The Hindu Business Line : Helping small enterprises grow

The fifth economic census includes some sobering facts: India is a country of small enterprises or shopkeepers, with the average business enterprise employing just 2.4 persons; while most of these enterprises are in bad shape, rural businesses, which account for three-fifths of India’s 42 million enterprises, are worse off. Apart from the rural-urban divide, there is an uneven spread of enterprise activity across States. About 19 per cent of all enterprises do not ha ve any premises, and 68 per cent of these are in rural areas. Just 1.4 per cent of all units employ 10 or more workers, 61 per cent of them being situated in urban areas.

Five States — Maharashtra, Tamil Nadu, West Bengal, Andhra Pradesh and Kerala — account for more than half the ‘larger’ enterprises. Uttar Pradesh, which is among the top five in terms of number of enterprises, is not in this list — a pointer to the fact that the businesses are mostly too small to impact economic growth. However, the picture is not entirely bleak: enterprise and employment growth picked up across the States in 1998-2005 over 1990-98, coinciding with an improved rate of poverty reduction despite the economic slowdown and low wages and incomes in the unorganised sector. One way of ensuring sustained, employment-intensive economic growth is to promote entrepreneurial activity in agriculture. Most enterprises, even in rural India, engage in non-agricultural activity, particularly low-income retail. Gujarat, Kerala, Tamil Nadu and Andhra Pradesh are the only States where activities such as dairying, horticulture, fisheries, animal-rearing and bee-keeping are considered serious business options.

Small enterprises seem unable to generate the surpluses to expand or access capital, particularly in the poorer States, where credit delivery mechanisms are undeveloped. This situation should be redressed with a special focus on farm-related businesses. Self-help groups should be encouraged to form producer co-operatives, as in the case of the women vegetable-growers of Kerala, so that they are collectively eligible for credit. An internal working group (IWG) of the Reserve Bank of India, set up to look into the recommendations of the Arjun Sengupta Committee on the Unorganised Sector, acknowledges the banks’ inability to reach out to micro and small-scale enterprises. A wider definition of the priority sector over the years has led to the neglect of agriculture and SSIs in the 1990s. Since 2004, banks have been trying to reach out to farmers and small entrepreneurs. The working group suggests that small borrowers be provided credit of Rs 25,000 on the basis of household cash flows, without insistence on security. These moves, and more, will help Indian enterprise grow.

Related Stories:
Solutions for SMEs from inside the ‘Budget’ prism
Small enterprises need big push

More Stories on : Editorial | SSI | Entrepreneurship

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
International farm research — Why India should step up funding

Helping small enterprises grow

UN bid to defuse world food crisis

How India’s airlines can save fuel and their industry

Compensation for breach of contract

Assault on the media

WTO: Missing the wood for the trees

Price spurt