The Catalytic Role of Industrial Counsellors and Policy Makers

Volume 18, Number 3 Article by Pradeep Banerjee September, 2006

Managing India’s Small Industrial Economy – The Catalytic Role of Industrial Counsellors and Policy Makers : By V Padmanand a :

Despite E F Schumacher’s enthusiasm for small-scale economic enterprises, which he expressed succinctly with his simple message, ‘Small is beautiful’ and Joseph Schumpeter’s championing of the entrepreneurial innovator as a creative destructor responsible for economic development, when it comes to practicalities, it is difficult to make a hundred small scale units bloom in the economy. There is a plethora of reasons that accounts for both the continual morbidity and the early mortality of these units. However, the imperatives of distributive economic ownership, as well as the need to counter the negative aspects of monopoly growth processes, make state support available for the small scale sector, and policy makers continue to devise policies to resurrect dead units and enable new units to be set up. Moreover, in the Indian instance, the relevance of small-scale units is not an issue. By reason of sheer magnitude, the numbers of small-scale units that operate in the economy offer the requisite rationale. Furthermore, with competition gathering from small scale units in other countries such as China, the need for upfront intervention directed at managing the country’s small scale industrial economy becomes something of a necessity.

There are two sets of actors, according to the book under review, who are best placed to make smaller firms both viable and vibrant, given their intimate concern with the development of this sector. The first is the set of industrial counsellors whose role at the micro level is clear cut and who along with the entrepreneur are concerned with the growth of a unit at the ground level. At the other end of the spectrum is the policy maker who at the macro level is concerned with the working of units in unison such that these can cumulatively contribute to the growth of the economy. Industrial counsellors and policy makers play the role of catalysts in the growth process of small-scale units. In the Indian context, their roles become almost inevitable and concerted action at both ends would result in a win-win situation for all concerned.

The authors aim at providing the interested reader with a handbook in the area of small scale unit management. The book starts with the identification of the ‘concern areas’ of small sector industrial units in operational matters and moves on to suggest methodologies that could be used to alleviate these operational problems. Additionally, illustrations are provided in the form of specific case studies illustrating how unit level concerns were identified, analysed and worked upon to arrive at resolutions for implementation.

The role of policy makers and industrial counsellors has been defined in the context of what they need to do and their intervention is called for at various levels. Recognising the paucity of studies that elaborate on ‘ways in which small enterprises are able to realise their potential for sustainable development’, the advice to industrial counsellors is that they work comprehensively ‘to understand firm-specific dynamics affecting development of a small enterprise in the context of the Indian business and economic environment’. Industrial counsellors are urged to build domain knowledge of all those aspects that prompt successful entrepreneurial performance by certain units, as well as those aspects that cause underperformance. Such well-formed domain knowledge is a pre-requisite for the taking of steps required to revitalise units in the throes of poor business performance. These revitalising steps include introducing working level changes as also product level changes; working towards financial viability at the operational level through a proper assessment of unit specific working capital requirements and tapping cost advantageous subsidised fund flows available from state institutions; and developing market-oriented strategies in order to ensure market compatibility of products manufactured by a unit.

If the above steps are to be initiated at the intra-unit level, the authors suggest that inter-unit networking built around certain principles could enhance unit level viability too. The text advocates the approach of aggregating small-scale units into consortia that become functional in operational activities. The consortia model works at building networks and allowing participating partners to pool their resources. The consortia could negotiate for discounts on purchase of inputs thus reducing production costs and present a combined front to access markets.

To enhance small-scale unit viability, the state on its part must make the right policy measure inputs that would influence the internal and environmental factors affecting operations, such as reducing the cost of operations and enabling market access. The state can increase benefits to the economy by adoption of policies supportive of the consortia approach. At the same time, counsellors are advised to work on translating these policies at the unit level to ensure viability of operant units.

Essentially, then, the text endorses that the two strands, namely, small-scale industrialisation and entrepreneurial innovativeness, are important processes which when carried through promise significant benefits leading to the development of the economy. And what enables these processes are contributions by counsellors and policy makers with specific domain expertise at the individual unit level and the combined consortium level. Pegging the roles of policy makers and counsellors both individually and in a combined mode, and exhorting them to play their roles with a ‘missionary zeal’ is, therefore, an interesting contribution of this text.

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