Industry body Assocham said that the share of small scale units in the country`s manufacturing sector may decline as newer technologies; trade barriers and strict quality norms erode their competitiveness.
According to a study by Assocham, the contribution to manufacturing and job creation by small scale industries (SSI) is likely to slip by 5% and 3% respectively as it has already plunged into deceleration because of its inability to absorb latest technologies.
The report said that large and medium industries are sourcing their inputs through cheaper imports that have endangered SSIs` existence and the trend is unlikely to be arrested in the coming year.
SSIs will encounter a gloom period, beginning 2008 as its contribution to manufacturing will come down to 35% as compared to 40% of now and over 45% preceding year until 2006-07.
The number of SSI units in 2006-07 were estimated at 4.4 million with employment capacities for nearly 23.8 million workers with Rs 14,000 billion of output to manufacturing.
As a result of deceleration, the number of units in SSIs have come down to around 4 million by now and employment generation has shrunk to 22.5 billion workers. Their output to manufacturing has come down to Rs 12,000 billion.
The report pointed out that due to lack of visible policy decisions, the export by SSIs would also decline by 7% - 8% as the inputs being produced by the entire sector are costing to their supplier higher by over 6% - 7%.
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