While sales growth has picked up for small-scale industries over the past couple of years, an all-India survey by the All-India Management Association says things may not be that rosy.

If measured over a four-year period from 1998 to 2002, overall sales growth for 872 SSI units, sampled earlier this year from all over the country, has gone down 5.2 per cent.

In comparison, official statistics show a 30 per cent hike in SSI production in this period. Within the SSI sample, in manufacturing, the growth fell by 8.1 per cent in 1998-2002, while SSI units in the services sector grew 16.3 per cent.

As a result of this poor growth, an amazingly large proportion of SSI units (a little over 60 per cent) are not confident of surviving the next five years.

For select segments, like auto products, growth was a whopping 58 per cent in the four-year period.

Confidence levels, not surprisingly, are higher in service sector firms, which have been seeing much higher growth rates than their manufacturing sector counterparts.

Interestingly, the policy of reservation of specific industries for small-scale units, found limited support: only 29 per cent of the respondents considered this beneficial.

A sign of just how poorly prepared the SSI sector is can be gauged from the fact that (according to the survey) just 52 per cent of units in the manufacturing sector were able to exploit opportunities in the market — the figure for service sector SSI units is marginally higher, at 56 per cent.

In other words, the sharp rise in SSI service units has more to do with the overall market growing than with their intrinsic abilities.

The main reason cited by the units for not being able to do well are lack of marketing skills (70 per cent), lack of finance (25 per cent), inspector raj (13 per cent), power shortages (14 per cent) and poor technical expertise (15 per cent).

Interestingly, it is not just imports from countries like China that are cited as a problem, a big threat has been from larger regional players like Priyagold in the biscuits segment and national players like Britannia and Parle, who offer similar products at similar prices.

In fact, about a third of SSIs actually felt globalisation/liberalisation had helped growth and another 15 per cent neither agreed nor disagreed — far more firms in the services sector benefited from globalisation/liberalisation.