. It is a Launch Pad for introducing students to a real-life scenario, which cannot be simulated in the classroom. It not only enables the student to apply the theoretical knowledge in a practical scenario but also enables them to learn things beyond books. This is a period where the students add value to them self and learn management skills as well as the corporate culture. Only academic knowledge is not enough for the students, it is also necessary for them to have a slice of the practical corporate world wherein they can apply their knowledge and put their skills to a test. This is a first step towards corporate world. A research project report provides an opportunity for students, to satisfy their inquisitiveness to know more details, exposes them to technical skills, and helps them to acquire social skills by drawing them into communication with outside professionals for continuous interaction.
TABLE OF CONTENT
Introduction
A rewarding feature of economic development in India has been the impressive growth of modern small scale industries. The small enterprises have by now
established their competence to manufacture a wide variety of sophisticated goods in different product lines requiring a high degree of skill and precision . They have made a notable contribution in realizing the principal objective of expanded employment opportunities, adoption of modern techniques and dispersal of industries in small town and rural areas. This has been possible as a result of the successful implementation of the program of assistance to small scale industries. The diversified, rapid growth of small scale industries is a significant feature of Indias economic development in recent years.
Definitions:As per the industrial policy statement of 31st May 1999, a tiny unit small scale industry, ancillary undertaking and service establishment are defined as follows
Tiny Unit
An industrial unit located in rural or backward areas with a population not exceeding 100000 as per 1991 census and having an investment upto RS 25 Lakhs in plant & machinery is called a tiny industrial unit.
undertakes to export at least 30% of its annual production by third year, the limit of investment in plant & machinery, has been raised to Rs 3 crore 75 lakes.
industries rest with the State/UT Governments. For the purpose of development of these industries in their respective jurisdiction, the state UT Governments provide a wide range of facilities concessions and incentives. Service oriented enterprises
having investment in plant and machinery not exceeding Rs 10 Lakhs and located in rural areas and towns with population less than 10 lakhs, are called small scale service establishments For the purposes of obtaining support State/UT
Governments who provide land developed plots and sheds in industrial estates on
problems of this sector could be identified as under : 1) Increasing competition from within the small scale sector as well as from large industries with established brand names and marketing set up, 2) Consumer awareness, even in rural and semi urban areas, per quality goods, 3) The need to set up distribution net works for reaching widely dispersed markets, 4) Instability of the SSI units to exploit export markets.
A situation in which the supply of money is outpaced by the demand for money. This means that liquidity is quickly evaporated because available money is withdrawn from banks (called a run), forcing banks either to sell other investments to make up for the shortfall or to collapse. See also recession. 1 In mid-2007, mounting losses in subprime mortgage markets triggered disturbances throughout the international financial system. The scale of the turmoil has been surprising, given the small size of the U.S. subprime market in relation to global financial markets. Not only is subprime a comparatively small market, its problems were known well in advance: when the rapid rise in housing prices stopped in 2006, it was inevitable that many subprime borrowers would have difficulty making payments, particularly those whose adjustable mortgage rates were scheduled to reset in 2007 and 2008. A Swiss bank CEO has called subprime loan losses probably the longest anticipated crisis we have ever seen.1 Nevertheless, a wide range of financial institutions have been affected adversely, many of which had no direct exposure to the subprime mortgage market. Almost weekly since July 2007, the financial press has highlighted a new trouble spot, such as hedge funds, small European banks, issuers of commercial paper, conduits for securitization of loans, credit swaps, jumbo mortgages, money market funds, consumer lenders, bond insurers, state and local government investment funds, and so on. The links between many of these markets and subprime mortgages are tenuous, but they are widely viewed as symptoms of a common underlying problem.
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The stock market has certainly perceived systemic weakness across financial sectors. As share prices for large banks, small banks, and investment banks have all significantly underperformed the market as a whole, as represented by the Standard & Poors 500 index. Between July 2007 and March 2008, shares in those companies lost about a third of their value. Financial market conditions have not stabilized, despite the efforts of regulators. The ultimate fear of the Federal Reserve is that the flow of credit to sound business and consumer borrowers will be disrupted, causing spending and investment to contract sharply throughout the economy. To date, there has been tightness in certain lending markets, but credit remains generally available. This report focuses on the tools that regulators primarily but not exclusively the Federal Reserve have employed or devised to avert a full-blown financial crisis that would be expected to worsen macroeconomic conditions. Inspired by the situation of friends around me who are not getting their expected joining dates after getting placed in popular multi national companies, I have analyzed the current economic recession in terms of the economics that i understand. As a true patriot, i visualize, long term national stronghold of my country in the soon to be emerged scenario and i am positive about the impact that this period of suffering will proved us later. Lets start with when and how this current recession came into our knowledge. This fall of American economy was clearly visible and accepted when three of world's biggest investment banks Merrill Lynch, Lehman brothers and Washington mutual have disappeared. Merrill into the arms of banking behemoth bank of America, Lehman into bankruptcy and as if that wasn't bas enough, the US reeled under the news of the biggest bank failure in its history, as federal regulators on September 25th seized the largest American savings and loan institution Washington mutual (WaMu) and brokered the emergency sale of its assets to JP Morgan chase for $1.9 billion. With assets worth $307 billion, marked the biggest failure ever, the previous one being that of continental Illinois in 1984. to make the matter worse,
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American international group(AIG) once America's largest insurer has been virtually nationalized. As expected, this has sent shock waves through the
OBJECTIVE OF
RESEARCH
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OBJECTIVE OF STUDY
The main objectives of our study are To analyses the Role of small scale industries in India aspect To analyses how industries To analyses the small scale industries in Indian economy To analyses the small scale industries impact Indian Stock market To analyses the impact of small scale industries Indian FDI To analyses the impact small scale industries in Indian insurance sector the global crisis effected in Role of small scale
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INDIAN ASPECT
Small and Micro producers are crucial in developing economies, and their role is even greater in the largely rural economies of South Asia. In India as well, the sector is the second largest employer, after agriculture, and accounts for nearly 6 percent of the country's GDP. India was an exception in that it gave the small scale sector large incentives, and protection, in the period 1948-1991, going to the extent of reserving certain production lines solely for the sector.In the historical context of this, this paper shall attempt to analyse the issues peculiar to a 'small scale of production' in India in an increasingly globalised scenario. It shall also look at some of the other issues plaguing the sector such as credit availability and maintaining quality standards.
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To analyses how the global crisis effected in Role of small scale industries
The US bank, JP Morgan Chase, says in a recent report that the entire world economy will shrink by one per cent in the last quarter of this year and the first of 2009. For the whole of 2009, the bank predicts a global growth of only 0.4 per cent. The prognosis called A bad week in hell would if borne out mean a social and economic disaster. Population growth alone demands a growth of 3 per cent globally to keep the economy per capita constant. The extreme wealth and resource distribution means that poor people will lose more from the downturn in the economy. The World Bank has produced a shortlist of 28 countries, 13 of them in Africa, which are especially vulnerable from the triple threat of food and fuel price hikes, and the financial crisis. The seriousness of the crisis is underlined by the extreme crisis measures taken by the governments. Preachers of privatisation have suddenly become evangels of massive state interventions, including state ownership of banks and companies. Theories and ideologies are put to one side if nothing is done, the recession will lead to xenophobia, nationalism and revolution, wrote Martin Wolf, chief economics commentator of the Financial Times. For politicians and capitalists, its a question of saving the entire profit-run system.In Germany for example, the government this week launched a package of 50 billion euros for industrial companies, and to support consumption. France's president Sarkozy has similar plans to save French industry from global predators 15
industries rest with the State/UT Governments. For the purpose of development of these industries in their respective jurisdiction, the state UT Governments provide a wide range of facilities concessions and incentives. Service oriented enterprises
having investment in plant and machinery not exceeding Rs 10 Lakhs and located in rural areas and towns with population less than 10 lakhs, are called small scale service establishments For the purposes of obtaining support State/UT
Governments who provide land developed plots and sheds in industrial estates on easy terms to entrepreneurs.
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Some of the factors that contribute to marketing problems of this sector could be identified as under :
5) Increasing competition from within the small scale sector as well as from large industries with established brand names and marketing set up, 6) Consumer awareness, even in rural and semi urban areas, per quality goods, 7) The need to set up distribution net works for reaching widely dispersed markets, 8) Instability of the SSI units to exploit export markets.
Small Scale Industrial Undertaking Ancillary Industrial Undertaking Tiny Enterprise Women Entrepreneurs Small Scale Service & Business (Industry related) Enterprises
(SSSBEs)
Investment Limits Computation of Plant and Machinery Performance of Small Scale Industries
o o o o o
Existing product groups Existing industry clusters List of Items Reserved for Exclusive Manufacture
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SSI Registration
Small Scale and ancillary units (i.e. undertaking with investment in plant and machinery of less than Rs. 6.0 million and Rs. 7.5 million respectively) should seek registration with the Director of Industries of the concernGovernment.
Benefits of Registering
The registration scheme has no statutory basis. Units would normally get registered to avail some benefits, incentives or support given either by the Central or State Govt. The regime of incentives offered by the Centre generally contains the following: - Credit prescription (Priority sector lending), differential rates of interest etc. - Excise Exemption Scheme - Exemption under Direct Tax Laws. - Statutory support such as reservation and the Interest on Delayed Payments Act. (It is to be noted that the Banking Laws, Excise Law and the Direct Taxes Law have incorporated the word SSI in their exemption notifications. Though in many cases 19
they may define it differently. However, generally the registration certificate issued by the registering authority is seen as proof of being SSI). States/UTs have their own package of facilities and incentives for small scale. They relate to development of industrial estates, tax subsidies, power tariff subsidies, capital investment subsidies and other support. Both the Centre and the State, whether under law or otherwise, target their incentives and support packages generally to units registered with them.
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Provisional Registration Certificate (PRC) - This is given for the pre-operative period and enables the units to obtain the term
loans and working capital from financial institutions/banks under priority sector lending. - Obtain facilities for accommodation, land, other approvals etc. - Obtain various necessary NOCs and clearances from regulatory bodies such as Pollution Control Board, Labour Regulations etc.
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- Value of plant and machinery is within prescribed limits. - Unit is not owned, controlled or subsidiary of any other industrial undertaking as per notification.
De-Registration A Small Scale Unit can violate the regulations in the following ways which will make it liable for de-registration: - It crosses the investment limits. - It starts manufacturing any new item or items that require an industrial license or other kind of statutory license. - It does not satisfy the condition of being owned, controlled or being a subsidiary of any other industrial undertaking.
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Finance Registration / Statutory Licenses and Clearances Repayment of Loans Production Marketing Recruiting Personnel Installation of Machinery Preparing a Project Report Selecting Your Product Assessing Profit Generation
LIST OF SMALL SCALE INDUSTRIES FOR PURPOSE OF DELEGATION OF POWERS TO ENVIRONMENT ENGINEERS / ASSISTANT ENVIRONMENT ENGINEERS IN THE MATTERS RELATED TO CONSENT.
S. No. 1. 2. 3. 4. 5. 6. 7.
Type of unit/Product Rice Hullors/Sheller Ice Boxes Oil Expellers (without solvent extraction) Saw Mills Thrasher (Wheat thrashing). Tyre Retreading Making Crumbs powder from waste rubber
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8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30.
Wires, Pipes, extruded shapes from metals (Excluding pickling and galvanizing) Automobile servicing and Repair stations Cold storage. Restaurants and Hotels below Ten beds. Ice cream and Ice cone manufacturing Turning machining Manufacturing of steel and aluminum utensils and trunks. Block making for printing. Printing process (Textiles excluded) PVC pipes Spun Pipes Hollow Blocks making Paint formulations. Wire Rope Making (Dry Processes only) Air Cooler Assembling Insulation tapes. Paper pins and U-clips (Without electroplating). X-ray Plant and Ultra sound scanning Photo Developers Welding units Laundry, Laundry Services and Dry-cleaning. Card Board and paper products (Pulp and paper Mfg. Excluded.) Herbal Oil Extraction (Without solvent)
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31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53.
Ayurvedic Medicines formulation Potato Wafers. Small poultry Farms. Poultry feed and Animal feed. Small Clinical Labs Bakeries Angora Rabbit Farms. Tiles Making (Cutting and Polishing of Marble/granite). Wire drawing (Without galvanizing and pickling). Battery Charging Milk Chilling Centers Soap manufacturers (Excluding detergents). Pickle manufacturing. Sports goods Bona China Crockery Audio-Video Magnetic Tapes. Capacitors and leads Fluorescent Tubes and Bulbs. Miniature circuit breakers Microwave oven (Assembly only). Mfg. Of Agricultural implements Banana Wafers Condensed Milk
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Dairy Farm ((Small Scale). Iodized salts Namkeens Pappad Plants Tomato Concentrate Tea Packing Leather Adhesive Liquid Glucose Maize/Corn Starch Reclamation of used oil Rice Bran Oil Surgical cotton & Bandage Engine Coolant Spark plugs for IC Engines Disposable Plastic syringes Plastic Water tanks Cleaning Powder (Formulation only). Shampoos (Herbal) Bone crushing plant Bottling Plant (Re-distillation excluded) Eucalyptus Oil (Without solvent extraction) Liquid shoe polish Mushrooms (Growing).
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77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99
Nursing Home below ten beds Oxygen Gas Plant Photo Emulsion coating Pig farming Printed ink P C C /R C C Poles Plastic Jerry Cans Thermocol Toothpaste and Powder Teflon Coated electric cable Activated Carbon Wire Enameling ACSR conductor insulation Antiseptic lotions (Bottling only). Carbon Papers IMFL (Blending & Bottling Only). PVC Shoe Manufacturing. Batten Wooden Boards Mfg. Confectionery Residential Educational Institutes with Boarding capability up to 200 Nos. Dal Mills Naphthalene Balls Mfg. Plastic Injection Moulding
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100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122
Melamine wares Electrical Heating Appliances. Flavoured Tobacco and Pan Masala manufacturing Seasonal Katha Vegetable and Fruit Canning Hatcheries Manufacture of Mirror from sheet glass from and photo framing Steel Fasteners Fragrance, Flavors and food additives. Readymade garments industry Bakelite Switches Manufacturing . All Hotel below twenty double rooms Manufacturing of Rubber chapel, Tubes, Gas gate washer and other similar items made from rubber. Manufacture of mirror from sheet glass and photo-framing Surgical Gauges and bandages Cotton spinning & Weaving Mineralized Water bottling plants Dying and Printing Laboratory ware Steel Furniture, fasteners etc. Fragrance, flavours & Food additives Aerated water/soft drink Light Engineering Industry including fabrication.
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123 124 125 126 127. 128. 129. 130. 131. 132. 133. 134 135 136 137.
Plastic Industry (PVC, HDPE, LDEP, Bags tubes and pipes). Readymade garment industry Flour Mills Sizing and de-sizing of fabric Washing of Fabric Trimming cutting, juicing and blanching fruits and vegetables Washing of equipment & regular floor washing, using cooling water Separated milk and whey Steeping and processing of grain Slaughter Houses Formulation of Drug & Pharmaceuticals (Tablets, Capsule and Dry powder only). Health Institutions up to 50 beds capacity Steel Fastners Milk [processing and milk products Mini & Micro Hydel Project
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Marketing is a system of integrate business activities designed to develop. Strategies and plans including marketing mixes to the
satisfaction of customer wants of selected market segments or targets. It is the management function responsible for identifying, anticipating and satisfying customer requirements profitably. Marketing is the crux of attaining success in the endeavor and differs widely from industry to industry.
Of late marketing management has earned much importance, especially in the SSI sector. This is attributed to the vastly different market situations existing now. The demand for most products then exceeded the supply And anybody having the resources could normally do well. In a competitive
environment as is prevailing now, small scale industries face marketing problems from stage to stage.
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Basically marketing involve, --------- finding out what consumers want --------- planning and developing a product or a service to satisfy these wants, --------- determine the best way to price, promote and distribute that product or service.
The various activities required to be looked into in detail for arriving of a could marketing strategy comprise product planning, market segmentation, market research, sales promotion, advertising, pricing and distribution. However, depending upon product, the market and environmental conditions the intensity of wages of these activities will differ.
Marketing begins with the choice of a product and its planned production. Product planning concerns itself with the
creation of a product which is in demand in the market. It includes. i) ii) iii) iv) v) vi) selection and development of new product, product differentitation packing branding value analysis and product modification The proposed product can be a totally new product or an existing product with some modification. It can be a duplication of a competitors
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product. The selection of product is an important process both for new and existing units for an existing unit, it is important because old products cannot survive indefinitely as every product has a life-cycle. Product life cycle consists of form stages is : i) ii) iii) iv) Introduction Growth Maturity and Decline
integration with the other functions of management and the realization that a business is basically a marketing organization is described as the modern concept of marketing or the marketing concept. It is based on two fundamental concepts viz.
1) that the company policies and operations should be consumers oriented and 2) that the aim of the company should be profitable sales. Marketing concept is thus a philosophy of business which believes that economic and social justification of the companys existence is the satisfaction of the customers wants. A belief in this concept leads to the direction of all activities of the company whether they may be in production, engineering of finance towards first determining the customers wants and them attempting to satisfy them whilst making a reasonable profit.
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In short, marketing concepts says, find wants and fill them rather that great products and sell them. The underlying principles of the marketing concept are: i) ii) iii) consumers can be grouped into different market segments depending on their needs and wants, consumer in any market segment will favour the offer of that organisation which comes closest to satisfying their particular needs and wants, the organization task is to research and choose target markets and develops effective offers and marketing programs ad the key to attracting and holding customers.
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Marketing System
Marketing system involves: i) ii) all the business institutions engaged in the performance of marketing functions, the legal, historical and customary relationships existing among these institutions, the customers served by business firms and iii) the marketing tasks performed by the system. The major class of institutions involved in the marketing system are producers of the materials (including farms, mines and fisheries), manufacturers and processors of finished and semi-finished goods, service industrial such as banks and insurance companies retail and wholesale intermediaries household consumers and industrial uses including the government. The whole marketing system has been evolved with a view of greater specialization in the economy. There institution specialize in different types of activities. The ultimate or household consumers are those who consume the products or service to enjoy the satisfaction they desire. Business and institutional uses are those who use the
goods and services in normal course of their business in order to produce goods or other services for the ultimate consumers as well as for other business and organization. The nature and characteristics of the product5 affect to a large extent the marketing program of the firm. Hence, the marketing executives should know their product very well. Goods and services can be divided into two categories viz. 1) Consumer goods and
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2) Industrial goods. Consumer goods and services are those bought and utilized by household consumers. Industrial goods are those used by business organization either raw material or intermediates. Many products and services are sold in both these markets. For examples a type writer purchased by an individual for his own use is termed a consumer product whilst of sold to business organization is an industrial or business product. Consumer goods are again subdivided into 1) Convenience goods 2) Shopping goods and 3) Specialty goods
Convenience Goods
Are those which the customer usually purchases frequently, immediately and with the minimum of effort in comparison to buying such as soaps, agarbatties, candy and many food products.
Shopping Goods
Are those which the consumer in the process of selection and purchase, , compares on such basis as suitability, quality, price and style such as furniture, shoes, paints major appliances, and ready made garments.
Specialty Goods
Are those with unique characteristics and/or brand specification for which a significant group of buyers are habitually within to make a 36
special purchases efforts, such as specific brands of fancy goods, cycles, mens suits, electric. Motors etc. The consumer goods industry is the most useful in that marketing have more freedom than any other industry to manipulate the five basic marketing tools viz pricing, product determination and mix, distribution, promotion and marketing research. Marketing management dominates more firms and commands a greater portion available resources. Product variation is more common in the consumer goods field than in other areas. The number of products and brands is the greatest here, as is the mortality rate. Thus phenomenon is caused by two factors: a) The consumer does not drive his preference until he confronts with the product. It is well received, the manufacturers know they have made a correct production decision. b) The case of entry in many consumer product lives, particularly where there is a mass market, attracts marginal and usually short live producers, as long number of who base their hopes of success on a single Product or product variation that they will attract & substantial number of buyers. The majority of there ventures end in disaster. In the industrial goods sector, price is an important competitive instrument, specially where product characteristics are clearly specified by the buyer. Product variation is important in segments of
industrial goods industries where technology is rapidly changing. Distribution channels vary in industrial goods industries, although the actual networks are generally simple than in the consumer goods or service industries
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Service Industries.
Services are activities, benefits or satisfactions which offered for sales or are provided in connection with the sale of goods. Models, television, repair shops, medical centers, legal firms, advertising agencies, accounting services and tax services, are typical examples of services firm. The limited resources of these small firm result in unsophisticated styles of marketing. Besides the above classification of goods, the goods are also classified as `Durable and `Non-durable. Durable goods have many uses while non durable are exhausted after one or more uses. The marketing
BREAK-EVEN ANALYSIS
Any pricing method which is based on an estimate of the cost is faced with the problems of determining such costs. The pricing policy, however, is based
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on what the future costs are likely to be whatever the difficulties involved, estimates have to be made and taken into account to arrive at an adequate pricing strategy.
Types of Cost :There are three types of cost : average unit cost, fixed costs and variable costs. Average unit cost is obtained by dividing the total cost by the number of units produced. Fixed costs are those which remain constant
irrespective of the number of units produced. Variable costs, on the other hand , are those which vary with the number of items produced. More raw material and direct labor would be required for more articles manufactured. Variable costs are added on to fixed costs to get total costs.
i) Cost Plus Pricing This is the simplest method, very popular in India in view of the seller market not requiring greater sophistication in pricing techniques. About 60% of industries rely on this technique. In cost plus pricing, the simple formula used is: Selling price = Unit total cost + desired unit profit.
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Here the average total cost of each unit of production is calculated to which the desired margin of profit is added and the ultimate selling price is arrived at. The practicability of this method naturally depends on the costs and practices of competitors. In case a competitors costs are lower and he uses the same method for his pricing strategy, obviously his prices will be lower. In case of a highly competitive situation there would be problems. The seller will have to reduce his cost to a level of the industrys lowest cost producer or be satisfied with a lower rate of return on his investment of course, he can differentiate his product through advertising and creating appropriate brand image to induce customers to pay more. This method, however, overlooks the fact that cost can vary with different levels of production.
ii)
the basis of the additional variable cost associated with an additional unit of output. The cost of producing and selling one more unit, i.e. the cost of the last unit is takes as the price of the final article, this type of method is useful in introductory companies i.e. for introducing a new product, where it is felt that it would not be advisable to charge this new product, with its share of the fixed costs. It is also useful for keeping labor employed during slack season and to prevent a shut down. However, this method cannot be followed independently, as the fixed costs have to be absorbed. It certain articles are sold on this basis and others are made to abroad all the fixed costs involved in an organization the seller is selling a proportion of his output at incremented cost and a number or his remaining customers are paying a 40
higher price to cover the fixed costs. This could result in such customers being driven away into his competitors hands. However, this concept is important as sometimes it is useful as mentioned about. Another example of its utility is that
once the sales have reached the break even stage (which is being discussed in the paragraph below) the balance of that product can be disposed off so long as the variable cost involved is recovered without incurring a loss. This is particularly important where the present product is likely to be replaced by another product or get out of fashion room.
iii)
strategy which takes into account both fixed cost as well as variable costs and the break even point involved. The break even point can be expressed in terms of units produced in percent of plant capacity or in amount of sales. This can be calculated in two ways. a) Equation of Technique b) Contribution Technique a) Equation of Technique i) B.E.P in units PQ=F+ VQ In above equation, P stands for selling price per unit, Q stands for quantity of goods sold F stands for fixed costs V stands for variable costs per unit U stands for quantity of goods produced and sold.
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ii)
B.E.P in value : S= F * V
In above equation, S stands for sales F stands for fixed costs V stands for variable costs.
c) Contribution Technique:
i) B.E.P in units = Fixed costs/ contribution per unit
ii) B.E.P in value = Fixed costs/p.v ratio In above equation p/v Ratio = Contribution/Sales * 100
enterprise. It helps the management in the optimization of profits and maximum utilization of resources.
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3) Equipment selection and replacement 4) Pricing of the products 5) Deciding the optimum product mix 6) Deciding upon the most profitable distribution channel Some important applications of BEP analysis are as follows: 1) Calculation of profit from different sales volume: Profit = S (VC + FC) 2) Calculation on sales volume to produce designed profit: i) Sales in units = F.C + desired profit ---------------------------Contribution ii) Sales in Rs. = F.C. + desired profit --------------------------P/V Ratio 3) Calculation of selling price per unit for a particular break even point :
And selling price per unit +contribution per unit + Variable cost per unit 4) Calculation of sales volume required to meet proposed expenditure : i) Additional sales volume (in units) = Proposed Exp ------------------Contribution p.u
Proposed expenditure
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----------------------------------------P/V Ratio Determination of margin of safety: i) ii) M.S = Total current sales B.E Sales M.S = Profit ------------------P/V Ratio iii) Calculation of sales volume required to offset price reduction: F.C.+ Pt i) In units : Qn = -------------------Pn - VC
In above equation, Qn = New sales volume Pn = New selling price F.C. + Pt ii) In value : Sales = --------------------New P/V Ratio 7) Change in sales volume or selling price to offset the impact of change in variable costs and fixed costs: i) When there is change in fixed costs Fn Pv f -----------------a) The new quantity = Q +
F + Pt --------------P Vn
P + ( Vn v)
B) Choosing the most profitable alternative: Break even technique may be used to select the most profitable alternative between two. It can be calculated as follows :
B.E.P of more expensive alternative = PC FI VI -V Above equation, FC = Fixed cost of more expensive alternative FI = Fixed cost of less expensive alternative VI = Variable cost of alternative having lesser fixed costs V = Variable cost of alternative having higher fixed costs. Break even analysis helps in area such as quantity to be produced and sold to achieve a targeted profit or to determine how many more articles would have to be sold to recover the suggested increase in the advertising budget. In this connection, contribution margin is important which is selling price per unit less the variable cost per unit. This difference represents the amount which will remain when one unit is sold after meeting variable costs. There will then help cover the fixed costs and later generate the desired profit.
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worthy for institutional financing. In India some the industries that come under this group are the companies or concerns which manufacture biscuits, paints, pens, oils engines, grinding wheels, automobiles spares etc. 2) Under the second category some units started on a small scale and are likely to remain so for a long time in view of the specialized nature of demand for their products. Though specialized type of machines are required by this sector, they do not require any large scale investment in block assets. Generally, these are organized as non-corporate concerns, partnership, proprietary or joint family concern. These concerns have little block assets to offer as security though they maintain sufficient stocks. They do not have godown facilities and their transactions are mostly on a small scale not do they have sufficient credit to raise finance on hypothecation from institutional agencies, for pledge arrangements are inconvenient to them. The managerial ability of these concerns also varies considerably from unit to unit. Their own resources are blocked either in holding stock or in giving short term credits ranging from 3 to 6 months to their customers. There principal requirement therefore is working capital with little scope for attracting outside capital they usually borrow either from relatives or from institutions being quite meager. Units producing agarbatties, bolts, nuts, oil stoves, wire nails etc. Come under this category. 3) The third category covers concerns which began as cottage industries but later developed into small scale industries or a feader units to large scale industries. This group, however, from the smallest segment among the small scale industries, Such concerns are mostly organized as proprietary or partnership concerns. Borrowed capital is relatively insignificant in their resources and the availability of institutional finance negligible.
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Being more labor intensive the tangible assets of these units are limited, their management as well as maintenance of records are rather poor, and an assessment of the market prospects for their products etc is rather difficult. Under these circumstances finance has to be provided primarily on the basis of judgment of the integrity and expertise of the management and not unnaturally, institutional agents are reluctant to meet their financial requirements. Units producing toys, confectionery, coil springs etc come under this categories.
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4) He should know how to keep accounts how to maintain stores, how to prepare the balance sheet etc. 5) He should have knowledge of marketing channels, distribution network, agency practices transport intricanies and the economics of packaging. 6) He should know how to ensure the stipulated quality of his product. 7) He should be well versed in taxation and other laws governing small scale industries. 8) He should be willing to put up with polluted environments and small inconveniences. 9) He should be willing to put up with bureaucratic regulations and insults, and move with the wing. 10) He should know how to avail himself of the various benefits available for the small scale industry. 11) He should possess the following qualities expertise, shrewdness, resourcefulness and most important, perseverance. There is no substitute for hard work. 12) He should have the guts to withstand the polluted climate in which he has to build his unit.
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Weaknesses
Training is an integral input of successful enterprise lack of adequate and skilled personnel is one of the bottle necks with a small industry. Staff training is essential for entrepreneur and workers employed in small enterprises. Often a small industry cannot afford to employ highly qualified technical and management personnel and skilled workers, for want of adequate funds. In order to give them an opportunity to observe and study modern technique of management it is necessary that a small enterprise ranges study cum observation visits of their personnel and workers to organized large scale and small scale units. Here, again a small industry finds it difficult to arrange such tours large industries send their technician to various training schemes such as the ford foundation, colombo plan. A small scale entrepreneur has to be well versed in excise, custom procedure and export and import regulation and procedure and export and import regulation and procedure. In addition, he must be conversant with the following regulations.
a) State Industries Act b) The Factories Act, 1948 c) Shop & Establishment Act,1948 d) Indian Boiler Act (If applicable) e) Payment of wages act,1036 f) Minimum wages act,1948 g) Workmens compensation Act,1923 h) Employee Provident Fund Act,1952 i) Employee State Insurance Act,1948 j) Income Tax Act, 1961
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GOVERNMENT FACILITIES
Small scale industry is significant segment of the Indian economy. The basic
objectives underlying the development of small & medium scale industries are the increase in the supply of manufactured goods, the proportion of capital formation, the development of indigenous entrepreneurial talents and skills and the creation of employment opportunities. In addition they included such socio-economic goals as the decentralization and dispersal of manufacturing activities from the metropolitan to the non-metropolitan and rural areas, the reduction of regional economic imbalances within a country and the diffusion of entrepreneurial and managerial abilities and skills as well as of technology throughout a country. The small scale sector has contributed a wide range of products and services to medium and large scale industries. Over the years, it has mastered the expertise to produce a large range of traditional finished goods in the form of consumables and consumer durable. Presently, 863 items are reserved for development in the small scale industries and ancillary sector. Small scale industries have established an impressive record of performance. It provides direct and indirect employment to over 112 millions of workers and offers technical and commercial implant training to a large segment of rural and urban population who either cannot afford to seek higher education on pecuniary grounds or just cannot find a berth in a highly competitive employment situation. It has drawn its human resources Substantially from the weaker section s of society and in close enough to the rural sector to appreciate and meet its needs. To promote as well as accelerate the process of industrialization in the country, the Government of India has taken several steps with a view ensuring that investment in industry, along with other sectors gets adequate importance.
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Economic Information
Industry prospect sheets, area survey reports, project profiles, feasibility studies/reports are brought out by SIDO which provide information of the scope for development of various industries.
Technical Assistance
SIDO provides technical consultant on the manufacture of technical processes, use of modern machines and equipment, preparation designs layout of machinery and assistance on all aspects of production.
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With a view to improving the quality of the products being manufactured in the small scale sector, 4 regional testing centers have been set up at New Delhi, Bombay , Calcutta and Madras. In addition, there are 19 field testing stations in areas of concentration of specific groups of industries to provide specialized testing facilities for a particular product or industry group.
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through small industries service institutes and their branches with the help of the State Directorates of Industries, state financial corporations, commercial banks and other developmental agencies of the benefit of different target groups insisting both skilled/semiskilled and educated/uneducated persons. These programs are Entrepreneurial organized for engineering and non-engineering entrepreneurs.
development programs for non engineers include women, rural artisans, technicians, weaker sections of the society, educated unemployed and the physically handicapped.
Modernization programs
The modernization program envisages upgradation of obsolete technology of small scale industry through identification of their input needs in rural, urban and backward areas of the country. The main objectives of the programs are: 1) Improvement in production technology 2) Product development design 3) Testing, design and quality control 4) Machinery and equipment 5) Selection of proper raw material 6) Application of improved management technology
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Under the modernization program, seminars, industrial clinics, industrial workshop, modernization course and study visits are organized 20 industries have been selected on all India basis and 38 industries on concentration basis indifferent states.
Financial Assistance
A network of State Financial Corporation, National Small Scale Industries corporation, State Small scale Industries Corporation, Commercial Banks, Cooperative Banks, Regional Rural Bank, provides financial assistance to small scale
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units. Small scale Industries Development bank of India provides refinance to the industrial loans advanced by these institutions to small scale sector.
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Commercial Banks :
Commercial banks mostly provide short term and in some cases medium term financial assistance also, to small scale units. Short term credit facilities are granted for working capital requirements like those for raw materials, good- in process, finished products, bills receivables and book debts. Medium term loans are granted for the acquisition of land, construction of factory premises, purchases of machinery and equipment and operative expenses. These loans are generally granted for periods ranging from five to seven years. They also establish letters of credit on behalf of their clients favoring supplies of raw material/machinery (Both Indian and Foreign) which extend the bankers assurance for payment and thus help their delivery. Certain transaction, particularly those in contracts of sale to government departments, may require guarantees being issued in lieu of security/ earnest money deposits for release of advance money , supply of raw materials for processing full payment of bills on assurance of performance etc. Commercial banks issue such guarantees also. 59
Export Promotion
Trade exhibition are held abroad and exportworthy SSI Units are given opportunity and assistance in exhibition their selected items in these exhibition. SIDO provides assistance towards handling, clearing, insurance publicity freight etc. Without recovering this expenditure from the participants. The trade enqueries generated in these exhibitions are circulated. The trade delegations and sales-cum-study teams are sponsored from small scale sector under the MDA scheme of the Ministry of Commerce which provides reimbursement of 60% of the expenditure from the funds on admissible items of expenditure. In addition to participation in external exhibitions, this organization also participates in various exhibitions/commodity fairs held in various parts of the country through the field organization in collaboration with other concerned organizations. The import Export policy allows various exports/imports entitlements to exporting units under the various schemes covered under the policy. These schemes primarily relate to advance licensing scheme imports under Indo-US MOU, schemes of 100% EOUS, setting up of units in FTZ/EPZs. The proposals received from SSI units are considered and recommended for granting of various licenses entitlements to the importers to help them to meet their requirements of materials etc. Imports under some of the schemes are allowed without payment of customer duty or at concessional rates of custom duty. The current import policy has, for the first time, allowed import licenses to the services centers approved by this organization for import of spares for Rs 1Lakh per annum. The cases for such imports are scrutinizes for recommending the needed imports from small scale units for recognition as export trading houses.
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assistance to SSI units through various schemes. The activities of SIDBI are follows : a) Refinancing of loans and advances extended by the primary lending institutions to industrial concerns in the small scale sector and also providing resource support to them. b) Discounting and rediscounting of bills arise from sale of machinery to, or manufactured by industrial concerns in the small scale sector. c) Extension of seed capital/soft loan assistance under National Equity Fund, Mahila Udyam Nidhi and Seed Capital Schemes through specified lending agencies. d) Granting direct to assistance as well as refinancing of loans extended by primary lending institutions for financing export of products manufactured by industrial concerns in the small scale sector. e) Providing services like factoring, leasing etc. To industrial concerns in the small scale sector. f) Extending financial support to State Small Industries Development Corporations for providing scarce raw materials to and marketing the end products of SSI units. g) Extending financial support to National Small Industries Corporation for providing leasing, hire purchases and marketing support to SSI units. The immediate thrust of SIDBI is on : 1) Initiating steps for technological upgradation and modernization of existing units. 2) Expanding the channels for marketing the products of SSI sector in domestic and overseas markets 3) Promotion of employment oriented industries especially in semi urban areas to create more employment opportunities and thereby checking migration of population to urban and cosmopolitan areas. The financial assistance of SIDBI to the small scale units scattered throughout the country is channeled through the existing credit delivery mechanism, comprising State financial corporation, State
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Industrial Development Corporation, Commercial Banks, Co-operative Banks and Regional Rural Banks which have vast network of branches in the country. The total number of institutions eligible for assistance from SIDBI is 869. The various schemes of financial assistance for SSI units are listed as follow: 1) 2) 3) 4) 5) 6) 7) 8) 9) Refinance scheme for industrial loans from small and village industries. Composite loan scheme Scheme for Schedule caste/Scheduled tribe and physically handicapped entrepreneurs. National Equity Fund Scheme Special scheme of Assistance to Ex-servicemen. Seed capital Scheme. Single window scheme Scheme for women entrepreneurs Mahila Udyam Nidhi Scheme
10)Refinance scheme for quality control 11)Schemes of incentives for exports 12)Refinance scheme for modernization of small scale industries 13)Assistance to small road transport operators 14)Refinance scheme for rehabilitation of small scale industries 15)Foreign currency refinance scheme 16)Refinance scheme under ADB line on credit 17)Refinance scheme for setting up industrial estates 18)Bills rediscounting scheme. .
National (NABARD)
Banks
for
Agricultural
and
Rural
Development
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The National Bank for Agricultural and Rural Development was set up in july 1982 to provide refinance assistance to State Co-operative Banks, Regional Rural Banks and other approved institutions for all kinds of production and investment credit to small scale industries, artisans cottage and village industries, handicrafts and other allied activities.
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INSURANCE IN INDIA
The insurance sector in India has come a full circle from being an open competitive market to nationalization and back to a liberalized market again. Tracing the developments in the Indian insurance sector reveals the 360 degree turn witnessed over a period of almost two centuries.
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The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are: 1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business. 1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. 1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.
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With a population of over one billion, Indian consumer industry holds huge potential for growth, as affordability is increasing and the size of low-income segment shrinking, experts and industry sources said here on Friday. The consumer industry in India is not only growing horizontally, but the configuration of consumer profile is also changing rapidly, said Mr RK Shukla of National Council for Applied Economic Research (NCAER), the organisation engaged in market research and analyses. The affordability is increasing and the size of low income segment is shrinking, whereas the middle income class is growing, he said at a panel discussion on Indian consumer market during a conference here on investment opportunities in India. This, however, may not necessarily be benefited by all segments of consumer industry, he said, adding that while the auto industry has seen a stable growth, fast moving consumer goods (FMCG) have faced a downturn. Speaking about the consumer product industry, Mr Adi Godrej of Godrej Consumer Products said uniform tax structure in the country and bringing down of value-added and other taxes would help the growth of consumer industry. About the FMCG industry, Mr SP Mustafa, Hindustan Lever group treasurer and Head M&A and investor relations, said the industry faced challenges from domestic and global markets. He said there was a large potential in the industry and it had global competency.
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Later, giving a presentation about his own company, Mr Mustafa said Hindustan Lever worked out a new strategy two years ago and since has seen a growth pattern. About the future plans of the company, he said the company is focusing on brand building. The companys strategy is to concentrate its resources on 30 national power brands and 10 other brands which are strong in certain regions, he said. The companys domestic business restructuring was aimed at driving profitable growth in its home and personal care business, improve profitability of its portfolio and secure the long-term future of its non-core businesses, Mr Mustafa said. In the exports segment, the company has discontinued non-value-added exports, he said, adding it is exploring possibilities to market tea to the US. The company is finally entering the water business for domestic market and the test marketing will start later this year, he said.
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IMPORTANCE OF STUDY
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REASERCH METHODOLOGY
ESEARCH
METHODLOGY
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RESEARCH METHODOLOGY:
In order to achieve the objectives of the study, secondary data had been used. The primary data cannot been collected due to limitation of the connectivity to the companies SSI) and Govt. personnel. The prime sources of secondary data are SIA newsletter, RBI bulletins, FICCI reports, Human Resource Development reports, CII survey reports, etc. Internet has also remained as an important source of secondary data. The reference period for the purpose of analyzing trends of FDI flows into India is primarily is set into three groups: (i) 1989-94, (ii) 1995-99 & (iii) 2000-07. In order to achieve the objectives of the study, secondary data had been used. The primary data cannot been collected due to limitation of the connectivity to the companies (MNCs) and Govt. personnel. The prime sources of secondary data are SIA newsletter, RBI bulletins, FICCI reports, Human Resource Development reports, CII survey reports, etc. Internet has also remained as an important source of secondary data. The reference period for the purpose of analyzing trends of FDI flows into India is primarily is set into three groups: (i) 1989-94, (ii) 1995-99 & (iii) 2000-07.
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REVIEW OF LITERATURE:
What-so-ever the literatures available are tried to interpret and analyse regarding the relatives of topic. For example, the reports on earlier FDI level & current FDI level are reviewed. Also, various other journals & Govt. published reports are reviewed. This is done to understand better the FDI level & reasons.
Types Of Research
Descriptive Research
Sources of Research
Primary Sources Primary sources are taken as hose which are latest, self analyzed and from which own thinking has been used. Here primary sources are not used. Secondary Sources Secondary sources are those which are already been collected, analyzed and taken as it is.only secondary data has been used here.
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Secondary Sources
Magazines Foreign Direct Investment by A.K Chandra maitena.duce@bde.esng www.oecd.org/. www.rbi.org.in mha.nic.in/fcra/intro/forms.html www.google.com
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ANALYSIS
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ANALYSIS OF DATA
After a long spell of growth, the Indian economy is experiencing a downturn. Industrial growth is faltering, inflation remains at double-digit levels, the current account deficit is widening, foreign exchange reserves are depleting and the rupee is depreciating. The last two features can also be directly related to the current international crisis. The most immediate effect of that crisis on India has been an outflow of foreign institutional investment from the equity market. Foreign institutional investors, who need to retrench assets in order to cover losses in their home countries and are seeking havens of safety in an uncertain environment, have become major sellers in Indian markets. In 2007-08, net FII inflows into India amounted to $20.3 billion. As compared with this, they pulled out $11.1 billion during the first nine-and-a-half months of calendar year 2008, of which $8.3 billion occurred over the first six-and-a-half months of financial year 2008-09 (April 1 to October 16). This has had two effects: in the stock market and in the currency market. Given the importance of FII investment in driving Indian stock markets and the fact that cumulative investments by FIIs stood at $66.5 billion at the beginning of this calendar year, the pullout triggered a collapse in stock prices. As a result, the Sensex fell from its closing peak of 20,873 on January 8, 2008, to less than 10,000 by October 17, 2008 In addition, this withdrawal by the FIIs led to a sharp depreciation of the rupee. Between January 1 and October 16, 2008, the RBI reference rate for the rupee fell by nearly 25 per cent, even relative to a weak currency like the dollar, from Rs 39.20 to the dollar to Rs 48.86 (Chart 2). This was despite the sale of dollars by the RBI,
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which was reflected in a decline of $25.8 billion in its foreign currency assets between the end of March 2008 and October 3, 2008. It could be argued that the $275 billion the RBI still has in its kitty is adequate to stall and reverse any further depreciation if needed. But given the sudden exit by the FIIs, the RBI is clearly not keen to deplete its reserves too fast and risk a foreign exchange crisis. The result has been the observed sharp depreciation of the rupee. While this depreciation may be good for Indias exports that are adversely affected by the slowdown in global markets, it is not so good for those who have accumulated foreign exchange payment commitments. Nor does it assist the Governments effort to rein in inflation.A second route through which the global financial crisis could affect India is through the exposure of Indian banks or banks operating in India to the impaired assets resulting from the sub-prime crisis. Unfortunately, there are no clear estimates of the extent of that exposure, giving room for rumour in determining market trends. Thus, ICICI Bank was the victim of a run for a short period because of rumours that sub-prime exposure had badly damaged its balance sheet, although these rumours have been strongly denied by the bank. So far the RBI has claimed that the exposure of Indian banks to assets impaired by the financial crisis is small. According to reports, the RBI had estimated that as a result of exposure to collateralised debt obligations and credit default swaps, the combined mark-to-market losses of Indian banks at the end of July was around $450 million. Given the aggressive strategies adopted by the private sector banks, the MTM losses incurred by public sector banks were estimated at $90 million, while that for private banks was around $360 million. As yet these losses are on paper, but the RBI believes that even if they are to be provided for, these banks are well capitalised and can easily take the hit.
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Such assurances have neither reduced fears of those exposed to these banks or to investors holding shares in these banks. These fears are compounded by those of the minority in metropolitan areas dealing with foreign banks that have expanded their presence in India, whose global exposure to toxic assets must be substantial. What is disconcerting is the limited information available on the risks to which depositors and investors are subject. Only time will tell how significant this factor will be in making India vulnerable to the global crisis A third indirect fallout of the global crisis and its ripples in India is in the form of the losses sustained by non-bank financial institutions (especially mutual funds) and corporates, as a result of their exposure to domestic stock and currency markets. Such losses are expected to be large, as signalled by the decision of the RBI to allow banks to provide loans to mutual funds against certificates of deposit (CDs) or buyback their own CDs before maturity. These losses are bound to render some institutions fragile, with implications that would become clear only in the coming months. A fourth effect is that, in this uncertain environment, banks and financial institutions concerned about their balance sheets, have been cutting back on credit, especially the huge volume of housing, automobile and retail credit provided to individuals. According to RBI figures, the rate of growth of auto loans fell from close to 30 per cent over the year ending June 30, 2008, to as low as 1.2 per cent. Loans to finance consumer durables purchases fell from around Rs 6,000 crore in the year to June 2007, to a little over Rs 4,000 crore up to June this year. Direct housing loans, which had increased by 25 per cent during 2006-07, decelerated to 11 per cent growth in 2007-08 and 12 per cent over the year ending June 2008. It is only in an area like credit-card receivables, where banks are unable to control the growth of credit, that expansion was, at 43 per cent, quite high over the year 80
ending June 2008, even though it was lower than the 50 per cent recorded over the previous year. It is known that credit-financed housing investment and credit-financed consumption have been important drivers of growth in recent years, and underpin the 9 per cent growth trajectory India has been experiencing. The reticence of lenders to increase their exposure in markets to which they are already overexposed and the fears of increasing payment commitments in an uncertain economic environment on the part of potential borrowers are bound to curtail debt-financed consumption and investment. This could slow growth significantly. Finally, the recession generated by the financial crisis in the advanced economies as a group and the US in particular, will adversely affect Indias exports, especially its exports of software and IT-enabled services, more than 60 per cent of which are directed to the US. International banks and financial institutions in the US and EU are important sources of demand for such services, and the difficulties they face will result in some curtailment of their demand. Further, the nationalisation of many of these banks is likely to increase the pressure to reduce outsourcing in order to keep jobs in the developed countries. And the slowing of growth outside of the financial sector too will have implications for both merchandise and services exports. The net result would be a smaller export stimulus and a widening trade defi While these trends are still in process, their effects are already being felt. They are not the only causes for the downturn the economy is experiencing, but they are important contributory factors. Yet, this does not justify the argument that Indias difficulties are all imported. They are induced by domestic policy as well.
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The extent of imported difficulties would have been far less if the Government had not increased the vulnerability of the country to external shocks by drastically opening up the real and financial sectors. It is disconcerting, therefore, that when faced with this crisis the Government is not rethinking its own liberalisation strategy, despite the backlash against neo-liberalism worldwide. By deciding to relax conditions that apply to FII investments in the vain hope of attracting them back and by focusing on pumping liquidity into the system rather than using public expenditure and investment to stall a recession, it is indicating that it hopes that more of what created the problem would help solve it. This is just to postpone decisions that may prove critical till it is too late.
Flows to Indi
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SIGNIFICANCE OF STUDY
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Small scale industry is widely recognized as a powerful instrument for socioeconomic growth and balanced sectoral development. One of the distinctive characteristics of small scale sector is that the development of these industries would create broader employment opportunities assisting entrepreneurship and skills development and ensure better use of scarce financial resources and appropriate technology. Furthermore, they can play a main role in achievement of national economy and sociopolitical objectives, the gestation period is very short and they need small amount of capital to start. It also helps in the dissemination of production capacity unlike the large scale industries which tend to concentrate in a few hands. This apart, establishment of such industries in rural areas and small towns helps to check the influx of population into bigger towns. A small industry faces a number of problems in its business operations in the present competitive environment. The principle weaknesses of small industries lies in1) Inadequate working capital 2) Inordinate delay by commercial banks to sanction working capital loan, 3) Management deficiency specially amongst the first generation entrepreneurs.
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experienced during off season. When sales are low. High cost of production and poor utility of goods produced have been found to be other major production related problems. These problems emanate from out date technology. The cost structure shows that raw materials and wages constitution more that 75% of the total cost. Therefore techniques of production must be upgraded to bring down the cost of production and to stand in competition with other units having modern t To solve
the problem of under utilization of capacity some suggestion are made. First, since one of the main causes of under utilization is due to bottlenecks in the smooth supply of right type of raw materials, the availability of raw materials of right quality
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movement of raw materials will ensure the free mobility of raw materials. Secondly dispersion of training facilities can help over the problem of scarcity of supply of skilled labor and the idle capacity created on this account. Thirdly, liberal grant of loans by banks, would help and industry to raise production to higher level and minimize, it not completely eliminate, the idle capacity. Similarly steps to create new demand and activation of latent demand through organized sales promotion program will help in improving the capacity utilization. The small scale industry is so far dependent on internal market alone barring a few industrial units who export their products. It is therefore, imperative that not only for great utilization of capacity but for providing stability to the production units concerned efforts are made to boost internal demand as also export market. However, it must be emphasized that strengthening of the home base should have precedence over creation of capacity exclusively for export market. Over dependence on export market exposed the industry, especially to the one which is composed of small and cottage sector units to the vicissitudes of external environmeCreation of capacity for new and non-traditional items does not imply as complete break of the industry away from the existing manufacturing pattern. What is in fact needed is to utilized the available skill and manufacturing capacity on the selective basis to produce those items which have a rising One of
the reasons restraining the growth of small industry is the acute shortage of skilled workers capable of making quality goods at competitive prices. Most of the workers do not have formal institutional training. Existing training institutions have not been
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able to cater to the requirements of some specialized trades and they suffer from many weaknesses. High rate of labor turnover is another problem faced by small
industry. In some units turnover of labor is caused by workers behavior and to some extent by entrepreneurs themselves. A significant percentage changes job because the facility of advance is denied to them or some other units offer them higher advance. The data reveals that due to absenteeism significant number of small units have an adverse effect on their work schedule to a large extent. Improvement in working conditions of labor will definitely lead to the efficiency of the small industry. Most of the workers emphasis the need for increase in their amount of advance, payment of overtime high work, annual bonus,
retirement benefits, leave facilities and availability of regular work throughout the year. But they are not aware of their rights for provisions of medical facilities, retiring rooms, drinking water, proper ventilation, safety precautions, disposal of waste etc. Given all these facilities, production compared with quality is bound to increase to the advantage of the entrepreneur. A large percentage racing from 15 tp 40 of the work force falls in the category of child or adolescent labor. Child labor is working at exploitable wages and under poor conditions, working late hours and night also. There is need to take certain measures for reducing absenteeism and labor turnover. The introduction of sound wage and incentive schemes and
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provision of better work in condition may help the entrepreneur to control the situation to some extent
LIMITATION
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LIMITATIONS OF STUDY
While preparing this research project report, the following obstacles had been faced by me: The topic is very wide and has to be covered in limited words. Therefore, it is not possible to cover all other related issues. The help from faculty is not enough due to their busy schedule. Proper source of information from Govt. could not be provided. Only internet, magazines and various surveys are available. Questionnaire cannot be created due to the limitation of subject. Scope of study is quite large but the time is limited.
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CONTRIBUTION
Of late marketing management has earned much importance, especially in the SSI sector. This is attributed to the vastly different market situations existing now. The demand for most products then exceeded the supply and anybody having the resources could normally do well. In a competitive environment as is prevailing now, small scale industries face marketing problems from stage to stage. Basically marketing involve, ------ finding out what consumers want, 91
------ planning and developing a product or a service to satisfy these wants, ------ determine the best way to price, promote and distribute that product or service. This project helps in solving all these types of problems. It guides how a small scale industry can make his place in the todays throat-cut competition. It shows the way how any person can start his own business under small scale industries. How much financial help he can get from government. How he can sell his product in the market . what price he should fix for his product and what help government can provide him to sell his product.
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BIBLIOGRAPHY
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BIBLOGRAPHY
1. Websites visitedwww.economictimes.com www.rbi.org.in, etc. maitena.duce@bde.es www.oecd.org/. www.rbi.org.in mba.nic.in/fcra/intro/forms.html www.google.com 2. BooksUsha Bhatt (2006), Foreign Direct Investment Contemporary Issues. Foreign Direct Investment By A.K Chandra 3. Journals>Economic Journals. 4. Repots>CII survey reports >FICCI survey reports. 5. Newsletters & Bulletins>SIA newsletters
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