SOAS Research Online

Abstract

This study examines the Indian Government's policy of supporting and promoting small manufacturing industry, whose aims stressed the generation of employment, the productive use of capital and skills, and the contribution small manufacturing can make to promoting regional and rural/urban balance. A less well publicised aim of the policy has been to create a sector which is viable and self-sustaining. The study examines the growth of small manufacturing over the period 1961-1991, and finds that growth was conditioned more by the growth of the economy as a whole than by specific government policy for small manufacturing. Analysis at the All-India level reveals that the distribution of small industry was positively related to the level of urbanisation and industrialisation, while, at a smaller scale, within Tamil Nadu, the same results largely hold. Overall, there is no evidence that the growth of the small scale sector has reduced regional imbalances. Examination of the viability of the small scale sector draws on research into the re-emergence of industrial districts of flexibly specialised small firms which emphasises that viability is dependent on the geographical agglomeration of small manufacturers, and the emergence of systems of informal and formal inter-firm cooperation through which they can collectively resolve their individual weaknesses and promote collective efficiency. A case study of small engineering units in Coimbatore sought to determine whether the Government's support services had acted as a model of public-private cooperation, and a catalyst to encourage cooperation between small firms, and with other agencies. The main finding was that the Government's support services were unsatisfactory. Small engineering units are flexible, adaptable, capable of accumulation and growth, but this dynamism co-exists with obsolete technology and poor quality standards. The explanation for this lies partly in the macro-policy environment, which has encouraged the growth of small manufacturing units, but has not provided either the incentive, or the support to pursue a path of technological innovation, compounded by the evident lack of trust and limited cooperation among small entrepreneurs, which is a major obstacle to the development of collective solutions to their problems.