REVIEW OF LITERATURE

In this Chapter, an attempt has been made to synthesize the findings of the earlier studies on
agro-industries relating to growth, importance, capital structure, finance, labour, profitability and
organization. Results of the other relevant studies, which explored the impact of globalization on
agro-industries, have also been briefly discussed to facilitate the growth of agro-industries in the
recent years.
Dhar (1958)1 observed that the stock of raw materials accounts for 27 per cent of the total
working capital, cash in hand 26 per cent and outstanding credit 29 per 'cent in oil mills. Shetty’s
study revealed that the oil pressing units have a preponderance of the fixed capital over the
working capital.
Dhar (1958)2 has observed that almost all the oil mills and flour mills were started mainly with
their own funds and funds borrowed from relatives and friends. While the commercial banks and
state financial agencies had contributed very little.
Baljit Singh (1961)3 who conducted a survey of small scale industries at Muradabad observed
that 72 per cent of food industries were individual proprietary and 28 per cent had been under
partnership organization.
Balji Singh (1961)4 found that the total capital per unit of worker is higher in units employing 10
or more workers than in the units of smaller size and the value of fixed capital per worker/unit
increased with adoption of improved technology in the large six units. On the other hand, the low
value of fixed capital reflects their low technology and labour intensive technologies of
production.
Dhar and Lydall (1961)5 concluded that the output capital ratio in flour mills, oil mills and cotton
textile tends to increase with the size of the unit. It is found that the output capital ratios was
generally more favourable for units employing less than 20 workers than those immediately
above them, but it was not necessarily more favourable than large units. They further, found that
the units using modem machinery and employing more than 20 workers were highly capital
intensive.
Lakdawala and Senbdesena’s (1961)6 investigation in Bomaby city has shown that 78 per cent of
the wheat mills were organized as private proprietorship as against 21 per cent by joint and
partnership concerns only a single unit was established on a corporate basis.

1
Dhar, P.N., (1958), ‘Small Scale Industries in Delhi’, Asia Publishing House, New Delhi, p.229.
2
Dhar, P.N., op. cit., p.88.
3
Singh, Baljit, (1961), The Economics of Small Scale Industries’, Asia Publishing House, New Delhi, p. 11.
4
Singh, Balji, op. cit., p. 18.
5
Dhar, P.N. and Lydall, H., (1961), The Role of Small Enterprises in Indian Economic Development’, Asia
Publishing House, Bombay, p.14.
6
Lakdawala, D.T. and Sandesara, J.C., (1961), ‘Small Industries in Big City’, University of Bombay, Bombay, pp.
14-15.
Shettys (1963)7 survey of small scale and household industries highlighted that 83 per cent of oil
processing units were organized under partnership and joint family concern as against 17 per
cent units under individual ownership.
Shetty (1963)8 observed that the dominance of non-institutional finance with all unpalatable
aspects associated with it in the financing pattern of agro industries.
Gupta and Surendra (1968)9 survey in Bihar, out of 28 sugar factories, 15 factories are organized
and by Bihar state sugar mill cooperative and the under management of Government of India
factories are in the private concern.
Sandesara (1969)10 also found that small agro industries such as wheat mills, rice mills, oil mills,
fruit and vegetable processing units, except biscuit making industries are labour intensive and
they have lower output lower wages and lower surplus per worker.
Singh and Whittington (1969)11 said that it was found out that the food industry including grain
mill, bakery, sugar, conflictionaiy registered marginal negative profits.
Gupta, et. al. (1971)12 study of West Godavari district showed that out of the 30 rice mills as
many as 23 units (i.e. 77 per cent) had partnership organization and the remaining mills were
under cooperative ownership.
Gupta, et. al., (1971)13 have observed that a large number of rice mills are facing the problems in
marking of rice due to lack of knowledge of the prevalent rice price Dhar and Iydall have also
arrived at the similar conclusion and emphasized that there is an urgent need to tay to eliminate
such problem and to give agro industries a reasonable change to sell their products on their
merits.
Mehta (1976)14 has observed that tobacco and rice milling are most labour intensive industries in
which the fixed capital requirement per worker are very low, i.e., below Rs.500 while flour mills
and sugar industries come under the medium group (i.e. Rs.1000- Rs.2000).
Arora (1978)15 stated that agro-industries are capital saving and labour intensive and offer more
employment opportunities in close proximity of village and they can provide subsidiary of
alternative occupation.

7
Shetty, M.C., (1963), ‘Small Scale and Household Industries in Development Economy’, Asia Publishing House,
New Delhi, p.78.
8
Shetty, M.C., op. cit., p.172.
9
Gupta, Surendra K., (1968), What Ails Bihar’s Sugar Industry’, The Indian Nation, Patna, 16 April,, p.4.
10
Sandesara, J.C., (1969), ‘Size and Capital Intensity in Indian Industry’, Bombay University, Bombay, p.83.
11
Sigh, A., and Whittingotn, G., (1969), ‘Growth Profitability and Valuation’, Cambridge University Press, London,
p.188.
12
Gupta, V.K., Gopalaswamy, T.P. and Mathur, O.P., (1971), ‘Setting up Modem Rice Mills’, Indian Institute of
Management, Ahmedabad, p.84.
13
Gupta, Gopalaswamy and Mathur, op. cit., p.88.
14
Mehta, M.M. (1976), ‘Industrialization and Employment’, Popular Prakasan, Bombay, p.27-30.
15
Arora, R.C., (1978), ‘Industry and Rural Development’, S. Chand and Co., New Delhi, p.78.
Arora (1978)16 emphasized that agricultural processing industries mainly food processing
industries are most suitable and viable in the small scale sector. In this sector, other agro
industries like oil crushing mills, dal mills and rice mills with an intermediate technology can
make great contribution towards creating employment potentials in rural areas. On the other
hand, Gur and Khandasari industry and improved atta chakkies can also play a very important
role in the rural development.
Rao (1978)17 has found that most of the oil mills lack of sufficient money to keep stock of
adequate raw materials to the full length of their capacity. Due to meager financial resources,
they have to utilize the cheap and interior material which naturally affects the quality of their
finished products.
Bepin Behari (1979)18 argues that intermediate technology in agro industries should be
considered as a buffer to absorb extra labour until the modem technology expands enough to
give room for modernization in all the industry. There are others who argue for simple
intermediate technology or improved technology on ecology, economic and social grounds.
Rao (1979)19 also revealed that traditional cottage industries with a little improved technology
can make a real contribution to the rural development of the countiy. In fact, he is in favour of
adopting improved technology in rural industries, so that they can survive on their own.
Ajit K. Sinha (1980)20 in his study on rural industry and rural industrialization has observed that
rice, flour and oil mills are running on absolute net profit of over 6000 per annum. He has also
found out that in such unit’s value added, associated positively to man-days of employment but
negatively to fixed capital. Such negative relationship between value added and fixed capital
limits the scope of investment of fixed capital in the unit.
Ajit K. Sinha (1980)21 has observed that traditional rural industries are not viable in their existing
form. He has emphasized that by applying modern science and technology, it should be a viable
and competitive unit from the angle of employment, input and income generation. In other
words, the introduction of modern technology in rural industries can achieve a greater degree of
industrialization in the country.
Sandesara (1980)22 observed in oil mills gross profit per unit of fixed capital, output and per
labourer was Rs. 0.48, Rs.0.04 and Rs.4877. In agricultural implement units, surplus per unit of
fixed capital was worked out lowest of Rs.0.07 as compared to the surplus per worker.

16
Arora, R.C., op. cit., p.42.
17
Rao, R.V., (1979), ‘Rural Industrialization in India’, Concept Publishing House, New Delhi, p.75.
18
. Bihari, Bepin, (1979), ‘Rural Industrialization in India’, Vikas Publishing House, New Delhi, pp.84-85.
19
Rao, R.V. (1979), ‘Rural Industrialization in India’, Concept Publishing House, New Delhi, pp.79-80.
20
Sinha, Ajit, K., (1980), ‘Rural Industry and Rural Industrialization’, Pointer Publishers, Jaipur, p. 106.
21
Sinha, Ajit, K., op. cit., p.30.
22
. Sandesara, J.C., (1980), ‘Efficiency of Incentives for Small Industry’, University of Bombay, Bombay, pp.89-90.
Papola (1982)23 has concluded that he size of the fixed capital/investment and working capital
depends on the technology of a unit and the magnitude of production. In food product units
machinery and equipment accounts for 55 per cent of the fixed capital.
Papola (1982)24 in his study arrived at a conclusion that most of food product units are facing
difficulties in obtaining adequate raw materials. He further maintains that the availability of
financial resources may not be of much help in ensuring the supplies of raw materials.
Lakdawala and Sandesara’s in their study also arrived at similar conclusion that small agro
industries are generally under a handicap in obtaining raw materials of the requisite at quality at
reasonable rates.
Papola’s (1982)25 study revealed that food product units would generate a higher output and
employment with an increase in capital, but may not necessarily in higher value added per
worker.
Desai and Vasant (1983)26 stated that after the nationalization of commercial banks, they opened
a massive network of offices all over the country, with the expansion of bank branches,
assistance on a massive scale has been available for small agro-industries.
Sharma (1983)27 using data from annual survey of industries concluded that agro-industries are
less capital intensive than non-agro industries. However, these labour intensive agro-industries
were found to have low labour productivity.
Vepa and Ram (1983)28 argued that agro industrial development can play a crucial role in
modernizing the stagnant rural economy in the next three decades.
Ram K. Vepa (1983)29 is of the view that there is no dearth of institutional credit support to the
agro industrial sector, but institutional credit agencies lack a sympathetic attitudes and
understanding towards rural entrepreneurs and full appreciation of the difficulties under which
agro industrial units operate.
Srivastava’s (1984)30 study showed that agro-based industries have low capital intensity though
cold storage units are very high capital intensive. The capital labour ratio was found to be lower
for agro based and highest for cold storages. Thus, labour intensity was found to be the highest
in the case of agro-based and lowest for cold storages.

23
Papola, T.S., (1982), ‘Rural Industrialization: Approaches and Potential”, Himalayan Publishing House, Bombay,
p.51.
24
Papola, T.S., op. cit., p.91
25
Papola, T.S., op. cit., p.76.
26
Desai, Vasant, (1983), ‘Problems and Prospects of Small Scale Industries in India’, Himalayan Publishing House,
Bomaby, p.195.
27
Sharma, R.K., (1983), ‘Industrial Development in Andhra Pradesh’, Himalaya Publishing House, Bombay, p.63.
28
Vepa, Ram. K., (1983), ‘Small Industry: The Challenges of the Eighties’, Vikas Publishing House, New Delhi,
p.333.
29
Vepa, Ram. K., op. cit., p.52.
30
Srivastava, G.C., (1984), ‘Rural Industrial Development’, Chaugh Publications, Allahabad, pp.97-99.
Venkaiah’s (1987)31 study highlighted that the tobacco processing and rice milling industries are
more labour intensive industries than the khandasari units. The sugar industry is the most capital
intensive among agro industries requiring a capital of Rs.437.23 per man-day of employment
as compared to khandasari units, rice milling and tobacco processing units.
Shambhu Singh (1988)32 in his study expressed that this is the emerging paradigm for the small
industries sector. Once the paradigm gets acceptance the follow-up measures would be relatively
simpler. A warm response from all those concerned and deliberation on the several points raised
will take place today will carry us forward in some measure in determining the outlines of new
strategies that are required for the promotion of this sector.
Srivastava (1991)33 reveals that one way of finding a solution to the problem of sick industries
and cooperative organizations in the filed of agroindustries is to promote integrated products by
utilizing various developmental schemes, rather than treating industry as belonging to particular
department. As already identified in the text certain industries are found to be lagging in rural
areas. The position of these are found to be carefully monitored and promotional measures
effected so as to minimize their drift to urban centres.
Batra and Narinder Kaur (1994)34 in their study stated that there are the originating factors which
bring the apparent causes to the surface. If bank finance is made available in time, the unit can be
saved, if not, the entrepreneur adopts some survival strategies which very often lead the unit into
a deeper sickness. It has also been shown that the factors causing sickness originate in the
contemporary environment which is characterized by lack of pre-investment planning,
deteriorating industrial relations and perverse management culture that now pervades the small
industry sector.
Narayana Rao (1994)35 in his study reveals that the term lending institutions were more particular
about formalities of engaging the services of a consultant rather than verifying the bonafides of
the so-called consultants. The problems of innovative, non-technical entrepreneurs were even
more complicated. These entrepreneurs had taken up projects either due to their vast trading
experience in a related line of high academic knowledge devoid of technical and practical
background. They had to depend on outsides for everything as a result of which cost of
production and other overheads may have gone up enormously.
Himachalam, et.al. (1995)36 in their study reveals that the private sector units got
disproportionately large share of loans sanctioned to them through their number is limited in the

31
Venkaiah, V., (1987), Impact of Agro based Industries in Rural Economy’, Himalaya Publishing House, Bombay,
p.275.
32
Shambhu Singh (1998), “SME Sector: Current Scenario and Challenges”, SEDME, Vol.XXV, No.4, December,
pp.21-26.
33
Srivastava V.K. (1991), “Agro-processing Industries - Potential for Employment Generation”, Productivity,
Vol.32, No.l, April-June, pp.31-47.
34
. Batra, G.S., Narinder Kaur (1994), “Strategic Management of Sickness in Small Scale Industries: Case Studies”,
SEDME, Vol.XXI, No.2, June.
35
Narayana Rao, V.L., (1994), “A Diagnostic Study of Sick Small Scale Units”, SEDME, Vol.XXI, No.2, June.
36
Himachalam, D., Jaya Chandran G., Narendra Kumar, D., (1995), “Financing of Small Scale Units by APSFC —
A Study”, SEDME, Vol.XXII, No.2, June, pp.35-43.
industrial estate. Further, only eight out of 35 units under study received nearly Rs. 116.09 lakhs
(60.75 per cent) of the total loans sanctioned. Therefore, it is suggested that this wide disparity
be removed by providing need based assistance and to see that all categories of units get due
share of assistance from the APSFC without any preferences and red tapism, keeping in view the
size and nature of units. This will create atmosphere congenial to stimulating and motivating the
entrepreneur to take the risk of uncertainty and promote entrepreneurship in all categories of
enterprises.
Sivarami Reddy, et. al., (1997)37 in their study they concluded that what has been perceived in
the new industrial policy as favourable to sand growth of SSI sector may not be as effective as it
appears to be. There are bound to be several constraints in the effective functioning and
development of SSI sector as some of the measure envisaged in the policy may turn out to be
bane rather than a boon. The policy, though supporting the concept of adequate supply of credit,
is silent on the aspect of cheap credit to SSI sector. It is any anybody’s guess that the SSI sector
could not flourish without the availability of cheap credit facilities. Yet another harmful effect of
the policy is that the SSI sector is left to be operated within the frame work of fiercely
competitive market forces. It is felt that the time is not yet ripe for opening of SSI sector to such
competition. Further, the SSI sector is bound to lose much advantage than what it gains from its
interlinking with large scale sector and participation of equity by non-SSI sector.
Kaveri (1998)38 in her study concluded that in the wake of economic liberalization and financial
sector reform many questions are raised about the future of SSI units. One thing is that they will
have a bright future provided they remain economically viable in this context, upgradation of
technology, management practices and product mix are the need of the hour. Therefore, in the
coming years, their credit requirements will be high and increasing. To meet such requirements
both banks and borrowers have to sit together to work out appropriate strategies. Among other
things, both have to learn to extend mutual respect and develop proper understanding. Alone
with this, the effort in educating both bankers and borrowers needs to be strengthened for timely
and adequate flow of institutional credit to the SSI sector.
Rama krishnaiah, et.al., (1998)39 in his study stated that the APSFC has been pumping huge
accounts into SSI sector in different forms of loans. The major form of loans extended to SSI
sector have been Term loans’ only. Since the adoption of new economic policy the corporation’s
financial assistance to SSI sector tend to decline gradually. In respect of term loans SSI units
there exists not only inter-industry variations but also year-wise variations with in the same
industry. They found that the sole proprietary SSI units formed the major number in securing
financial assistance from the corporation. The purpose-wise analysis of term loans the
corporation major part extended for the establishment of new SSI units. Further, they observed

37
Sivarami reddy. C., Mohan Reddy, P., Raghunatha Reddy, S., (1997), “Indian Small Scale Industry: The Changing
Perceptions”, SEDME, Vol.XXIV, No.3, September.
38
Kaveri, V.S., (1998), “Financing of Small Scale Industries: Issues and Suggestions”, SEDME, Vol-XXV, No.3,
September, pp.71-76.
39
Rama Krishnaiah, K., Narasaiah, P.V., Mohan Reddy, P., Sivarami Reddy, C., (1998), “Institutional Finance to
SSI: Role of APSFC”, SEDME, Vol.XXV, No.3, September, pp.55-70.
that there have been intense inter-regional imbalances in the extension of credit to SSI sector in
the three regions of the State of Andhra Pradesh.
Ramaswamy and Gereffi (1998)40 in their study revealed that India’s apparel industry achieved
rapid growth of exports in recent years. Studies of the garment industry have underlined certain
weaknesses of the industry in terms of narrow fabric base and export destination. They suggested
remedies call for adopting policies to promote the switch from exclusive reliance on cotton -
based garments to synthetic garments and market diversification to enter non-quota markets. The
argument is unassailable as far as it goes. In this paper they argue that the problem of sustaining
the attained level of clothing exports needs much more careful attention. The process of
globalization involves specialization. Specialization in the global apparel market is not by fabric
base alone but by product. India has a comparative cost advantage in cotton cloth and the
clothing export growth has been achieved with no reliance on imports.
Sawkat Jahangir (1998)41 in his study reveals that all the sick small scale industries which were
found to be eligible for rehabilitation and viable, may not equally need the above concessions
and reliefs. It was observed that some entrepreneurs were always declaring their units as sick just
to attract and avail of some rehabilitation benefits. To check this tendency it is essential to
review and checkup the overall activities thoroughly. After such a study, if it is confirmed that no
bad intention is involved and sickness is not fake than banks/financial institutions, can they for
revival of such units though suitable scheme.
Sunil Kumar (1998)42 in his study expressed that the labour productivity increased because of
capital deepening process in the small scale sector instead of improvement in efficiency of labour
input itself. The insignificant slow growth of capital productivity had the direct implication that
new technologies introduced over the study period were intended specifically to save labour
costs and that this was achieved at the expense of increased capital costs per unit of output. The
analysis of total factor productivity indices revealed that significant improvement at a slow rate
in the efficiency (both economic and technical) of small scale sector had taken place during the
study period.
Sivanand and Murthy (1999)43 in their study revealed that the small scale industries in spite of
the competitive hardship they have been experiencing during the past several years, have not
embraced marketing philosophy. Marketing orientation clearly shows a strong association with
marketing department, thus rewarding those small-scale enterprises which have such
departments. As revealed by the study, marketing orientation shows no significant association
with the number of products produced, educational level of entrepreneurs, experience of the
entrepreneur, age of enterprise, form of organization and the size of the operation.
40
Rama Swamy, K.V., Gary Gereffi (1998), “India’s Apparel Sector in the Global Economy- Catching up or Falling
behind”, Economic and Political Weekly, January 17, pp. 122-130.
41
Sawkat Jahangir, Md., (1998), “Sick Small Scale Industries: Rehabilitation Measures”, SEDME, V0I.XXV, No.2,
June, pp.59-65.
42
Sunil Kumar (1998), “Productivity Growth in Small Scale Sector in India: An Econometric Analysis”, SEDME,
VoLXXV, No.2, June, pp.77-89.
43
Sivanand, C.N., Murthy, B.E.V.V.N., (1999), “Marketing Orientation of Small Scale Industries”, SEDME, Vol.26,
No.4, December, pp.29-44.
Bhat, et.al. (2000)44 in their study stated that building up the competitive edge of enterprises,
particularly SMEs and improving their operational efficiency can pay rich dividends in the long
run, both at-the national and at the enterprise level. Of the many impacts of the WTO
agreements, two are particular interest to SMEs. The first, it has led to quickening the pace of
growth of world trade, which is over $6 trillion. The second is that it has firmly established
competitiveness as the reigning factor in the global market place at the level of both national and
enterprises. The questions which now face SMEs, one whether they will be able to face upto the
challenges of this competition and how best they can take full advantage of the increased trading
opportunities. Traits such as flexibility, adaptability, inventiveness and innovativeness, which are
inherent to SMEs, go a long way towards helping SMEs to their innate role. However, despite
their having these desirous qualities, SME’s need to be nurtured and promoted by conducive
policy environment and strong support mechanism.
Siva Rami Reddy, et. al., (2000)45 in their study reveal that open account method of verdict sales
to a greater extent solves the problem of raw material supply. Whenever raw material supply and
final inventory disposal are inter linked, it is advantage to opt for open account method of credit
sales as it reduces the pressure on working capital. It is necessary for the SSI units to refer
competitors’ credit policy to develop an effective credit policy of their own. The credit policy
shall be changed depending upon the needs and circumstances only necessary. To a certain
extent, the success of cash discount facility will ease out the enterprise from the pressing
problems of working capital.
Vijay Paul Sharma and Aravind Kumar (2000) 46 expressed in their study that to improve
agricultural productivity in the country, a significant increase in capital investment in agricultural
sector is needed. Limited investment in agricultural sector has caused poor rural infrastructure
and insufficient agricultural research. Therefore, India should attract more technology and
investment in agricultural sector through open door policy.
Revaty arid Rao (2001)47 in their study concluded that financial constraints reported by these
surveys usually take the form of lack of access to credits. In view of structure of liabilities,
current liabilities and provisions have occupied 50.3 per cent. It was found that the borrowed
funds occupied a dominant position in the total sample units. The relationship between short
term and long term liabilities revealed that short-term liabilities had occupied a place of
prominence. Among the different sources of finance, share capital is one important source. The
unfavourable profitability position prevailing among SBUs was not enabling them to build up
reserves of considerable size. The fund flow analysis reveals that the share of internal source of
finance to total source stood 33.8 per cent in the selected units. Regarding the analysis on capital
structure, it was observed that small enterprises lack conceptual understanding.
44
Bhat, T.P., Vikrant Saxena and Anshuman Gupta, (2000), “Impact of WTO Agreement on Small and Medium
Enterprises in India”, The Indian Journal of Commerce, Vol.53, No.l & 2, January-June.
45
Siva Rami Reddy, C,, Mohan Reddy and Harinatha Reddy (2000), “Management of Trade Credit in Small Scale
Industries - A Study”, SEDME, Vol.27, No.4, December, pp.25-35.
46
Vijay Paul Sharma and Aravind Kumar (2000), “Agriculture – Industry Linkages: An Analysis”, Productivity,
Vol.41, No.l, April-June, pp. 142-149.
47
Revathy, J., Rao, K.V., (2001), “A Research Study on the Financing Pattern of Small Business Units”, SEDME,
Vol.28, No.2, June, pp.31- 43.
Sridhar Krishna (2001)48 in his study observed that the Indian goods cannot compete with
Chinese goods, which have been the main source of competition in the industries adversely
affected by imports, are one, poor infrastructure, in particular, inadequate power. Two, the cost
of power is relatively high. Three, the cost of transportation in India is high. Four, the cost of
capital is high in India with working capital loans being available at rates between 16 per cent
and 19.5 per cent. Lack of cheap finance also meant that modernization was not possible. Five,
the import duty on raw material, in particular, polymers is high and needs to be reduced. Six,
because of under invoicing of imports. Seven, because of inspector raj there is an additional
economic cost and eight, because labour laws prevent modulation of the labour force in
accordance with capacity utilization, small-scale units have be on with these costs even where
levels of capacity utilization are low.
Surendranath Misra (2001)49 stated that the success of agroindustrial enterprise depends up on
effective marketing. Factors responsible for poor marketing possibilities are a), presence of
outside competitors, (b). absence of any governmental agency handling marketing of agro-
industrial productions, (c). absence of proper packing and (d). absence of proper publicity and
advertisement of the products.
Baidyanath Misra (2002)50 in his study concluded that the working of small enterprises show that
they do not have same degree of access to the information and technology needed to improve
production, efficiency and product quality that large firms have and face difficulties in
establishing and maintaining adequate market networks. If some specific promotional measures
are initiated, the small scale industries may bring about a substantial change in economic and
social landscape of rural areas.
Bhagabata Patro and Preyasi Nayak (2002) 51 in their study expressed that the analysis manifests
a clear case for agro-based industries as the most suitable strategy to achieve the benefits of
favourable terms of trade and increased employment. With virtually no employment in the
Government sector, it is urgently necessary to devise suitable programmes to popularize and
promote agro-based activities to absorb the growing labour-force in the next millennium.
Calculation of indirect benefits of employment by the agro-based industries will put them in a
more favourable position.
Bhagban Sarangi (2002)52 in his study stated that if rural development has to gain strength, then
economic and social life of the rural poor, comprising small and marginal farmers, landless
labourers, tenants and other weaker sections must be improved through providing them with
48
Sridhar Krishna (2001), “Phasing out of Import Licensing Impact on Small Scale Industries”, Economic and
Political Weekly, July, pp.2545-2550.
49
Surendranath Misra (2001), “Role of Agro-industries in the Rural Development of Orissa - Performance,
Problems and Prospects”, Kurukshetra, July, pp. 15-20.
50
Baidyanath Misra (2002), ‘Role of Small Industries in Rural Development’, Agro-Industries and Economic
Development: A Vision for the 21st Century, Deep & Deep Publications Pvt. Ltd., New Delhi, pp.3-18.
51
Bhagabata Patro and Preyasi Nayak (2002), “Employment Implications of Agro-based Industries in India”, Agro-
industries and Economic Development A Vision for 21st Century, Deep and Deep Publications Pvt. Ltd., New
Delhi, pp.42-50.
52
. Bhagban Sarangi (2002), “Economic Potential of Agro-Industries”, Agro-industries and Economic Development
- A Vision for 21st Century, Deep and Deep Publications Pvt. Ltd., New Delhi, pp.51-58.
subsidiary occupations. The agro-industries offer a wide and viable field for promoting
occupational diversification in villages and broadening the base of economic operation through
supplementary occupations. In the context of a developing economy like India, the agro-
industries such as food processing, sugar, cotton, textile, paper, wool products, agricultural
implements, coil and other village industries have great potential.
Bhavani (2002)53 in her study reveals that while liberalization has exposed all industrial units
including small units to market competition to a greater extent, globalization intensifies market
competition by allowing imports and multinational corporations into India relatively easily. In
order to withstand competition, Indian industrial units especially the smaller ones need to
improve their productivity and quality, to reduce costs (given the higher qualities) and to go for
higher performance of products and better services. This means substantial improvement in
various dimensions of technology, namely, transformation (mechanization). Organization and
information, small units not only need to upgrade their technologies immediately but should also
keep track of the changes in technologies.
Das (2002)54 in his study reveals that daily the most suitable step to fight against unemployment
and poverty needs to be properly assessed in our agriculture dominated rural areas for the
economic development of the marginalized mass. Dairy development is a sin que none of
economic development. For dairy development, the suggestions outlined above, if harnessed
properly would help to promote economic development in general and agricultural development
in particular. This requires coordinated effort by government rural people and the farmers.
Proper motivation and guidance would also go a long way to promote daily sector in all respects.
Nilakantha Panigrahi (2002)55 in his study stated that the educational status of the tribal people in
Orissa is very poor. They have low level of awareness and by and large are confined to their age-
old habitations. During last five decades of development, it has been observed that except a
few piecemeal mega development projects the government is yet to make nay attempt to develop
tribal people within their strength and limitations. As a result, even today one does not find many
changes in the qualitative life of the tribal people. Inspire of good attempts made by the
government to tap the agro resources available in the tribal regions, the profit either went to
middleman or to a few others in the system. The major reason for exploiting tribal people seems
to be that they have poor economic base and their world knowledge is confined to limited sphere.
In order to overcome these bottlenecks the experiment made by an NGO in a tribal pocket
reflects that micro finance and empowerment processes are very important to develop the
agro-based resources in the tribal regions of the state. Government of Orissa under its SGSY
Programme and NABARD under its micro-finance scheme can promote more number of agro-
based small industries in the tribal areas.

53
Bhavani, T.A., (2002), “Small - scale Units in the Era of Globalization: Problems and Prospects”, Economic and
Political Weekly, July 20, pp.3041-3052.
54
Das, C.R., (2002), “Rural Deyelopment in Orissa through Dairy Sector”, Agro-industries and Economic
Development - A Vision for 21st Century, Deep and Deep Publications Pvt. Ltd., New Delhi, pp.156-171.
55
Nilakantha Panigrahi (2002), ‘Prospect of Agro-industries in Tribal Region of Orissa’, Agro-industries and
Economic Development – A Vision for 21st Century, Deep and Deep Publications Pvt. Ltd., New Delhi, pp.245-
259.
Sahu and Pradhan (2002)56 in their study reveals that the sea food processing industry in Orissa
has shown greater abilities and prospects for its development to meet the growing demands of
foreign markets. Mr. A.J. Tharakan, President of the All India seafood exporters’ association,
remarked that Orissa has great prospects to develop the seafood industry to develop the seafood
industry to fetch foreign exchange to the tune of Rs.500 crores by 2001. If proper care, strategic
action and corrective measures are taken, Orissa alone can earn foreign exchange to the tune of
Rs. 1000 crores by 2005, doubling the job potential in the processing units. The seafood
processing industry will meet the challenges of the next millennium, i.e., the 21st century
provided favourable steps are taken to build infrastructural facilities for modernization and
upgradation of seafood processing technology. This sector will provide greater scope for
employment and foreign exchange earnings in the State.
Shibalal Meher (2002)57 in his study stated that sericulture industry has a great role in the
economic development of the country. Not only it has the potential for generation of productive
employment, thereby improving the living condition of the poor and the socially disadvantaged
groups but also it has an important role in the foreign exchange earning of the country. A
backward state like Orissa should give more importance to the sericulture sector in the ninth plan
for rapid economic development.
Chandra and Sahu (2003)58 in their study stated that the agro industry suffered a huge
productivity setback during 1994/2000-01 compared with 1984- 85/1994-95. Rural urban gaps in
productivity is another worrisome feature of India’s agro-industry. Productivity levels among
rural enterprises are much lower than those among their urban counterparts, for all types of agro-
industrial activities, both within agro-food processing and non-food processing segments,
irrespective of the scale of production. Also they sated that in sum agro industry in India
continuous to suffer substantial productivity losses in comparison to non-agro basedindustry.
Diriesh, et. al., (2003)59 in his study indicates that the positive impact of the NEP has showing.
Entrepreneurs have become more quality conscious, started looking for technological
upgradation and have stated investing in HRD, in how so ever a small way it may be. All these
indicate that the small scale sector in India has come of age and is gearing up to face the
competition with full vigour nevertheless, it faces many hurdles and irritants which need to be
removed.

56
Sahu, P., and Pradhan, N.D., (2002), “Prospects of Seafood Processing Industry in Orissa”, Agro-industries and
Economic Development – A Vision for 21st Century, Deep and Deep Publications Pvt. Ltd., New Delhi, pp.85-101.
57
Shibalal Meher (2002), “Role of Sericulture Industry in the Economic Development of India”, Agro-industries and
Economic Development - A Vision for 21st Century, Deep and Deep Publications Pvt. Ltd., New Delhi, pp. 117-
125.
58
Chadha, G.K. and Sahu P.P. (2003), “Emerging Trends in AgroProcessing Sector, Small Scale Agro-Industry in
India: Low Productivity in its Achilles Heel”, Indian Journal ofEconomics, Vol.58, No.3, July-September.
59
Dinesh, N., Awasthi, Krishna, K.V.SM., Jose Sebastian, (2003), “Impact of New Economic Policy on Small and
Tiny Enterprises”, SEDME, Vol.30, No.2, June.
Karam Singh (2003)60 from his study reveals that the agro-processing industry in India has to go
a long way in establishing its mechanism monitoring the ‘quality of implementation’ and
establishing its own brand images based on the quality parameters.
Ranjanendra Narayan Nas and Partha Pratim Ghosh (2003) 61 stated that it can be extended to
incorporate monetary factors flexible exchange rate and flow of foreign direct investment in the
industrial sector. The inflow of foreign capital can be taken as function of net profit in the
industrial sector per unit of capital. Monetary factors will influence industrial investment.
Bala Subrahmanya (2004)62 in his study stated that reveals that small industry in India has found
it an intensely competitive environment since 1991, thanks to globalization domestic economic
liberalization and dilution of sector specific protective measures. As a result, its growth in terms
of units, employment output and exports have come down. This has resulted in a less impressive
growth in its contribution to national income and exports, though not in terms of employment, in
the 1990s. Lack of reliable and stable economic infrastructure, reduced growth of credit inflow
and technological obsolescence, which together would have led to inferior quality and low
productivity are the major bane of small industry in India. But at the sometime, international and
national policy changes have thrown open new opportunities and markets for the Indian small
industry.
Chengappa (2004)63 stated that the challenge lies with the ways and means of improving the
capacity of the agro-industries to harness forward linkages in agriculture and allied activities in
order to efficiently convert part of the output to value added products acceptable to the domestic
and international markets. In the process, this generates employment opportunities for different
types of skills through food processing, packing, storing, transporting, grading and distribution.
Jaya Kirshan (2004)64 in his study reveals that the nature of activities is dominant by
manufacturing SSIs, on the nature of operation, perennial activity dominates over seasonal
activity, limited companies are dominating under the nature of ownership followed by
proprietorship, young generation entrepreneurs employ more managerial staff than old
generation entrepreneurs. Entrepreneurs are experiencing the impact of WTO and its agreements
across the year of establishment and generations, however, awareness about WTO agreements
and its implications are poor and also SSIs are facing competition from larger and medium scale
industries outside the State than with in the State. He suggest to compare successfully with
internal or/and external industries due to the implications of WTO agreement with on-going

60
Karam Singh, (2003), “Report on Emerging Trends in Agro-processing Sector”, Indian Journal of Agricultural
Economics, Vol.58, No.3, July-September.
61
Ranjanendra Narayan Nag and Partha Pratim Ghosh (2003), “Industry- Agriculture inter-linkage, Agricultural
Trade Liberalization and Supply Constraints: A Post WTO Perspective”, Indian Economic Review, VoLXXXVIII,
No.2, pp.235-251.
62
. Bala Subrahmanya, M.H., (2004), “Small Industry and Globalization Implications, Performance and Prospects”,
Economic and Political Weekly, May 1, pp. 1826-1834.
63
Chengappa, P.G., (2004), “Emerging Trends in Agro-processing in India”, Indian Journal ofAgricultural
Economics, Vol.59, No.4, January - March, pp.55-74.
64
Jaya Krishna, M., (2004), “World Trade Organization and its Implications on Small Scale Industries in
Karnataka”, SEDME, Vol.31, No.2, June.
transition in industry, SSIs should use quality raw materials, improve productivity and reduce
costs vis-a-vis another countries.
Nagarjuna and Busenna (2004)65 in their study revealed that in the observed 14 sick units have
been facing sickness due to shortage of raw materials, managerial deficiency, lack of finance,
lack of demand, shortage of power, lack of skilled labour, lack of order in Ranga Reddy district.
The symptoms of 14 sick units are sales decline, continuous cash losses, not paying the bills in
time, unable to pay the loans.
Nandagopal and Chinnaiayan (2004)66 in their study reveal that the compound growth rate
(CGR) of small scale food processing industries was 2.44 per cent, which was higher than the
total SSIs registered in the study area. CGR was the highest (33.39 per cent) in production
followed by investment (20.14 per cent). Employment growth was 5.71 per cent. Investment
growth per SSI was higher (17.54 per cent) than per worker (13.91 per cent). Growth rate in
productivity per SSI was 30.02 per cent and per worker it was 26.19 per cent. The food products
sector in the study area (Coimbatore district in Tamil Nadu) was characterized by increasing
returns to scale. Further, they suggest that the Globalization creates serious challenges for Indian
small scale food-processing industries. This is the time to protect the sector by upgrading the
existing technology by providing adequate financial support with reasonable rate of interest.
Intensification of food parks and participate management are required to compete for quality,
price and service.
Raghurama (2004)67 in his study reveals that in Kerala especially after globalization there has
been a decelerating trend in the number of small scale units registered, investment made and
employment generated, despite the fact that the state is gifted with abundant natural resources
and favourable industrial climate. Small scale industries must be promoted on a large scale
considering the fall in investment and increase in unemployment in the state. This requires
initiative on the part of the entrepreneurs, change in the attitude of entrepreneurs and motivation
and incentive from the government. For the actual development of small scale industries
commitment, dedication and hard work are required on the part of the entrepreneurs. The small
scale industries must be competitive in the context of globalization for their survival and growth.
Otherwise, they will perish resulting in colossal waste of resources and unemployment.
Rajya Lakshmi (2004)68 in her study stated that the SSI units had latest equipment, except a few
units could not go for modernization. The machinery of the some units is below ten years old. On
the whole, the machinery in SSI units is good condition. Majority of the units are using right
quality material and input process control measures. The need to control the rejects or defective

65
Nagatjuna, B., Busenna, P., (2004), “Sickness in Small Scale Industries Case Studies of 14 Sick Small Scale
Industries in Ranga Reddy District”, SEDME, Vol.31, No.2, June.
66
Nandagopal, R., Chinnaiyan, P., (2004), “Small Scale Food Processing Industries: A Case Analysis”, SEDME,
31.2, June.
67
Raghurama, A., (2004), “Small Scale Industries in Kerala - Competitiveness and Challenges under Globalization”,
SEDME, Vol.31, No.2, June.
68
Rajyalakshmi, N., (2004), “Productivity Awareness among SSI Units - A Case Study”, The Indian Journal of
Commerce, Vol.57, No.2, April-June.
products. Though productivity management it is possible for SSI units to develop a competitive
advantage in a particular industry.
Rama Rao and Raju (2004)69 expressed that among the regions, the dominant role of yield effect
in Coastal Andhra and Telangana and area effect in Rayalaseema was observed in period I and
overall period, whereas, yield effect was dominant in all the regions during the overall period.
Thus, as in districts, in regions the dominant role of yield effect was clearly felt. In the State, as a
whole, change in yield has a higher effect on production.
Jabir Alie Sanjeev Kapoor (2005)70 stated in their paper to develop suitable interface between the
industry and the farmers in our country, there is a need to promote a partnership web between the
two. The nature of transaction should be symbolic in nature which can provide sufficient
incentives to both the parties to operate on the same level. The recent experiments of ‘e-chapel’
promoted by ITC and ‘Kissan Kendra’ by Tata Rallis are welcome steps in this direction. The
same spirit is very much required to build organizations that can provide a stable and sustainable
interface between the farmers and the agri-business companies.
Nagayya (2005)71 in his study stated that implementation of a few thrust areas followed in the
recent years to enhance the competitiveness of small scale sector reveals that the sector has
intrinsic strength to withstand global competition. It has been readopting itself to the emerging
needs. The process of liberalization has not only created new vistas, but also through up new
challenges for the sector. With globalization and WTO environment, the sector has to face
intensive competition in the years to come. The new trade regime offers opportunities for market
expansion to small enterprises and also provides a number of protective devices, which can be
legitimately used to extend relief, at least temporarily, against increasing imports in response to
elimination of quantitative restrictions and lowering of tariffs. SSIs can gain through product
innovation, diversification and strategic diversion from slow growth traditional products to high
value added growth products and adoption of aggressive marketing strategies. Formation of
consortia, cluster associations and strategic alliances with their counterparts in other countries,
technological linkages and financial tie-up can maximize the growth potential of SMEs in the
countiy.
John Victor Mensah (2005)72 in his article has presented evidence that only 43.7 per cent of the
sampled firms belonged to business associations, of which the majority were located in the urban
areas. Of this percentage, 81 per cent had derived benefits in various forms such as experiencing
sharing, training and credits. The main strategy for enhancing the effectiveness of the association
support is for entrepreneurs to adopt good business practice and strengthen collaboration among
association members, promotion institutions as well as national and local authorities.
69
Rama Rao I.V.Y. and Raju V.T. (2004), “Instability Analysis of Food grain Production Growth in Andhra
Pradesh”, Productivity, Vol.45, No. 1, April-June, pp. 102-109.
70
Jabir Ali and Sanjeev Kapoor (2005), “Technical and Seal Efficiency in the Indian Food Processing Industry”,
Productivity, Vol.45, No.4, January-March, pp.511-518.
71
Nagaiah, D., (2005), “Enhancing Competitiveness among Small and Medium Enterprises”, SEDME, Vol.32, No.l,
March, pp.53-74.
72
. John Victor Mensah (2005), “Business Associations and Business Performance of Small Scale Industries:
Evidence from the Central Region in Ghana”, Indian Development Review, Vol.3, No.l, pp.51-71.
Bardar Alam Iqbal (2006)73 expressed that industries recline on agriculture and the further will
witness greater fusion of industry and agriculture and one of the instruments for bringing this
fusion will be agroindustries. In this process of integration, the agro-industries could render
significant services by modernizing the outlook of the rural population gradually, thus reducing
tension and friction to a minimum which would lead to removal of regional and sectoral
imbalances.
Iqbal (2006)74 in his study on agro based industries has observed that agro-industries are
confronted with acute shortage of modem machinery and technology. There is usually
discrimination in import of modem technology in favour of large scale industries.
Reddy and Sarma (2006)75 stated in their study that the division TFP productivity growth rates
for 14 major states and all India textile industry for pre and post liberalization periods have been
presented. The results reveals that for most of the States, the TFP growth rates are relatively
lower and negative in pre-liberalization period for the textiles and manufacture of textile
products industries. The different studies investigated extensively on the problems of the agro-
industries on capital, labour, raw material, power and other issues, and also changes of the
productivity and employment in agro-industries. There were also few attempts on the part of the
researchers on the policy implications of agro-industries and small scale industries by various
governments in different states of India. Some researchers made micro level studies on the
impact of liberalization and globalization on agro-industry. A close scrutiny of the above studies
reveals that there is dearth of comprehensive study for a region like Andhra Pradesh. Hence, the
present study is intended to fill this gap.

73
Badar Alam Iqbal (2006), “Agro-industries: Key to Economic Progress”, Kurukshetra, February, pp.4-7.
74
Badar Alam Iqbal, op. cit.
75
Reddy V.K. and Sarma I.R.S. (2006), “Productivity in Indian Textile Industry: Trends and Determinants”, The
ICFAI Journal of Applied Economics, January, pp.80-88.