The Hindu Business Line : Kerala Govt urged to prop up small enterprises

A major change in industrial structure has taken place in the small enterprise economy of Kerala in such a way that more of tinier units have got registered.

Kochi , March 3

GIVEN Kerala's own recent negative record of agriculture, and of an already flooded services sector, the small industry is the only sector, which offers substantial opportunities, according to Dr P.M. Mathew, Director, Institute of Small Enterprises Development (ISED) here.

The first step of a well-meaning government, therefore, should be to explore a possible political consensus on the development of this sector, he said.

It is most important that this idea, and the resulting consensus, is widely disseminated among the people through all possible media, so that the social mindset is prepared for the necessary structural and organisational changes, and the participation of all concerned are assured for such changes.

This was, in fact, what Ms Margaret Thatcher did in UK, though there may be differences of opinion on her overall economic philosophy. "In Kerala, `peoples planning' was an excellent opportunity to trigger such a movement, which unfortunately, did not materialise," he said in a study on Economic Reforms and Policy Intervention for Small Enterprises Development.

Available indications are that, a major change in industrial structure has taken place in the small enterprise economy of Kerala in such a way that more of tinier units have got registered over time, thereby implying a major decline in per unit employment.

The new class of entrepreneurs who have entered the field during the last one and half decades might have been a particular category of persons who preferred to invest in tiny projects. While in many other States, entrepreneurs take decisions on "to grow or not to grow" the Kerala situation seems to be a unique one, where the majority of the entrepreneurs have already made up their mind, not to grow at all. The question then, is to choose among the tiniest of projects.

An entrepreneurial behaviour, as observed above, has significant policy implications. It raises fundamental questions on the pattern of industrialisation, which has been nurtured through policy action in the State.

The crucial objective of SSI promotion, as mentioned in several official policy documents of the State, is to provide employment opportunities significantly. It is vital to take note that not only the employment opportunities do not grow, the industrial structure itself is getting reduced into labour displacing rather than employment promoting, he said.

The State Government, for the last several years, has been laying thrust on infrastructure as the key to industrial promotion in the State. While regular electricity supply, industrial sheds etc are useful from the promotional angle, many of the new SSIs getting registered need such facilities only to a limited extent. This, in essence, is a question of low absorptive capacity in the SSI sector.

The resource-starved Government spends on projects and activities, which the private entrepreneurs do not need or cannot make use of. On the other hand, many of their necessities are often not met with, he alleged.

Due to increasing levels of unemployment, more people are attracted to the SSI sector. However, these new entrants probably do not want to even think about a large project, but would like to confine to the tiny sector.

While, this has often been explained in terms of generic terms like "labour problem" and "lack of entrepreneurship", a more concrete understanding of the situation at the disaggregated level is needed.

The Government has a compulsion of registering as many units as possible, and of late, this has been institutionalised through a target system, which drives the District Industrial Centres (DICs) into action. But it is likely that, the majority of these new units are ill equipped and poorly run. In fact, the DICs do not have a monitoring system to capture the warning signals of sickness and to act accordingly.

In fact, it could be inferred that the birth of new units is not demand-driven. The DICs need to register new units, or the unemployed youth have a craving "to start something". Considering the complicated sociological dimensions of the job market in Kerala.

The situation demands a strong enterprise policy for Kerala, he said. The term "enterprise policy" is more precise than the wider concept of an industrial policy.

Kerala's vital need for employment generation of a significant scale lies in its ability to generate enterprises that are sustainable. Such a perception cuts across the conventional tri-sector segregation of the economy.

A new agenda of development for the next one decade or so, should focus on two important aspects i.e., a people friendly approach to industrial development and organisational innovations, he added.