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Small Scale Industries (SSI) sector constitutes an important sector of Indian economy. It has been serving as a nursery for nurturing the entrepreneurial talents and contributes substantially to the generation of employment, output, balanced regional development and alleviation of poverty. The sector produces wide range of products and provides employment to 250 lakhs persons.
The growth of SSI sector cannot be under-estimated as it tackles the crucial problem of unemployment in the country to a greater extent by providing largest employment, next to agriculture.

The Third All India Census of SSI units (reference period 2001-02) showed that the employment generated by the SSI sector per Rs. 1 lakh investment is 1.39 as against 0.20 in respect of large scale manufacturing sector covered under Annual Survey of Industries (ASI). This means that the organised sector requires an investment of Rs. 5 lakhs to generate employment to one person, whereas the SSI sector generates employment for 7 persons with the same investment. Lack of demand, shortage of working capital and other marketing problems are the main reasons for the sickness / incipient sickness in the country, as revealed from the Third Census of SSI units.

According to Michael E. Porter, a region can develop a competitive advantage as long as the firms within it continue to innovate, and businesses cluster together for mutual advantage. He defines clusters as a geographic concentration of inter-connected companies and institutions in a particular field. It is nothing but a sectoral and geographical concentration of enterprises, which have common opportunities and face similar threats. Clustering is considered to be an effective platform to enlarge production, trigger growth, alleviate poverty, etc. According to the UNIDO Survey of Indian SSI clusters undertaken in 1996, there are 350 clusters and approximately 2000 rural and artisan based clusters in India. It is estimated that these clusters contribute 60% of the manufactured exports from India.

As per definition, subsidies are financial or in-kind assistance by governments to producers or exporters of commodities manufactures and services. Subsidies are paid by governments for many reasons, including the need to prop-up an inefficient production structure, to raise the income of one sector, to promote regional development, or with the aim of developing the export markets, etc.

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* Contributed by: -
Shri. K. Madanan is the Joint Director of Industries and Commerce, Government of Kerala,
Dr. K. S. Chandrasekar is Reader at Institute of Management in Kerala,
Thiruvananthpuram.