Economic Challenger - - NEWS -

(i) Weak Cap­i­tal Struc­ture

As the pro­mot­ers of small and medium scale en­ter­prises are per­sons with poor means, th­ese units suf­fer from a weak cap­i­tal struc­ture. A greater pro­por­tion of debt and a lower pro­por­tion of own funds are usu­ally em­ployed. En­trance of new per­sons with in­ad­e­quate man­age­rial and tech­ni­cal ca­pa­bil­i­ties, con­trib­ute sub­stan­tially to the sick­ness of many units. Many SME units have to de­pend on lo­cal mar­kets.

(ii) De­pen­dence on Loan Funds

Fi­nan­cial man­age­ment and con­trol is paid scant at­ten­tion, re­sult­ing into low pro­duc­tiv­ity of SMEs. De­pen­dence of small units upon large units also causes sick­ness due to for­ward and back­ward link­ages. Gen­er­ally the small and medium scale units are set up with a low amount of own funds and de­pend­ing to a greater ex­tent on loan­able funds.

(iii) Pro­duc­tion con­straints

Short­age of es­sen­tial in­puts like raw­ma­te­rial, power, fuel or other in­fra­struc­ture in­puts are pro­duc­tion con­straints. Er­ratic and un­pro­duc­tive trends in qual­ity and price of ma­te­rial and in­suf­fi­cient trans­port fa­cil­i­ties, in­ad­e­quate ma­te­rial con­trol are other con­straints.

(iv) Mar­ket­ing con­straints

The lib­eral pol­icy of the govern­ment in an in­dus­try of­ten leads to the cre­ation of ex­cess ca­pac­ity, which in turn may ul­ti­mately lead to glut in the mar­ket bring­ing down prices to un­eco­nomic lev­els. The changes in the fis­cal poli­cies of the govern­ment i.e in­crease in ex­cise, oc­troi, sales tax etc are also con­straints

(v) Change in the Pol­icy of buy­ers

An ex­port ori­ented in­dus­try which can­not keep pace with the changes in the in­ter­na­tional mar­ket is likely to face se­vere cri­sis on that score. The most of the SME units de­pend on the larger units for their mar­kets as an­cil­lar­ies or ven­dors or sub­con­trac­tors and as such any change in the pol­icy of the buyer can cause sick­ness to such units. (vi) De­lay in sanc­tion­ing Loans

The strin­gent terms and con­di­tions of grant­ing of credit by the com­mer­cial banks and other fi­nan­cial in­sti­tu­tions are hin­drances. De­lay in sanc­tion­ing of ac­tual dis­burse­ment of the loan amount and im­proper sched­ule of pay­ment of in­stall­ments and liq­ui­da­tion of the debt with­out tak­ing ad­e­quate care of the ges­ta­tion pe­riod. Work­ing cap­i­tal man­age­ment and gross ab­sence of fi­nan­cial sense on the part of the en­trepreneurs and other fi­nan­cial con­straints cause in­dus­trial sick­ness.

(i) Lack of Hu­man Re­sources

Strained labour re­la­tions and in­ap­pro­pri­ate wage and salary ad­min­is­tra­tion, lack of sound be­hav­ioral ap­proach are the rea­sons of short­age of man­power. The man­age­rial short sight­ed­ness to­wards prob­lems of hu­man re­sources in the in­dus­trial units is an­other fac­tor . Ab­sence of a sat­is­fac­tory and ra­tio­nal man­power plan­ning, man­age­ment and ad­min­is­tra­tion and im­proper pro­ject for­mu­la­tion, plan­ning and ap­praisal make the units sick.

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