IN 1.pdf¢ 1.1 Introduction Kerala, a land of remarkable and unequalled beauty , evergreen...
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Kerala, a land of remarkable and unequalled beauty, evergreen forests, palmy backwaters and strategic location on the trans-national trade corridor with excellent
communication network, high density of science and technology personnel, highly literate
work force, a good network of banks, well-connected road and rail network and rich
natural resources, is a favourable ground for the industrial development.
The small scale industrial sector is one of the most dynamic and vibrant sectors
of the Indian economy in terms of employment, production and export. In micro, small
and medium eterprises sector, it is estimated that about 59 million persons are working
in over 26 million units throughout the country. Out of the total units, 95.05 percent are
micro, 4.74 percent are small and 0.21 percent are medium enterprises. There are over
6000 products ranging from traditional to high-tech items, which are being manufactured
by the MSMEs in India. It contributes 40 percent of the direct export, 45 percent of the
total industrial production with 8 percent of the GDP.
The major traditional industries in Kerala are coir, handloom, handicraft, cashew,
khadi, sericulture, beedi, bamboo etc., and the non-traditional industries are rubber based
industries, information technology, food processing, ready made garments, tourism,
ayurvedic medicines, marine products, engineering goods etc. The cottage industries
are tiny or micro enterprises which come under the SSI or MSME sector. The cottage
Chapter - 1. Introduction2
and small scale industries have a significant role in the national economy, offering as
the scope for individual, co-operative enterprises and a means for the rehabilitation of
displaced persons for the better utilisation of local resources and thereby achieving self-
The Indian economy has undergone substantial changes since the introduction
of economic reforms in 1991. These reforms were a comprehensive effort consisting of
three main components viz., Liberalisation, Privatisation and Globalisation. They include
various measures like de-regulating the markets and encouraging private participation,
trade liberalisation, dismantling the restrictions on domestic and foreign investments,
reforming the financial sector and the tax system. All such policy initiatives radically
changed the economic setup of the country and integrated it with the rest of the world
[http://www.business.gov.in/indian_economy/eco_indicators.php]. Those policies and
procedures compatible with the globalisation and liberalisation may have affected the
cottage industries in Kerala.
The SSI sector is now more exposed to severe competition both from
large scale sector and multi national companies due to the globalisation policies.
The competitiveness in Indian industries is so severe with the abolition of industrial
licensing and restrictions on MRTP companies, liberalisation of foreign investment,
import of foreign technology, removal of quantitative restrictions on industrial goods,
reduction of import rates etc. [Soundarapandian, 2006, P.184].
The economic policies of liberalisation and privatisation have created a
situation where Indian industry in general and small scale sector in particular are
seriously threatened. The removal of quantitative restrictions on import and
dereservation of small scale industries are affecting small industries badly [Economic
Review, 2000, P.101].
There are changes in the cottage industries in Kerala due to the economic
reforms of liberalisation and globalisation. The changes and impact may be favourable
or unfavourable, siginificant or insignificant. The study discloses the impact of
globalisation and liberalisation policies in coir, handloom, handicraft and other
manufacturing industries in the cottage industrial sector in Kerala and also changes in
the functional areas of cottage industries in Kerala.
Chapter - 1. Introduction 3
1.2 Statement of the Problem
According to Viswanathan Tekumalla, “cottage industries are industries where
artisans not exceeding nine per industrial unit, find employment in urban or rural areas
either as independent workers or apprentices or assistants in or at their own or their
employer’s home or as wage-earners in small karkhanas and work with capital, limited
in practice but not in theory, adopting at times a simple and harmless division of labour
and employing such hand or power-driven machinery as does not interfere with the
utility and art value of the products, whose market is by no means merely local” [Chitra,
The cottage industry is one which is carried on in a place which is not a
factory for the purpose of Factories Act of 1948, i.e. an industry which is carried on
wholly or primarily with the help of the members of the family as whole or part time
occupation. As per the Factories Act 1948, SSIs are those organised units which
do not ordinarily employ more than 100 persons without power or 50 persons with
power and have working capital less than rupees five lakh [Rao, 1979, P.20].
The Government’s policy on cottage and small scale industries was concretised
in the Industrial Policy Resolution of April 1948. The Industrial Policy Resolution laid
emphasis on cottage industries.
From the approach outlined in the Industrial Policy Resolution, an All
India Cottage Industries Board was set up in 1948. Later it was bifurcated into six
boards by the end of the first five year plan namely the All India Handloom Board,
All India Handicrafts Board, Central Silk Board, Coir Board, All India Khadi and
Village Industries Board and Small Scale Industries Board. While the first five
were to be concerned with traditional [village] industries, the Small Scale Industries
Board was to be concerned with modern small scale industry. Government policy
on industry was further elaborated in the Industries Development and Regulation
Act of 1951. 1
1 The Act laid down that all undertakings in industries listed Schedule I annexed to the Act, with a size
larger than a specified minimum would need to be registered with an agency to be notified by the
Government. More importantly, the setting up of new units of a size larger than the specified minimum
in the ‘schedule industries,’ or substantial expansion [above 25 percent of existing capacity] of the
existing units in the scheduled industries, would require the prior approval of the Government of India
in the form of industrial licenses [Suri, K.B., Small Scale Enterprises in Industrial Development - The
Indian Experience, New Delhi:Sage Publications India Pvt. Ltd.,1988, p.302.].
Chapter - 1. Introduction4
Those industries using locally available raw material, small equipment and tools,
less power, number of employees less than ten, production is done in their own houses
or work shed adjacent to their own houses and which is not under the purview of Indian
Factories Act 1948 can be considered as cottage industries.
The expansion of cottage and small scale industries depends upon a number of
factors like the provision of raw materials, cheap power, technical advice, organised
marketing of their products, safeguards against intensive competition from large firms,
as well as on the education of the worker in the use of the best available technique.
The traditional industries in Kerala include coir, handloom, handicraft, khadi,
bamboo etc. The coir industry is one of the major traditional industries in Kerala, consisting
of three major sub-sectors, viz. fibre extraction, spinning and weaving. The industry
employs 3.75 lakh workers and 76 percent of them are women [Economic Review,
The handloom industry is largely rural-based and is an important provider of
rural non-farm employment. In fact, handloom is the largest employment provider after
agriculture in India [Niranjana, 2007]. Among the total export of handloom from Kerala,
roll fabrics is 5 percent and the remaining is made-ups [Moray, 2007]. Handloom industry
in Kerala gives direct employment to 1.5 lakh people. About 15 handloom exporters in
Kannur together clock over Rs.300 crore turnover. By 2010, the target is to perk this up
to Rs.1000 crore, sending handloom from Kerala to about 50 countries. But the local
sale is only Rs.50 crore per year [Meher, 2007].
Handicraft industry is a major area for employment generation in Kerala by
upholding our tradition and culture. Coconut shell carving, straw picture making, cane
work, bamboo and reed weaving, ivory carving, bell metal casting, screw-pine, mat
weaving are the major handicraft items produced in Kerala. The Kerala State Handicrafts
Apex Co-operative Society, Handicrafts Development Corporation, Kerala State Bamboo
Corporation, Kerala Artisans Development Corporation are the institutions to promote
handicraft industry in Kerala. There are a number of institutions to promote other industries
Chapter - 1. Introduction 5