It has already plunged into deceleration because of its inability to absorb latest technologies, which eroded its competitiveness a great deal.

The above assessment has been arrived at a study on "Prospects of small scale industries in 2008 vis-�-vis other Booming Sector" such as retail, real estate, IT and stocks, as carried out by the Associated Chambers of Commerce and Industry of India (Assocham).

The assessment highlights that the large and medium scale-industries are sourcing their inputs through cheaper imports that have endangered the existence of SSIs and the trend is unlikely to be arrested in 2008.

The small scale industries input costs have also risen and their supplies got restricted to vendors as, by and large, SSIs have failed to absorb technologies since these called for higher investments in research and development, which the sector could not generate.

Releasing the analysis, Assocham president Venugopal N Dhoot said the small scale industries would encounter a gloomy period in 2008 as its contribution to manufacturing would come down to 35 per cent as compared to the present 40 per cent, and over 45 per cent in preceding years until 2006-07.

The number of small scale industries units in 2006-07 were estimated at 4.4 million with employment capacities for nearly 23.8 million workers.

Since not many visible policy decisions such as reduction in inspector raj nor credit extension is being given to them at concessional rates, their export potential would decline by 7-8 per cent.

Thus, vendors in medium and large industries are sourcing their supplies from economies of scale at much cheaper price and the trend will continue as customs and import tariffs for most of the inputs would fall.

Until small scale industries upgrade them technologically and the number of inspectors are reduced to less than 15, their contribution to exports as well as manufacturing would fall by 5 per cent and over 8-9 per cent, said Dhoot.

The Assocham chief added that expansion in most of small scale industries units have come to virtual halt and plugged employment opportunities.

The credit extension is at very high cost and their delivery mechanism too is faulty. As long as these impediments continue, thesmall scale industries would find it difficult to compete with their counterparts.

The other barriers in the path of SMEs are lack of information, capability to build an international market position and maintaining international business relations.

Most enterprises in this sector are product and technology-oriented than market-oriented. Moreover, the lack of managers with international experience and foreign language skills is another hindrance in their growth.

Among the external barriers, the most crucial are technical trade restrictions including standardisation, quality requirements, conformity assessment, packaging and labeling, ecology requirements etc, bureaucratic procedures, marketing and distribution problems and lack of risk assurances.