Kerala Database

Small - scale Industries

P.M. Mathew

1.0. Introduction

The term database means different things to different people, depending upon how the usefulness of data is perceived. Data are facts, certainly known and which can be used as a raw material for drawing conclusions. For the academician, a database means logically sequenced facts, which can be used for drawing meaningful conclusions. To the layman, it means arithmetic which can be used to support what one seeks to prove.

2.0. A Changing Concept

The term database itself is a changing concept, depending upon its usefulness as a raw material for arriving at information. Data becomes a resource, only when it is transformed into information. Viewed from this angle, and specifically in the context of the present information era, the usefulness of data need to be examined against its ability to cope with the emerging information needs of various sectors of human concern. The demand, therefore, is a derived demand. From the user's side, therefore, the database of an economy can be examined at two levels:

Secondary information created on various economic activities (I would prefer to call it database per se)

Research output, which is a derived product of various original sources mentioned above which, again, is acts as an input for further enquiries.

From the point of planning by the government and businesses, and of development of programmes, both forms of data/ information are useful.

The focus of this paper is on the process of generation of data, and its conversion into information, for the requirements of development of small industry in Kerala. Our interest in the subject owes to the instrumental potential of this sub-sector in satisfying the objectives of social policy in the State.

2.1. The Database per se

The terms 'small industry', 'small enterprises' and 'unorganised sector' have been interchangeably used in the development literature of India. While there are significant definitional problems and overlaps which prevent a clear segregation of different sub-sectors, it is necessary to have a functional definition which makes these concepts operationally meaningful.

The definition of the Government of India, from time to time, determines the manner in which 'small industry' is distinguished from the 'medium and large', and the various components within the small sector. 'Traditional and village industries' are those which are registered and administered by various all-India Boards / Commissions through their developmental programmes, and are essentially commodity-specific. Those activities which are not covered as above, are referred to as 'modern small-scale industries' (SSIs). Governed by the All-India Small-scale Industries Board, and under the administrative control of the Small Industries Development Organisation (SIDO), there is a network of District Industries Centres in the country, and a Directorate of Industries in each state. This network caters to the SSIs.

In India, the definition of 'small industry' is residuary in nature, with a ceiling on investment in plant & machinery at original cost. An industrial undertaking, in which the investment in plant and machinery, whether held on ownership terms or on lease or on hire purchase, does not exceed Rs. 100,000, is treated as a small-scale industrial undertaking. Village and small industries (VSIs) are divided into two: 1) those units which fall under the purview of SIDO; and 2) powerlooms. The constituents of 'traditional industries' are, khadi and village industries, handlooms, sericulture, coir and wool-based industries.

The availability of data and information on small enterprises vary in different states of India, depending upon the administrative practices and the co-ordination of programmes at the lower level. However, for comparative purposes at the national level, there are a few sources of data: 1) the Annual Survey of Industries (ASI) carried out by the Central Statistical Organisation (CSO), covering factories registered under the Factories Act; 2) data available with the SIDO, based on basic registration statistics, specific sample surveys and the occasional Census of Small-scale Industries ; 3) the Population Census, which also provides some information on the manufacturing sector; 4) the Economic Census carried out by the CSO, which provides information on registered and unregistered economic activities; 5) data on unorganised sector in manufacturing and repairs (other than under the Factories Act) generated by the Follow-up Rounds of the NSSO.

Among the developing countries, India is one having a much elaborate and strong statistical system. However, the database of the small enterprise economy, from the point of view of analysis, policy formulation, and implementation of programmes, is not strong enough. While major efforts have been made to collect data, they do not assure their operational meaningfulness. This, to a large extent, can be explained in terms of the lower priority which has been given to small enterprises in the agenda of planning in the country.

2.1.1. Data as a Raw Material for Planning

Though this weakness of the data system has been pointed out by several expert committees from time to time, adequate steps have not been taken to integrate the data system for better utilisation. At the State level, the major input for planning small industry continues to be the data available from registration statistics, the basic source being the Permanent Register of SSIs maintained by the District Industries Centers (DICs). Registration with the DIC is purely voluntary. As the benefits accruing from such registration have significantly come down, it is likely that a number of units may remain unregistered. All the studies undertaken by the DCSSI make use of the frame of registered SSIs; naturally the associated constraints apply. The Economic Census has a wider coverage; but data form the two sources are often conflicting than complementary.

Collection of detailed data on various parameters of importance to the small-scale sector (like production, capacity, employment, investment, borrowings, raw material used, fuel consumed, exports etc.) was attempted, for the first time, by Small Industries Development Organisation (SIDO) in 1973-74 by way of a Census of Small-scale Industrial Units registered with the State Directorates of Industries. The Census covered 1.4 lakh registered SSI units. During the Fifth Five Year Plan (1974-79), a scheme aimed at updating the data provided by the Census on an annual basis through registration records, and compilation of an Index of Industrial Production (IIP) for the Small-scale Sector, was initiated. It covers data in the following forms:

a. Registration Data

The registration of small-scale units is being done by State Governments at DIC level, following a uniform procedure throughout the country which was introduced in 1977. The 'Permanent Register of Small-scale Industries', the basis for all official data on the sector, contains data on unit-wise location, employment, production, capacity and investment.

b. Representation in the Index of Industrial Production (IIP).

Production data on 18 reserved items, selected from the frame of SSI units registered upto 1984-85, has been provided to CSO by the Office of the DC (SSI). This helps the CSO to give representation to the small-scale sector in the IIP. In the context of Special Data Dissemination Standards of the International Monetary Fund (IMF), the scheme has been revised by the Office of the DC (SSI), in order to collect data from 138 computerised DICs in respect of 500 items from 28,000 units.

c. Index of Industrial Production (SSI)

A system of collection of production data was introduced in 1976. Being compiled by the Office of the DC (SSI), the Index of Industrial Production (Small-scale Sector) is meant to estimate growth of production of the small-scale sector on a regular basis. For this purpose, a 2% sample has been selected from the frame-list of working units available from the first All-India Census of SSIs. The sample covers 2,400 units from which monthly production information on 356 important items is being collected on quarterly basis.

d. Sample Survey of SSIs.

Sample surveys to update data available from the Census was introduced since the Sixth Plan period. It is meant to help in identifying shifts/ changes taking place in the small-scale sector and to provide valuable information for development of specific segments of the sector and / or product-lines, besides enabling to estimate requirements of various raw materials and finance. Under the scheme, two surveys were taken up, in 1982-83 and 1995-96, by the Office of the DC(SSI).

e. Ad-hoc Surveys and Studies.

Ad-hoc surveys and studies are taken up by the Office of the DC (SSI), in order to capture specific aspects such as, sickness, size of the unregistered sector etc. It has so far completed two Diagnostic Surveys on industrial sickness during 1982-83 and 1994-95. Besides, a study for assessing the size and contribution of unregistered SSI sector was conducted in 1994-95.

f. All-India Census of Registered SSI Units.

Complete data on the working of all registered SSI units for the base year 1987-88, was collected through the Second Census. This is the latest comprehensive data available on the SSI sector. The Third all-India Census of SSI was launched in October 2002. It has three objectives: (1) to update the frame; (2) to identify sick units; and (3) to collect other useful information for policy formulation. The output of this Census is expected by April, 2003.

2.1.2. Data on Kerala's Un-organised Sector.

The unorganised sector has only a weak database. The Office of the DC (SSI) collects data on registered units (registered with State Directorate of Industries) and makes estimates for the unregistered units. It does not collect detailed data on the entire unorganised sector (VSI sector) including handloom, powerloom, handicrafts, coir, sericulture, and KVI, which fall under the purview of different Boards and Ministries. The Department of Statistics, Govt. of India, conducts Economic Census and its follow-up surveys, through which information on unorganised manufacturing sector is collected. The Economic Census provides information only on broad parameters such as number of units, employment, type of activity, location etc. The detailed information on unorganised sector is collected through follow-up surveys, viz, Directory Manufacturing Establishment Survey (DME), Non-Directory Manufacturing Establishment Survey (NDME) and Own-Account Enterprise Survey (OAE).

The Third Economic Census attempted a complete enumeration of entrepreneurial activities other than crop production and plantation. The information was collected on crucial aspects such as location of enterprises, activities, nature of operations, type of ownership, social group of the entrepreneur, consumption of fuel and the employment pattern. The results of this Census show that there were 12.22 lakh enterprises in the State, as against 8.72 lakhs in 1980 (a 40.18% growth). The total number of persons working in these enterprises rose from 24.82 lakhs to 31.39 lakhs. The average number of persons per enterprise decreased slightly from 2.81 to 2.57. According to the Fourth Economic Census, the results of which were made available during the second half of the year 2001, Kerala has the eighth position with regard to the total number of enterprises and the sixth position with regard to number of persons working in rural enterprises. These indicate the crucial role of unorganised enterprises in the Kerala economy.

Apart from the data collected by Kerala for fulfillment of the requirements of the national statistical system, such as the CSO, NSSO and the Office of the DC (SSI), the major state-level source available is the Directorate of Economics and Statistics (DES). However, unlike in states like Gujarat, the coverage of the data collected by DES is limited. The coverage of the DES includes two types of data: (1) Compilations from other original sources; and (2) Occasional studies.

The main items compiled by the DES include registration data, as it is available from the Permanent Register of SSIs maintained by the DICs, and data relating to sick industrial units as reported by the Directorate of Industries and Commerce. However, these data often vary with corresponding figures, as they are available from the DC (SSI). While conceptually, registration and sickness data are compiled by the DC (SSI) based on DIC-level records, such variations between data from two sources need further explanation. Another major set of data brought out by the DES, is on units registered under the Factories Act. Such data, compiled from sources like Inspectorate of Factories and Boilers and Directorate of Employment and Training, provides some picture of the employment and geographical distribution of such industries. However, the overlapping of data from the above two sources does not permit their useful interpretation from the policy angle. A second set of data available from DES relates to traditional industries. These are basically compilations from the respective promotional/ administrative Board/ Department for these industries.

The DES in Kerala had a tradition of undertaking several occasional studies on specific small industries, industrial estates, finance etc. Unfortunately, no such study has taken place during the last about a decade. This has been reported to be because of the poor budgetary allocations of this Department.

For the requirements of 'People's Planning', the DES initiated a compilation of Census data, which also includes a panchayath-level distribution of labour according to occupational classification. However, the industrial classifications used by the publication entitled "District-level Statistics (1996)", has very little comparability. Therefore, it is difficult to use this data for arriving at meaningful conclusions on the small/micro industries sector. However, calculations based on the origin of labour can be useful for planning purposes.

2.2. Research Output

The Survey of Research in Economics Series (Industry) of the Indian Council of Social Science Research carried a survey by K.K. Subramaniam and S.P Kashyap (Subramaniam and Kashyap 1975), on the status of our understanding on small industry as in 1975. The Survey provided significant insights into the logical foundations of academic enquiries and policy architecture in this sub-sector of the economy. Subramaniam and Kashyap brought out some strong analytical arguments that triggered enquiries on this vital sub-sector in the 1960s and 1970s. This survey covered only "analytical studies" and left out other "model schemes". While the culture of research in the 1970s was more analytical and less policy oriented, the contribution by Subramaniam and Kashyap was remarkable for its analytical rigour, ofcourse, akin to the survey series of the American Economic Association. This has been amplified by the discussion on the choice problem, scale-efficiency debate, and discussion on complementarity. Though studies in the pre-1970s were few in number, the very academic culture of the period was suitable for the requirements of a nascent small industry sector in the country.

A subsequent project of the Indian Council of Social Science Research, and carried out by the present author for the period 1960-1999, pointed out at the slow pace of academic enquiries on the subject. The report has identified some crucial reasons for this lethargy. On the one hand, the small-scale sector could not attract any academic 'bandwagon effect', such as in areas like agriculture or rural development, in which such an effect is more pronounced. Moreover, the sector does not maintain any strong base of secondary data'. Naturally, the Ph.D. and M. Phil scholars are often not attracted into this difficult terrain. Besides, very few senior researchers are interested in undertaking other-than-exclusive secondary-data based studies, which small industry really demand. DFIs and industry associations also are not keen on investing in R&D activities in a sector which has more social relevance than economic. A combination of these factors made the small sector of industry an area of less attention in academic exercises.

Surprisingly, since 2000, (which can be described as the 'globalisation era' for small industry), has witnessed a mushrooming of literature on the subject (as amplified by the columns of Economic and Political Weekly itself). Academic contributions in the post-QR era has largely been on the subject of the doom of small industry, rather than its prospects. More of a postmortem rather than an interest to nurse the morbid, to a situation of perfect health!

Another project of the Indian Council of Social Science Research, carried out by the present author in 1990, looked into the state of creation of research output in the small industry sector during the period 1960 to 1999. The study shows that, despite being a major development affecting the small industry sector, the liberalisation era did not produce substantial academic literature on small industry, which by all yardsticks, is the engine of employment creation, especially in the rural areas.

More recently, came the edited volume entitled "India's Socio-economic Database" by Chandrashekhar and Tilak (2001), again based on an ICSSR-funded project. The contribution by Venkataramiah et. al (2001), in this volume makes an excursion into the categories and sub-categories of small industry in India as well as the different sources of data, which throw some light upon this sub-sector. The major conclusions of the study relate to the imperative for data creation in several of the important functional areas of small industry: exports, finance, industrial sickness, industrial estates, other developmental programmes etc. Unfortunately, this study almost completely overlooks the current developments in the area of policy formulation, the gap between policy and practice, and the inadequacy of data relating to policy and practice. On the other hand, it discusses a variety of routine exercises of several government departments which collect data, rather in a ritualistic fashion, but with very little practical utility.

The above discussion is meant to draw the point that, in India, academic research, data collection, and the actual practice of industrial administration are rather water-tight compartments. It should be against this background that we should attempt at a discussion on the database and the data needs of small industry in Kerala. Let us examine the Kerala situation against the national pattern we have adopted.

Academics in India is, to a large extent, is fund-driven, rather than interest-driven. Therefore, the flow of research funds and the associated priority setting, to a large extent, have influenced academic exercises in the country; agriculture in the 1970s, poverty in the 1980s, gender in the 1990s, and small-scale and micro enterprises in the new century. An understanding of the political economy of academics itself is necessary to have a realistic understanding of the usefulness of academic output to the real life situation of the masses which feed the academic community.

3.0. Untapped Areas

There are several untapped areas of data on small and micro enterprises which can be utilised in a cost-effective manner, with the coordinated effect of atleast the following agencies:

Directorate of Industries and Commerce

Directorate of Economics and Statistics

National Sample Survey Organisation

The survey undertaken by the DC(SSI) (both Census and 2% sample studies) are a gold-mine of rich information. Unfortunately, these have not been compiled at the state level. The Third Census of SSIs, proposes to adopt an innovative technology for data processing at the national level. If the DES and the State Directorate of Industries and Commerce co-ordinates with the Office of the DC(SSI) right now, useful state-level reports on Kerala's SSI sector can be generated by April 2003 (the time schedule of DC(SSI) for bringing out the Census results).

Economic Census results as well as the Enterprise Surveys (latest being the 56th Round of NSSO) are not compiled at the State-level. The DES which collects these data, can easily compile them without substantial costs.

The economic variables of decennial Population Census can be easily compiled, if properly coordinated with the Census Directorate.

The State-level Bankers' Committee (SLBC) and the DFIs can provide rich data if there is a coordinated effort by the DES and the Directorate of Industries and Commerce. (The Directorate of Industries and Commerce is a member of the SLBC)

Mushrooming of service industries and activities has been a major feature of the pattern of industrialisation in Kerala during the last two decades. Apart from the other objective factors, public policy has played a major role in triggering this process. There has been a significant per unit decline in employment in the SSI sector, from 7.3 in 1984-85 to 3.8 in 2001-2002. On the one hand, the Industries Department promote micro-firm creation through programmes like PMRY, the same programme is replicated by agencies like Kudumbashree. The irony of these government programmes is that they are not based on any worthwhile scientific potential studies. Besides, the individual projects themselves are not based on any market study, which obviously, is difficult to expect from a poor start-up. While the reality being so, every such programme is being painted as a "success story" based on isolated experiences or on sheer numbers of firm creation or employment creation (often disguised unemployment). The same argument applies to KVI sector as well.

A realistic assessment of the services sector, from the point of view design of appropriate plans and programmes, is an urgent necessity. Unfortunately, post-mortem academic exercises are not likely to serve any useful purpose in this regard. The imperative, however, is to decide what need to be collected and what not. A decision on this can be taken only based on continuous consultation among all concerned departments/ agencies and professional institutions.

4.0. The Concerns and the Response

The major concern relating to data on small industry today is not simply its availability. The crucial question relates to, why it is collected and how it is used. Unfortunately, this question is rarely raised. Rosy pictures of the prospects of the SSI sector have often been painted, especially from the point of view of its employment potential. In fact, industry in Kerala is the proxy for employment. Probably the maximum number of starred questions in the Legislative Assembly in a year relates to employment in the SSI sector!

The next question relates to the means of employment promotion. The answer depends on varying perceptions. One view favours local level development, essentially through micro-enterprises and cooperatives, which in turn is expected to lead to substantial employment generation. The other extreme view is that, nascent entrepreneurship in Kerala is a redundant fifth wheel, which cannot be relied upon. "Development" comes mainly through the foreign route (as employment abroad, is now a days, considered by the average Keralite as anything worthwhile). The tone, for academic debates is probably set by the political leadership. In every society, there should be a catalytic role of the intelligentsia, which makes the political leadership to think in new ways and on innovative lines. Unfortunately in Kerala, such academic leadership is rare. Therefore, the academic leadership generally does not feel uncomfortable with the poor availability of reliable data. And moreover, they advise the novices in the field, not to tread in "difficult areas" like industry, and small industry in specific. It is this negligence that has set the tone for poor data generation on small industry.

But the bureaucracy has a compulsion of designing programmes, implementing them, and of finding out justification for what and how they have implemented them. It is this compulsion that gets reflected in the initiatives of official agencies collecting statistics. It may also mean collecting data for a purpose as directed by the various Central Government departments (which also means central funds for their implementation!).

Should these be the basis for building up the database on small industry, which is a crucial sub-sector of Kerala industry? Should we not undertake a clear assessment, either pre-project or post-project, on the ground level phenomena, when we design and announce policy for the vital sub-sectors, like say, IT sector and on labour? Should we not base the setting up of new institutions and programmes like the Kerala Venture Capital Fund and NRI support initiatives, based on hard data?

Against this background, one need to make an introspection on the lost opportunities and the vitality of doing things in a different fashion. The Arun Gosh Committee, appointed by the Planning Commission recommended an enhanced integration of data from sources like the Office of the DC(SSI), the CSO and the NSSO, such that they may provide a better understanding of small industry and evolution of meaningful policies. Unfortunately, much progress has not been made in this area. The 56th Round of the NSSO focussed on unorganised manufacturing. The Third Economic Census came out with its report in June 2002. The result of the Third Census of SSIs, which is already late by more than a year, is expected by April 2003.

5.0. Towards a Demand-driven Database

While the industrial policy statements of the Industries Department in the State sets the direction of programmes and their implementation in the State, adequate effort has not been taken by the Department to create a data-base for these thrust areas. For example, even with the high priority given to information technology and biotechnology and for NRI investments, there is no relevant data which can support the policy which is being implemented. The Kerala Venture Capital Fund Ltd. was created as an ambitious institutional intervention relating to finance, but the Fund is starved of hard data in its day-to-day activities. This applies in the case of other related institutions like the KFC, KSIDC, KINFRA and the Directorate of Industries and Commerce.

A project of the Institute of Small Enterprises and Development (ISED), attempted to generate a demand-driven database on small enterprises in the State. This project identified the following seven areas of policy intervention in which data need to be collected, compiled and disseminated:

Industrial geography
Industrial policy & performance

Promotion and development

Business demography

Finance

Exports

Gender outlook

A first step in this direction was initiated as a project during the year 2001-2002. The final output was published as a Handbook in August 2002 (ISED, 2002). This document is expected to be continuously updated in future.

5.1. Business Demography

A discussion on untapped areas of data can give several "ought to be's" and "should be's". But, from the point of view of planning and programme implemetation, what is needed is a coordinated effort to understand the various aspects of the process of development, as well as of the feasible future directions.

Business Demography is a vital area of research in many countries today. Several Business Schools undertake business demographic studies. These have been increasingly funded by government departments, development finance institutions and other promotional agencies. Unfortunately, no worthwhile academic exercise has taken place in this area in our country. A humble attempt in this context was launched by Institute of Small Enterprises and Development in 1999. Steps have been taken to analyse relevant demographic variables such as business births, deaths, natality, fertility and morbidity. In the context of Kerala, there is a high need and potential for undertaking such demographic studies.

6.0. The Question of Relevant Database

The primary concern of Kerala should be on how effectively we utilise the State's own infrastructure to generate data which are meaningful to the context of our development priorities. The present state of affairs indicates our own lack of seriousness on policy pronouncements and their implementation.

And that explains the need and opportunities for generation of data. But on the other hand, the official circles themselves doubt the authenticity of official data on employment and output of the SSI sector. The mainstream of academics does not promote research which has practical policy implications. Probably they are even ignorant of such practical problems. Juxtaposed with this is the situation of Ph.D.s and M.Phils of miserably poor quality produced in our universities. A separate study on such research output in Kerala, itself should be immensely rewarding.

Though 'relevance of research' is a wider issue, it will be worthwhile to examine it in the context of small industry research in the State. In the government circles, data are just an administrative appendix, or a byproduct of hardcore "administration". But can we think of an alternative paradigm? Research becomes relevant only when it reflects the social realities and concerns. To use small industry as an academic dead body for post-mortem purposes is not that difficult. But to suggest what we need to know from a developmental angle is a difficult task.

Selected References

Alexander, P.C (1963): Industrial Estates in India (New Delhi, Asia Publishing House)

Bhavani, TA (2002): "Small-scale Units in the Era of Globalisation: Problems and Prospects", Economic and Political Weekly, July 20-26.

Chandrashekhar, C P and J B G Tilak (2001): "India's Socio Economic Database" (Delhi, Tulika)

Government of India (2002): Report of the Special Group on Targeting Ten Million Employment Opportunities per Year (Chairman Dr. S P Gupta) (New Delhi, Planning Commission)

Government of India (2001): Report of the Study Group on Development of Small Enterprises (Chairman Dr. S P Gupta) (New Delhi, Planing Commission)

Government of India (1992): Report on the Second all-India Census of Small-scale Industrial Units (New Delhi, Office of the Development Commissioner Small-scale Industries).

Government of India (2000): Report of the Gupta Committee Sub-group 1: Policy Legal Framework, Reservation and other Issues of SSI Sector (New Delhi, Ministry of Small-scale Ago & Rural Industry).

ISED (1996): New Opportunities and Challenges for Small Business Association in India (Proceedings of the Indo-British Workshop held in Cochin, March 25, 1996 (Cochin/Durham, ISED/Durham University Business School)

ISED (2001): "Approach Paper on Development of Small Enterprises in Kerala", (Cochin, Institute of Small Enterprises and Development)

ISED (2002): "Handbook of Small Enterprises in Kerala", (Cochin, Institute of Small Enterprises and Development).

Mathew P M (2000): "Small Enterprises: The Experience of the South and the North" (Oxford)

Mathew P M (2000): 'Studies on Small-scale Industry in India (1960-1999): An Excursion' (ICSSR Project) (Cochin, ISED)

Mathew, P M (2002): "Loka Vyapara Kramavum Nammudae Cherukita Vyvasaya Meghalayum", (Cochin, Institute of Small Enterprises and Development)
Mathew, P M (2002): 'WTO and the SME Sector: A Study on the Medicinal Biotechnology Sub-sector', (New Delhi/ Cochin, United Nations Industrial Development Organisation/ ISED)

Mathew, P M (2002): 'Small Industry in the 1990s: A Study on United Kingdom and India', (New Delhi, K K. Birla Foundation)

Sandessara
Sandessara, J C (1988): "Small-scale Industrialisation: The Indian Experience", Economic and Political Weekly, March 26

Sathe, D (2002): "Industrial Slowdown and Small-scale Sector", Economic and Political Weekly, July 20-26.

Subramanian, K K and S P Kashyap (1975): "Small-scale Industry: A Trend Report" in A Survey of research in Economics (vol. V) (Bombay, Allied)

Suri K B (ed) (1988): "Small-scale Industry in Industrial Development: Indian Experience" (New Delhi, Sage)

Venkitaramaiah, P, D Nagaiya and C Ravi (2001) in Chandrasekhar et. al (2001).