INTRODUCTIONshodhganga.inflibnet.ac.in/bitstream/10603/25921/12/12_chapter 1.pdf · 1.1...

1.1 Introduction

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

INTRODUCTION

CHAPTER 1

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-

sufficiency.

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,

1948, P.38].

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.].


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,

2008].

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�

2 Kerala has developed through the course of ages, a culture all its own and as a result, a number of

industries to provide for the artistic and utilitarian needs of that culture sprang up. Most of them survive to

the present day. It has been the constant endeavour of the cottage industries movement to sustain and

rehabilitate the indigenous industries of old and bring them into line with modern demands and

requirements. These industries fall under the following head:- handloom products, coir goods, ivory and

horn carvings, rattan, reed and grass-works, wooden toys, bell-metal curios, screwpine articles [Chitra,V.R.,

Cottage Industries of India, Madras: Silpi Publication, 1948, p.237.].

in Kerala like Kerala Khadi and Village Industries Board, District Industries Centres,

KITCO, KINFRA, K-bip, SIDCO and SIDBI.

The impact of western civilisation, symbolised in the dumping of cheap products

of the machine age, had for a short time dimmed the popularity and value of the cottage

industries’ products of Kerala.2

During the year 1991-92, the Indian economy faced a very difficult situation like

high rates of inflation, deficits in the domestic budget, large indebtedness, decline in the

agricultural and industrial growth, large current account deficits in the balance of payments

and low foreign exchange reserves. These circumstances compelled the Government

of India to undertook a package of policy reforms for the Indian economy named as

macro stabilisation and structural adjustments in July, 1991. These reforms are termed

as liberalisation, privatisation and globalisation. These reforms opened the economy to

the world and this paved the way for the arrival of MNCs to India, importing of cheap

products, more competition, entry of MNCs and big firms in the small scale industrial

sector, removal of production limit etc., which may have unfavourable impact on

industries, especially the cottage industries. So the performance of cottage and small

scale industries might have deteriorated during the post-liberalisation period.

The Government has taken a number of policies without much discussion with

the stakeholders. A majority of the cottage industrialists are non-exporting units so they

may not have awareness of trade policies, export policies, industrial policies etc. But

exporters have awareness of such policies because they are familiar with these policies.

These policies may influence significantly or insignificantly the industries, especially the

cottage industries. Some of these policies may have positive impact and some of them

may have negative impact on the cottage industrial sector in Kerala.


The major policies concerned with the economic reforms include:

� De-reservation of SSIs

� Reduction in Customs Duty

� Abolition of Quantitative Restrictions

� Abolition of Industrial Licensing

� Foreign Direct Investment

� Export Credit Reforms

� Anti Dumping Measures

� Market Access Initiative Scheme

� Devaluation of Indian Rupee

� Elimination of Export Subsidy

� Interest Rate Reforms

� Reduction in Excise Duties

� Trade Related Intellectual Property Rights

� Trade Related Investment Measures

� General Agreement on Trade in Services

� Changes in Research and Development

� Making Rupee Convertible - Partial or Full

� Adaptation, Absorption, Assimilation and Diffusion of Technological

Advances

� Removal of export subsidy

� Elimination of MRTP limit

� Changes in FERA regulations

� Liberalisation of EXIM policy

� Reducing Subsidies

� Privatisation and Disinvestment in Public Sectors

� Single Window Clearance Facilities

� Public Distribution System

� Mergers and Acquisitions

� Special Economic Zones


� Employment Guarantee Programme for Poverty Alleviation

� Foreign Technology Agreements

� Free Trade Agreements etc.

The implementation of New Economic Policy in India has put the small scale

sector in a difficult position. The Government of India took some steps during the

liberalisation period such as the devaluation of Indian currency, reduction in the import

tax, de-reservation of 15 items during 1997, removal of quantitative restrictions in 1999,

foreign direct investment ceiling etc. [Soundarapandian, 2006, P.181].

For the purpose of the study, twelve such policies were considered namely:

� Reduction in Customs Duty

� Foreign Direct Investment

� Anti Dumping Measures

� Abolition of Quantitative Restrictions

� Devaluation of Indian Rupee

� De-reservation of Small Scale Industries

� De-licensing of Industries

� Interest Rate Reforms

� Reduction in Excise Duty

� Trade Related Intellectual Property Rights

� Trade Related Investment Measures and

� Foreign Technology Agreement

In order to mitigate the negative impact of these policies, all the stakeholders can

take effective measures such as the reduction of cost of production, modification of

existing products, diversification of products, finding more export orders, forming cluster

units, developing geographical brand name, taking quality mark certification, conducting

marketing research, implementing e-commerce, increasing the volume of production

and amount of capital, development of local market, producing value added eco-friendly

products, attending in international trade fairs and exhibitions, starting more ancillary


units, modification of technology, implementing new method of production, implementing

new packaging techniques, starting special economic zones for the small scale industries

sector, starting small industrial parks etc.

The cottage industrialists may not have awareness of these policies but exporters

may have awareness of these policies. These policies might have affected the cottage

industries favourably or unfavourably. The exporters and industrialists can utilise the

opportunities of favourable policies. The exporters, industrialists, government and various

industrial associations can take a number of measures to face the challenges of

unfavourable policies. These policies may lead to a number of changes in the overall

economy in general and industrial sector in particular so it may influence the functional

areas of cottage industries in Kerala.

1.3 Review of Literature

The progress of modernisation of the traditional techniques have been studied

with reference to the two major traditional industries of Kerala viz. coir and handloom. It

is concluded that the main difficulty encountered in the adoption of the machine technique

is the displacement of labour and the consequent technological unemployment it

generates [Oomman, 1967].

The lack of advertising on the part of SSI units becomes a handicap for procuring

and maintaining a share in the market. SSI units, often engage in only one line of product

or activity i.e. with no diversification of activities [Roy,1983].

The share of SSI manufacturers in the total export of export houses, including

trading houses, was 28.7 percent in 1979-80 which was increased to 41.8 percent in

1981-82. Both the State and Central Government offer greater incentives to those export

houses which export SSI products [Kapoor, 1984].

The workers in the traditional and modern sectors differ considerably in their

background. Most of the modern sector workers come from middle or lower level

background. But most of the traditional sector workers are from the working class

background [Zachariah,1990].


The functions involved in the management of village industries are similar to that

of a large industry, which involves planning, organising, staffing, controlling, financing

and marketing. Lack of raw material is a serious problem in village industry, 51 percent

of the units obtain raw material from different parts of Kerala and rest of them bring raw

material from Tamilnadu, Karnataka etc. In village industries on an average there are 9

workers per unit. Among the workers female representation is dominated i.e. 76 percent.

As the remuneration from village industries is too small to sustain their livelihood, the

traditional workers do not like to suggest this occupation to their younger generation,

which may result in the gradual decline of traditional industries in the State [Sreedevi,

1992].

The small firms get three types of significant privileges like product reservation,

excise concession and reservation of bank credit as well as interest rate concession

[Desai, 1993].

Planning the SSI includes identifying opportunities, assessing resources and

their sources, obtaining licences and clearances, documentation, preparation of project

feasibility report, tying up with promotional and supporting agencies and finally the

project implementation [Thomas, 1994].

There was continuous increase in the number of sick units during the period

1981 - 1991. The incidence of sickness in the SSI sector is significantly higher than the

other sectors. The study of the pre-operational problems of the SSI units reveals that the

demand in the domestic market is the most prominent factor considered by the majority

of entrepreneurs of the sick and the non-sick units for the selection of products. Before

starting their projects 52.5% of the non-sick units and 48.8% of the sick units had not

conducted any market survey. Irregular supply and price variation in raw material are the

major problems faced by the SSI units in general [Kumar, 1994].

Among the variety of incentives, the coverage of incentives was thin and the

number of units assisted and the amount of assistance per unit are very small.


The problem of limited coverage of many of these incentives was made worse by the

cumbersome and time-consuming procedures involved to get the incentives. As a result,

many of the units could not even apply for such incentives. In Kerala, assistance given

by banks and other financial institutions for SSI units was comparatively small [Manalel,

1994].

The quality of the SSI products or service has been identified as the major

determining factor facilitating the demand [Gopakumar, 1996]. The small scale industrial

units did not give importance to marketing research [Kumar,1996].

The SSI units which are run by women entrepreneurs, depend mainly on local

market hence they feel less marketing problems [Koshy, 1998]. The lack of credit facility

is the major problem in SSI sector in Kerala [Correya, 2000].

In Kerala, there are a large number of Government manufacturing units mainly in

the SSI sector. Nearly 10 % of the total SSI units registered in the State fall under this

industry [George, 2002].

The small scale and informal sector, often referred to as unorganised sector is

the major contributor to employment in the manufacturing sector. The policy of de-

reservation of SSI has immense harm to their growth [Mathur, 2002].

An amount of Rs. 5 crore under Market Access Initiative has been given for

promoting cottage sector export coming under the KVIC. Under the Export Promotion

Capital Goods Scheme, the industries are not required to maintain an average level of

export while calculating the export obligation. These units get export house status on

achieving an average export performance of Rs. 5 crore as against Rs.15 crore for

others. The units in handicraft sector are entitled to duty free imports of an enlarged list

of items as embellishments up to 3 percent of FOB value of their export [Das, 2002].

The objectives of Human Resource Management in rural sector are to increase

the productive employment of the farmers, landless labourers and artisans, to develop

Chapter - 1. Introduction 11�agro-processing, fruit processing and vegetable processing industries, to improve the

service sector through development of agriculture or rural sector including inter alia

infrastructure development [Mehrotra, 2002].

The dumping of Chinese goods has seriously affected the SSI in India hence a

large number of SSI units became sick and closed [Datt, 2003, P.818].

The third all India census of small scale industries which announced its results

in August 2004, The size of the small enterprise sector is around 10.52 million units. The

total employment contribution of the sector is 24.93 million. The export contribution of

the sector is Rs.14,199 crore and the number of exporting units are 50,606 [Mathew,

2005].

The parameters of pre and post-globalisation is given in table 1.2.

Source: P.M. Mathew, “Waiting for a new deal”, Survey of Indian Industry 2005, Chennai, the Hindu, November22, 2004, pp. 43-45.

Post-Globalisation

Collaborations

Strategic alliances

Outsourcing - Local / International market

World Market

Flexible Production System

Focus on growth

Pre-Globalisation

Local / National Investment

Single-firm activity

Manufacturing for self-identified market

Local Market

Rigid Production System

Limited Economic Interest

Table 1.1

Pre and Post-Globalisation Parameters

Sl.No.

1.

2.

3.

4.

5.

6.

The rating scheme formulated by the National Small Industries Corporation

Limited is expected to be advantageous to the SSI sector. It has been formulated in

consultation with various stakeholders such as Small Industries Associations, Indian

Banks Association and various rating agencies such as CRISIL, ICRA and Dun &

Bradstreet. The NSIC is the nodal agency for implementing the scheme of performance

and credit rating for SSI [The Hindu, Thiruvananthapuram, June 25, 2006].

The Indian SMEs are the second biggest employment generator after agriculture

and it provides jobs to over 59.2 million people and account for 39 percent of the industrial


production and 34 percent of the export. There are about 350 urban SMEs clusters and

2000 rural artisan based clusters in India [Foreign Trade Review, 2007].

SSI faces competition due to liberalisation policies. The transport equipment

and parts industry, media and publishing and wood products industries are highly inefficient

in both organised and unorganised sectors [Sreepriya, 2007].

Coir industry has two distinct sectors. The first is the processing sector consisting

of all the stages from the retting of coconut husks to the spinning of yarn. The second is

the manufacturing sector comprising the production of a variety of goods such as coir

mats, mattings, rugs, carpets etc. The processing sector extends over the whole coastal

belt of Kerala and the manufacturing sector is mainly located in Alleppey and its suburbs

[Unnithan, 1968].

Kerala, Madras, Maharastra and West Bengal have declining shares of

‘agriculture’ and rising shares of both ‘manufacturing’ and ‘services’. But in Orissa and

Rajasthan, have rising shares of ‘agriculture’ and declining shares of both ‘manufacturing’

and ‘services’ [Krishnamurty, 1970].

The coir co-operatives in Kerala owe their origin to the coir development scheme

formulated by the Travancore - Cochin Government in 1950. The cottage side of the coir

industry had three distinct phases of activities viz. [a]. collection and supply of raw material,

i.e. husks [b]. production of coir yarn and [c]. marketing of coir yarn produced. These

functions are performed by thondu vyavasaya co-operative societies, coir vyavasaya

co-operative societies and coir marketing co-operative societies. The manufacturing

co-operatives are faced with the problems of working capital and marketing [Varkey,

1981].

The coir industry which is one of the oldest export oriented industries in the

State has been affected by several problems. The fall in demand for coir products in the

world market, competition from other products and other producing countries, absence

of technological improvements, increasing cost of production, shortage of raw material

Chapter - 1. Introduction 13�absence of marketing strategies etc., are the major problems in Kerala [Jacob, 1985].

The unorganised sector is not systematically covered by labour laws and women

in this sector suffer from powerlessness, immobility and lack of bargaining power. The

problems of coir workers are low wages, long working hours, poor health conditions

etc. [Jayasree, 1994].

Kerala is the largest producer of coir and coir products in India. The agencies

working in the coir sector in Kerala are the Coir Board, KSCC, Directorate of coir and

COIRFED. These agencies have undertaken a number of schemes with the ultimate

aim of developing the industry in the co-operative sector. However, the contribution of

co-operative sector in the total production of coir and coir products in Kerala is only

15%. The private sector contributes a major share and is working without any sort of

assistance from these agencies [Pillai, 1994].

Kerala is the largest producer and exporter of coir and coir products in India.

Kerala’s share in the total export of the country amounted to around 96% in 1996-97.

India’s coir products export in quantity terms decreased from 52,312 tons in 1971-72 to

48,569 in 1997-98. But in value terms the export increased from Rs.14.85 crore in 1971-

72 to Rs. 226.51 crore in 1997-98. The annual growth rate in the value of export was

4.28 percent while the annual rate of decline in the quantity of export was 0.31 percent.

The decline in the quantity of export is an indication of poor export performance [John,

2000].

The coir industry has been developed in Kerala as a labour oriented cottage

industry. In terms of the number of persons employed, coir industry is the largest traditional

industry in Kerala. It plays a very significant role in the economic development of the

country as a source of employment, income and foreign exchange earnings of the country.

For historical reasons, cultivation of coconut and related coir industry have deep roots in

Kerala. In addition to the availability of raw materials, the abundant natural retting facilities

like long coastal areas and lagoons, Kerala alone accounted for over 80 percent of the

total production of coir in India.


The coir industry in Kerala has different processes like, retting of husks, extraction

of fibre, spinning of coir yarn, manufacturing of coir products and exporting of coir. The

traditional items of export are coir fibre, yarn, coir products such as coir mats, mattings,

rugs, carpets, ropes etc. Besides these, some non-traditional coir products such as

rubberised coir products, coir-geo textiles, coir pith etc., are also exported from the

country. The Research and Development of coir industry is carried out primarily by the

Coir Board through its various concerns such as the Central Coir Research Institute,

National Coir Training and Design Centre and Central Institute of Coir Technology [Menon,

2002].

Among the agro based industries, coir is the most important one. As a traditional

industry, it plays a significant role in the economic structure of the country as a source

of income, employment and foreign exchange earnings. India and Sri Lanka are the

major producers and exporters of coir and coir products in the world market [Nair, 2003].

The Coir Board introduced a series of welfare schemes for coir workers. The

Model Coir Village Scheme was started to provide basic amenities of life to the coir

workers. As per the direction of Government of India, the Coir Board implemented Model

Coir Village Scheme in Kerala from the year 1991-92 onwards [Thresiakutty, 2005].

Between April and December in 2005, coir export touched a total of 97,168 tons,

estimated at Rs.363 crore, compared with 87,020 tons, valued at Rs.354 crore during

the corresponding period in 2004-05. The increase in value is 2.31 percent and quantity

11.66 percent. The Central Coir Research Institute is the premier research institute in

the coir section, having state-of-the-art equipment and testing facilities for coir material.

The testing laboratory attached to the centre is recognised by the Australian Quarantine

Inspection Service, American Society for Testing Materials and the Bureau of Indian

Standards. The services and facilities available in the centre are open to coir traders and

industrialists and research students [The Hindu,Thiruvananthapuram, June 27, 2006].

The Union Commerce Ministry had granted the ‘Centre of Excellence’ status in

export to Alappuzha and Kollam [The New Indian Express, Kochi, October 13, 2006].


The ministry is willing to support mechanisation, modernisation and value addition

initiatives of the coir sector. A couple of major initiatives have already been taken by the

government. The Alappuzha Cluster Development Programme, at a cost of Rs.56 crore,

will be implemented as soon as the share of stakeholders. The ministry has also

sanctioned Rs. One crore each for the development of 24 other coir clusters across the

country [The New Indian Express, Kochi, October 13, 2006].

The export of coir and coir products from India has increased 7.33 percent in

quantity and 13.79 percent in value during the first half of 2006. The growth has been

4,906 tons in quantity and Rs.32.54 crore in value during the first six months of 2006-07

compared to the first six months of 2005-06. During the period under review, a total of

71,840 tons of coir and coir products were exported. These export fetched Rs.268.43

crore. During the first half of the year 2005, the total quantity of coir and coir products

export stood at 66,934 tons worth Rs.235.89 crore. India and Sri Lanka account for

about 90 percent of the coir fibre production [The Hindu, Thiruvananthapuram, October

30, 2006].

The shortage of raw material is one of the main problems that the coir sector is

facing. The coir industry in the State, which is a major coconut producer, depend other

States for husk. The State produced nuts worth Rs.572 crore annually, but not even 35

percent of the husk is converted into yarn. Husk is either a waste item or is used as fuel.

In 1947, the State exported just Rs.8 crore of coir products. In 2005-06, it earned

Rs.508 crore through export. If the internal consumption is also taken into account, the

sector would have earned Rs.1000 crore. Taking into account the problems faced by the

coir industry, the State Government had earmarked Rs.5 crore for procurement and

processing of raw husk. The coir industry was labour intensive, with more than 4 lakh

employed in the sector, of which 80 percent are women [The Hindu, Thiruvananthapuram,

October 30, 2006].

The Coir Board is drafting new strategies to widen the contours of the coir markets,

which has reached a stagnation point. Exploring new markets and entering into joint


ventures with new countries would help a lot in expanding the market. South Africa is

our first destination and a gateway to other countries in the continent. All these countries

need a lot of coir and coir products to construct their dwellings [The New Indian Express,

Kochi, March 24, 2007].

The handloom products, coir products, ivory and horn carvings, rattan, reed and

grass works, wooden toys, bell metal curious and screwpine articles are products

produced in the cottage industries [Chitra, 1948].

The textile industry comprises mills, powerlooms and handlooms in which

handloom is the most scattered and unorganised one. However, it plays a key role in the

Indian economy. The lop sided capital structure, antiquated production methods and

absence of training are the major problems in handloom industry. The Kerala State

Handloom Development Corporation, established in 1968, provides raw material, financial

and marketing assistance to weavers outside the co-operative field [Krishnan, 1985].

The country-wise production pattern of handloom shows a significant discrepancy

between co-operative spinning mills and requirements [Manickavasagam, 1986].

The cheap handloom goods to Kerala from neighbouring States in large quantities

and their aggressive marketing strategies are the threats to HANTEX and HANVEEV in

Kerala [Rajagopalan, 1986].

The average net working capital of cotton mills in Kerala is lower than that of

cotton mills in South India. The working capital of handloom sector is raised from short-

term external sources such as bank borrowings and sundry creditors [Kevin, 1988].

Among the industrial disputes in India, 30 to 40 percent of them are in textile

sector [Kumar, 1989]. Weaving is the most important activity of rural India next to

agriculture. There are a number of weavers scattered across the country to produce

textiles for domestic and export purpose [Swarnalatha, 1991].


The Swadeshi Movement of the 1920s was a factor in the encouragement of

textiles. The textile industry in India consists of mills, handlooms and powerlooms. There

may be more scope for higher productivity, if only Indian labour accepts more work by

manning more machines, as a result of which labourers would also benefit by way of

higher emoluments [Thilakavathy, 1996].

The salary and wages of employees in the textile units in Kerala are very low

compared to other public and private sector enterprises. A majority of employees in the

textile sector belonged to 45-55 years and they are under-educated and technically under-

qualified [Prasad, 2002].

Handlooms produced in India are about one third of the total cotton cloth required

for consumption in the country and for export abroad [Prasad, 2003]. The textile and

clothing sector provide direct employment [formal and informal] to an estimated 38 million

people nation-wide [Tewari, 2005]. The liberalisation of textile import led to a sharp increase

in import of textiles in the period 2000 to 2003 [Goldar, 2005].

Development Commissioner [Handloom] implemented various schemes for the

benefit of the handloom weavers, such as supply of inputs, production and marketing

support, welfare package, training etc. The Government of India introduced a group

insurance scheme for handloom weavers throughout the country in the year 1992-93.

Under this scheme a weaver is provided an insurance coverage of Rs.10,000/- for an

annual premium of Rs.120/- which Central Government and State Government equally

contribute [Thresiakutty, 2005].

The partnership and co-operative forms are suitable for handloom sector. It is an

important employment provider and the number of employment opportunities in this

sector have been increased over the last years [Cornelius, 2006].

The handloom quality mark was launched for handloom products that will help

buyers to distinguish between genuine items diligently crafted by artisans and the poor

imitations produced by powerlooms. The ‘Handloom Mark’ designed by the National


Institute of Design, Ahmedabad, will be implemented by the Mumbai based textiles

committee, a statutory body under the Ministry of Textiles. The scheme is expected to

not only help the buyers in getting guaranteed products, but also help the artisans, who

are facing myriad threats to their very survival with the advent of powerlooms [The Hindu,

Thiruvananthapuram, June 28, 2006].

The export of handloom textiles from Kannur region is increased from Rs.300

crore to Rs.317 crore during 2006-07. We export handloom textiles to USA, Canada,

England, France, Japan and gulf countries by 40 Handloom exporting companies. Among

the total export from Kerala State 50 percent is exported to USA, 30 percent to Europe

and remaining 20 percent to gulf countries. t-shirt, shirt, women and children’s dress

materials are the major exporting products. Abolition of quota restrictions gave more

opportunities to the Indian industrialists. High quality and prompt delivery of products are

the peculiarities which give immense help to get more orders from foreign countries

[The Malayala Manorama Daily, Pathanamthitta, September 24, 2007].

The handicraft products have cultural and artistic value than the volume and

price [Kale, 1963]. The level of activity in the wood industry sector depends entirely on

the wood supply. The employment of labour in the wood industry sector of Kerala has

been projected to vary between 25,000 and 40,000 in 1980 and between 21,000 and

53,000 in 2000 [Cherukat, 1973]. The relative order of importance to improve productivity

is Machinery > Men > Materials. Among the human factors at different levels, the

contribution of Top Management > Supervisors > Workers [Prakasam, 1976].

Handicraft provides employment, earn foreign exchange and help to redistribute

income among the poor and preserve the traditional skills and cultural heritage [Kathuria,

1988].

The rural artisans play a significant role in rural industrialisation and development

in India. They supply consumer goods, artistic items as well as services to the rural

community. The traditional artisans of Kerala are blacksmiths, carpenters and goldsmiths

from socially and economically depressed class. The recent innovations in technology

Chapter - 1. Introduction 19�displace the traditional workers from their occupation. The artisans suffer from various

problems like severe unemployment, declining demand for their products, low income,

low standard of living, competition from machine made goods etc. [Shrihari, 1990].

More than ten thousand craftsmen in Kerala have been earning their livelihood

directly from the handicraft industry, besides a host of other people who benefit indirectly

from it. The Handicrafts Development Corporation Ltd. formed by the Government of

Kerala in 1968 was a major step in the promotion of handicraft industry in Kerala. Indian

handicrafts are very popular in the international markets and India now export her

handicrafts to over 90 countries in the world [Rajam, 1996].

The Government regulation affects private investment through three types of

controls, [a]. physical [licensing] [b]. pricing and distribution of products and [c]. fiscal

and monetary [Roy, 1984].

The present distribution structure is not adequate or adaptive to meet the needs

of the expanding manufacturing sector and the emerging mass market [Antony, 1986].

In July 24th

, 1991, the Government of India announced major changes in the

industrial policy regarding industrial licensing, foreign investment, foreign technology

agreements, public sector policy etc. [Cherunilam, 1992].

The new and most powerful phase of globalisation occurred with the signing of

GATT in 1994 and the establishment of WTO with effect from 1st

January, 1995 [Arya,

2003].

The GATT, was set up in 1947 to dismantle both tariff and non-tariff barriers and

facilitate world trade. It has mainly a set of legal rules but the WTO is an organisation

set up in 1995. The five specific functions of the organisation [Article III of the Agreement]

are:

� to facilitate the implementation, administration and operation and further

the objectives of Multilateral Trade Agreements,


� to provide a forum for negotiations among members concerning their

multilateral trade relations,

� to administer the understanding on rules and procedures governing the

settlement of disputes,

� to administer the Trade Policy Review Mechanism and

� to establish liaison with the IMF and World Bank [Shenoy, 2004].

The macro economic conditions in China are much better than in India

[Bajpai,1997].

The international financial agencies and corporations are very active in many

countries, including India [Mishra, 1999].

The key objective of the formation of cluster consortiums is to tap the

opportunities provided by the increasing liberalisation of the Indian economy [Russo,

2000].

There is a positive relationship between trade liberalisation and productivity growth

in the developing countries of Latin America, Asia and Africa [Das, 2002].

The informal economy has been estimated as 60% of the Net Domestic Product,

68% of income, 60% of savings and 41% of manufactured export [White, 2002].

The liberalisation in India led strong unequal effects by productivity growth and

profits in 3-digit industries [Aghion, 2003]. The WTO reported that around 63% of anti

dumping cases initiated during 1995-2000 were directed against the developing countries

[Aggarwal, 2003].

Since 1990 the Indian Government adopted various structural reform measures

to the changes in the regulatory framework to attract foreign direct investment in India. It

is reported that our country is not been able to attract FDI in the export oriented areas

hence it is note that there is no significant role of FDI in export promotion of India. FDI

Chapter - 1. Introduction 21�has no impact in the traditional export sector including the manufacturing sector in India

[Banga, 2003].

According to the GATT principle of ‘Most Favoured Nation’ treatment, trade must

be conducted on the basis of non-discrimination between WTO members [Aggarwal,

2003].

The demand for money in several countries has become unstable due to financial

innovations and reforms. It leads banks to switch from targeting money supply to interest

rate, since it is well known that targeting interest rate is more appropriate when demand

for money is unstable [Rao, 2003].

The reduction of tariff is not expected to benefit India’s export to USA in a major

way. The reduction of MFN tariff would alleviate the trade diversion effect of the NAFTA.

As a result, India’s export growth in USA market resulting from the Uruguay Round tariff

cuts would be much higher in some of the traditional items [Aggarwal, 2004].

The trade liberalisation has a negative impact on unskilled workers in the short

and medium run. It is argued that trade liberalisation decreased the industry wage

premiums in those sectors that experienced the largest tariff reduction [Goldberg, 2004].

The tariff rate for industry as a whole increases from 1980-81 to 1988-89 and

thereafter declines. The ranking of industries change over time, the highest tariff in 1980-

81 was on cotton textiles, wool, silk and other man-made fibre textiles, jute textiles and

leather and leather products [around 115 percent], in basic chemicals and chemical

products in 1988-89 [165.22 percent] and in beverages and tobacco in 1996-97 [77

percent] [Pandey, 2004].

The balance of payment crisis and India’s subsequent trade liberalisation [1991]

brought to an abrupt end decades of Nehruvian socialist ideas [Sharma, 2004].

The GATT has been successful in reducing barriers to trade but antidumping

duties remain a significant obstacles to liberalised trade [Aggarwal, 2004].


Since January 1st

, 2005 trade in textiles and clothing are fully integrated into the

WTO system and quota-restrictions, which regulated the trade in textiles and clothing

for decades have been removed. The productivity is found to be an important factor

determining the unit cost across the industry. The output per firm and credit given by

commercial banks have a positive relationship with productivity only in man-made and

garment sectors [Hashim, 2004].

The non-tariff measures imposed by ASEAN and Sri Lanka have increased during

1997-98 to 2002-03 and also revealed that a larger portion of smaller firms [exports less

than Rs. 20 million] faced non-tariff barriers than larger firms [Saqib, 2005].

The ‘license raj’ - a system of industrial control governing entry and expansion in

this sector vary across Indian States with different labour market regulations [Aghiony,

2005].

In order to face the competition successfully, flexibility is imperative, the needs,

types and levels of flexibility in different countries are different [Ali, 2005].

India has followed an idiosyncratic pattern of development compared with other

fast-growing Asian economies. India emphasises on skill-intensive rather than labour-

intensive in manufacturing sector [Kochhar, 2006]. India and China have followed most

of the liberalisation and globalisation policies, while privatisation of State owned banks

has lagged in both countries [Roland, 2006].

A new orientation in planning ensures to remove the regional imbalances and

balanced development in the economy of Kerala [George, 1988].

The employment in manufacturing sector declines sharply because of traditional

manufacturing being replaced by modern manufacturing sector [Chunkath, 1989].

There is no significant relationship between size and profitability or size and

growth in most of the industries [Shanta,1990].

Majority of entrepreneurs, who start small firms, as a means for self employment,

Chapter - 1. Introduction 23�may not have necessary skills needed for success. Family background, experience and

skills acquired, property inherited etc., are the factors which affect the quality of

entrepreneurship [Abraham, 1991].

The import liberalisation provides stimulus to the growth of the domestic industry.

Increase in productive efficiency, availability of imported capital goods etc., may help

the growth of domestic industry [Mallik, 1991].

The rural unemployment cannot be resolved by capital accumulation and

industrialisation or urbanisation but by the creation of employment opportunities in the

rural non-agricultural sector [Rao, 1993].

The first step in the assistance programme of the Central Government was to

protect the village and cottage industries from the competition by the large organised

sector by implementing the ‘Common Production Programme’ [Venugopal, 1993].

Only two percent of the women workers are employed in the organised sector,

the rest 98 percent are in unorganised sector. The traditional informal sector provides

jobs to workers in rural area to both male and female workers [Sheth, 1994].

The quality circle introduced in Kerala only in 1987, i.e. five years after its induction

in India. In Kerala, quality circles have permeated more into the public sector than into

the private sector. If it properly practiced, can produce substantial tangible and intangible

benefits [Thomas, 1995].

India’s economic development during the post-independence period, has been

guided by a process of planning, which led to the industrial growth of the country

[Anandaraj, 1996].

In many countries the small enterprises play a significant role in the growth and

development of their economic system. In wood industry the success of the units depend

on the selection of the location and logical selection of machinery and equipments [Salim,

1998].


The tariff reduction, liberalisation of foreign investment, exchange rate reforms

etc., have introduced in India with a view to increase the value, volume and to alter the

structure of trade [Veeramani, 1998].

The rural industrialisation can be realised through the stimulation of local initiative

[Eapen,1999].

Indian firms need modernising because of liberalisation and globalisation. The

firms can import technology with equity participation as a competitive strategy [Thomas,

1999].

The Indian economy has been liberalised and restrictions on importing technology

been removed so Indian industries can import technology from abroad [Prasad, 1999].

The share of FDI in GDP has been increasing during the post-liberalisation period.

The technical efficiency of foreign firms are significantly higher than their domestic counter

parts [Rajesh, 2000].

The availability of credit facility is an essential input for the economic development

of the rural community and subsequent elimination of money lenders. The performance

of commercial banks in Kerala’s rural sector have been fairly good during the post-

nationalisation period. The number of branches of commercial banks increased from

8,262 in July 1969 to 64,939 in March 1999 [Kunjukunju, 2001].

The extent of quality improvement cannot be determined only by technological

modernisation but also depends upon motivation on the part of the organisation

[Chakravarty, 2001].

The entrepreneurship development programmes are not very attractive among

highly skilled and technically qualified women. The EDPs are quite effective in fulfilling

expectations of the participants with regard to counselling services, knowledge of SSI,

general awareness and project report preparation. Women who attend EDPs may get

Chapter - 1. Introduction 25�better self-awareness and enhanced knowledge of small enterprise after the training

programme [Saraswathyamma, 2001].

There are two types of barriers in India such as institutionalised barriers like

licences and other restrictions and strategic barriers created by the firms using market

mechanisms like advertising and economies of scale [Babu, 2001].

The Women’s Industrial Co-operatives are formed with the purpose of making

women economically independent and socially distinct by providing employment to them.

The State Government provides a number of schemes and incentives to ensure a

meaningful survival of the WICs. It is revealed that the WICs have failed in availing all

the schemes of incentives provided by the State Government [Vasanthakumari, 2002].

The first decade of liberalisation and globalisation did not make any significant

and positive impact in the economy of Kerala. It did not make any positive impact in the

women’s sector too. There is no planned effort to tap the advantages of globalisation

[Embran, 2003].

Some of the beneficiaries of the PMRY run their business in rented premises,

while a majority run in adjacent rooms of residential houses. Sixty percent of the

beneficiaries were previously employed and hence they are experienced while 40 percent

were not previously employed and are inexperienced [Rozario, 2004].

The first indication of dumping and its possible adverse impact on domestic

industry comes from the extent of import. Sudden increase in import may give the signal

of possible dumping of the product. In such cases, the authorities may provide relief to

the domestic producers by imposing antidumping duty [Baruah, 2004].

The informal workers do not require much capital, skill and advanced technology.

They require low volume of both starting and working capital [Thomas, 2004].

Approximately two third of the businesses all over the world are small and medium


enterprises. They have traditionally been known for their agility of response to the

changing environment [Reji, 2004].

The trade liberalisation did not change the industrial structure in a significant way

or to improve the manufacturing productivity. The scale and composition of industrial

production have a weak impact on India’s merchandise export. The change in trade and

industrial policies could not alter the manufacturing structure that has evolved over the

long phase of import substitution [Roy, 2004].

Most of the members of Development of Women and Children in Rural Areas in

Kerala got training from Government institutions [90.44%], while 9.56% of members got

training from private institutions [Sujatha, 2004].

Irregular supply of power and its high cost are the major problems affecting the

rubber based industries in Kerala. The productivity of rubber based industries in Kerala

is very low and below national level [Rajesh, 2005].

There is an increase in trade through bilateral trade after Indo-Sri Lanka Free

Trade Agreement came in to operation [Jha, 2005].

The SEZs have a positive effect in attracting the Foreign Direct Investment but

the State incentive is not significant. The FERA 1973 became the key to guiding and

controlling FDI inflows in India [Naik, 2006].

The agro-processing industries occupy a key position in the industrial structure

of Kerala accounting for an average of 40.26 percent of the manufacturing units in the

State, 62.12 percent of the industrial employment, 34.89 percent of value of output and

38.64 percent of net value added in the manufacturing sector of the State during 1981-

2001 [Cherian, 2006]. In Kerala and Tamil Nadu, the major skill developed by the women

entrepreneurs through training is technical skill [Santha, 2007].

During the post-liberalisation period there is a significant expansion of the machine

Chapter - 1. Introduction 27�tool industry in India and most of the machines are exported to advanced countries

[Rijesh, 2007].

As per the survey of Economist Intelligence Unit by 2020, India as a trading nation

will record the biggest jump in world ranking from 24th

to 10th

. Propelled by fast growth

in India and China, Asia will increase its slice of the world’s GDP from 35 percent in

2005 to 43 percent by 2020 and India’s share in the global GDP will rise from 6.2 percent

in 2005 to 8.8 percent in 2020 [The Hindu, Thiruvananthapuram, June 26, 2006].

German small and medium enterprises are inspecting investment opportunities

in India, particularly in IT and automobile sectors. And they are doing so rejecting the

Chinese option. China which is known for its manufacturing has been kept aside because

of the low quality that is produced there. India on the other hand is quality producer and

costs here are moderate compared to the international level [The New Indian Express,

Kochi, March 24, 2007].

Due to the devaluation of Indian Rupee the export sector is facing difficulties, to

revamp this sector the finance minister announced the reduction of customs duty on

certain products. Moreover, exporters will be given two percent subsidy on interest of

loan. This subsidy is given to exporters’ to encourage them to increase the export of

leather, textile, sea food and handicraft. The customs duty on polyster fibre will be reduced

from 7.5 percent to 5 percent and handloom fibres will also be reduced from 10 percent

to 5 percent recently [The Malayala Manorama Daily, Pathanamthitta, November 30,

2007].

The finance minister announced that, to conduct Grand Kerala Shopping Festival,

a trade fair authority will be formed later. The various departments in the festival will be

co-ordinated by this authority [The Malayala Manorama Daily, Pathanamthitta, January

15, 2008].

The globalisation and liberalisation are not only merely concepts but they are

real facts. The globalisation and liberalisation policies affect all the sectors of the industry


either favourably or unfavourably. The cottage industries are small in size which may

face competition from large domestic and multi national firms through the process of

liberalisation and globalisation. Twelve policies have been taken to analyse the awareness

and impact with the opinion of exporters in Kerala. The exporters are fully aware of two

policies and a majority of exporters are aware of remaining ten policies. Out of the twelve

policies, seven policies such as reduction in customs duty, foreign direct investment in

small scale sector, anti dumping measures, abolition of quantitative restrictions, de-

reservation of SSI, de-licensing of industries and foreign technology agreements have

unfavourably affected the cottage industries. In short, globalisation and liberalisation

policies affected the cottage industries unfavourably [Thomas, 2009].

1.4 Objectives of the Study

The major objectives of the study are as follows:

1. To examine the performance of cottage and small scale industries in Kerala.

2. To examine the level of awareness among the exporters on the globalisation and

liberalisation policies.

3. To examine whether the liberalisation and globalisation policies affected the cottage

industries in Kerala or not.

4. To study the nature of impact of globalisation and liberalisation policies on the cottage

industries.

5. To identify the measures taken by the cottage industrialists to face the challenges of

globalisation and liberalisation.

6. To identify the changes in financial, human resource, production and marketing areas

of cottage industries in Kerala during the post-liberalisation period.

7. To study the industry-wise difference in the level of awareness, influence on industries,

nature of impact, measures taken and the changes in the functional areas of cottage

indusries.

8. To give suggestions and recommendations on the basis of the study.

Chapter - 1. Introduction 29�1.5 Hypotheses of the Study

The hypotheses used in the study are given below:

1. As the consequence of economic crisis and balance of payment problem, the

Government of India has taken a number of policies which are compatible with the

liberalisation and globalisation. These economic reforms opened the economy to the

world, which might led the way for the arrival of Multi National Corporations to India,

importing of cheap products, stiff competition, entry of big firms in the small scale

industries sector through de-reservation, removal of production limit, diversification of

firms and products. These policies and reforms may have unfavourable impact on

industries, especially the cottage industries. So it is hypothesised that, the performance

of cottage and small industries in Kerala has deteriorated during the post-

liberalisation period.

2.The Government might have taken a number of policies without much discussion with

the stakeholders. A majority of the cottage industrialists are non-exporting units. They

sell their products in the domestic market, hence they may not have awareness of trade

policies, export policies, industrial policies etc. But exporters may have awareness of

such policies because they are familiar with trade policies, export policies and industrial

policies. Hence it is hypothesised that, the exporters are aware of the globalisation

and liberalisation policies.

3. The globalisation and liberalisation policies taken by the Government have affected

the entire economy, significantly or insignificantly especially the industrial sector. So it

is hypothesised that, the globalisation and liberalisation policies have affected

the cottage industries in Kerala.

4.Some of these policies may have positive and some of them may have negative impact

on the cottage industrial sector in Kerala. So it is hypothesised that, the globalisation

and liberalisation policies affected the cottage industries unfavourably.


5.In order to minimise the negative impact of these policies all the stakeholders can take

effective measures such as the reduction of cost of production, modification of existing

products, diversification of units and products, finding more export orders, forming cluster

units, making geographical brand name, taking quality mark certification, conducting

marketing research, implementing e-commerce, increasing the volume of production

and amount of capital, export order based production, development of local market,

producing eco-friendly value added products, attending international trade fairs and

exhibitions, starting more ancillary units, modification of technology, implementing new

method of production, implementing new packaging techniques, starting special economic

zones for the small scale industries sector, small industrial parks etc. The cottage

industrialists might not have taken adequate measures because of the lack of

infrastructure, lack of awareness, inadequate technology, shortage of fixed and working

capital etc. So it is hypothesised that, the cottage industrialists have not taken

adequate measures to face the negative impact of globalisation and liberalisation

policies.

6.The policies and measures taken by the Govenment may influence the overall economy

and which may lead to the changes in various functional areas of cottage industries

also. Hence it is hypothesised that, there are significant changes in the financial,

human resource, production and marketing areas of cottage industries in Kerala

during the post-liberalisation period.

7.There are a number of cottage industries in Kerala, these policies and measures

influence the industries differently. So it is hypothesised that, there are industry-wise

differences in the level of awareness of policies, influence on industries, nature

of impact, measures taken and changes in the functional areas of cottage

industries.

1.6 Operational Definition of Cottage Industry

There are number of definitions on cottage industries. With the help of them the

researcher operationally defined the cottage industries as, “those industrial units

Chapter - 1. Introduction 31�registered with the respective District Industries Centres in Kerala having not more

than 9 employees in each unit and working in the rural or urban area”.

There is no data on the label of cottage industries in Kerala. As per the operational

definition, the researcher deliberately selected the cottage industrial units from the

directory published by the Directorate of Industries and Commerce, Kerala for primary

data collection.

1.7 Methodology

The methodology applied for the study is described and presented under the

following heads.

1.7.1 Nature of the Study

The study is analytical in nature. The performance of small scale, village, coir,

handloom and handicraft industries were analysed with the help of quantitative data.

The awareness of policies, influence, nature of impact and the measures taken were

analysed with the opinion of exporters. The changes occurred in the composition of

finance, human resource, production and marketing areas of cottage industries were

analysed on the basis of the primary data collected from cottage industrialists. The pre-

liberalisation period is the period before 1989-90 and post-liberalisation period is the

period after 1990-91.

1.7.2 Data Required

The study is mainly based on primary data but neccessary secondary data

were also used. The opinion of exporters and cottage industrialists were taken as primary

data.

1.7.2. [i]. Primary Data

The primary data have been collected from cottage industrialists and exporters.

The exporters’ opinion were gathered to analyse the impact of globalisation and

liberalisation policies affecting the cottage industries in Kerala. The data from cottage


industrialists were collected to analyse the changes in the financial, human resource,

production and marketing areas of cottage industries during the post-liberalisation period.

1.7.2.[i.a]. Sources of Primary Data

There is no data with the label of cottage industries but there are number of

small scale units functioning with the peculiarities and characteristics of cottage industries

in Kerala. The researcher compiled a list of cottage industrial units from among the

small scale units in Kerala as per the operational definition of cottage industries. The

primary data from the cottage industrialists and exporters have been collected between

1st

January 2008 and 31st

December, 2008.

1.7.2. [ii]. Secondary Data

In this study, some secondary data were used to analyse the status and

performance of various industries during the pre and post-liberalisation period. The

following secondary data were used for the study.

� SSI units registered in Kerala

� SSI investment in Kerala

� SSI production in Kerala

� SSI employment in Kerala

� SSI export

� Turnover of the Kerala Small Industries Development Corporation Ltd.

� Sanction and disbursement of assistance to SSI in Kerala by Small

Industries Development Bank of India

� Budgeted and actual figures of SSI in Kerala

� Value of production of village industries

� Value of sales of village industries

� Number of sales outlets of Kerala Khadi & Village Industries Board

� Number of employees in village industries

� Budgeted and actual figures of Kerala Khadi & Village Industries Board

� Coir export


� Workers in the coir sector and workers enrolled in the Kerala Coir

Workers Welfare Fund Board

� Coir co-operative societies in Kerala

� Budgeted and actual figures of coir industry in Kerala

� Number of looms in Kerala

� Quantity of production of handloom cloth in Kerala

� Productivity of handloom industry in Kerala

� Number of weavers

� Number of handloom co-operative societies in Kerala

� Turnover, production, yarn purchased and yarn distributed by HANTEX

� Performance of the Kerala Handloom Development Corporation Ltd.

� Handloom export

� Budgeted and actual figures of handloom industry in Kerala

� Turnover and export of the Handicrafts Development Corporation Ltd.

� Turnover of the Kerala State Bamboo Corporation Ltd.

� Turnover of the Kerala Artisans Development Corporation Ltd.

� Turnover and purchase of the handicrafts co-operative apex society

� Budgeted and actual figures of the handicraft industry in Kerala

� GDP

� GSDP

� NSDP etc.

1.7.2. [ii.a]. Sources of Secondary Data

The secondary data for the study were collected from the Economic Review,

Economic Survey, Budget Manual of Government of Kerala, Coir News, Annual Reports

of the Ministry of Textiles, Annual Reports of the Kerala Khadi & Village Industries Board,

Annual Reports of the Reserve Bank of India, Reports of the National Planning

Commission, ‘Vyavasayakeralam’, Yojana, Kerala Calling, Malayala Manorama Daily,

Indian Express Daily, Hindu Daily, Web sites etc.


1.7.3 Sampling Plan

To collect the primary data, separate sample surveys were conducted from the

exporters and industrialists. Globalisation and liberalisation policies were analysed with

the opinion of exporters. Informal interviews and discussions with 20 cottage industrialists

were conducted to prepare tool for data collection. From the informal interview and

discussion, it was found that, they were not aware of the globalisation and liberalisation

policies. So to analyse the impact of globalisation and liberalisation policies, the

researcher relied the exporters’ opinion. The informal interviews and discussion with 20

exporters were conducted and as per their opinion, twelve globalisation and liberalisation

policies were selected. The data on the globalisation and liberalisation policies were

collected from the opinion of 120 exporters, 30 each from coir, handloom, handicraft

and general exporters from all over Kerala by using pre-tested questionnaires. The

respondents were selected under convenience sampling method.

The data on the changes in the functional areas of cottage industries were

collected from the cottage industrialists. The data have been collected from those SSI

units registered before 1990 with the Directorate of Industries and Commerce, Kerala

as per the operational definition of cottage industry i.e. units having less than 9 employees.

The data on the changes in financial, human resource, production and marketing

areas of cottage industries were collected from 400 cottage industialists, 100 each from

coir industrialists from Alleppey district, handloom and handicraft industrialists from

Thiruvananthapuram district and other industrialists from Ernakulam district by using

pre-tested questionnaires. The coir industrial units are found more in Aleppey, handloom

and handicraft in Thiruvananthapuram and other industrial units in Ernakulam districts

so these districts were selected for sample survey. The respondents were selected

under convenience sampling method.

Table 1.3 shows the number of coir industrial units registered with the respective

District Industries Centres in Kerala before 1990.


Thiruvananthapuram

Kollam

Pathanamthitta

Allappuzha

Kottayam

Idukki

Ernakulam

Thrissur

Palakkad

Malappuram

Kozhikode

Wayanad

Kannur

Kasargod

Total

Table 1.2

Sampling Frame of Coir Industry

185

509

0

2321

54

0

10

49

20

61

123

3

13

50

3398

Units Registered

Before 1990DistrictSl.No.

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

Source: Directory, Directorate of Industries and Commerce,Thiruvananthapuram District selected for the sample survey

é

é

Out of the total 3,398 coir units registered before 1990 with the Directorate of

Industries and Commerce, Kerala, a majority of them are in Allappuzha district i.e.

2,321 so the researcher selected the units from Allappuzha district. The primary data

were collected from 100 coir industrialists in Allappuzha district. The convenience

sampling method was adopted for selecting the units.

The primary data were also collected from the coir exporters to analyse impact

of globalisation and liberalisation policies. It was not taken as district-wise but Kerala

State as a whole with the help of the online directory published by the Coir Board. From

the directory, 30 coir exporters were selected to analyse impact of globalisation and

liberalisation policies. The convenience sampling method was adopted for selecting the

units.


Table 1.3

Sampling Frame of Handloom Industry

Sl.No. DistrictUnits Registered

Before 1990

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

Thiruvananthapuram

Kollam

Pathanamthitta

Allappuzha

Kottayam

Idukki

Ernakulam

Thrissur

Palakkad

Malappuram

Kozhikode

Wayanad

Kannur

Kasargod

Total

479

26

3

2

7

1

4

74

35

1

20

1

236

1

890

Source: Directory, Directorate of Industries and Commerce,Thiruvananthapuram District selected for the sample surveyé

é

Table 1.4 shows the number of handloom industrial units registered with the

respective District Industries Centres in Kerala before 1990.

Out of the total 890 handloom units registered before 1990 with the Directorate

of Industries and Commerce, Kerala, a majority of the industrial units are in

Thiruvananthapuram District i.e. 479 hence the researcher selected the units from

Thiruvananthapuram district. The primary data were collected from 100 handloom

industrialists from Thiruvananthapuram district. The convenience sampling method

was adopted for selecting the units.

The primary data collected from the handloom exporters were not taken as

district-wise but Kerala State as a whole with the help of the online exporters’ directory.

The primary data were collected from 30 handloom exporters from Kerala to analyse

impact of globalisation and liberalisation policies. The convenience sampling method



Table 1.4

Sampling Frame of Handicraft Industry

Sl.No. DistrictUnits Registered

Before 1990

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

Thiruvananthapuram

Kollam

Pathanamthitta

Allappuzha

Kottayam

Idukki

Ernakulam

Thrissur

Palakkad

Malappuram

Kozhikode

Wayanad

Kannur

Kasargod

Total

655

371

170

256

349

52

621

424

554

241

521

55

219

60

4548

Source: Directory, Directorate of Industries and Commerce,Thiruvananthapuram District selected for the sample survey

é

é

Table 1.5 shows the number of handicraft industrial units registered with the

respective District Industries Centres in Kerala before 1990.

Out of the total 4548 handicraft units registered before 1990 with the Directorate

of Industries and Commerce, Kerala, a majority of the handicraft industrial units are in

Thiruvananthapuram district i.e. 655 hence the researcher selected the units from

Thiruvananthapuram district. The primary data were collected from 100 handicraft

industrialists from Thiruvananthapuram district. The convenience sampling method


The primary data collected from the handicraft exporters were not taken as

district-wise but Kerala State as a whole with the help of the websites [http://

www.tradeboss.com and http://www.tradeindia.com]. The primary data were collected

from 30 handicraft exporters from Kerala to analyse impact of globalisation and

liberalisation policies. The convenience sampling method was adopted for selecting


5

6

5

32

90

15

33

29

40

17

3

275

236

93

70

127

263

37

288

285

78

61

115

30

48

18

1749

60

56

68

122

142

23

143

104

122

60

100

25

51

27

1103

30

13

4

31

19

7

89

15

14

10

25

3

18

2

280

331

162

148

285

456

67

610

419

247

160

280

58

134

50

3407

Table 1.5

Sampling Frame of Other Industries

Sl.No. DistrictUnits Registered Before 1990

Chappal Food Soft Drink Candle Total

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

Thiruvananthapuram

Kollam

Pathanamthitta

Allappuzha

Kottayam

Idukki

Ernakulam

Thrissur

Palakkad

Malappuram

Kozhikode

Wayanad

Kannur

Kasargod

Total

Source: Directory, Directorate of Industries and Commerce, Thiruvananthapuram District selected for the sample survey

é

é

the units.

Table 1.6 shows the number of other industrial units registered with the respective

District Industries Centres in Kerala before 1990.

Out of the 3,407 other industrial units i.e. candle, chappal, food and soft drink

industrial units registered before 1990 with the Directorate of Industries and Commerce,

Kerala, a majority of the industrial units are located in Ernakulam District i.e. 610

hence the researcher selected the units from Ernakulam district. The primary data were

collected from 100 other industrialists from Ernakulam district to analyse the changes

in the functional areas of other industries by using convenience sampling method.

The primary data collected from other merchandise exporters were not taken

as district-wise but Kerala State as a whole with the help of the exporters directory

published in the web sites [www.tradeboss.com and www.tradeindia.com]. The primary

Chapter - 1. Introduction 39�data were collected from 30 general exporters from Kerala to analyse impact of

globalisation and liberalisation policies by using convenience sampling method.

1.7.4 Data Collection Instruments

To collect the primary data two pretested questionnaires were prepared. First

questionnaire has been used to collect the opinion from exporters, to analyse the impact

of globalisation and liberalisation policies [see appendix - 1] and the second questionnaire

was used to collect the data from the cottage industrialists [see appendix - 2], to analyse

the changes in the functional areas of cottage industries.

1.7.5 Data Processing and Analysis Plan

In order to analyse the data, tables, figures, graphs, percentage, compound annual

average growth rate, ‘t’ test and χ2 were widely used. The ‘t’ test was used to compare

the data of pre and post-liberalisation period. The χ2

was used to test the period-wise

and industry-wise difference.

1.8 Limitations of the Study

There are different types of cottage industries in Kerala but the study is limited to

coir, handloom, handicraft and other industries comprising of candle making, chappal,

food and soft drink industries under study. The ‘other industries’ were taken without any

criteria. There is no separate secondary data regarding the ‘other industries’. There are

a number of globalisation and liberalisation policies affecting the overall industrial sector

but only twelve of them were taken for the present study. The impact of globalisation

and liberalisation policies were analysed with the opinion of exporters in the concerned

fields. However, it is earnestly believed that these limitations will not affect the quality of

the study in any significant way.

1.9 Chapterisation

The study is reported in six chapters. The first chapter deals with the introduction,

statement of the problem, operational definition of cottage industry, objectives of the

study, hypotheses of the study, methodology, review of literature, limitations of the study


and chapterisation.

The second and third chapters deal with the theoretical background of

globalisation, liberalisation and cottage industry.

The fourth chapter depicts the performance of cottage and small scale industries

in Kerala.

The fifth chapter explains the awareness of various globalisation and liberalisation

policies, their influence, nature of impact, measures taken and the changes in the

composition of financial, human resource, production and marketing areas of cottage

industrial units in Kerala.

The sixth chapter deals with the findings, suggestions, conclusion and possibilities

for further research.

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