HUMAN RESOURCE DEVELOPMENT IN RURAL INDIA

(Contribution of Small and Medium Enterprises in employment generation)

Author
Mr. Khaled goheri
Lecturer at the University of Sistan
E-mail: [email protected]

ABSTRACT

India with 300 million people still living below the poverty line, needs measures to uplift
the status of these people. The Indian small scale sector has been instrumental in the
generation of employment opportunities to the local and less educated strata of the
society, particularly the poor. It has created new opportunities and paved way for their
empowerment through self employment and entrepreneurship. Small and Medium
Enterprises are treated as the engine of growth in most of the developing countries like
India. The present situation of financial crisis is re-emphasizing the need for the
development of self employment and self development. In this backdrop, the authors
through this paper have proposed to evaluate the current scenario of employment
generation and contribution of the small and medium enterprises to the development of
the human resources in rural India. The major advantage of the sector is its employment
potential at low cost. As per the available statistics this sector employs an estimated 31
million people spread over12.8 million enterprises and the labour intensity in the sector
is almost four times higher than the large enterprises. Keeping in view the importance of
SME sector in employment generation, a study has been undertaken in this area with
special reference to the state of Andhra Pradesh.

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INTRODUCTION

The achievement of sustainable and equitable development remains the greatest challenge

facing the human race. Despite good progress over the past few generations, billions of

people still live in acute poverty and suffer with grossly inadequate access to the

resources-education, health services, infrastructure, land and credit, to give them a chance

for better life. The essential task of development is to provide opportunities to these

people and increase the reach of opportunities. David McClelland in his book “The

Achieving Society”, published in 1961 examined the factors contributing to the economic

development of various countries in the early twentieth century. Based on his research he

analyzed that the countries that have advanced economically, showed the evidence of

human resource development activities as an integral part of the system. According to the

World Development Report of 1980, the development of any country depends upon the

quality of human capital and human development activities undertaken.

HUMAN RESOURCE DEVELOPMENT:

Developing the people is the essence of any human resource development effort and it is

an important goal of all other development activities like plans, policies and programmes.

All forms of development i.e. social, economic, technological and agricultural are

ultimately meant to serve the people in terms of improving their happiness through better

standards of living. Human resource development holds the key for economic

development through enabling people to become more productive. As economic

development of any country depends upon the development of the population, many

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developing countries are becoming increasingly aware of the need to involve people

through participation, empowerment and better access to opportunities. The objective of

HRD is to develop competencies in individual, groups and collectives. Developing

competencies is a never-ending process because competency development is the driver of

development for any nation.

In economic terms, HRD in the early years (1950-60) was equated with human capital

formation. The basic philosophy underlying this fact is that human resources are the

most important assets and can be developed and increased to an unlimited extent.

Currently, for most of the developing countries, HRD strategies are focusing on the

alleviation of poverty to the most possible extent. For this purpose, investment in

education and health services at the basic level and creation of employment and self-

employment opportunities at the later become very critical. HRD is the need of any

nation, which wants to be dynamic and growth-oriented to succeed in the fast changing

environment. Countries can become competent in the global environment, only through

the competency development of the human resources.

THE INDIAN BACK DROP:

Poverty has been one of the persisting social evils haunting the rural masses of India.

Ever since independence, a number of policies were made and adopted for the upliftment

of rural population of the country. Now, the emphasis has been shifted from the

development of employment opportunities to generation of self employment and

empowerment. The biggest challenge faced by the Indian government is that a large

chunk of the rural masses are still living below the poverty line and the task of uplifting

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them has become constitutional responsibility of the Union, State and Local

governments. The government of India has taken up the task of developing rural India,

through various policy implications and schemes, which includes the development of

small and medium enterprises in India.

SMALL AND MEDIUM ENTERPRISES:

Small-scale industries were the dream of father of our nation “Mahatma Gandhi.” He had

insisted on the growth of small-scale industries in India, because he had the vision that

they will help the poor people to improve their quality of life. The underlying fact is that

these industries are not capital intensive, but labor intensive and India is a country with

rich human resources. Small and Medium Enterprises (SMEs), also known as small and

medium scale industries or businesses, are the essential part of a healthy economy. The

SME sector represents over 90 per cent of enterprises in most of the developing countries

and contributes 40-60 per cent of the total output or value added to the national economy.

Worldwide the Micro, Small and Medium Enterprises have been accepted as the engine

to economic growth for promoting equitable development. SMEs in most of the

economies are credited with generating highest rate of employment growth and account

for a major share of industrial production and exports. In India, too tiny industries, which

are now known as the micro, and small industries have always been effective tools of

social and economic development. This is evident from the fact that its growth has

always been higher than the overall industrial growth and provision of employment

facilities with out basic educational and other requirements. It is estimated that in terms

of value the small and medium enterprises account for 39% of the manufacturing out put

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and around 34% of the total exports of the country. The national common minimum

programme of the government also recognizes the fact that it is the most employment

intensive segment.

The enactment of Micro, Small, and Medium Enterprises Development (MSMED) Act,

2006 was a landmark initiative taken by the Government of India to enable the SMEs to

become globally competitive and address the global markets. As per the Micro, Small

and Medium enterprises Development Act, 2006, in the manufacturing sector, an

enterprise with investment in plant and machinery up to Rs 5 crore is termed as a small

enterprise, and an enterprise with investment up to Rs.10 crore is defined as a medium

enterprise. In the services sector enterprises with investment in equipment up to Rs 2

crores are classified as small enterprises and those with investment up to Rs 5 crore are

classified as medium enterprise. The president under notification dated 9th may, 2007 has

amended the Government of India (Allocation of Business) Rules, 1961. Pursuant to this

amendment Ministry of Agro and Rural Industries and Ministry of Small Scale Industries

have been merged into a single Ministry namely, “Ministry of Micro, Small and Medium

Enterprises”.

CONTRIBUTION TO THE GENERATION OF EMPLOYMENT:

SMEs have been playing a pivotal role in country’s overall economic growth, and have

achieved steady progress over the last couple of years. From the perspective of industrial

development in India, SMEs are playing a prominent role in the generation of

employment facilities especially in the rural areas. The SME segment also plays a major

role in developing countries such as India to alleviate poverty and propel sustainable

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 growth. They also lead to an equitable distribution of income among the country as

majority of these units are located in the rural areas. Moreover, SMEs in countries such

as India help in efficient allocation of resources by implementing labor -intensive

production processes, in lieu of capital-intensive industries, as the country is rich in

human resources.

The SME sector has registered a consistently higher growth rate than the overall

manufacturing sector. In fact, it plays a dual role since the output produced by SMEs is a

source of final consumption as well as a source of capital goods in the form of inputs to

heavy industries. Over the decades the investments in this sector are increasing as well as

the number of units and the employment generation through these units. The number of

units established under this segment, and the generation of employment through this

sector present a pleasing scenario in the state of Andhra Pradesh.

Table-1 Small Scale Industries in the State of Andhra Pradesh

Increase Increase Increase

No. of Invst Employment
S.No Period in in in
Units (Rs.Cr.) (in Lakhs)
Number Number Number
1 Upto March 95 113697 1636.38 975457
2 Upto March 96 117820 4123 1827.17 190.79 1009293 33836
3 Upto March 97 122790 5150 2037.84 210.67 1047193 37900
4 Upto March 98 127725 4935 2335.07 297.23 1097192 49999
5 Upto March 99 132722 4997 2886.57 551.50 1155445 58253
6 Upto March 2000 136917 4195 3425.59 539.02 1195109 39664
7 Upto March 2001 139041 2124 3752.36 326.77 1220542 25433
8 Upto March 2002 140653 1612 4013.03 260.67 1239753 19211
9 Upto March 2003 142294 1641 4247.53 234.50 1264046 24293
10 Upto March 2004 143867 1573 4451.58 204.05 1285995 21949
11 Upto March 2005 145499 1632 4717.70 266.12 1310071 24076
12 Upto March 2006 146766 1267 4963.07 245.37 1325903 15832
13 Upto March 2007 149206 2440 5849.08 886.01 1361922 36019
14 Upto March 2008 153470 4264 7899.00 2049.92 1439786 77864
Source: RBI Website

The table presents the data from the year 1995 to 2008. Over the years there have been

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continuous additions to the number of units operating in this sector. Moreover the amount

of investment in these units and resultant employment generation has been highest in the

year 2008. This can be attributed to the global financial crisis and implications to some

extent. As the IT, IT enabled service sectors are the prime sufferers from the crisis,

people began to search for alternative courses of action which will be beneficial for them

not only in the short run but forever. From the table it is evident that there has been an

increasing emphasis on the small-scale industries and the employment generation is also

increasing persistently. In all the years, there has been a progress in the number of units

even through these organizations are facing some hurdles in the form of capital

inadequacy and lack of technical expertise.

The post liberalization era in the Indian economy has enhanced the opportunities and

even created some challenges for the small industries sector. Whatever may be the

constraints, these units are able to generate more value to the investment when compared

with the overall investments of the economy. The table below indicates the growing

significance of SMEs in the Indian economy. The output of SMEs is increasing; the

productivity in terms of per unit investment is also growing. The table gives an idea of

the employment generation capacity of the investments in the small scale industries in

comparison with the total employment generated through the total economy.

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Table: 2 Employment Generations per Rs.10 Million of Investments

The table suggests that the every ten millions of rupees invested by the SMEs’ have

generated more than 4 times of employment opportunities than the overall economy, as

per the data available in Financial Year 06. For instance, every ten millions of rupees

invested by SMEs’ in FY06 generated employment for around 151.4 persons, whereas

for the overall economy the same amount of investment generated employment for 37.4

persons.

Along with the SME segment, the Khadi and Village Industries Commission (KVIC)

segment provides employment to nearly 8.3 million persons where as the manufacturing

and service sector small industries together provide employment to an estimated 2.42

million. This is the largest segment that provides employment next to the agricultural

sector in India. So ,one can realize the need for the development of these institutions,

keeping in view the long term benefits associated with this sector. The same has been

emphasized by the Indian policy makers during the previous five year plans. The

consequent budgetary allocations to this sector reflect the priority given to the

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development of this sector. The government is also extending institutional support in

this regard.

INSTITUTIONAL SUPPORT:

The government of India recognizes the contribution of the small-scale industries to the

generation of employment and it has been providing all the necessary inputs to this

sector on a priority basis. The government has been investing in man-power

development for the small-scale industry for setting up technical institutes such as ITIs,

Polytechnics, etc. This initiative has helped in creating a pool of technically qualified

persons. With globalization, the small-scale industries are forced to change their

strategies to become globally competitive and sustain their position in the international

trade. The government of India is implementing many policy initiatives through various

organizations to support the SME sector, keeping in view the importance attached to this

sector in the generation of employment and economic growth. The following is a

comprehensive presentation of various institutional support facilities provided to the

SME sector.

SMALL INDUSTRIES DEVELOPMENT ORGANISATION (SIDO):

The Small Industries Development Organisation (SIDO) comprises the Office of the

Development Commissioner (Small Scale Industries) [DC (SSI)] with headquarters in

New Delhi, 30 Small Industries Service Institutes (SISIs), 28 Branch SISIs, 4 Regional

Testing Centres (RTCs), 7 Field Testing Stations (FTS), one Hand Tool Design

Development Training Centre (HTDD&TC), and two Small Entrepreneurs Promotion

and Training Institutes (SEPTI) at various locations in the country. It is an attached office

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of the Ministry of SSI. There is at least one SISI located in every State and in some cases

more. The 4 RTCs are located at New Delhi, Mumbai, Chennai and Kolkata. Several

grantee institutions/autonomous bodies also function under the administrative control of

the SIDO. AS&DC (SSI) is the ex officio Chairman of the Governing Councils of these

autonomous societies. The activities of these societies range from research and

development to tool design, die making, process-cum-product development, training in

footwear technology, etc.

NATIONAL SMALL INDUSTRIES CORPORATION LIMITED (NSIC):

This was established in 1955 with a view to promoting, aiding, and fostering the growth

of small scale industries and industry related small scale services / business enterprises in

the country, on a commercial footing. During the last 50 years, the Corporation expanded

its activities in the areas of Marketing, Technology, Financing and Information Support

to small enterprises in the country. The emerging competitive business environment and

dismantling of the market barriers provide an added impetus for enlarging the activities

of NSIC. In line with the current economic changes, the Corporation has introduced

many new Schemes from time to time for the development of small enterprises. The

Corporation is now an ISO: 9001-2000 Company, providing services of marketing

assistance, technology up gradation and entrepreneurship development. The scheme of

assisting these enterprises in obtaining performance – cum – credit rating is the latest

initiative of the Government being implemented by the NSIC with the assistance of noted

rating agencies operating in the country.

NATIONAL INSTITUTE OF SMALL INDUSTRY EXTENSION TRAINING

(NISIET):

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NISIET was set up in 1960 to assist in promotion, development, and modernization of

small and medium enterprises (SMEs) in the country. At present, the main activities of

NISIET are entrepreneurship development related training programmes, training research

and consultancy, including the methodology of cluster development.

NATIONAL INSTITUTE FOR ENTREPRENEURSHIP AND SMALL BUSINESS

DEVELOPMENT (NIESBUD):

The major activities of the Institute, established in 1986, include, development of model

syllabi for training of various target groups, designing effective training strategies,

methodology, manuals and tools, facilitating and supporting Central/State Governments

and other agencies in executing programmes of entrepreneurship and small business

development, etc.

INDIAN INSTITUTE OF ENTREPRENEURSHIP (IIE):

This organization was established in 1993, with the aim of undertaking training, research

and consultancy activities in the small industry sector focusing on entrepreneurship

development as an autonomous national institute. IIE is working towards strengthening

the capacity in the field of entrepreneurship development, training, entrepreneurship

education, research and consultancy, incubator services on gems and jewellery,

publication and sensitization of environment for promotion of entrepreneurship,

enterprise creation and self-employment in the North Eastern Region. IIE, Guwahati has

also taken initiatives for providing hand-holding services to the entrepreneurs in the

North Eastern Region for which a Business Facilitation & Development Centre (BFDC)

has been set up with financial assistance from the Ministry.

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 NATIONAL COMMISSION FOR ENTERPRISES IN THE UNORGANIZED

SECTOR:

It has been set up by the Government as an advisory body and a watchdog for the

informal sector with a view to fulfilling the commitment in the National Common

Minimum Programme of the Government. The Commission will recommend measures

considered necessary for bringing about improvement in the productivity of these

enterprises, generation of large scale employment opportunities on a sustainable basis,

particularly in the rural areas, enhancing the competitiveness of the sector in the

emerging global environment, linkage of the sector with institutional framework in areas

such as credit, raw material, infrastructure, technology up gradation, marketing and

formulation of suitable arrangements for skill development.

THE WORLD ASSOCIATION FOR SMALL AND MEDIUM ENTERPRISES

(WASME):

This institute formed in 1980 in New Delhi, India, is now recognised as the largest

professionally managed global non-governmental organization with Members comprising

of national governments, chambers of commerce and industry, small business authorities

and associations, banks and financial institutions, training and consultancy agencies

serving micro, small and medium enterprises, primarily in developing countries.

WASME is managed by a competent Secretariat and works out of its own building at

Noida, supported by professionals in Information Services, Economic Research,

Marketing, Technology Transfer and other specialized subjects. It is served by Permanent

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Representatives in Washington DC, Vienna, Paris, Bangkok, Geneva, Brussels and Kuala

Lumpur.

To support the initiatives of the Union government, the state government of Andhra

Pradesh is also providing institutional support through District Industrial Centers (DIC),

and other NGOs. The State Government is supporting the initiative of the Association of

Lady Entrepreneurs of Andhra Pradesh (ALEAP) to set up a premier institute for

entrepreneurial development in Hyderabad, particularly for small entrepreneurs, in

collaboration with the Entrepreneurship Development Institute of India, (EDI)

Ahmedabad through the establishment of Technology incubators, where entrepreneurs in

new technologies can obtain hands-on experience.

CONCLUSION:

It is evident from the research studies, that world wide the small and medium enterprises

are consistently offering a growth rate even during the times of crisis. This is due to the

fact that these organizations are basically domestic in nature with international business

domains. Moreover the capital requirements are very low when compared with large

industries, along with lower level of skill requirements. As a result these units have been

instrumental in the generation of employment for the less educated and economically

poorer sections of India. The contributions were commendable in the recent past as the

global economic crisis is generating a gloomy scenario of employment in all most all

parts of the world. But in India the RBI and the Government of India are working

together to provide a supporting environment to the sustainable development of the SME

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sector. The apex bank has already initiated measures to maintain a comfortable liquidity

of rupee and foreign exchange, besides ensuring continuous credit flow to productive

sectors, exports and small and medium enterprises (SMEs).

In spite of the support from the government and non government organisattions, these

organizations are facing problems in the competitive environment. Given the situations of

liberalization and competition from the Multi nationals, these organizations have to

evolve from the role of a traditional manufacturer in the domestic market to that of an

international fragment, as with globalization, all forms of production of goods and

services are getting increasingly fragmented across countries and enterprises. The SME

sector can become globally competitive, if these are able to make use of the latest

technologies and training facilities offered by various government and non government

agencies. Creating awareness in the educated youth can enormously increase the potential

employment generation associated with the small scale sector. The Ministry of Micro,

Small and Medium Industries has already designed a number of programmes, which aim

at extending training and skill development facilities to the needful entrepreneurs in

various areas. The educated, unemployed youth can take the advantage of these training

programmes and can establish their own units which will provide them with an

opportunity for self development with integrated economic development.

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References:

The Financial Express, August, 29, 2009

G.Priya & Pushpalatha.A “Performance of Small Scale Industries in Recent Years”

The Economic Challenger, July-September, 2007
B. Yerram Raju “SMEs: Issues in the changing global economic Environment”ssi.
htm
Deccan Chronicle, 12th February, 2009
Laghu Udhyog Samachar, April-September,2000
Dr. Gupta C.B., Dr. S.S. Khanka, Entrepreneurship and Small Business Management,
Sultan Chand and sons, New Delhi, 2000, P-2.13.

Dr. Vasant Desai, Small Scale Industries and Entrepreneurship, Himalaya Publishing
House, New Delhi, 2006, P-17.

Economic Survey 2001-02, Government of India, p.180.

Task Force Report on Modern Small Scale Industries, 2000.

Third All India Census Report on SSI 2001-02.

Union Budget, 2009.

www.economic times.com

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