<p>A few weeks ago, I had argued that the biggest concern facing India was falling domestic investment. Rejuvenating domestic investment cycle is more important than token changes in India’s foreign investment policy.<br /><br />A critical element in reviving domestic manufacturing is condition of the small and medium enterprises. These small units are much discussed, much maligned and much ignored.<br /><br />Here are some quick facts to put them in some context. Small and medium industrial units churn out 45 per cent of India’s manufacturing output. These 26 million units are also responsible for 40 per cent of exports.<br /><br />The current economic slowdown is hurting them as much as it is hurting large enterprises. About 80 units are turning sick every day. This is an estimate by Micro Small and Medium Enterprises - Development Institute, run by the central government.<br /><br />The units are turning sick for reasons that have not changed in many years. Lack of credit, delayed payments from buyers and most importantly lack of business management skills.<br /><br />Gutsy entrepreneurs work hard to survive. The lucky ones do, the unlucky ones don’t. And it’s the rare one that not just survives but thrives. “Every small unit wants to become a large enterprise,” says Dippak Khoslaa, Director, Carrier Engineers, a small auto component maker in Faridabad, an industrial suburb of Delhi. “But almost no unit gets support to improve its business processes.”<br /><br />Khoslaa company was among those who did get support. Under a quality cluster programme of CII-Avantha Centre for Competitiveness, Khoslaa worked with mentors and trainers to improve his factory’s efficiency and cost competitiveness.<br /><br />"With better planning, Khoslaa could save 30 per cent space in the same unit. This allowed him to set up more machines and increase his output. He established direct contact with workers. Their feedback on process innovation brought the unit even more savings. These savings helped mitigate rising input expenses." <br /><br />“Small units need critical inputs to improve their efficiency in use of capital, space, credit and human resources,” says Gautam Thapar, Chairman and CEO of Avantha Group. Large conglomerates like Avantha realize the importance of small enterprises.<br /><br />Over 8,000 small units have benefits from inputs from Avantha supported Confederation of Indian Industry’s Centre for Competitiveness. Now millions more need such support.<br /><br />This is a model that has to be scaled up in mission mode to reach out to the millions of small enterprises that need help desperately. Thapar says, “Until the small suppliers improve and grow, groups like ours will also not become more productive.”<br /><br />And until the small units become more efficient and grow, India can’t hope to improve its industrial output. Even the foreign investors who set up base in India will look to small units to feed their needs.<br /><br />If the Indian government and industry bodies focus on supporting small manufacturing units, large enterprises will grow faster too.<br /><br />(Pranjal Sharma is a senior business writer. He can be contacted at pranjalx@gmail.com)<br /><br /><br /><br /><br /> </p>
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