Kanika Datta: Big opportunities for small scale

SWOT

I have this splendid stainless-steel vacuum flask that I carry to office everyday containing boiling water for tea. The water not only stays piping hot through the day but is still steaming 24 hours later.

Likewise, I recently invested in a smart toaster. Unlike the many toasters I have owned, it is pleasingly efficient, toasting the bread evenly and providing a regulator that allows you to control how much you want to toast.

Last month, I hunted in vain for wooden kitchen spoons of the kind the were once easily available in Calcutta's New Market. I did eventually acquire a pair, identical to the New Market ones""but it came as a gift from the US.

As did this magical no-peeling-needed garlic crusher to replace the clunky locally made one with its toxic paint, and four attractive trivets. Not to speak of this formidably efficient car-mug that keeps my breakfast coffee hot on the long drive to Bahadur Shah Zafar Marg.

The common denominator to this list of gadgetry above is just this: they are all made in China. The wonder flask is a US design and brand made in China and the toaster is sourced by Bajaj Electricals from China. Both are readily proffered by dealers in even semi-moffusil markets in the capital.

The spoons, garlic press and trivets from the US were all made in China, too. The car-mug has a slightly different story: in India these rudimentary steel and plastic covered cups cost anything between Rs 350 and Rs 700. In the US, they cost several dollars but are still less than the Indian price and, yes, they're made in China, too.

No, this is not another piece extolling the well-worn virtues of the Middle Kingdom's economic miracle. But I do constantly wonder why the labels on items like these couldn't read Made in India instead and more often.

The popular perception is that China is so far ahead in the global manufacturing game, that India might never be able to catch up anytime soon, especially in high-tech products.

But the point about my recent shopping list is that items like these are simple, labour-intensive, relatively low-tech""the trivets, for instance, are nothing but silicone squares dyed eye-catching colours""don't require massive investments to produce and can easily find both a domestic and export market.

Unless India's policy makers don't buy electrical goods for their homes or toys for their children and so on, it seems hard to escape the obvious conclusion that these and myriad other low-tech items present an enormous opportunity for India's vast but ailing small-scale sector.

Yet the story for the small-scale sector since liberalisation has been the opposite: of how local toy-makers have been driven out of business as a result of the flood of cheaply made goods, of how 250 units in capital city Delhi had to close shop last year, succumbing to the onslaught of Chinese electrical goods. This is hardly surprising when even Indian brown-goods makers like Sumeet and Bajaj have been sourcing outside India for several years now.

What is surprising, however, is that once the new government came to power, the Left""so ostensibly sensitive to the cause of the Common Man and seemingly more touchy on the subject of swadeshi than the BJP""has not seen fit to focus on this sector.

Its leaders must know as well as anyone that small-scale units account for more than half of India's manufacturing output, a third of its exports, and 80 per cent of employment in the manufacturing sector.

The last point is surely an important one, given the high-minded election manifesto promises that have been made on employment generation. Now that the euphoria over the successes of the services sector has been tempered, it is increasingly clear that India may become the world's back-office, but it still needs to focus on manufacturing if it is to reduce unemployment.

The small-scale sector has a crucial role to play in all of this. The recently published third All-India Small-Scale Census has said that Rs 1 lakh of investment in the small-scale sector can generate more than double the number of jobs that a similar investment in the organised, large-scale sector can create.

Yet today, of the 3.3 million small-scale units, more than 10 per cent are sick or closed (the census estimates of 8 per cent are considered an understatement). It is a misconception that the small-scale sector suffers from lack of protection.

On the contrary, the sector's problems are a microcosm of the issues that Indian industry in general (barring the Tatas and Reliances of the world) faces: lack of working capital, infrastructure and petty harassment.

As Y P Suri, secretary of the Federation of Associations of Small Industries of India, eloquently said last year, "We do not want protection; all we want is support in terms of infrastruture."

Banks too are reluctant lenders: in the last decade, the ratio of working capital to turnover has dropped from 8 to 2 per cent. And S S Aggarwal, national president of Laghu Udyog Bharat, ironically spoke of how the small-scale industrialist has to routinely deal with 42 different government inspectors.

The Made in China label on myriad low-tech items now available around the globe has clearly not been achieved in conditions that Indian small-scale entrepreneurs suffer.

It would have been infinitely preferable if the Left had made the plight of this sector a hobby horse instead of the pointless impediments it is raising to foreign direct investment or the appointment of foreign consultants in Planning Commission committees.