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1.1 Introduction
Kerala, a land of remarkable and unequalled beauty, evergreen forests, palmy
backwaters and strategic location on the trans-national trade corridor with excellent
communication network, high density of science and technology personnel, highly literate
work force, a good network of banks, well-connected road and rail network and rich
natural resources, is a favourable ground for the industrial development.
The small scale industrial sector is one of the most dynamic and vibrant sectors
of the Indian economy in terms of employment, production and export. In micro, small
and medium eterprises sector, it is estimated that about 59 million persons are working
in over 26 million units throughout the country. Out of the total units, 95.05 percent are
micro, 4.74 percent are small and 0.21 percent are medium enterprises. There are over
6000 products ranging from traditional to high-tech items, which are being manufactured
by the MSMEs in India. It contributes 40 percent of the direct export, 45 percent of the
total industrial production with 8 percent of the GDP.
The major traditional industries in Kerala are coir, handloom, handicraft, cashew,
khadi, sericulture, beedi, bamboo etc., and the non-traditional industries are rubber based
industries, information technology, food processing, ready made garments, tourism,
ayurvedic medicines, marine products, engineering goods etc. The cottage industries
are tiny or micro enterprises which come under the SSI or MSME sector. The cottage
INTRODUCTION
CHAPTER 1
Chapter - 1. Introduction2�
and small scale industries have a significant role in the national economy, offering as
the scope for individual, co-operative enterprises and a means for the rehabilitation of
displaced persons for the better utilisation of local resources and thereby achieving self-
sufficiency.
The Indian economy has undergone substantial changes since the introduction
of economic reforms in 1991. These reforms were a comprehensive effort consisting of
three main components viz., Liberalisation, Privatisation and Globalisation. They include
various measures like de-regulating the markets and encouraging private participation,
trade liberalisation, dismantling the restrictions on domestic and foreign investments,
reforming the financial sector and the tax system. All such policy initiatives radically
changed the economic setup of the country and integrated it with the rest of the world
[http://www.business.gov.in/indian_economy/eco_indicators.php]. Those policies and
procedures compatible with the globalisation and liberalisation may have affected the
cottage industries in Kerala.
The SSI sector is now more exposed to severe competition both from
large scale sector and multi national companies due to the globalisation policies.
The competitiveness in Indian industries is so severe with the abolition of industrial
licensing and restrictions on MRTP companies, liberalisation of foreign investment,
import of foreign technology, removal of quantitative restrictions on industrial goods,
reduction of import rates etc. [Soundarapandian, 2006, P.184].
The economic policies of liberalisation and privatisation have created a
situation where Indian industry in general and small scale sector in particular are
seriously threatened. The removal of quantitative restrictions on import and
dereservation of small scale industries are affecting small industries badly [Economic
Review, 2000, P.101].
There are changes in the cottage industries in Kerala due to the economic
reforms of liberalisation and globalisation. The changes and impact may be favourable
or unfavourable, siginificant or insignificant. The study discloses the impact of
globalisation and liberalisation policies in coir, handloom, handicraft and other
manufacturing industries in the cottage industrial sector in Kerala and also changes in
the functional areas of cottage industries in Kerala.
Chapter - 1. Introduction 3�1.2 Statement of the Problem
According to Viswanathan Tekumalla, “cottage industries are industries where
artisans not exceeding nine per industrial unit, find employment in urban or rural areas
either as independent workers or apprentices or assistants in or at their own or their
employer’s home or as wage-earners in small karkhanas and work with capital, limited
in practice but not in theory, adopting at times a simple and harmless division of labour
and employing such hand or power-driven machinery as does not interfere with the
utility and art value of the products, whose market is by no means merely local” [Chitra,
1948, P.38].
The cottage industry is one which is carried on in a place which is not a
factory for the purpose of Factories Act of 1948, i.e. an industry which is carried on
wholly or primarily with the help of the members of the family as whole or part time
occupation. As per the Factories Act 1948, SSIs are those organised units which
do not ordinarily employ more than 100 persons without power or 50 persons with
power and have working capital less than rupees five lakh [Rao, 1979, P.20].
The Government’s policy on cottage and small scale industries was concretised
in the Industrial Policy Resolution of April 1948. The Industrial Policy Resolution laid
emphasis on cottage industries.
From the approach outlined in the Industrial Policy Resolution, an All
India Cottage Industries Board was set up in 1948. Later it was bifurcated into six
boards by the end of the first five year plan namely the All India Handloom Board,
All India Handicrafts Board, Central Silk Board, Coir Board, All India Khadi and
Village Industries Board and Small Scale Industries Board. While the first five
were to be concerned with traditional [village] industries, the Small Scale Industries
Board was to be concerned with modern small scale industry. Government policy
on industry was further elaborated in the Industries Development and Regulation
Act of 1951.1
1 The Act laid down that all undertakings in industries listed Schedule I annexed to the Act, with a size
larger than a specified minimum would need to be registered with an agency to be notified by the
Government. More importantly, the setting up of new units of a size larger than the specified minimum
in the ‘schedule industries,’ or substantial expansion [above 25 percent of existing capacity] of the
existing units in the scheduled industries, would require the prior approval of the Government of India
in the form of industrial licenses [Suri, K.B., Small Scale Enterprises in Industrial Development - The
Indian Experience, New Delhi:Sage Publications India Pvt. Ltd.,1988, p.302.].
Chapter - 1. Introduction4�
Those industries using locally available raw material, small equipment and tools,
less power, number of employees less than ten, production is done in their own houses
or work shed adjacent to their own houses and which is not under the purview of Indian
Factories Act 1948 can be considered as cottage industries.
The expansion of cottage and small scale industries depends upon a number of
factors like the provision of raw materials, cheap power, technical advice, organised
marketing of their products, safeguards against intensive competition from large firms,
as well as on the education of the worker in the use of the best available technique.
The traditional industries in Kerala include coir, handloom, handicraft, khadi,
bamboo etc. The coir industry is one of the major traditional industries in Kerala, consisting
of three major sub-sectors, viz. fibre extraction, spinning and weaving. The industry
employs 3.75 lakh workers and 76 percent of them are women [Economic Review,
2008].
The handloom industry is largely rural-based and is an important provider of
rural non-farm employment. In fact, handloom is the largest employment provider after
agriculture in India [Niranjana, 2007]. Among the total export of handloom from Kerala,
roll fabrics is 5 percent and the remaining is made-ups [Moray, 2007]. Handloom industry
in Kerala gives direct employment to 1.5 lakh people. About 15 handloom exporters in
Kannur together clock over Rs.300 crore turnover. By 2010, the target is to perk this up
to Rs.1000 crore, sending handloom from Kerala to about 50 countries. But the local
sale is only Rs.50 crore per year [Meher, 2007].
Handicraft industry is a major area for employment generation in Kerala by
upholding our tradition and culture. Coconut shell carving, straw picture making, cane
work, bamboo and reed weaving, ivory carving, bell metal casting, screw-pine, mat
weaving are the major handicraft items produced in Kerala. The Kerala State Handicrafts
Apex Co-operative Society, Handicrafts Development Corporation, Kerala State Bamboo
Corporation, Kerala Artisans Development Corporation are the institutions to promote
handicraft industry in Kerala. There are a number of institutions to promote other industries
Chapter - 1. Introduction 5�
2 Kerala has developed through the course of ages, a culture all its own and as a result, a number of
industries to provide for the artistic and utilitarian needs of that culture sprang up. Most of them survive to
the present day. It has been the constant endeavour of the cottage industries movement to sustain and
rehabilitate the indigenous industries of old and bring them into line with modern demands and
requirements. These industries fall under the following head:- handloom products, coir goods, ivory and
horn carvings, rattan, reed and grass-works, wooden toys, bell-metal curios, screwpine articles [Chitra,V.R.,
Cottage Industries of India, Madras: Silpi Publication, 1948, p.237.].
in Kerala like Kerala Khadi and Village Industries Board, District Industries Centres,
KITCO, KINFRA, K-bip, SIDCO and SIDBI.
The impact of western civilisation, symbolised in the dumping of cheap products
of the machine age, had for a short time dimmed the popularity and value of the cottage
industries’ products of Kerala.2
During the year 1991-92, the Indian economy faced a very difficult situation like
high rates of inflation, deficits in the domestic budget, large indebtedness, decline in the
agricultural and industrial growth, large current account deficits in the balance of payments
and low foreign exchange reserves. These circumstances compelled the Government
of India to undertook a package of policy reforms for the Indian economy named as
macro stabilisation and structural adjustments in July, 1991. These reforms are termed
as liberalisation, privatisation and globalisation. These reforms opened the economy to
the world and this paved the way for the arrival of MNCs to India, importing of cheap
products, more competition, entry of MNCs and big firms in the small scale industrial
sector, removal of production limit etc., which may have unfavourable impact on
industries, especially the cottage industries. So the performance of cottage and small
scale industries might have deteriorated during the post-liberalisation period.
The Government has taken a number of policies without much discussion with
the stakeholders. A majority of the cottage industrialists are non-exporting units so they
may not have awareness of trade policies, export policies, industrial policies etc. But
exporters have awareness of such policies because they are familiar with these policies.
These policies may influence significantly or insignificantly the industries, especially the
cottage industries. Some of these policies may have positive impact and some of them
may have negative impact on the cottage industrial sector in Kerala.
Chapter - 1. Introduction6�
The major policies concerned with the economic reforms include:
� De-reservation of SSIs
� Reduction in Customs Duty
� Abolition of Quantitative Restrictions
� Abolition of Industrial Licensing
� Foreign Direct Investment
� Export Credit Reforms
� Anti Dumping Measures
� Market Access Initiative Scheme
� Devaluation of Indian Rupee
� Elimination of Export Subsidy
� Interest Rate Reforms
� Reduction in Excise Duties
� Trade Related Intellectual Property Rights
� Trade Related Investment Measures
� General Agreement on Trade in Services
� Changes in Research and Development
� Making Rupee Convertible - Partial or Full
� Adaptation, Absorption, Assimilation and Diffusion of Technological
Advances
� Removal of export subsidy
� Elimination of MRTP limit
� Changes in FERA regulations
� Liberalisation of EXIM policy
� Reducing Subsidies
� Privatisation and Disinvestment in Public Sectors
� Single Window Clearance Facilities
� Public Distribution System
� Mergers and Acquisitions
� Special Economic Zones
Chapter - 1. Introduction 7�
� Employment Guarantee Programme for Poverty Alleviation
� Foreign Technology Agreements
� Free Trade Agreements etc.
The implementation of New Economic Policy in India has put the small scale
sector in a difficult position. The Government of India took some steps during the
liberalisation period such as the devaluation of Indian currency, reduction in the import
tax, de-reservation of 15 items during 1997, removal of quantitative restrictions in 1999,
foreign direct investment ceiling etc. [Soundarapandian, 2006, P.181].
For the purpose of the study, twelve such policies were considered namely:
� Reduction in Customs Duty
� Foreign Direct Investment
� Anti Dumping Measures
� Abolition of Quantitative Restrictions
� Devaluation of Indian Rupee
� De-reservation of Small Scale Industries
� De-licensing of Industries
� Interest Rate Reforms
� Reduction in Excise Duty
� Trade Related Intellectual Property Rights
� Trade Related Investment Measures and
� Foreign Technology Agreement
In order to mitigate the negative impact of these policies, all the stakeholders can
take effective measures such as the reduction of cost of production, modification of
existing products, diversification of products, finding more export orders, forming cluster
units, developing geographical brand name, taking quality mark certification, conducting
marketing research, implementing e-commerce, increasing the volume of production
and amount of capital, development of local market, producing value added eco-friendly
products, attending in international trade fairs and exhibitions, starting more ancillary
Chapter - 1. Introduction8�
units, modification of technology, implementing new method of production, implementing
new packaging techniques, starting special economic zones for the small scale industries
sector, starting small industrial parks etc.
The cottage industrialists may not have awareness of these policies but exporters
may have awareness of these policies. These policies might have affected the cottage
industries favourably or unfavourably. The exporters and industrialists can utilise the
opportunities of favourable policies. The exporters, industrialists, government and various
industrial associations can take a number of measures to face the challenges of
unfavourable policies. These policies may lead to a number of changes in the overall
economy in general and industrial sector in particular so it may influence the functional
areas of cottage industries in Kerala.
1.3 Review of Literature
The progress of modernisation of the traditional techniques have been studied
with reference to the two major traditional industries of Kerala viz. coir and handloom. It
is concluded that the main difficulty encountered in the adoption of the machine technique
is the displacement of labour and the consequent technological unemployment it
generates [Oomman, 1967].
The lack of advertising on the part of SSI units becomes a handicap for procuring
and maintaining a share in the market. SSI units, often engage in only one line of product
or activity i.e. with no diversification of activities [Roy,1983].
The share of SSI manufacturers in the total export of export houses, including
trading houses, was 28.7 percent in 1979-80 which was increased to 41.8 percent in
1981-82. Both the State and Central Government offer greater incentives to those export
houses which export SSI products [Kapoor, 1984].
The workers in the traditional and modern sectors differ considerably in their
background. Most of the modern sector workers come from middle or lower level
background. But most of the traditional sector workers are from the working class
background [Zachariah,1990].
Chapter - 1. Introduction 9�
The functions involved in the management of village industries are similar to that
of a large industry, which involves planning, organising, staffing, controlling, financing
and marketing. Lack of raw material is a serious problem in village industry, 51 percent
of the units obtain raw material from different parts of Kerala and rest of them bring raw
material from Tamilnadu, Karnataka etc. In village industries on an average there are 9
workers per unit. Among the workers female representation is dominated i.e. 76 percent.
As the remuneration from village industries is too small to sustain their livelihood, the
traditional workers do not like to suggest this occupation to their younger generation,
which may result in the gradual decline of traditional industries in the State [Sreedevi,
1992].
The small firms get three types of significant privileges like product reservation,
excise concession and reservation of bank credit as well as interest rate concession
[Desai, 1993].
Planning the SSI includes identifying opportunities, assessing resources and
their sources, obtaining licences and clearances, documentation, preparation of project
feasibility report, tying up with promotional and supporting agencies and finally the
project implementation [Thomas, 1994].
There was continuous increase in the number of sick units during the period
1981 - 1991. The incidence of sickness in the SSI sector is significantly higher than the
other sectors. The study of the pre-operational problems of the SSI units reveals that the
demand in the domestic market is the most prominent factor considered by the majority
of entrepreneurs of the sick and the non-sick units for the selection of products. Before
starting their projects 52.5% of the non-sick units and 48.8% of the sick units had not
conducted any market survey. Irregular supply and price variation in raw material are the
major problems faced by the SSI units in general [Kumar, 1994].
Among the variety of incentives, the coverage of incentives was thin and the
number of units assisted and the amount of assistance per unit are very small.
Chapter - 1. Introduction10�
The problem of limited coverage of many of these incentives was made worse by the
cumbersome and time-consuming procedures involved to get the incentives. As a result,
many of the units could not even apply for such incentives. In Kerala, assistance given
by banks and other financial institutions for SSI units was comparatively small [Manalel,
1994].
The quality of the SSI products or service has been identified as the major
determining factor facilitating the demand [Gopakumar, 1996]. The small scale industrial
units did not give importance to marketing research [Kumar,1996].
The SSI units which are run by women entrepreneurs, depend mainly on local
market hence they feel less marketing problems [Koshy, 1998]. The lack of credit facility
is the major problem in SSI sector in Kerala [Correya, 2000].
In Kerala, there are a large number of Government manufacturing units mainly in
the SSI sector. Nearly 10 % of the total SSI units registered in the State fall under this
industry [George, 2002].
The small scale and informal sector, often referred to as unorganised sector is
the major contributor to employment in the manufacturing sector. The policy of de-
reservation of SSI has immense harm to their growth [Mathur, 2002].
An amount of Rs. 5 crore under Market Access Initiative has been given for
promoting cottage sector export coming under the KVIC. Under the Export Promotion
Capital Goods Scheme, the industries are not required to maintain an average level of
export while calculating the export obligation. These units get export house status on
achieving an average export performance of Rs. 5 crore as against Rs.15 crore for
others. The units in handicraft sector are entitled to duty free imports of an enlarged list
of items as embellishments up to 3 percent of FOB value of their export [Das, 2002].
The objectives of Human Resource Management in rural sector are to increase
the productive employment of the farmers, landless labourers and artisans, to develop
Chapter - 1. Introduction 11�agro-processing, fruit processing and vegetable processing industries, to improve the
service sector through development of agriculture or rural sector including inter alia
infrastructure development [Mehrotra, 2002].
The dumping of Chinese goods has seriously affected the SSI in India hence a
large number of SSI units became sick and closed [Datt, 2003, P.818].
The third all India census of small scale industries which announced its results
in August 2004, The size of the small enterprise sector is around 10.52 million units. The
total employment contribution of the sector is 24.93 million. The export contribution of
the sector is Rs.14,199 crore and the number of exporting units are 50,606 [Mathew,
2005].
The parameters of pre and post-globalisation is given in table 1.2.
Source: P.M. Mathew, “Waiting for a new deal”, Survey of Indian Industry 2005, Chennai, the Hindu, November22, 2004, pp. 43-45.
Post-Globalisation
Collaborations
Strategic alliances
Outsourcing - Local / International market
World Market
Flexible Production System
Focus on growth
Pre-Globalisation
Local / National Investment
Single-firm activity
Manufacturing for self-identified market
Local Market
Rigid Production System
Limited Economic Interest
Table 1.1
Pre and Post-Globalisation Parameters
Sl.No.
1.
2.
3.
4.
5.
6.
The rating scheme formulated by the National Small Industries Corporation
Limited is expected to be advantageous to the SSI sector. It has been formulated in
consultation with various stakeholders such as Small Industries Associations, Indian
Banks Association and various rating agencies such as CRISIL, ICRA and Dun &
Bradstreet. The NSIC is the nodal agency for implementing the scheme of performance
and credit rating for SSI [The Hindu, Thiruvananthapuram, June 25, 2006].
The Indian SMEs are the second biggest employment generator after agriculture
and it provides jobs to over 59.2 million people and account for 39 percent of the industrial
Chapter - 1. Introduction12�
production and 34 percent of the export. There are about 350 urban SMEs clusters and
2000 rural artisan based clusters in India [Foreign Trade Review, 2007].
SSI faces competition due to liberalisation policies. The transport equipment
and parts industry, media and publishing and wood products industries are highly inefficient
in both organised and unorganised sectors [Sreepriya, 2007].
Coir industry has two distinct sectors. The first is the processing sector consisting
of all the stages from the retting of coconut husks to the spinning of yarn. The second is
the manufacturing sector comprising the production of a variety of goods such as coir
mats, mattings, rugs, carpets etc. The processing sector extends over the whole coastal
belt of Kerala and the manufacturing sector is mainly located in Alleppey and its suburbs
[Unnithan, 1968].
Kerala, Madras, Maharastra and West Bengal have declining shares of
‘agriculture’ and rising shares of both ‘manufacturing’ and ‘services’. But in Orissa and
Rajasthan, have rising shares of ‘agriculture’ and declining shares of both ‘manufacturing’
and ‘services’ [Krishnamurty, 1970].
The coir co-operatives in Kerala owe their origin to the coir development scheme
formulated by the Travancore - Cochin Government in 1950. The cottage side of the coir
industry had three distinct phases of activities viz. [a]. collection and supply of raw material,
i.e. husks [b]. production of coir yarn and [c]. marketing of coir yarn produced. These
functions are performed by thondu vyavasaya co-operative societies, coir vyavasaya
co-operative societies and coir marketing co-operative societies. The manufacturing
co-operatives are faced with the problems of working capital and marketing [Varkey,
1981].
The coir industry which is one of the oldest export oriented industries in the
State has been affected by several problems. The fall in demand for coir products in the
world market, competition from other products and other producing countries, absence
of technological improvements, increasing cost of production, shortage of raw material
Chapter - 1. Introduction 13�absence of marketing strategies etc., are the major problems in Kerala [Jacob, 1985].
The unorganised sector is not systematically covered by labour laws and women
in this sector suffer from powerlessness, immobility and lack of bargaining power. The
problems of coir workers are low wages, long working hours, poor health conditions
etc. [Jayasree, 1994].
Kerala is the largest producer of coir and coir products in India. The agencies
working in the coir sector in Kerala are the Coir Board, KSCC, Directorate of coir and
COIRFED. These agencies have undertaken a number of schemes with the ultimate
aim of developing the industry in the co-operative sector. However, the contribution of
co-operative sector in the total production of coir and coir products in Kerala is only
15%. The private sector contributes a major share and is working without any sort of
assistance from these agencies [Pillai, 1994].
Kerala is the largest producer and exporter of coir and coir products in India.
Kerala’s share in the total export of the country amounted to around 96% in 1996-97.
India’s coir products export in quantity terms decreased from 52,312 tons in 1971-72 to
48,569 in 1997-98. But in value terms the export increased from Rs.14.85 crore in 1971-
72 to Rs. 226.51 crore in 1997-98. The annual growth rate in the value of export was
4.28 percent while the annual rate of decline in the quantity of export was 0.31 percent.
The decline in the quantity of export is an indication of poor export performance [John,
2000].
The coir industry has been developed in Kerala as a labour oriented cottage
industry. In terms of the number of persons employed, coir industry is the largest traditional
industry in Kerala. It plays a very significant role in the economic development of the
country as a source of employment, income and foreign exchange earnings of the country.
For historical reasons, cultivation of coconut and related coir industry have deep roots in
Kerala. In addition to the availability of raw materials, the abundant natural retting facilities
like long coastal areas and lagoons, Kerala alone accounted for over 80 percent of the
total production of coir in India.
Chapter - 1. Introduction14�
The coir industry in Kerala has different processes like, retting of husks, extraction
of fibre, spinning of coir yarn, manufacturing of coir products and exporting of coir. The
traditional items of export are coir fibre, yarn, coir products such as coir mats, mattings,
rugs, carpets, ropes etc. Besides these, some non-traditional coir products such as
rubberised coir products, coir-geo textiles, coir pith etc., are also exported from the
country. The Research and Development of coir industry is carried out primarily by the
Coir Board through its various concerns such as the Central Coir Research Institute,
National Coir Training and Design Centre and Central Institute of Coir Technology [Menon,
2002].
Among the agro based industries, coir is the most important one. As a traditional
industry, it plays a significant role in the economic structure of the country as a source
of income, employment and foreign exchange earnings. India and Sri Lanka are the
major producers and exporters of coir and coir products in the world market [Nair, 2003].
The Coir Board introduced a series of welfare schemes for coir workers. The
Model Coir Village Scheme was started to provide basic amenities of life to the coir
workers. As per the direction of Government of India, the Coir Board implemented Model
Coir Village Scheme in Kerala from the year 1991-92 onwards [Thresiakutty, 2005].
Between April and December in 2005, coir export touched a total of 97,168 tons,
estimated at Rs.363 crore, compared with 87,020 tons, valued at Rs.354 crore during
the corresponding period in 2004-05. The increase in value is 2.31 percent and quantity
11.66 percent. The Central Coir Research Institute is the premier research institute in
the coir section, having state-of-the-art equipment and testing facilities for coir material.
The testing laboratory attached to the centre is recognised by the Australian Quarantine
Inspection Service, American Society for Testing Materials and the Bureau of Indian
Standards. The services and facilities available in the centre are open to coir traders and
industrialists and research students [The Hindu,Thiruvananthapuram, June 27, 2006].
The Union Commerce Ministry had granted the ‘Centre of Excellence’ status in
export to Alappuzha and Kollam [The New Indian Express, Kochi, October 13, 2006].
Chapter - 1. Introduction 15�
The ministry is willing to support mechanisation, modernisation and value addition
initiatives of the coir sector. A couple of major initiatives have already been taken by the
government. The Alappuzha Cluster Development Programme, at a cost of Rs.56 crore,
will be implemented as soon as the share of stakeholders. The ministry has also
sanctioned Rs. One crore each for the development of 24 other coir clusters across the
country [The New Indian Express, Kochi, October 13, 2006].
The export of coir and coir products from India has increased 7.33 percent in
quantity and 13.79 percent in value during the first half of 2006. The growth has been
4,906 tons in quantity and Rs.32.54 crore in value during the first six months of 2006-07
compared to the first six months of 2005-06. During the period under review, a total of
71,840 tons of coir and coir products were exported. These export fetched Rs.268.43
crore. During the first half of the year 2005, the total quantity of coir and coir products
export stood at 66,934 tons worth Rs.235.89 crore. India and Sri Lanka account for
about 90 percent of the coir fibre production [The Hindu, Thiruvananthapuram, October
30, 2006].
The shortage of raw material is one of the main problems that the coir sector is
facing. The coir industry in the State, which is a major coconut producer, depend other
States for husk. The State produced nuts worth Rs.572 crore annually, but not even 35
percent of the husk is converted into yarn. Husk is either a waste item or is used as fuel.
In 1947, the State exported just Rs.8 crore of coir products. In 2005-06, it earned
Rs.508 crore through export. If the internal consumption is also taken into account, the
sector would have earned Rs.1000 crore. Taking into account the problems faced by the
coir industry, the State Government had earmarked Rs.5 crore for procurement and
processing of raw husk. The coir industry was labour intensive, with more than 4 lakh
employed in the sector, of which 80 percent are women [The Hindu, Thiruvananthapuram,
October 30, 2006].
The Coir Board is drafting new strategies to widen the contours of the coir markets,
which has reached a stagnation point. Exploring new markets and entering into joint
Chapter - 1. Introduction16�
ventures with new countries would help a lot in expanding the market. South Africa is
our first destination and a gateway to other countries in the continent. All these countries
need a lot of coir and coir products to construct their dwellings [The New Indian Express,
Kochi, March 24, 2007].
The handloom products, coir products, ivory and horn carvings, rattan, reed and
grass works, wooden toys, bell metal curious and screwpine articles are products
produced in the cottage industries [Chitra, 1948].
The textile industry comprises mills, powerlooms and handlooms in which
handloom is the most scattered and unorganised one. However, it plays a key role in the
Indian economy. The lop sided capital structure, antiquated production methods and
absence of training are the major problems in handloom industry. The Kerala State
Handloom Development Corporation, established in 1968, provides raw material, financial
and marketing assistance to weavers outside the co-operative field [Krishnan, 1985].
The country-wise production pattern of handloom shows a significant discrepancy
between co-operative spinning mills and requirements [Manickavasagam, 1986].
The cheap handloom goods to Kerala from neighbouring States in large quantities
and their aggressive marketing strategies are the threats to HANTEX and HANVEEV in
Kerala [Rajagopalan, 1986].
The average net working capital of cotton mills in Kerala is lower than that of
cotton mills in South India. The working capital of handloom sector is raised from short-
term external sources such as bank borrowings and sundry creditors [Kevin, 1988].
Among the industrial disputes in India, 30 to 40 percent of them are in textile
sector [Kumar, 1989]. Weaving is the most important activity of rural India next to
agriculture. There are a number of weavers scattered across the country to produce
textiles for domestic and export purpose [Swarnalatha, 1991].
Chapter - 1. Introduction 17�
The Swadeshi Movement of the 1920s was a factor in the encouragement of
textiles. The textile industry in India consists of mills, handlooms and powerlooms. There
may be more scope for higher productivity, if only Indian labour accepts more work by
manning more machines, as a result of which labourers would also benefit by way of
higher emoluments [Thilakavathy, 1996].
The salary and wages of employees in the textile units in Kerala are very low
compared to other public and private sector enterprises. A majority of employees in the
textile sector belonged to 45-55 years and they are under-educated and technically under-
qualified [Prasad, 2002].
Handlooms produced in India are about one third of the total cotton cloth required
for consumption in the country and for export abroad [Prasad, 2003]. The textile and
clothing sector provide direct employment [formal and informal] to an estimated 38 million
people nation-wide [Tewari, 2005]. The liberalisation of textile import led to a sharp increase
in import of textiles in the period 2000 to 2003 [Goldar, 2005].
Development Commissioner [Handloom] implemented various schemes for the
benefit of the handloom weavers, such as supply of inputs, production and marketing
support, welfare package, training etc. The Government of India introduced a group
insurance scheme for handloom weavers throughout the country in the year 1992-93.
Under this scheme a weaver is provided an insurance coverage of Rs.10,000/- for an
annual premium of Rs.120/- which Central Government and State Government equally
contribute [Thresiakutty, 2005].
The partnership and co-operative forms are suitable for handloom sector. It is an
important employment provider and the number of employment opportunities in this
sector have been increased over the last years [Cornelius, 2006].
The handloom quality mark was launched for handloom products that will help
buyers to distinguish between genuine items diligently crafted by artisans and the poor
imitations produced by powerlooms. The ‘Handloom Mark’ designed by the National
Chapter - 1. Introduction18�
Institute of Design, Ahmedabad, will be implemented by the Mumbai based textiles
committee, a statutory body under the Ministry of Textiles. The scheme is expected to
not only help the buyers in getting guaranteed products, but also help the artisans, who
are facing myriad threats to their very survival with the advent of powerlooms [The Hindu,
Thiruvananthapuram, June 28, 2006].
The export of handloom textiles from Kannur region is increased from Rs.300
crore to Rs.317 crore during 2006-07. We export handloom textiles to USA, Canada,
England, France, Japan and gulf countries by 40 Handloom exporting companies. Among
the total export from Kerala State 50 percent is exported to USA, 30 percent to Europe
and remaining 20 percent to gulf countries. t-shirt, shirt, women and children’s dress
materials are the major exporting products. Abolition of quota restrictions gave more
opportunities to the Indian industrialists. High quality and prompt delivery of products are
the peculiarities which give immense help to get more orders from foreign countries
[The Malayala Manorama Daily, Pathanamthitta, September 24, 2007].
The handicraft products have cultural and artistic value than the volume and
price [Kale, 1963]. The level of activity in the wood industry sector depends entirely on
the wood supply. The employment of labour in the wood industry sector of Kerala has
been projected to vary between 25,000 and 40,000 in 1980 and between 21,000 and
53,000 in 2000 [Cherukat, 1973]. The relative order of importance to improve productivity
is Machinery > Men > Materials. Among the human factors at different levels, the
contribution of Top Management > Supervisors > Workers [Prakasam, 1976].
Handicraft provides employment, earn foreign exchange and help to redistribute
income among the poor and preserve the traditional skills and cultural heritage [Kathuria,
1988].
The rural artisans play a significant role in rural industrialisation and development
in India. They supply consumer goods, artistic items as well as services to the rural
community. The traditional artisans of Kerala are blacksmiths, carpenters and goldsmiths
from socially and economically depressed class. The recent innovations in technology
Chapter - 1. Introduction 19�displace the traditional workers from their occupation. The artisans suffer from various
problems like severe unemployment, declining demand for their products, low income,
low standard of living, competition from machine made goods etc. [Shrihari, 1990].
More than ten thousand craftsmen in Kerala have been earning their livelihood
directly from the handicraft industry, besides a host of other people who benefit indirectly
from it. The Handicrafts Development Corporation Ltd. formed by the Government of
Kerala in 1968 was a major step in the promotion of handicraft industry in Kerala. Indian
handicrafts are very popular in the international markets and India now export her
handicrafts to over 90 countries in the world [Rajam, 1996].
The Government regulation affects private investment through three types of
controls, [a]. physical [licensing] [b]. pricing and distribution of products and [c]. fiscal
and monetary [Roy, 1984].
The present distribution structure is not adequate or adaptive to meet the needs
of the expanding manufacturing sector and the emerging mass market [Antony, 1986].
In July 24th
, 1991, the Government of India announced major changes in the
industrial policy regarding industrial licensing, foreign investment, foreign technology
agreements, public sector policy etc. [Cherunilam, 1992].
The new and most powerful phase of globalisation occurred with the signing of
GATT in 1994 and the establishment of WTO with effect from 1st
January, 1995 [Arya,
2003].
The GATT, was set up in 1947 to dismantle both tariff and non-tariff barriers and
facilitate world trade. It has mainly a set of legal rules but the WTO is an organisation
set up in 1995. The five specific functions of the organisation [Article III of the Agreement]
are:
� to facilitate the implementation, administration and operation and further
the objectives of Multilateral Trade Agreements,
Chapter - 1. Introduction20�
� to provide a forum for negotiations among members concerning their
multilateral trade relations,
� to administer the understanding on rules and procedures governing the
settlement of disputes,
� to administer the Trade Policy Review Mechanism and
� to establish liaison with the IMF and World Bank [Shenoy, 2004].
The macro economic conditions in China are much better than in India
[Bajpai,1997].
The international financial agencies and corporations are very active in many
countries, including India [Mishra, 1999].
The key objective of the formation of cluster consortiums is to tap the
opportunities provided by the increasing liberalisation of the Indian economy [Russo,
2000].
There is a positive relationship between trade liberalisation and productivity growth
in the developing countries of Latin America, Asia and Africa [Das, 2002].
The informal economy has been estimated as 60% of the Net Domestic Product,
68% of income, 60% of savings and 41% of manufactured export [White, 2002].
The liberalisation in India led strong unequal effects by productivity growth and
profits in 3-digit industries [Aghion, 2003]. The WTO reported that around 63% of anti
dumping cases initiated during 1995-2000 were directed against the developing countries
[Aggarwal, 2003].
Since 1990 the Indian Government adopted various structural reform measures
to the changes in the regulatory framework to attract foreign direct investment in India. It
is reported that our country is not been able to attract FDI in the export oriented areas
hence it is note that there is no significant role of FDI in export promotion of India. FDI
Chapter - 1. Introduction 21�has no impact in the traditional export sector including the manufacturing sector in India
[Banga, 2003].
According to the GATT principle of ‘Most Favoured Nation’ treatment, trade must
be conducted on the basis of non-discrimination between WTO members [Aggarwal,
2003].
The demand for money in several countries has become unstable due to financial
innovations and reforms. It leads banks to switch from targeting money supply to interest
rate, since it is well known that targeting interest rate is more appropriate when demand
for money is unstable [Rao, 2003].
The reduction of tariff is not expected to benefit India’s export to USA in a major
way. The reduction of MFN tariff would alleviate the trade diversion effect of the NAFTA.
As a result, India’s export growth in USA market resulting from the Uruguay Round tariff
cuts would be much higher in some of the traditional items [Aggarwal, 2004].
The trade liberalisation has a negative impact on unskilled workers in the short
and medium run. It is argued that trade liberalisation decreased the industry wage
premiums in those sectors that experienced the largest tariff reduction [Goldberg, 2004].
The tariff rate for industry as a whole increases from 1980-81 to 1988-89 and
thereafter declines. The ranking of industries change over time, the highest tariff in 1980-
81 was on cotton textiles, wool, silk and other man-made fibre textiles, jute textiles and
leather and leather products [around 115 percent], in basic chemicals and chemical
products in 1988-89 [165.22 percent] and in beverages and tobacco in 1996-97 [77
percent] [Pandey, 2004].
The balance of payment crisis and India’s subsequent trade liberalisation [1991]
brought to an abrupt end decades of Nehruvian socialist ideas [Sharma, 2004].
The GATT has been successful in reducing barriers to trade but antidumping
duties remain a significant obstacles to liberalised trade [Aggarwal, 2004].
Chapter - 1. Introduction22�
Since January 1st
, 2005 trade in textiles and clothing are fully integrated into the
WTO system and quota-restrictions, which regulated the trade in textiles and clothing
for decades have been removed. The productivity is found to be an important factor
determining the unit cost across the industry. The output per firm and credit given by
commercial banks have a positive relationship with productivity only in man-made and
garment sectors [Hashim, 2004].
The non-tariff measures imposed by ASEAN and Sri Lanka have increased during
1997-98 to 2002-03 and also revealed that a larger portion of smaller firms [exports less
than Rs. 20 million] faced non-tariff barriers than larger firms [Saqib, 2005].
The ‘license raj’ - a system of industrial control governing entry and expansion in
this sector vary across Indian States with different labour market regulations [Aghiony,
2005].
In order to face the competition successfully, flexibility is imperative, the needs,
types and levels of flexibility in different countries are different [Ali, 2005].
India has followed an idiosyncratic pattern of development compared with other
fast-growing Asian economies. India emphasises on skill-intensive rather than labour-
intensive in manufacturing sector [Kochhar, 2006]. India and China have followed most
of the liberalisation and globalisation policies, while privatisation of State owned banks
has lagged in both countries [Roland, 2006].
A new orientation in planning ensures to remove the regional imbalances and
balanced development in the economy of Kerala [George, 1988].
The employment in manufacturing sector declines sharply because of traditional
manufacturing being replaced by modern manufacturing sector [Chunkath, 1989].
There is no significant relationship between size and profitability or size and
growth in most of the industries [Shanta,1990].
Majority of entrepreneurs, who start small firms, as a means for self employment,
Chapter - 1. Introduction 23�may not have necessary skills needed for success. Family background, experience and
skills acquired, property inherited etc., are the factors which affect the quality of
entrepreneurship [Abraham, 1991].
The import liberalisation provides stimulus to the growth of the domestic industry.
Increase in productive efficiency, availability of imported capital goods etc., may help
the growth of domestic industry [Mallik, 1991].
The rural unemployment cannot be resolved by capital accumulation and
industrialisation or urbanisation but by the creation of employment opportunities in the
rural non-agricultural sector [Rao, 1993].
The first step in the assistance programme of the Central Government was to
protect the village and cottage industries from the competition by the large organised
sector by implementing the ‘Common Production Programme’ [Venugopal, 1993].
Only two percent of the women workers are employed in the organised sector,
the rest 98 percent are in unorganised sector. The traditional informal sector provides
jobs to workers in rural area to both male and female workers [Sheth, 1994].
The quality circle introduced in Kerala only in 1987, i.e. five years after its induction
in India. In Kerala, quality circles have permeated more into the public sector than into
the private sector. If it properly practiced, can produce substantial tangible and intangible
benefits [Thomas, 1995].
India’s economic development during the post-independence period, has been
guided by a process of planning, which led to the industrial growth of the country
[Anandaraj, 1996].
In many countries the small enterprises play a significant role in the growth and
development of their economic system. In wood industry the success of the units depend
on the selection of the location and logical selection of machinery and equipments [Salim,
1998].
Chapter - 1. Introduction24�
The tariff reduction, liberalisation of foreign investment, exchange rate reforms
etc., have introduced in India with a view to increase the value, volume and to alter the
structure of trade [Veeramani, 1998].
The rural industrialisation can be realised through the stimulation of local initiative
[Eapen,1999].
Indian firms need modernising because of liberalisation and globalisation. The
firms can import technology with equity participation as a competitive strategy [Thomas,
1999].
The Indian economy has been liberalised and restrictions on importing technology
been removed so Indian industries can import technology from abroad [Prasad, 1999].
The share of FDI in GDP has been increasing during the post-liberalisation period.
The technical efficiency of foreign firms are significantly higher than their domestic counter
parts [Rajesh, 2000].
The availability of credit facility is an essential input for the economic development
of the rural community and subsequent elimination of money lenders. The performance
of commercial banks in Kerala’s rural sector have been fairly good during the post-
nationalisation period. The number of branches of commercial banks increased from
8,262 in July 1969 to 64,939 in March 1999 [Kunjukunju, 2001].
The extent of quality improvement cannot be determined only by technological
modernisation but also depends upon motivation on the part of the organisation
[Chakravarty, 2001].
The entrepreneurship development programmes are not very attractive among
highly skilled and technically qualified women. The EDPs are quite effective in fulfilling
expectations of the participants with regard to counselling services, knowledge of SSI,
general awareness and project report preparation. Women who attend EDPs may get
Chapter - 1. Introduction 25�better self-awareness and enhanced knowledge of small enterprise after the training
programme [Saraswathyamma, 2001].
There are two types of barriers in India such as institutionalised barriers like
licences and other restrictions and strategic barriers created by the firms using market
mechanisms like advertising and economies of scale [Babu, 2001].
The Women’s Industrial Co-operatives are formed with the purpose of making
women economically independent and socially distinct by providing employment to them.
The State Government provides a number of schemes and incentives to ensure a
meaningful survival of the WICs. It is revealed that the WICs have failed in availing all
the schemes of incentives provided by the State Government [Vasanthakumari, 2002].
The first decade of liberalisation and globalisation did not make any significant
and positive impact in the economy of Kerala. It did not make any positive impact in the
women’s sector too. There is no planned effort to tap the advantages of globalisation
[Embran, 2003].
Some of the beneficiaries of the PMRY run their business in rented premises,
while a majority run in adjacent rooms of residential houses. Sixty percent of the
beneficiaries were previously employed and hence they are experienced while 40 percent
were not previously employed and are inexperienced [Rozario, 2004].
The first indication of dumping and its possible adverse impact on domestic
industry comes from the extent of import. Sudden increase in import may give the signal
of possible dumping of the product. In such cases, the authorities may provide relief to
the domestic producers by imposing antidumping duty [Baruah, 2004].
The informal workers do not require much capital, skill and advanced technology.
They require low volume of both starting and working capital [Thomas, 2004].
Approximately two third of the businesses all over the world are small and medium
Chapter - 1. Introduction26�
enterprises. They have traditionally been known for their agility of response to the
changing environment [Reji, 2004].
The trade liberalisation did not change the industrial structure in a significant way
or to improve the manufacturing productivity. The scale and composition of industrial
production have a weak impact on India’s merchandise export. The change in trade and
industrial policies could not alter the manufacturing structure that has evolved over the
long phase of import substitution [Roy, 2004].
Most of the members of Development of Women and Children in Rural Areas in
Kerala got training from Government institutions [90.44%], while 9.56% of members got
training from private institutions [Sujatha, 2004].
Irregular supply of power and its high cost are the major problems affecting the
rubber based industries in Kerala. The productivity of rubber based industries in Kerala
is very low and below national level [Rajesh, 2005].
There is an increase in trade through bilateral trade after Indo-Sri Lanka Free
Trade Agreement came in to operation [Jha, 2005].
The SEZs have a positive effect in attracting the Foreign Direct Investment but
the State incentive is not significant. The FERA 1973 became the key to guiding and
controlling FDI inflows in India [Naik, 2006].
The agro-processing industries occupy a key position in the industrial structure
of Kerala accounting for an average of 40.26 percent of the manufacturing units in the
State, 62.12 percent of the industrial employment, 34.89 percent of value of output and
38.64 percent of net value added in the manufacturing sector of the State during 1981-
2001 [Cherian, 2006]. In Kerala and Tamil Nadu, the major skill developed by the women
entrepreneurs through training is technical skill [Santha, 2007].
During the post-liberalisation period there is a significant expansion of the machine
Chapter - 1. Introduction 27�tool industry in India and most of the machines are exported to advanced countries
[Rijesh, 2007].
As per the survey of Economist Intelligence Unit by 2020, India as a trading nation
will record the biggest jump in world ranking from 24th
to 10th
. Propelled by fast growth
in India and China, Asia will increase its slice of the world’s GDP from 35 percent in
2005 to 43 percent by 2020 and India’s share in the global GDP will rise from 6.2 percent
in 2005 to 8.8 percent in 2020 [The Hindu, Thiruvananthapuram, June 26, 2006].
German small and medium enterprises are inspecting investment opportunities
in India, particularly in IT and automobile sectors. And they are doing so rejecting the
Chinese option. China which is known for its manufacturing has been kept aside because
of the low quality that is produced there. India on the other hand is quality producer and
costs here are moderate compared to the international level [The New Indian Express,
Kochi, March 24, 2007].
Due to the devaluation of Indian Rupee the export sector is facing difficulties, to
revamp this sector the finance minister announced the reduction of customs duty on
certain products. Moreover, exporters will be given two percent subsidy on interest of
loan. This subsidy is given to exporters’ to encourage them to increase the export of
leather, textile, sea food and handicraft. The customs duty on polyster fibre will be reduced
from 7.5 percent to 5 percent and handloom fibres will also be reduced from 10 percent
to 5 percent recently [The Malayala Manorama Daily, Pathanamthitta, November 30,
2007].
The finance minister announced that, to conduct Grand Kerala Shopping Festival,
a trade fair authority will be formed later. The various departments in the festival will be
co-ordinated by this authority [The Malayala Manorama Daily, Pathanamthitta, January
15, 2008].
The globalisation and liberalisation are not only merely concepts but they are
real facts. The globalisation and liberalisation policies affect all the sectors of the industry
Chapter - 1. Introduction28�
either favourably or unfavourably. The cottage industries are small in size which may
face competition from large domestic and multi national firms through the process of
liberalisation and globalisation. Twelve policies have been taken to analyse the awareness
and impact with the opinion of exporters in Kerala. The exporters are fully aware of two
policies and a majority of exporters are aware of remaining ten policies. Out of the twelve
policies, seven policies such as reduction in customs duty, foreign direct investment in
small scale sector, anti dumping measures, abolition of quantitative restrictions, de-
reservation of SSI, de-licensing of industries and foreign technology agreements have
unfavourably affected the cottage industries. In short, globalisation and liberalisation
policies affected the cottage industries unfavourably [Thomas, 2009].
1.4 Objectives of the Study
The major objectives of the study are as follows:
1. To examine the performance of cottage and small scale industries in Kerala.
2. To examine the level of awareness among the exporters on the globalisation and
liberalisation policies.
3. To examine whether the liberalisation and globalisation policies affected the cottage
industries in Kerala or not.
4. To study the nature of impact of globalisation and liberalisation policies on the cottage
industries.
5. To identify the measures taken by the cottage industrialists to face the challenges of
globalisation and liberalisation.
6. To identify the changes in financial, human resource, production and marketing areas
of cottage industries in Kerala during the post-liberalisation period.
7. To study the industry-wise difference in the level of awareness, influence on industries,
nature of impact, measures taken and the changes in the functional areas of cottage
indusries.
8. To give suggestions and recommendations on the basis of the study.
Chapter - 1. Introduction 29�1.5 Hypotheses of the Study
The hypotheses used in the study are given below:
1. As the consequence of economic crisis and balance of payment problem, the
Government of India has taken a number of policies which are compatible with the
liberalisation and globalisation. These economic reforms opened the economy to the
world, which might led the way for the arrival of Multi National Corporations to India,
importing of cheap products, stiff competition, entry of big firms in the small scale
industries sector through de-reservation, removal of production limit, diversification of
firms and products. These policies and reforms may have unfavourable impact on
industries, especially the cottage industries. So it is hypothesised that, the performance
of cottage and small industries in Kerala has deteriorated during the post-
liberalisation period.
2.The Government might have taken a number of policies without much discussion with
the stakeholders. A majority of the cottage industrialists are non-exporting units. They
sell their products in the domestic market, hence they may not have awareness of trade
policies, export policies, industrial policies etc. But exporters may have awareness of
such policies because they are familiar with trade policies, export policies and industrial
policies. Hence it is hypothesised that, the exporters are aware of the globalisation
and liberalisation policies.
3. The globalisation and liberalisation policies taken by the Government have affected
the entire economy, significantly or insignificantly especially the industrial sector. So it
is hypothesised that, the globalisation and liberalisation policies have affected
the cottage industries in Kerala.
4.Some of these policies may have positive and some of them may have negative impact
on the cottage industrial sector in Kerala. So it is hypothesised that, the globalisation
and liberalisation policies affected the cottage industries unfavourably.
Chapter - 1. Introduction30�
5.In order to minimise the negative impact of these policies all the stakeholders can take
effective measures such as the reduction of cost of production, modification of existing
products, diversification of units and products, finding more export orders, forming cluster
units, making geographical brand name, taking quality mark certification, conducting
marketing research, implementing e-commerce, increasing the volume of production
and amount of capital, export order based production, development of local market,
producing eco-friendly value added products, attending international trade fairs and
exhibitions, starting more ancillary units, modification of technology, implementing new
method of production, implementing new packaging techniques, starting special economic
zones for the small scale industries sector, small industrial parks etc. The cottage
industrialists might not have taken adequate measures because of the lack of
infrastructure, lack of awareness, inadequate technology, shortage of fixed and working
capital etc. So it is hypothesised that, the cottage industrialists have not taken
adequate measures to face the negative impact of globalisation and liberalisation
policies.
6.The policies and measures taken by the Govenment may influence the overall economy
and which may lead to the changes in various functional areas of cottage industries
also. Hence it is hypothesised that, there are significant changes in the financial,
human resource, production and marketing areas of cottage industries in Kerala
during the post-liberalisation period.
7.There are a number of cottage industries in Kerala, these policies and measures
influence the industries differently. So it is hypothesised that, there are industry-wise
differences in the level of awareness of policies, influence on industries, nature
of impact, measures taken and changes in the functional areas of cottage
industries.
1.6 Operational Definition of Cottage Industry
There are number of definitions on cottage industries. With the help of them the
researcher operationally defined the cottage industries as, “those industrial units
Chapter - 1. Introduction 31�registered with the respective District Industries Centres in Kerala having not more
than 9 employees in each unit and working in the rural or urban area”.
There is no data on the label of cottage industries in Kerala. As per the operational
definition, the researcher deliberately selected the cottage industrial units from the
directory published by the Directorate of Industries and Commerce, Kerala for primary
data collection.
1.7 Methodology
The methodology applied for the study is described and presented under the
following heads.
1.7.1 Nature of the Study
The study is analytical in nature. The performance of small scale, village, coir,
handloom and handicraft industries were analysed with the help of quantitative data.
The awareness of policies, influence, nature of impact and the measures taken were
analysed with the opinion of exporters. The changes occurred in the composition of
finance, human resource, production and marketing areas of cottage industries were
analysed on the basis of the primary data collected from cottage industrialists. The pre-
liberalisation period is the period before 1989-90 and post-liberalisation period is the
period after 1990-91.
1.7.2 Data Required
The study is mainly based on primary data but neccessary secondary data
were also used. The opinion of exporters and cottage industrialists were taken as primary
data.
1.7.2. [i]. Primary Data
The primary data have been collected from cottage industrialists and exporters.
The exporters’ opinion were gathered to analyse the impact of globalisation and
liberalisation policies affecting the cottage industries in Kerala. The data from cottage
Chapter - 1. Introduction32�
industrialists were collected to analyse the changes in the financial, human resource,
production and marketing areas of cottage industries during the post-liberalisation period.
1.7.2.[i.a]. Sources of Primary Data
There is no data with the label of cottage industries but there are number of
small scale units functioning with the peculiarities and characteristics of cottage industries
in Kerala. The researcher compiled a list of cottage industrial units from among the
small scale units in Kerala as per the operational definition of cottage industries. The
primary data from the cottage industrialists and exporters have been collected between
1st
January 2008 and 31st
December, 2008.
1.7.2. [ii]. Secondary Data
In this study, some secondary data were used to analyse the status and
performance of various industries during the pre and post-liberalisation period. The
following secondary data were used for the study.
� SSI units registered in Kerala
� SSI investment in Kerala
� SSI production in Kerala
� SSI employment in Kerala
� SSI export
� Turnover of the Kerala Small Industries Development Corporation Ltd.
� Sanction and disbursement of assistance to SSI in Kerala by Small
Industries Development Bank of India
� Budgeted and actual figures of SSI in Kerala
� Value of production of village industries
� Value of sales of village industries
� Number of sales outlets of Kerala Khadi & Village Industries Board
� Number of employees in village industries
� Budgeted and actual figures of Kerala Khadi & Village Industries Board
� Coir export
Chapter - 1. Introduction 33�
� Workers in the coir sector and workers enrolled in the Kerala Coir
Workers Welfare Fund Board
� Coir co-operative societies in Kerala
� Budgeted and actual figures of coir industry in Kerala
� Number of looms in Kerala
� Quantity of production of handloom cloth in Kerala
� Productivity of handloom industry in Kerala
� Number of weavers
� Number of handloom co-operative societies in Kerala
� Turnover, production, yarn purchased and yarn distributed by HANTEX
� Performance of the Kerala Handloom Development Corporation Ltd.
� Handloom export
� Budgeted and actual figures of handloom industry in Kerala
� Turnover and export of the Handicrafts Development Corporation Ltd.
� Turnover of the Kerala State Bamboo Corporation Ltd.
� Turnover of the Kerala Artisans Development Corporation Ltd.
� Turnover and purchase of the handicrafts co-operative apex society
� Budgeted and actual figures of the handicraft industry in Kerala
� GDP
� GSDP
� NSDP etc.
1.7.2. [ii.a]. Sources of Secondary Data
The secondary data for the study were collected from the Economic Review,
Economic Survey, Budget Manual of Government of Kerala, Coir News, Annual Reports
of the Ministry of Textiles, Annual Reports of the Kerala Khadi & Village Industries Board,
Annual Reports of the Reserve Bank of India, Reports of the National Planning
Commission, ‘Vyavasayakeralam’, Yojana, Kerala Calling, Malayala Manorama Daily,
Indian Express Daily, Hindu Daily, Web sites etc.
Chapter - 1. Introduction34�
1.7.3 Sampling Plan
To collect the primary data, separate sample surveys were conducted from the
exporters and industrialists. Globalisation and liberalisation policies were analysed with
the opinion of exporters. Informal interviews and discussions with 20 cottage industrialists
were conducted to prepare tool for data collection. From the informal interview and
discussion, it was found that, they were not aware of the globalisation and liberalisation
policies. So to analyse the impact of globalisation and liberalisation policies, the
researcher relied the exporters’ opinion. The informal interviews and discussion with 20
exporters were conducted and as per their opinion, twelve globalisation and liberalisation
policies were selected. The data on the globalisation and liberalisation policies were
collected from the opinion of 120 exporters, 30 each from coir, handloom, handicraft
and general exporters from all over Kerala by using pre-tested questionnaires. The
respondents were selected under convenience sampling method.
The data on the changes in the functional areas of cottage industries were
collected from the cottage industrialists. The data have been collected from those SSI
units registered before 1990 with the Directorate of Industries and Commerce, Kerala
as per the operational definition of cottage industry i.e. units having less than 9 employees.
The data on the changes in financial, human resource, production and marketing
areas of cottage industries were collected from 400 cottage industialists, 100 each from
coir industrialists from Alleppey district, handloom and handicraft industrialists from
Thiruvananthapuram district and other industrialists from Ernakulam district by using
pre-tested questionnaires. The coir industrial units are found more in Aleppey, handloom
and handicraft in Thiruvananthapuram and other industrial units in Ernakulam districts
so these districts were selected for sample survey. The respondents were selected
under convenience sampling method.
Table 1.3 shows the number of coir industrial units registered with the respective
District Industries Centres in Kerala before 1990.
Chapter - 1. Introduction 35�
Thiruvananthapuram
Kollam
Pathanamthitta
Allappuzha
Kottayam
Idukki
Ernakulam
Thrissur
Palakkad
Malappuram
Kozhikode
Wayanad
Kannur
Kasargod
Total
Table 1.2
Sampling Frame of Coir Industry
185
509
0
2321
54
0
10
49
20
61
123
3
13
50
3398
Units Registered
Before 1990DistrictSl.No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Source: Directory, Directorate of Industries and Commerce,Thiruvananthapuram District selected for the sample survey
é
é
Out of the total 3,398 coir units registered before 1990 with the Directorate of
Industries and Commerce, Kerala, a majority of them are in Allappuzha district i.e.
2,321 so the researcher selected the units from Allappuzha district. The primary data
were collected from 100 coir industrialists in Allappuzha district. The convenience
sampling method was adopted for selecting the units.
The primary data were also collected from the coir exporters to analyse impact
of globalisation and liberalisation policies. It was not taken as district-wise but Kerala
State as a whole with the help of the online directory published by the Coir Board. From
the directory, 30 coir exporters were selected to analyse impact of globalisation and
liberalisation policies. The convenience sampling method was adopted for selecting the
units.
Chapter - 1. Introduction36�
Table 1.3
Sampling Frame of Handloom Industry
Sl.No. DistrictUnits Registered
Before 1990
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Thiruvananthapuram
Kollam
Pathanamthitta
Allappuzha
Kottayam
Idukki
Ernakulam
Thrissur
Palakkad
Malappuram
Kozhikode
Wayanad
Kannur
Kasargod
Total
479
26
3
2
7
1
4
74
35
1
20
1
236
1
890
Source: Directory, Directorate of Industries and Commerce,Thiruvananthapuram District selected for the sample surveyé
é
Table 1.4 shows the number of handloom industrial units registered with the
respective District Industries Centres in Kerala before 1990.
Out of the total 890 handloom units registered before 1990 with the Directorate
of Industries and Commerce, Kerala, a majority of the industrial units are in
Thiruvananthapuram District i.e. 479 hence the researcher selected the units from
Thiruvananthapuram district. The primary data were collected from 100 handloom
industrialists from Thiruvananthapuram district. The convenience sampling method
was adopted for selecting the units.
The primary data collected from the handloom exporters were not taken as
district-wise but Kerala State as a whole with the help of the online exporters’ directory.
The primary data were collected from 30 handloom exporters from Kerala to analyse
impact of globalisation and liberalisation policies. The convenience sampling method
was adopted for selecting the units.
Chapter - 1. Introduction 37�
Table 1.4
Sampling Frame of Handicraft Industry
Sl.No. DistrictUnits Registered
Before 1990
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Thiruvananthapuram
Kollam
Pathanamthitta
Allappuzha
Kottayam
Idukki
Ernakulam
Thrissur
Palakkad
Malappuram
Kozhikode
Wayanad
Kannur
Kasargod
Total
655
371
170
256
349
52
621
424
554
241
521
55
219
60
4548
Source: Directory, Directorate of Industries and Commerce,Thiruvananthapuram District selected for the sample survey
é
é
Table 1.5 shows the number of handicraft industrial units registered with the
respective District Industries Centres in Kerala before 1990.
Out of the total 4548 handicraft units registered before 1990 with the Directorate
of Industries and Commerce, Kerala, a majority of the handicraft industrial units are in
Thiruvananthapuram district i.e. 655 hence the researcher selected the units from
Thiruvananthapuram district. The primary data were collected from 100 handicraft
industrialists from Thiruvananthapuram district. The convenience sampling method
was adopted for selecting the units.
The primary data collected from the handicraft exporters were not taken as
district-wise but Kerala State as a whole with the help of the websites [http://
www.tradeboss.com and http://www.tradeindia.com]. The primary data were collected
from 30 handicraft exporters from Kerala to analyse impact of globalisation and
liberalisation policies. The convenience sampling method was adopted for selecting
Chapter - 1. Introduction38�
5
6
5
32
90
15
33
29
40
17
3
275
236
93
70
127
263
37
288
285
78
61
115
30
48
18
1749
60
56
68
122
142
23
143
104
122
60
100
25
51
27
1103
30
13
4
31
19
7
89
15
14
10
25
3
18
2
280
331
162
148
285
456
67
610
419
247
160
280
58
134
50
3407
Table 1.5
Sampling Frame of Other Industries
Sl.No. DistrictUnits Registered Before 1990
Chappal Food Soft Drink Candle Total
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Thiruvananthapuram
Kollam
Pathanamthitta
Allappuzha
Kottayam
Idukki
Ernakulam
Thrissur
Palakkad
Malappuram
Kozhikode
Wayanad
Kannur
Kasargod
Total
Source: Directory, Directorate of Industries and Commerce, Thiruvananthapuram District selected for the sample survey
é
é
the units.
Table 1.6 shows the number of other industrial units registered with the respective
District Industries Centres in Kerala before 1990.
Out of the 3,407 other industrial units i.e. candle, chappal, food and soft drink
industrial units registered before 1990 with the Directorate of Industries and Commerce,
Kerala, a majority of the industrial units are located in Ernakulam District i.e. 610
hence the researcher selected the units from Ernakulam district. The primary data were
collected from 100 other industrialists from Ernakulam district to analyse the changes
in the functional areas of other industries by using convenience sampling method.
The primary data collected from other merchandise exporters were not taken
as district-wise but Kerala State as a whole with the help of the exporters directory
published in the web sites [www.tradeboss.com and www.tradeindia.com]. The primary
Chapter - 1. Introduction 39�data were collected from 30 general exporters from Kerala to analyse impact of
globalisation and liberalisation policies by using convenience sampling method.
1.7.4 Data Collection Instruments
To collect the primary data two pretested questionnaires were prepared. First
questionnaire has been used to collect the opinion from exporters, to analyse the impact
of globalisation and liberalisation policies [see appendix - 1] and the second questionnaire
was used to collect the data from the cottage industrialists [see appendix - 2], to analyse
the changes in the functional areas of cottage industries.
1.7.5 Data Processing and Analysis Plan
In order to analyse the data, tables, figures, graphs, percentage, compound annual
average growth rate, ‘t’ test and χ2 were widely used. The ‘t’ test was used to compare
the data of pre and post-liberalisation period. The χ2
was used to test the period-wise
and industry-wise difference.
1.8 Limitations of the Study
There are different types of cottage industries in Kerala but the study is limited to
coir, handloom, handicraft and other industries comprising of candle making, chappal,
food and soft drink industries under study. The ‘other industries’ were taken without any
criteria. There is no separate secondary data regarding the ‘other industries’. There are
a number of globalisation and liberalisation policies affecting the overall industrial sector
but only twelve of them were taken for the present study. The impact of globalisation
and liberalisation policies were analysed with the opinion of exporters in the concerned
fields. However, it is earnestly believed that these limitations will not affect the quality of
the study in any significant way.
1.9 Chapterisation
The study is reported in six chapters. The first chapter deals with the introduction,
statement of the problem, operational definition of cottage industry, objectives of the
study, hypotheses of the study, methodology, review of literature, limitations of the study
Chapter - 1. Introduction40�
and chapterisation.
The second and third chapters deal with the theoretical background of
globalisation, liberalisation and cottage industry.
The fourth chapter depicts the performance of cottage and small scale industries
in Kerala.
The fifth chapter explains the awareness of various globalisation and liberalisation
policies, their influence, nature of impact, measures taken and the changes in the
composition of financial, human resource, production and marketing areas of cottage
industrial units in Kerala.
The sixth chapter deals with the findings, suggestions, conclusion and possibilities
for further research.
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