MSMEs Introduction-Rashmi Chaudhary

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Introduction
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1.1 Introduction
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Industrialization is the most important factor for economic

development of a country. In the process of industrialization,
emphasis is given to the three major groups of industries:
large-scale industries, small-scale industries and cottage
industries. We propose to study role of micro, small-scale and
medium industries in the development of Uttarakhand, where
industrialization is mainly in plains and whose development is
vitally linked with various programmes and policies designed
to alleviate poverty, unemployment and backwardness of the
people of Uttarakhand. Cottage and small-scale industrial
sector plays a dominant role in the economic development
of both developed and developing countries. In developing
countries cottage and small-scale industries are especially
important in context of employment generation, equitable
distribution of national income, balanced regional growth
and development of rural and semi urban areas.1 They
1 Rahman, M. (2006): ‘A Study on the Problems and Prospects of Small-Scale
Industries in Hill Districts of Assam’ ( Unpublished Ph.D Thesis ), Department
of Commerce, Assam University, Silchar. p. 1.
2 | MSMEs and Regional Economic Development
provide immediate large-scale employment, offer a method of

ensuring a more equitable distribution of the national income
and facilitate effective mobilization of resources of capital and
skill which might otherwise remain unutilized.2
Small-scale industries play a very vital role even in
industrialized and advanced countries like the U.S.A., the U.K.,
Canada, and West Germany and more particularly in Japan.3
This sector is considered to be an engine of growth, especially
in a developing country like India due to their contribution
to income generation, employment, GDP and export earnings.

Small and cottage industries are those industries whose
capital is supplied by the proprietor or through means like
partnership or from financing agencies setup for this purpose
etc. Those industries generally use power driven machines and
also employ modern methods of production, engage labour on
wage, produce for expanded market. Their work pattern is on
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permanent basis. Such industries can be managed with little
resources and in terms of returns provide much better results4.
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Cottage industries, on the other hand also called household

industries, are organized by individuals with private resources
and with the help of family members and are pursued as
full-time or part-time occupation. The capital investment is
small and the equipments used are simple. These industries
generally use locally available resources, raw materials and
indigenous skills. The output produced in each industrial unit
is generally sold in local market.
Small scale industries, including traditional cottage and
village industries and modern small enterprises have been
given an important place in India’s economic planning for
ideological and economic reasons. Our late Prime Minister
Mrs. Indira Gandhi once remarked, “Small scale industries offer
2 ICSI Herald, Vol. IX, No. 4, April 1998. p. 13.
3 Baruah, R. K. (2000): Financing Small Scale Industries, Omsons Publications,
Delhi
4 Funda, K. K. (2003): ‘How to start a Small Scale Industry’, Laghu Udyog
Samachar, April-September, 2003. p.78
Introduction | 3
many opportunities; besides adding to production, they broaden the

industrial base. They enable the process of modernization as well as
entrepreneurship to spread to more regions and layers of society”.5
Father of our Nation, Mahatma Gandhiji had strongly advocated
the development of Indian villages by making them financially
viable through small and village industrial units6. The small
scale and cottage industrial sector have found their economic
rationale in Mahalanobis model of economic development,
which was the basis for India’s second and subsequent Five
Year Plans. This sector has emerged as a vibrant and dynamic
sector of Indian economy, which contributes nearly 40 percent

of the total industrial production and over 34 percent of the
national exports by providing employment to over 250 lakh
persons7. This sector enjoys the pride of being second largest
employer in the country and offers a wide variety of products.
Small and Medium Enterprises (SMEs) are showing their
impact on national and regional economies throughout the
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world. They have been recognized in both developed and
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developing countries as an effective instrument for creating

employment opportunities with a small amount of capital
investment.
The small scale and cottage industries also play an
important role in removing regional disparities. The industrial
development in a backward area can only be achieved by the
rapid development and promotion of small scale industries8.
Besides economic aspects, the social role of small scale and
cottage industrial units are quite significant in achieving
various social goals such as removal of poverty, attainment
5 Ali, M. Z. (2004): ‘Absenteeism in Small Scale Industries’, SEDME (Small
Enterprise Development, Management and Extension) Journal, Vol. 31, No. 4,
December, 2003.
6 Vinod, D. (2003): ‘Development through Khadi and Village Industries’,
Yojana. October, 2003.
7 Annual Report (2003-04): Ministry of Small Scale Industries, Government of
India. New Delhi.
8 Kulkarni, P.R. (2001): ‘Financial Structure for Backward Area Development’,
SEDME Journal.Vol. 28, No. 2, June 2001.
of self-reliance, reduction in disparities in income, wealth and

standard of living and regional imbalances.
In 1995, Government grouped small scale industries into
two categories- those using power but employing less than 50
persons and those not using power but employing less than
100 persons. All small scale enterprises had capital investment
of Rs. 5 lakh. This limit was revised to Rs. 10 lakh in 1975 and
Rs. 15 lakh in 1980. In March 1985, the Government has again
revised the investment limit of small scale undertakings to Rs.
35 lakh. As per the Industrial Policy Resolution of 1990, the

investment limit for small scale industries has been revised to
Rs. 60 lakh and correspondingly for ancillary units from Rs. 45
lakh to Rs. 75 lakh.
During 1997, on the recommendation of Abid Hussain
Committee, the Government has raised the investment limit
on plant and machinery for small scale industrial units and
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ancillaries from Rs. 60/75 lakh to Rs. 3 crore and that for tiny
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units from Rs. 5 lakh to Rs. 25 lakh9. The investment limit on

plant and machinery was reduced from Rs. 3 crore to Rs. 1
crore for small scale units in 2000. However the investment
ceiling for tiny industries remained unchanged to Rs. 25 lakh.
1.2 Uttarakhand - Topographical, Geographical And

(FRQRPLF3URÀOH
Uttaranchal, formerly a part of Uttar Pradesh, was formed

on November 9, 2000 as the 27th State of the Indian Union.
Bestowed with magnificent flowers, skiing slopes and dense
forests, the state has many shrines and places of pilgrimage
such as Badrinath, Kedarnath, Gangotri and Yamunotri. A
picturesque state, with a breathtaking panoramic view of
Himalayas, Uttarakhand is a major tourist attraction and offers
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of India, New Delhi.
Introduction | 5
immense opportunities for promotion of tourism. The unique

Himalayan ecosystem plays host to a large variety of animals,
plants and rare herbs. Two of India’s mightiest rivers, the Ganga
and the Yamuna take birth in the glaciers of Uttarakhand. About
58% of the population of Uttarakhand depends on agriculture.
The state is rich in mineral deposits like limestone, rock
phosphate, dolomite, magnesium, copper, graphite, soap stone,
gypsum etc. The number of small scale and heavy industries in
Uttarakhand is increasing. The state has excellent potential for
hydropower generation. There are a number of hydro-electric
projects on the rivers Yamuna, Bhagirathi, Ganga, Ramganga,

Sharda etc. generating electricity. Recent developments in
the region include initiatives by the Government to speed
up economic development and growth, thrust areas being
hydropower, horticulture including floriculture and aromatic
and medicinal plants, tourism development, industrialisation,
information technology and development of infrastructure.
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Administrative Setup of Uttarakhand
Dehradun is the capital of newly established state of

Uttarakhand. It comprises of 13 districts, 5 tehsils and 95 C.D.
blocks. Besides, there are 15669 populated villages and 70 cities
and town areas in the newly constituted state.
Geographical Context – The Himalayas
The name Himalaya has been derived from two Sanskrit

words Hima (snow) and Alaya (abode), ‘the abode of snow’. The
massive Himalayan arc extends over 2,500 kilometres between
Nanga Parbat (8,126 m) in the west and Namcha Barwa (7,755
m) in the east. Physiographically, starting from the Shivalik
Hills in the south, the Himalayan mountain range extends to
the Tibetan plateau in the north. The broad divisions are the
Shivaliks, the lesser throughout its length, separated by major
geological fault lines.
Table 1.1: Uttarakhand and its Districts
Code District Headquarters Population Area Density Map

(As of 2011) (km²) (/km²)
AL Almora Almora 621972 3083 202
BA Bageshwar Bageshwar 259840 2302 113

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CL Chamoli Chamoli Gopeshwar 391114 8032 51


(As of 2011) (km²) (/km²)
CP Champawat Champawat 259315 1781 146
DD Dehradun Dehradun JN 1695860 3088 550
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HA Haridwar Haridwar 1927029 2360 817
Introduction | 7

(As of 2011) (km²) (/km²)
NA Nainital Nainital 955128 3860 247
PG Pauri Garhwal Pauri JN 686572 5399 127
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PI Pithoragarh Pithoragarh 485993 7100 68

(As of 2011) (km²) (/km²)
RP Rudra Prayag Rudraprayag 236857 1890 125
TG Tehri Garhwal New Tehri JN 616409 4080 151
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US Udham Singh Rudrapur 1648367 2908 567
Nagar
Introduction | 9

(As of 2011) (km²) (/km²)
UT Uttarkashi Uttarkashi 329686 8016 41
Source: http://updateox.com/india/district-wise-population-india-as-of-2011-census
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Introduction | 11
The higher regions of the Himalaya are snowbound

throughout the year and in spite of their proximity to the
tropics, the perpetual snow level seldom falls below 5,500
meters. The Himalayan ranges encompass numerous glaciers
(9,575); notable among them is the Siachen, which is the largest
glacier in the world except the polar region. The Himalayan
glaciers are the source for several large perennial rivers, which
in turn further define and shape the mountain configuration,
and drain into major river systems of the continent. The IHR,
including the Himalaya proper and the northeastern hill

states, lies between 21°57’ and 37°5’N latitudes and 72°40’
and 97°25’E longitudes covering an area of 5,33,000 km2. It
stretches over 2,500 km from Jammu & Kashmir in the west to
Arunachal Pradesh in the east, covering partially/ fully twelve
states of India, but its width varies from 150 km to 600 km at
different places.
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The region is vast, rugged and varied. The higher ranges
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remaining perpetually snow bound overlooked by more

than 13 peaks surpassing 7000 m in elevation. It plays a vital
strategic role in safeguarding the entire northern boundary
of the nation. Apart from national security standpoint, the
Himalayan region is also important for its high forest cover.
More than 65 percent of its geographical area is under forests
representing one-third of the total forest cover and nearly
half (46 percent) of the very good forest cover of the country.
Over 9,000 Himalayan glaciers and high altitude lakes form
a unique reservoir storing about 12000 km of fresh water.
This reservoir releases its wealth to the rest of the country,
mostly in a manner that sustains life to millions, deep into
the plains.10
10 State Action Plan on Climate Change “Transforming Crisis into

¢Ȅȱ ȱȱĴǰȱŘŖŗŘǰȱǯȱŘŘ
Geological Settings
Physiography
The Uttarakhand Himalayas are divided into the distinct

non-montane and montane physiographic zones (Figure 1) as
follows:
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Fig. 1.1: Physiographic zones of Uttarakhand

A. Non-montane
1. Bhabhar: This is a level surface zone at the foothills of the
Himalayas 34 km wide where the Himalayan torrents
rush down from the steep slopes and disappear under
boulders and gravels due to the extremely porous soil
type of Bhabhar.
2. Tarai: Situated below the Bhabhar and parallel to it,
the Tarai is a marshy and damp tract (once 80-90 km
wide) containing fertile soils with good water retention
capacity.
B. Montane
1. Sub-Himalayas: Called Sub-Himalayas because it
possesses the least of Himalayan features. It consists of
two zones, the Shivaliks—the youngest of the Himalayan
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Introduction | 13
to the north of Shivaliks. The Shivaliks extend in a narrow

varying width of 6 to 30 km with altitudes of 300 to 1000
m.
2. Mid Himalayas: This zone extends in a varying width of
60-90 km in an abrupt rise in elevation between 1000 m
to 3000 m. It contains two types of physiographic sub-
units:
(a) The Himachal ranges, and
(b) The Himachal valleys and lake basins.
3. Greater Himalayas: This zone has a varying width of 40-

60 km. The altitude varies between 3000-7000 m. Except
for lower valleys, this zone is perpetually covered with
snow hence called Himadri. The region covers glacial
landforms above 3000 m.
4. Trans-Himalayas: Also known as the Tethys Himalayas
and Indo-Tibet plateau, the region is in the rain-shadow
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of the Greater Himalayas and is therefore a cold desert. It
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slopes down to the Yarlungtsangpo (Brahmaputra) river

valley in Tibet.
(a) Land Use Pattern
Owing to its largely mountainous regions, the state is
endowed with unique ecosystems. The Northern region of
the state is part of great Himalayan range, covered with snow
and glaciers. Two of the Indian sub-continent’s major rivers-
the Ganga and the Yamuna—also originate from the glaciers
of Uttarakhand. Other parts of Uttarakhand are covered with
dense forest that makes up the bulk of the natural resources
base.
Like most other hill economies, the people of Uttarakhand
practice integrated systems of farming, forestry, horticulture,
livestock and off-farm activities. According to the 2008-
09 records, the forest area constitutes almost 65 percent of
the total area of the State. The net sown area for the region
is approximately 13.29 percent of the total reported area,
although there are wide variations in this percentage from

district to district. A chart showing the land use pattern in the
State is given in Figure 1.2 below.
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Fig. 1.2: Land use Pattern in Uttarakhand

(b) Forest Cover
The area under forest in Uttarakhand is 3.4 million ha,
which constitute 61.45 percent of its total land available for
utilization. By legal status, reserve forests constitute 71.08
percent, protected forests 28.51 percent, and unclassified forest
0.41 percent of the total forest area. Major forest types occurring
in the state are Tropical Moist Deciduous, Tropical Dry
Deciduous, Sub-tropical Pine, Himalayan Moist Temperate,
Sub Alpine and Alpine Forests. Forests are largely distributed
throughout the state with conifers and Sal being major forest
formation.
(c) Hydrological Setting
The predominantly hilly State of Uttarakhand has a varied
hydrogeological setup and can be divided broadly into two
distinct hydrogeological regimes viz. the Gangetic alluvial plain
Introduction | 15
and the Himalayan mountain belt. The former is covered with

a vast expanse of alluvium and unconsolidated sedimentary
material of varying size fractions (ranging from boulder to
clay) and is a promising zone for ground water development.
The latter zone, being predominantly hilly, offers much less
potential for large-scale development of ground water. Ground
water in the hilly region occurs mostly in fissures/fractures
and emerges as springs. The springs are amenable to small-
scale development of ground water resources in the State. The
yield of tube wells in Shivalik formation ranges from 50.4 m3/
hr to 79.2 m3/hr, in Bhabhar formations yield is up to 332.4 m3/

hr. In Tarai belt yield of tube wells ranges 36 m3/hr to 144 m3/
hr and in Indo-Gangetic plains yield varies from 90 m3/hr to
198 m3/hr.
Major River Basins and Sub-Basins

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The main drainage system of Uttarakhand have been
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grouped into following six catchments:

1. Yamuna Catchment - The Yamuna River originates from
the base of Bandarpunch peak. It has carved a deep V-
shaped gorge. The Yamuna cuts across the Nag Tibba
range and Mussoorie range near a place called Yamuna
Bridge. The rivers Tons, Pabar and Aglar11 are its
important tributaries. It passes through the Doon valley
on its Western boundary.
2. Bhagirathi Catchment - This is one of the two rivers,
which join to form the river Ganga. It originates from the
snout of the Gangotri glacier at Gaumukh, which is at
the base of Chaukhamba peak. The Bhagirathi River has
cut a deep gorge across the granitic rocks of the higher
Himalayas of Garhwal. Its main tributaries are the river
Janhavi and the Bhilangna.
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3. Alaknanda Catchment - This River joins the river

Bhagirathi at Devprayag to form the river Ganga. It
originates from the eastern slopes of Chaukhamba - from
the Bhagirathi kharak and Satopanth glaciers. The river
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are the Khiraonganga, Pindar, Dhauliganga, Birahi,
Nandakini, Mandakini etc. It has formed a broad valley
at Srinagar (Garhwal).
4. Mandakini Catchment - It comes out from the Mandakini
glacier near Kedarnath. It cuts through a gorge of glacial

debris. The river has formed road terraces at Augustmuni
and Tilwara. At Tilwara it is joined by the river Lastar
Gad. The river Mandakini joins the river Alaknanda at
Rudraprayag.
5. Pindar Catchment - The River Pindar originates from
the Pindari Glacier, which is located between Nanda
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Devi and Nanda Kot peaks. Sundardhunga River joins
the Pindar near Dhakuri. The Pindar joins the river
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Alaknanda near Karanprayag.

6. Kali Catchment - The River Kali forms the boundary
between Kumaon and Nepal. The towns of Champawat
and Pithoragarh are situated on the back of the Kali
River. Its important tributaries are Darma and Saryu
rivers.
The Land Survey Directorate (LSD) has divided the
Uttarakhand into 8 catchments, and then into 26 watersheds,
then into 110 small watersheds and finally into 1110 micro
watersheds.
Natural Lakes and Reservoirs: Uttarakhand is having
thirty-one natural lakes in the state covering an area of about
300 ha. The State is endowed with eight large sized man- made
reservoirs in Tehri and Udhamsingh Nagar district covering
an area of 20,075 ha. The Tehri dam is the largest dam in
Uttarakhand followed by Sharda Sagar reservoir with 6880 ha
water area and Nanak Sagar reservoir with a water area of 4084
Introduction | 17
ha is the third largest. These reservoirs are owned by Irrigation

Department. Additionally there is a total of 1545 small ponds/
tank covering an area of 604 ha in the state. The reservoirs are
generally used for the irrigation purpose12.
(d) Climate
Uttarkhand experiences every grade of climate which
varies according to elevation from hot in the Tarai to freezing
point in the high Himalayas. The southern zone has the tropical
climate marked by the sultry heat of the dry summer followed
by rains and low temperature. The middle zone has short mild
and wet summers with long and severe winter. The rainfall is
the highest as compared to the other regions of the state.
Ȋȱ Summer: Summer is called ‘Ruri’ or Kharsaun in the
local dialect of Uttarakhand. The season generally
start around 13th February and ends around 12th June.
Whereas between 15 March and 14th April the actual
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summer sets in and the atmosphere is generally dry.
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Between 15th May and 16th June there is a little rain and
mainly stormy weather in the high Himalaya.
Ȋȱ Monsoon: The monsoon is called ‘Chaumas’ or ‘Baskal’
in the local language. The monsoon starts around 13
June and ends around 12 October. The main rainy
season falls between 17 July and 18 August, the sky
being generally clear in the month of September and
October with slight dew at night. The annual rainfall
decreases from east to west which is mainly dependent
upon the monsoon received from the Bay of Bengal.
Ȋȱ Winter : Winter is also known as ‘Hyund’ in the hills
of Uttarakhand. The season covers the period from
13th October to 12th February. There is generally plenty
of dew at night between 17th November and 16th
December and it is extremely cold from 15th January
12 State Action Plan on Climate Change “Transforming Crisis into
¢Ȅǰȱ ȱȱĴǰȱŘŖŗŘǰȱǯȱŗŞȬŘŗ
to 13th February. During January and February there is

snowfall in high altitude area from 1500 to 3000 metres.
The winter rains are caused by north westerly cyclone
in the Uttarakhand region.
(e) Flora
Ȋȱ Forest Vegetation : The most commonly noticeable
flora in the hills of Uttarakhand includes Chir,
Fir, Spruce, Deodar, Surai, Kail and Pine. In sub-
mountainous tracts different species of trees, i.e., Sal,
Sain (Asna), Tun, Haldu, Kaju, Jamun, Khair, Sisso,

Semal and Kutal are available. Shesham, Babul, Spruce,
Blue Pine, Jamun, Teak, Bamboo, Ringal, Cane and
Khair are also grown extensively. The lower zone of
the region is practically covered by the profuse growth
of Sal and Bamboo whereas Chir and Deodar is found
at higher altitude where the climate is more temperate.
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Coniferous forests are predominant at upper high
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altitude areas.
Ȋȱ Local Jungle Fruits : The well known jungle fruits are
Bedu, Kaifal (Polentila), Mel (Crab Apple), Akhrot
(walnut), Timula (Fig), Kuronda (Carissa carindas),
Jamun, Umara, Ber, Hissar (mulberry), Kingor (Barberry,
Rasp and Blackcherry). The fruits of the cold climate
are Kapasai (Hazel), Currant, Gooseberry and Medlar.
Other fruits like mango, pomegranate, plantain, lemon,
sweet-lemon, orange, guava, peach and apricot are also
found whereas they can be grown in Uttarakhand.
Ȋȱ The Shrubs : The main shrubs are Tairu, Manghau
and Bemru which are commonly consumed during
the season particularly when the people are on fast on
various religious and festival days.
(f) Fauna
At one time there were a large number of tigers in Terai.
Today their number has registered a sharp decline. Elephants
Introduction | 19
are also found but the old prestige attached to these have gone.
A fight in old days, between two trained elephants was a sport
enjoyed by the kings. Today, the elephant is used primarily to
extract timber from the forests. The leopard and the Black Buck
are also on the verge of extinction. The animals still found in
abundance are the Chitals and the spotted deer. Other animals
are Himalayan bears having strong muscular bodies, each
with two white chevrons on the chest and chin in the shape of
an inverted horse shoe. They like resinous food and fruits. In
addition, there is the Sloth Bear which eats fruits and insects.
The amount of trouble it takes, to get at small titbits is amazing.

Bears are extremely fond of honey. There are Porcupines
which, when disturbed, raise their quills and charge back-
wards. Nature has provided them quill for protection. At 2400
m the Musk Deer is found which secretes ‘Kasturi’ (Musk) and
therefore, is in great demand. There are mountain goats and
sheep which are found in the high altitude regions and are
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capable of negotiating steep hills and precipices. ‘Thars’ and
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‘Gorals’ belong to goat family. The ‘Thar’ has a face covered

with black hair and is reddish-brown in colour. The ‘Ghorali’
is a wild sheep which is found throughout the Himalayas. It is
light blue in colour with a white belly, tail and horns.13
1.3 Uttarakhand – Overview and Economy
Uttarakhand is one of the hilly states in the Indian

Himalayas. Formerly a part of Uttar Pradesh, Uttarakhand
(formerly called Uttaranchal) was created as the 27th state of
the Indian Union on November 9th, 2000 by carving out the
13 hill-districts of Uttar Pradesh. It lies in the Northern part
of India between the latitudes 28o43’-31o27’N and longitudes
77 o 34’- 81 o 02’E having a maximum dimension of east - west
310 km and 255 km north - south covering an area of 53,484 sq.
km with the elevation ranging from 210 to 7817 msl. The state
shares border with China (Tibet) in the North and Nepal in the
13 Guide to Garhwal and Kumaon Hills, D.S. Bisht, 2001, pg 20-23.
East and inter-state boundaries with Himachal Pradesh in the

West, Northwest and Uttar Pradesh in the South.
Broadly the region constitutes of 13 districts falling in two
major administrative unit viz., Garhwal (northwest portion)
and Kumaon (southeast portion). Garhwal Division consists of
7 districts, i.e. Dehradun, Haridwar, Uttarkashi, Tehri, Pauri,
Rudra Prayag and Chamoli while remaining 6 districts viz.,
Pithoragarh, Bageshwar, Almora, Nainital, Champawat and
Udham Singh Nagar fall in Kumaon division.
Hindi, Garhwali and Kumaoni are commonly spoken in

the state. English is the medium of education in many of its
schools.
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State formed on 9 November, 2000
Total Area 53,484 sq km
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Total Forest Area 34,651 sq km
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Capital Dehradun (Temporary)

Total Districts 13
High Court Nainital
Per Capita Income More than INR 42,000
Main Crops Rice, Barley, Maize
Main Fruits Apple, Litchi, Plum, Peach, Malta
Main Rivers Bhagirathi, Alaknanda, Mandakini,
Pindar, Tons, Yamuna, Kali, Bhilangna,
Saryu, Ramganga etc.
Main Tourist and Historic Nainital, Mussoorie, Pauri, Almora,
Places Ranikhet, Khirsu
Main Religious Places Badrinath, Kedarnath, Gangotri,
Yamnotri, Panchakedar, Panchabadari,
Panchaprayag, Haridwar, Rishikesh, Hem
Kund Sahib etc.
Population density 189
(persons per sq km)
Introduction | 21
Total population (million) 10.11

Decennial Growth Rate 19.17%
(2001-11)
Male population (million) 5.15
Female population 4.96
(million)
Sex ratio (females per 963
1,000 males)
Literacy rate (%) 79.6
(FRQRPLF3UR¿OH
GSDP (Rs crore) (2009- 45,580
10) Factor Cost
Per Capita Income (Rs) 55,877
(2009-10) (current prices)
CAGR (%) (2004-05 to 12.9
2009-10)
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Key Industries Auto & Auto-components, Agro &
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Food-Processing, Paper, Machinery &

Equipment, Pharmaceuticals, FMCG,
Tourism, Hydro Power
Key Industrial Areas Haridwar, Pantnagar, Dehradun,
Sitarganj
Source: All demographic information is from 2011 Census data.
Economic data is from CII’s Uttarakhand Investment Climate Report,
November 2011. For detailed information and state statistical data,
see http://des.uk.gov.in/pages/display/61-uttarakhnad-at-a-glance.
The gross state domestic product (GSDP) stood at Rs

45,580 crore in 2009-10 as against Rs 41,188 crore in 2008-09
registering a growth of 11 percent. The State’s gross domestic
product (GDP) registered a compounded annual growth rate
(CAGR) of 12.9 percent between 2004-05 and 2009-10 as against
national average of 8.6 percent. However, its contribution to
the national GDP was only about 1 percent during 2009-10. The
State derives majority of its GSDP from services and secondary
sectors with shares of 52 percent and 34 percent during 2009-10
respectively. Services sector registered a CAGR of 14.1 percent

while secondary sector grew at a CAGR of 18.3 percent during
2004-05 to 2009-10.This growth is largely driven by sub-sectors
like manufacturing, transport, warehousing, communication,
trade, hotels and restaurants, financing, insurance, real estate
and business services. Manufacturing recorded the highest
CAGR of 27.5 percent, followed by trade, hotels, transport,
storage and communication with a CAGR of 16.8 percent.
Agriculture and allied sub-sectors, which is part of the primary
sector, grew by 1.55 percent. The growth of agriculture and
allied sub-sector was 4.62 in the year 2006-07, which has

slowed down thereafter. Leisure, adventure, and religious
tourism play a prominent role in Uttarakhand’s economy,
with the Corbett National Park and Tiger Reserve and other
hill stations being amongst the most frequented destinations.
Other national wonders include the Valley of Flowers, which
along with Nanda Devi National Park, is a United Nations
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Educational, Scientific and Cultural Organization (UNESCO)
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World Heritage Site. After attaining statehood, the economic

progress of Uttarakhand has been rapid, with its economic
growth rate increasing from just over 3 percent per annum to
11 percent per annum. However, this rapid growth has been
accompanied by adverse impact on the local ecology, thus
making the incorporation of sustainable development practices
into state’s overall development strategy an imperative.
The government of Uttarakhand has responded by making
sustainable development an important element in the state
growth strategy.
Given the terrain of the state and favourable climatic
conditions, agriculture continues to be the major source of
income for more than three-fourths of the state’s population.
Agriculture and allied activities with a share of about 13 percent
(at constant 2004-05 prices) during 2009-10, is a significant
contributor to the state domestic product as against the national
average of 14.6 percent. However share of the agriculture and
Introduction | 23
allied sub-sector in the gross domestic product is decreasing

due to the increasing contribution of other sectors during the
period of 2004-05 to 2009-10 .The State hosts several climatic
zones thus giving it an edge in developing activities based on
floriculture, fruits and nuts, vegetables and vegetable seeds.
Given that Uttarakhand has significant area under forests,
forestry and logging is a key component of the agricultural
GDP (21.60 percent of the agriculture GDP) during 2009-10.
The productivity of the most of the crops in the state is less
than the national average during 1999-2000 to 2009-10 as more
than half of the agricultural area in hill region.

The per capita income (at current prices) of Uttarakhand
registered a CAGR of 17.7 percent from Rs 24,740 in 2004-
05 to Rs 55,877 in 2009-10 whereas the per capita income of
India increased by CAGR of 14.0 percent in the same period.
The State’s per capita income is twelfth highest in the country
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and is higher than the all India average. In Uttarakhand, Gini
Coefficient14 (2004-05 uniform recall period - URP) for rural and
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urban is 0.28 and 0.32 respectively. It remains below the national

average of 0.30 and 0.37 for rural and urban respectively. Thus,
the income disparity in the State is comparatively less skewed
than that of India.
Uttarakhand – Human Development
UNDP Data15 suggests that Uttarakhand’s Human

Development Index (HDI) and the corresponding Inequality
Adjusted Index (IHDI) stood at 0.515 and 0.345 respectively.
The state’s HDI and IHDI rank among Indian states were 7 and
10 respectively. Considering the State’s HDI ranking of 18 in
2005, it has made significant progress on human development
since then.
14ȱȱȱ ȱĜȱȱȱȱȱȱ¢ȱȱȱǰȱȱȱ
of 0 expressing total equality and a value of 1 maximal inequality.
15 M.H. Suryanarayana, Ankush Agrawal and K. Seeta Prabhu, Inequality-
adjusted Human Development Index for India’s States. UNDP-India 2011.
Infant mortality rate (IMR) for Uttarakhand is estimated

at 41 deaths per 1,000 live births in 2009 as against 48 in
2001 16. IMR for the State is better than the all India average.
Crude Birth Rate (CBR) and Crude Death Rate (CDR) stand
at 19.7 and 6.5, both slightly below the national average.17 The
health infrastructure in the State fares moderately on most
of the health infrastructure indicators. It is evident that the
State is better placed in terms of the number of Sub Centres,
Primary Health Centres (PHCs) and Community Health
Centres (CHCs). There are 8 beds per 10,000 population in
Uttarakhand (2008)18 as against national figures of 4 beds per

10,000 population (2008).
The overall literacy rate in Uttarakhand is 79.6 percent,
which is higher than the national average of 74.0 percent. Male
literacy in the State stands at 88.3 percent while the female
literacy is 70.7 percent. All India male and female literacy are
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82.1 percent and 65.5 percent respectively. The State is better
placed as compared to all India in case of Literacy, Gross
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Enrolment Ratio (GER), Pupil-Teacher Ratio and Dropout

Rate.19 The State has about 1.2 percent, 1.7 percent and 4.6
percent of the total Government middle, high, and senior
secondary schools of the country respectively. About 72
percent of the schools in the State are Government schools and
28 percent are private schools.20 This shows that Government
plays a significant role in the education sector.
Agriculture
Agriculture is one of the most significant sectors of the

economy of Uttarakhand and Agro food processing is one of
the most important industries of the state. To boost the agro
16 SRS Bulletin, January 2011
17 ibid.
18 RHS Bulletin, 2010, Ministry of Health & Family Welfare, Government of
India
19 Census of India 2011, Selected Education Statistics 2007-08
20 Selected Education Statistics 2007-08, MHRD
Introduction | 25
food processing industries agri exports zones have been set up

in the state for litchi, horticulture, herbs, medicinal plants and
basmati rice. Fruits like apple, orange, pear, peach and plum
are grown widely in the state giving immense opportunity for
food processing industry.
Table 1.2: Summary of Agro Statistics
Sr. Components Growth/Ratio/

No Production
1 Agriculture GSDP at Current prices Rs. 6228 Crore
(FY2009)
2 Growth of Agriculture & Allied GSDP
(Avg. from 1.98% FY2001 to FY
2009)
3 Agricultural sector’s contribution in 15.50%
GSDP (FY 2009)
4 Food Grain production (FY2010) 1780 (Thousand
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Tonnes)
5 State’s contribution to national food 0.81%
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grain production (FY2010)

6 State’s rank in national food grains (FY2010)
production
7 Yield total foodgrains (FY2010) 1781 (Thousand
Tonnes)
8 8Gross area irrigated (FY2009) 569769 (Hectare)
9 Area under wells and tube well 213780 (Hectare)
irrigation (Hectare) FY2009
10 Population dependent on agriculture ¾
11 Rice Production (FY2010) 610 (Thousand
Tonnes)
12 Wheat Production (FY2010) 831 (Thousand
Tonnes)
13 Coarse Cereals (FY2010) 297 (Thousand
Tonnes)
14 Pulses (FY2010) 42 (Thousand
Tonnes)
Sr. Components Growth/Ratio/

No Production
15 Oil Seeds (FY2010) 29 (Thousand
Tonnes)
16 Sugarcane (FY2010) 5058 (Thousand
Tonnes)
17 Rank in Sugarcane production 8
(FY2010)
Source: PHD Research Bureau, Compiled from RBI & Ministry of
Agriculture, Directorate of Economics and Statistics, Uttarakhand.
Sugarcane, rice and wheat are cultivated largely in

Uttarakhand. Since almost 90% of the terrain of Uttarakhand
is hilly, yield per hectare is not very high. There is a disparity
between the gross cropped area between hills and plains. Hills
comprises only 14% whereas the plains comprise of the 86% of
the gross cropped area.
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Sugarcane is the major crop of Uttarakhand. However,
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sugarcane production has gone down during last decade from

7.34 million in FY2001 to 5.05 million tonnes in FY2010. Highest
sugarcane production was registered during FY2008 with the
production of 7.68 million tonnes.
The share of Uttarakhand in the total sugarcane production
of India has also gone down in recent years. It was 2.48% in
FY2001 and it was estimated around 1.81% in FY2010.
Intra-State Industrialisation in Uttarakhand
According to the District-wise number of units registered

and the employment data in Uttarakhand upto the year 2010,
calculated from the district-wise data accessed from the website
of the Directorate of Industries, Government of Uttarakhand,
Haridwar district had the highest number of registered units
(3554) as well as the number of workers (77457) accounting
for 17.19% of the total number of units and more significantly
40.31% of the total number of workers in the state.
Table 1.3: District-Wise Industrialisation in Uttarakhand (2010)
Sr. District No. of Units No. of Workers Workers Index Overall

No. Registered per Unit (%) Rank
% Rank No. % Rank
1 Haridwar 3554 17.19 1 77457 40.31 1 21.8 28.75 1
2 Udham Singh Nagar 2869 13.87 3 56592 29.45 2 19.7 21.66 2
3 Dehradun 2919 14.12 2 28692 14.93 3 9.8 14.52 3
4 Pauri Garhwal 1863 9.01 4 5001 2.60 5 2.7 5.81 4
5 Tehri Garhwal 1763 8.53 5 4310 2.24 6 2.4 5.38 5
6 Nainital 1300 6.29 8 7020 3.65 4 5.4 4.97 6
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7 Uttarakashi 1373 6.64 U7 2486 1.29 7 1.8 3.97 7
8 Almora 1411 6.82 6 2114 1.10 9 1.5 3.96 8
9 Pithoragarh 972 4.70 10 2368 1.23 8 2.4 2.97 9
10 Chamoli 1009 4.88 9 2001 1.04 10 2.0 2.96 10
11 Rudraprayag 647 3.13 11 1485 0.77 12 2.3 1.95 11
12 Bageshwar 527 2.55 12 1586 0.83 11 3.0 1.69 12
13 Chamapawat 471 2.28 13 1043 0.54 13 2.2 1.41 13
Total 20678 100 192155 100 9.3 100
(Uttarakhand)
Source: Calculated from the district-wise data accessed from the website of the Directorate of Industries,
Government of Uttarakhand.
Introduction | 27
In Champawat, Bageshwar and Rudraprayag districts, the

number of registered units was less than 1000. The perusal
of the district-wise list of all the registered units in the state
accessed from the website revealed that although Chamoli,
Almora and Rudraprayag districts had significant number of
registered units, but almost all these units were micro units
with very little investments and low employment.21 From the
data related to the number of workers per unit in the table it
is noted that only Haridwar and Udham Singh Nagar districts
had average number of workers above 20 while in all the other
districts this figure was in single digit only.

Thus from Uttarakhand, Haridwar district is the most
successful in attracting industries with the highest composite
district industries development index. The intra-state disparity
in industrialisation in Uttarakhand is reflected in the fact that
Haridwar, Udham Singh Nagar and Dehradun districts together
U
account for 45.18% of the registered units in the state and more
importantly 84.69% of the total industrial workers in the state.
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)LVFDO'HÀFLW
Gross fiscal deficit of Uttarakhand as percentage of GSDP

has declined to 3.3% during FY 2011 as compared to the 8.3%
in FY2010. Primary deficit as percentage of GSDP has declined
from 5.1% to 0.3% during the same period. The revenue deficit
has also declined from 2.4% in FY2010 to 0.3% of GSDP during
2011. Primary Revenue Balance has declined to 3.2% from 0.8%
of GSDP during the same period.22
Economic Policy of Uttarakhand
Uttarakhand has developed itself as an industrial hub

of north India. The state has successfully developed three
21 A Study on Impact Evaluation of Package of Special Category States

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22ȱȱȘĴǱȱȱȱęȱ ȱŘŖŗŗ
Introduction | 29
integrated industrial estates (IIEs) at Haridwar, Pantnagar and

Sitarganj. A Pharma city at Selequi, an IT Park at Sahastradhara
in Dehradun and a growth centre at Siggadi in Kotdwar has
also been developed. The contribution of industry sector in the
GSDP has gone up from 22% during FY2000-01 to 37% during
FY2008-0923.
Table 1.4: Fiscal Indicators (% of GSDP)
Fiscal FY 2005- FY 2009 FY 2010 FY 2011

components 08 RE (BE)
GFD/GSDP 4.9 4.6 8.3 3.3

RD/GSDP -1.4 -0.6 2.4 -0.3
PD/GSDP 1.9 1.6 5.1 0.3
PRB/GSDP -4.5 -3.5 -0.8 -3.2
Source: PHD Research Bureau, Compiled from RBI. RD: Revenue
'H¿FLW*)'*URVV)LVFDO'H¿FLW3'3ULPDU\'H¿FLW35%3ULPDU\
Revenue Balance BE: Budgeted Estimates, RE: Revised Estimates, (–)
U
sign refers to surplus.
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Inequalities in the Uttarakhand Economy
As with the rest of India, there are various forms of social

inequalities in Uttarakhand that manifest in the form of unequal
opportunities and quality of life for certain social groups.
These groups include the scheduled castes, the scheduled
tribes and women. The scheduled castes in Uttarakhand, like
elsewhere in the country, have suffered due to a deep-seated
process of discrimination and exploitation over a long period
of time. These problems are computed by the fact that the
hill society of Uttarakhand has traditionally been an upper
caste dominated society, in which the dalits were relegated
to en extremely low social position. To a large extent, similar
problems afflict the tribal population as well (though they
constitute only 3% of the population as compared to 18% in
the case of the scheduled castes) with the added complication
23 ĴǱȱȱȱęǰ June 2011 PHD Research Bureau

that their social isolation as well24. The main tribal groups of

Uttarakhand are the Bhotiyas, Tharus, Boxas and Jaunsaris and
each of these groups have distinct characteristics and needs.
Finally women, especially rural women, are a particularly
vulnerable group in Uttarakhand. The hill region districts
are relatively less developed in terms of infrastructure, i.e.,
electricity, roads and irrigation. The inter-district inequality in
infrastructure has resulted in increasing disparity in terms of
income and livelihood between the hills and the plains. The
land holdings are small and fragmented, and irrigation facilities
are limited. Soil and water conservation is another limiting

factor for inclusive development. For physical, geographical
and environmental reasons, the scope for agricultural policies
based on modern input-intensive agriculture is severely
constrained in the hill regions. The marketable surplus in hill
situation is low; marketing facilities are limited, and marketing
malpractices are prevalent. Remoteness and inaccessibility of
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hilly areas also inhibit the transfer of technology.
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The credit infrastructure and facilities in the remote areas

are lacking. As a result, the majority of the rural population in
the hills either survives on subsistence agriculture or migrates
to other parts of the country for employment, leaving their lands
untilled and fallow. The state faces the challenge of promoting
livelihoods to retain people through local employment and
income generation and to enhance their quality of life. Hill
development remains an uphill challenge as out-migration of
local peoples continues from the highland hinterlands. As a
result of the out-migration of a large section of the able bodied
man, the women constitute the main workforce in agriculture.
They also take care of the cattle, collect fuel wood and fodder
from forests, often situated at considerable distance from the
villages involving four to five hours of walking both ways, and
do all household chores. Their life is an unending drudgery
of hard work. Their condition is made worse by the fact
24 Sabyasachi Kar, ȱ ȱȱ ¢ȱǱȱȱȱȱĴȱ
Economy
Introduction | 31
that they also suffer from poor nutrition, which makes them
vulnerable to many health hazards including chronic anemia
and tuberculosis. There is also a considerable gap in the male
and female literacy rates. More than these social inequalities
however, it is the geographical inequality between the hills and
the plains of Uttarakhand that divides the state most critically.
This geographical disparity manifests itself in the form of
inter-district inequality. Four of the thirteen districts, namely,
Nainital, Haridwar, Dehradun and Udham Singh Nagar are in
the plains or have large parts in the plains.
Compared to other nine districts, these districts are

way ahead in terms of various indicators of development.
For instance, a recent study of inter-district disparities in
Uttarakhand undertaken by the Planning Department shows
that three of these districts (Dehradun, Haridwar and Udham
Singh Nagar) have a relatively high level of development. The
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main handicaps of hill regions are physical inaccessibility, lack
of electricity and smaller number of towns to act as growth foci.
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Consequently transport costs are high. The cost of provision

of economic and social services also tends to be higher in hill
areas.
1.4 Need of the Study
Uttarakhand in spite of being a small state , has certain key

features that make it distinct from other states of the country
and highlights its potential for development. However,
development has predominantly been in the plains and the
hill districts have been left behind. All the hill districts have
subsistence farming as their main economic activity. Due to
subsistence livelihood, migration and a remittance economy
operate in the hill districts. They are land-locked with huge
distance between the markets and resources. Because of these
constraints, traditional agriculture cannot be the lead sector for
development.
Thus the state faces the challenge of promoting livelihoods

to minimize migration through local employment and income
generation and to enhance the quality of life of people living
in villages. The positive feature of these hill districts are that
they have enormous potential for tourism, a suitable climate
for high-value agriculture, and a pleasant environment due to
60% forest cover. These have to harnessed for a development
strategy. The development strategy for Uttarakhand hills
should be based on developing brand equity under the name
of Organic Green State and an Uttarakhand Brand Equity Fund
should be set up. This can be achieved by working towards this

common goal through infrastructure development, tourism
promotion, agriculture diversification, poultry and wool-
based livelihoods and SMEs based on the above that capture
linkage with industry and tourism.
The formation of the new state had to fulfill the high
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expectations of the local people related to development and
better living standards. However, within Uttarakhand there
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is a geographical inequality between the hills and plains that

divides the state critically. Districts in the plans are far ahead
on various development indicators. In 2006-07 the state GDP
grew by 10.15%, the manufacturing sector grew by 17% and
the spare of the primary sector has shrinked by 2.7%. Industries
have created about 2.8 lakh jobs but these are in the plains and
most of the growth due to industrialization has been restricted
to the plains.
The hill region districts are less developed in terms of
infrastructure i.e. electricity, roads and irrigation. The inter-
district inequality in infrastructure leads to increasing disparity
in terms of income and livelihood between the hills and the
plains. Low levels of income not only result in low levels of
consumption and material deprivation, but also constrain
human potential by restricting access to education and health
facilities, thereby creating a vicious circle of poverty.
Introduction | 33
More than three-fourth of Uttarakhand’s population

depends on agriculture for their livelihood and the economy
is predominantly depends on mountain agriculture. However,
the land holdings are small and fragmented and irrigation
facilities limited. Soil and water conservation is other issue
for over development. For physical, geographical and
environmental reasons, the scope for agriculture policies based
on modern input-intensive agriculture is severely constrained
in the hill regions. As a result, the majority of rural population
in the hills either survives on subsistence agriculture or
migrates to other parts of the country for employment. The

state faces the challenge of promoting livelihoods to retain
people through local employment and income generation
to enhance their quality of life. Weak rural economy, lack of
employment opportunities, dependence on money order
economy and increasing consumption of liquor and tobacco
due to frustration and non-availability of sufficient nutritional
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food are some of the main reasons for poor economic attainment
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in the hill state of Uttarakhand.

At the same time, the hill districts of Uttarakhand have
tremendous potential. The vast natural resources add to the
state’s attractiveness as an investment destination, especially
for tourism and agriculture and forest-based industries.
Uttarakhand is the first state in the country to have created a
Tourism Development Board by legislation. Also, it is the first
one to be called an organic state.
1.5 Review of Literature
A review of literature was conducted extensively by the

investigator to know the progress of studies made on the role
of industries in the development industries in other countries
and in India. The investigator obtained the information
through a study and analysis of many text books, magazines,
journals, and websites. The review of literature was presented
as under.
Sekhar (2007) found that women’s participation in the rural

economy is significant. In Uttarakhand, young men generally
migrate to the plains in search of employment, whereas
women are left behind to cultivate the land and take care of
the children and the older generation. One option to reduce
the drudgery of women in agriculture is to identify alternative
economic activities that are viable given the economic, social,
and institutional constraints. The study highlights seven
economic activities—dairy farming, mushroom cultivation,
bee-keeping, quilt-making, poultry farming, papad making,
and petty business. As alternate/supplementary economic

activities, the last three, namely, poultry farming, papad-
making, and petty business contribute more than 50% to
household income. These activities provide a level of income
higher than the poverty line income of the region.
A study by Kar (2007) highlights the importance of
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equitable growth focusing on GDP growth and distribution
of growth to all sections of the population and geographical
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regions of the country. The study shows that the higher

growth rate of the state in the initial years has helped the state
to transform itself, but most of the growth has been restricted
to the plains, while the hill areas have grown slowly due to
structural problems. The development has been mainly in
the plain districts of the state and not the hills, which have
remained cut off from the rest of the country. Thus, there is a
need to modify or reschedule the current schemes according to
the hill districts of the state.
It is the geographical inequality between the hills and the
plains of Uttarakhand that divides the state most critically.
This geographical disparity manifests itself in the form of
inter-district inequality, which is most acute in the areas of
infrastructure like electricity, roads and irrigation. The inter-
district inequality in infrastructure leads to inequality in terms
of income and livelihood between the hills and the plains,
and results in rampant underdevelopment in the hills while
Introduction | 35
the plains are relatively prosperous. In order to change this

situation, the study suggests a strategy that is based on long-
term planning. The first step is to identify sectors that impede
growth as well as sectors in which the region has a comparative
advantage. The current state of infrastructure is clearly a
constraint on development in this region and must be the focus
of a strategy for inclusive growth. The study identifies priority
sectors that need to be developed in order to achieve the
goal of inclusive growth; these include infrastructure, health,
education, horticulture and tourism.
Avvai Kothai (2005) says that the role of small scale units
in the economy can be known from the fact that the small scale
sector contributes 40 per cent of industrial production and 35
per cent of national exports, the composition of exports and
food products being 29 percent and 18 percent respectively.
The industry groups, which have recorded high growth rates
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and share in the total production of SSIs, are textile products,
wood furniture, paper printing and metal products. The fixed
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investment in the sector has been reckoned at Rs. 84,329 crore.

As per the policy note 2004-05 issued by the small industries
department, our country has about 35.31 lakh small scale units
providing employment to more than 199.65 lakh people. This
sector is the second largest employer of Indian work force
after agriculture. Under the WTO regime the small scale units
have to face challenges of growing competition both globally
and domestically. Right from cosmetics to computers a lot
of products have already started entering India without any
restriction. Around 675 items reserved for the small scale
industry would now have to face competition from similar
products being imported freely which would be produced by
large world scale manufacturers.
Subash Singh Yadav (2005) says that the small-scale sector
has been playing a prominent role in the socio-economic
development of the country for the past five decades. It has direct
impact on the growth innovative and competitive structure. In
the context of liberalization as experienced through integration

with the global economy in a phased manner in national and
international competitive environment, perspectives and
strategies for small industry development have undergone a
sea change, the author opines.
Prasad (1983) in his study found that the small scale
industrial sector is an integral part of not only the industrial
sector, but also of the country’s economic structure as a
whole. If small scale industries are properly developed, they
can provide a large volume of employment, can raise income

and standard of living of the people in lower income group
and can bring about more prosperity and balanced economic
development. Small scale industrial sector has vast potential
in terms of creating employment and output, promotion of
export, expansion of base for indigenous entrepreneurship
and dispersal of industries and entrepreneurship skills in both
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rural as well as backward areas.
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Desai (1983) also stated that rapid industrialization in

India depends on the growth of small scale industries. Most
of the small scale industries are operating under certain
handicaps like shortage of raw materials, low levels of technical
knowledge and counseling, poor infrastructure, inadequate
capital and credit facilities, improper distribution system, lack
of facilities for market analysis, research and development.
They are also weak in marketing their products beyond their
localities especially in international markets.
Nayak Committee (1992) set up by the Reserve Bank of
India to examine the adequacy of institutional credit to the
Small Scale Industrial sector and the related aspects. The
Committee found that banks has insufficiently serviced the
working capital needs of the sector particularly that of cottage
and tiny enterprises. Moreover, there is a need for the setting
up of specialized bank branches for small scale industries,
the absence of which has led to serious bottlenecks. Further,
the system of providing term loan and working capital by
Introduction | 37
two kinds of institutions, viz. Banks and State Financial

Corporations (SFCs) has given rise to a host of problems of co-
ordination among them.
Abid Hussain Committee (1997) Report on small
enterprises has examined and suggested institutional
arrangements, policies and programmes for meeting long
term and short term requirements of the small scale industries.
The Committee found that the reservation policy of specific
products for exclusive manufacture by small scale industries
had not served much purpose as most industrialization had

occurred in items not reserved for small scale industries.
Moreover, it had resulted in low efficiency and productivity
and restricted the expansion and export potential of important
industries like light engineering, food processing, textiles and
others. Credit to small scale industrial sector had become more
and more expensive especially after interest rate deregulation.
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Mali (1998) in his study has observed that small and
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medium enterprises (SMEs) and micro enterprises have

to face increasing competition in the present scenario of
globalization, they have to specifically improve themselves in
the fields of management, marketing, product diversification,
infrastructural development, technological upgradation.
Moreover, new small and medium enterprises may have to
move from slow growth area to the high growth area and
they have to form strategic alliance with entrepreneurs of
neighbouring countries. Data bank on industries to guide the
prospective entrepreneurs including investors from abroad is
also needed.
Rajendran (1999) made a study to examine the various
kinds of assistance given to small scale industries with the
prime objective of identifying institutional assistance for
the development of small scale industries and the problems
faced by these industries in Tiruchirapalli district of Kerala.
He concluded that the greatest problem faced by the small
entrepreneurs was non-availability of adequate financial
assistance. Moreover, the small enterprises also face problems

relating to the acquisition of raw material, marketing of
products and technological and administrative problems.
Small scale industries can play an important role in the
development of hills areas as revealed by Hamid (1989) in
the study of Jammu and Kashmir. In his study he found that
the state of Jammu and Kashmir is not ideally suited for
developing large scale industries and as such the only remedy
lies in the establishment of small scale and cottage industries,
which are most suited to the socio-economic condition of the

state. He identified the causes of industrial backwardness
in Jammu and Kashmir includes- peculiar geographical
location, limited explorable resources, shortage of imported
raw materials, inadequate and irregular power supply,
insufficient central investment, poor technical know how,
absence of entrepreneurial spirit among the local people, non-
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participation of potential investors and entrepreneurs from
outside the state and passive role of financial institutions.
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It is interesting to note that all characteristics also prevail in

Mizoram as responsible for slow industrial growth in Jammu
and Kashmir.
Pande (1983) explained few causes that attributed to
the slow growth of small scale industries in hill areas. The
small scale industrial units in the village area and suburban
localities suffer from a considerable degree of technological
obsolescence.
Agarwal (1988) has emphasized that the importance of small
scale and cottage industries is more in the absence of large and
medium industries in the North-eastern region. He mentioned
some of the specific exogenous factors leading to bad industrial
health in the region. These are absence of effective industrial
policy and ad-hocism in Government decision at the state level
as well as industry-wise decisions, prolongation of gestation
period due to infrastructure deficiencies and weakness of
supporting services, uncertainties and shortage of essential
Introduction | 39
raw material and construction material supplies, defective

sales tax regulations, high power tariffs and transportation
costs etc, defective capital base and operational plans, shortage
of working capital, non-availability of trained and experienced
personnel and old techniques of production and lack of quality
control.
Agarwal (1999) mentioned that the entrepreneurs of
small scale industries are generally lacking in knowledge of
various aspects as how to set up an industry. Owing to the
predominance of agricultural background of the region, the

infrastructure for industrial development has not developed
properly. Apart from lack of industrial tradition and
managerial class, the state is handicapped by difficult terrain
and disturbed socio-political conditions are also adversely
affecting industrialization in the state.
Lianzela’s (1994) work is based on the economic
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development of Mizoram as a whole. He focused on various
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sectors of the economy and their development purely from the

economic point of view. Although he put valuable suggestions
and policy recommendations for the future development of the
state, he did not give any specific strategy for the development
of small scale and cottage industries in the state.
Uma Kapila (2008) believed that small scale enterprises are
hampered in their growth because imperfections in markets,
in labour, capital and land. Typically, the factor market most
focused on is the capital, distortions in which are seen to
especially discriminate against small scale enterprises. The
key elements in Indias’ policy for the support of small scale
industries have been small scale industry reservations, fiscal
concessions by way of lower excise duties, preferential and
allocation of and subsidization of bank credit, extension of
business services by government and preferential procurement
by the government.
Deepak Nayyar (2008) explored macroeconomics through
industrialization to development in the changed context
shaped by liberalization. It begins with the international

context to consider the dabate on industrialization in India
which is relevant for other late industrializers.
According to Dutt and Sundharam (2008) small scale
industries provide immediate large scale employment, they
offer a method of ensuring a more equitable distribution of
national income and they facilitate an effective mobilization
of resources of capital and skill which might otherwise remain
unutilised some of the problem that unplanned urbanization
tend to create will be avoided by the establishment of small

centers of industrial production all over the country.
T. Ravi Kumar (2007) studies the various levels of
familiarity with economics to the basic theories, issues and
problems of regional analysis as well as the analytical and
empirical methods that may be utilized within a regional
framework of study. The book deals with contemporary issues
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in regional policy such as regional growth, impact of industrial
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and infrastructure investment on regional systems, inter-

industry linkages etc.
Sarngadharan and Kumar (2007) highlights that the
traditional activity is an activity that produces marketable
products, using locally available raw materials, human skills,
and indigenous technology, the traditional industry of India
included handloom, handicrafts, coir, beedi, cashew, tiles
and bricks and other household industrial activities carried
out in the rural parts of the country . This sector is generating
employment and earning foreign exchange through large-
scale exports.
Manoj Kumar Aggarwal (1996) studied the interrelationship
between traditional agriculture and modern industrial sector.
His study explores the complex web of relations between
agriculture and industry with reference to Uttar Pradesh.
The study finds that the growth of the economy accelerated
since 70s . Share of industry in the state income increased and
it started playing a leading role in the economy. The study
Introduction | 41
also highlights concrete policy measures to strengthen the

bonds between agriculture and industry with a view to impart
impetus to the economic development of Uttar Pradesh.
Islam, (1992) Chadha and Saher (2003) study the spread
between the share of SSI in manufacturing employment and
value added is indicative of low productivity of SSI compared
with medium and large industry for instance, in 2000-01, within
manufacturing, the unorganized segment, which is largely a
house of small and tiny enterprises, constitutes 83.0 percent of
employment but only one-fourth of gross value added. It has

important implication for the employment generating capacity
of SSI if the objective is to improve the productivity of labour
engaged in them along with an example of employment.
Bala Subrahmanya, et al (2002) study the Research and
Development (R&D) and technological innovation in small
enterprise sector in Karnataka. The study found that nearly
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49 per cent (of the 2006 small enterprises in Karnataka) were
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engaged in technological innovations, most informally. These

innovations were primarily ‘incremental’ in nature and
product-oriented. The role of external agencies, particularly
government agencies was found to be insignificant.
Desai and Taneja (1993) based on a survey of 185 SMFs
(compromising electronics in Ahemdabad, apparel in
Bangalore, food products in Goa, vehicle and ancillaries in
Madras, and metal products and engineering in Kolkata,
Hyderabad and Pune) found that a considerable number of
small enterprises (about 40 percent) got technology support
from large enterprises, plant suppliers while among the rest,
a majority developed technology on their own or by imitating
others.
Ramastry and Krishnaswamy (1979) made perhaps a
maiden attempt to understand the innovative behavior of small
enterprises with reference to 20 engineering firms in Bangalore.
They found that the enterprises were innovative in different
ways relating to technology. The general level of technological
infrastructure in the country prevailing then being rather

low and, along with the limited investment capacity and low
demand conditions prevailing around the time, the overall
environment was not conducive to technological innovation in
small enterprises.
Work by Little and colleagues in the late 70s, and early
1980s (Little et al. 1987) focused on small scale industry
(SSI) specially after than on nonfarm enterprises generally.
However, given that SSI accounts for most industrial activity
in rural areas, the study findings on the productivity of

small enterprises are likely to apply to many of the non-farm
enterprises in rural areas.
1.6 Objectives of the Study
Uttarakhand is bestowed with rich natural- forest and

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agricultural resources. Most of the state’s wealth lies untapped
yet, and these could provide a strong base for industrial
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development. Despite enormous latent potentialities for

setting up of various resource based industries, no significant
progress could be achieved in the field of industrialization in
the state. With a view to bring about sustained and balanced
regional development of this region and also to improve the
living standard of the people of Uttarakhand, the present
study aims to focus on the Role of Micro-Small and Medium
Industrial Enterprises in the Development of Uttarakhand –
with special reference to Haridwar District’ . In order to make
the study not only of academic interest but also of practical
utility, the following objectives have been set.
Ȋȱ To study the basic infrastructural facilities for the
growth of MSMEs.
Ȋȱ To find out whether MSMEs are successful in
developing the region.
Ȋȱ To see whether MSMEs are capable to provide
employment opportunities.
Introduction | 43
Ȋȱ Despite potential for the development of area, much

has not been achieved. Therefore, effort will be to
identify those enterprises which can be fruitfully
developed in Haridwar region.
Ȋȱ To identify those factors which have proved to be
obstacle in the development of MSMEs.
Ȋȱ To review Government policies and measures for the
development of MSMEs.
Ȋȱ After studying various aspects to give suggestions for
future of MSMEs.
1.7 Research Methodology
The study is based both the primary and secondary

data. The secondary data was collected from published and
unpublished records and reports of the central Government
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and Government of Uttarakhand. For this purpose, personal
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visits were made to several organizations of which the

following are important: Uttarakhand Small Industries
and Export Corporation, Uttarakhand State Industrial
Development Corporation, Labour Commission Uttarakhand,
Economics and Statistical Organisation Uttarakhand, Director
of Industries Uttarakhand, Uttarakhand Small Industries and
Export Corporate, Uttarakhand Small Industries Corporation
and Economics and Statistical Organization Uttarakhand.
Primary data for this study were obtained through
questionnaires designed and administered to business
owners and labourers in the MSMEs of Haridwar District. 100
questionnaires amounting to about 10 % of the total labourers
working in these units and 37 questionnaires amounting to
about 5 % of the total MSMEs was administered to business
owners and labourers .
The methodology employed in this research entailed
a compilation of questionnaires for MSMEs operators and
labourers in Haridwar District. The respondents were even

given the option of putting down their names or not in order
to ensure objectivity and frankness in their responses. From
the responses the researcher discovered that there were few
identified problems and challenges facing MSMEs. It became
also very glaring that many of these problems and challenges
were either closely related or essentially meant the same
thing but expressed in different words or forms. For example,
respondents used various phrases like “irregular electricity
supply,” “epileptic electricity supply,” “frequent power
outage,” “low voltage” and “frequent load shedding” to

express the fact that they experience irregular power supply
for their operations. Similarly expressions like “Bad Roads,”
“Lack of Good Roads,”“Non existence of Access Roads,”
and “Construction of own access roads” were employed by
respondents to state problems they encounter with relation
to accessing their factory premises. These and other problems
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relating to the availability of water for use in their (SMEs)
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factories were all grouped under “Infrastructure” in the

questionnaire. The responses were keyed into the computer
and analyzed with the help of various statistical tools.
Chapterization
This chapter has provided an introduction to the study,

the economic state of Uttarakhand including an overview
of topographical , geographical and economic profile. It has
spelt out the objectives and need purpose and methodology of
the research. Chapter 2 reviews the MSMEs since 1991 till its
present position. Chapter 3 brings the functioning of MSMEs
and its role in economic development. Chapter 4 presents the
role of MSMEs in economic development of Haridwar and
data collected and its analysis and interpretations. Chapter
5 presents the problems of MSMEs of Haridwar. The final
chapter summarises the study and recommends areas for
further action.
Introduction | 45
References
1. Rahman, M. (2006): ‘A Study on the Problems and Prospects of
Small-Scale Industries in Hill Districts of Assam’ (Unpublished
Ph.D Thesis), Department of Commerce, Assam University,
Silchar. p.1
2. ICSI Herald, Vol. IX, No.4, April 1998. p.13.
3. Baruah, R. K. (2000): Financing Small Scale Industries, Omsons
Publications, Delhi
4. Funda, K. K. (2003): ‘How to start a Small Scale Industry’, Laghu
Udyog Samachar, April-September, 2003. p.78
5 Ali, M.Z. (2004): ‘Absenteeism in Small Scale Industries’, SEDME

(Small Enterprise Development, Management and Extension) Journal,
Vol. 31, No. 4, December, 2003.
6. Vinod, D. (2003): ‘Development through Khadi and Village
Industries’, Yojana. October,2003.
7. Annual Report (2003-04): Ministry of Small Scale Industries,
Government of India. New Delhi.
U
8 Kulkarni, P.R. (2001): ‘Financial Structure for Backward Area
Development’, SEDME Journal.Vol. 28, No. 2, June 2001
JN
şǯȱȱ ȱ ȱ ȱ ¡ȱ Ĵȱ ǻŗşşŝǼȱ ȱ ȱ ǰȱ
Ministry of Industry, Department of SSI.A & R.I. (Abid Hussain
ĴǼǯȱ ȱȱ ǯȱ ȱǯ
10. State Action Plan on Climate Change, “Transforming Crisis into
¢Ȅȱ ȱȱĴȱŘŖŗŘǰȱǯȱŘŘ
ȱ ŗŗǯȱȱ ǰȱǯǯȱǻŗşşśǼȱĴȱȱȱǰȱǯȱś
12. State Action Plan on Climate Change “Transforming Crisis into
¢Ȅȱ ȱȱĴȱŘŖŗŘǰȱǯȱŗŞȬŘŗ
13. Bisht, D.S. (2001). Guide to Garhwal and Kumaon hills, pp. 20-23.
14. Suryanarayana M.H., Ankush Agrawal and K. Seeta Prabhu (2011)
Inequality-adjusted Human Development Index for India’s States.
UNDP, India.
15. SRS Bulletin, January 2011
16. ibid.
17. RHS Bulletin, 2010, Ministry of Health & Family Welfare,
Government of India
18. Census of India 2011, Selected Education Statistics 2007-08
19. Selected Education Statistics 2007-08, MHRD
20. A study on Impact Evaluation of Package of Special Category

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MSMEs Introduction-Rashmi Chaudhary

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1

Industrialization is the most important factor for economic

provide immediate large-scale employment, offer a method of

to income generation, employment, GDP and export earnings.

Cottage industries, on the other hand also called household

many opportunities; besides adding to production, they broaden the

sector of Indian economy, which contributes nearly 40 percent

developing countries as an effective instrument for creating

of self-reliance, reduction in disparities in income, wealth and

35 lakh. As per the Industrial Policy Resolution of 1990, the

units from Rs. 5 lakh to Rs. 25 lakh9. The investment limit on

1.2 Uttarakhand - Topographical, Geographical And

Uttaranchal, formerly a part of Uttar Pradesh, was formed

immense opportunities for promotion of tourism. The unique

projects on the rivers Yamuna, Bhagirathi, Ganga, Ramganga,

Administrative Setup of Uttarakhand

Dehradun is the capital of newly established state of

Geographical Context – The Himalayas

The name Himalaya has been derived from two Sanskrit

Table 1.1: Uttarakhand and its Districts

Code District Headquarters Population Area Density Map

AL Almora Almora 621972 3083 202

BA Bageshwar Bageshwar 259840 2302 113

CL Chamoli Chamoli Gopeshwar 391114 8032 51

Code District Headquarters Population Area Density Map

CP Champawat Champawat 259315 1781 146

DD Dehradun Dehradun JN 1695860 3088 550

Code District Headquarters Population Area Density Map

NA Nainital Nainital 955128 3860 247

PG Pauri Garhwal Pauri JN 686572 5399 127

Code District Headquarters Population Area Density Map

RP Rudra Prayag Rudraprayag 236857 1890 125

TG Tehri Garhwal New Tehri JN 616409 4080 151

Code District Headquarters Population Area Density Map

UT Uttarkashi Uttarkashi 329686 8016 41

The higher regions of the Himalaya are snowbound

including the Himalaya proper and the northeastern hill

remaining perpetually snow bound overlooked by more

10 State Action Plan on Climate Change “Transforming Crisis into

The Uttarakhand Himalayas are divided into the distinct

Fig. 1.1: Physiographic zones of Uttarakhand

to the north of Shivaliks. The Shivaliks extend in a narrow

3. Greater Himalayas: This zone has a varying width of 40-

slopes down to the Yarlungtsangpo (Brahmaputra) river

although there are wide variations in this percentage from

Fig. 1.2: Land use Pattern in Uttarakhand

and the Himalayan mountain belt. The former is covered with

hr to 79.2 m3/hr, in Bhabhar formations yield is up to 332.4 m3/

Major River Basins and Sub-Basins

grouped into following six catchments:

3. Alaknanda Catchment - This River joins the river

glacier near Kedarnath. It cuts through a gorge of glacial

Alaknanda near Karanprayag.

ha is the third largest. These reservoirs are owned by Irrigation

to 13th February. During January and February there is

Sain (Asna), Tun, Haldu, Kaju, Jamun, Khair, Sisso,

The amount of trouble it takes, to get at small titbits is amazing.

‘Gorals’ belong to goat family. The ‘Thar’ has a face covered

1.3 Uttarakhand – Overview and Economy

23 ĴǱȱȱȱęǰ June 2011 PHD Research Bureau