A Report on Technology Upgradation for Enterprises in the Unorganised Sector: Status, Constraints & Recommendations


The National Commission for Enterprises in the Unorganised Sector (NCEUS) was set up in 2004 by the United Progressive Alliance (UPA) government as an advisory body and a watchdog for the informal sector. In this report, the Commission discusses the technological needs of the unorganised sector and makes recommendations to increase the productivity, employment and earnings of the sector’s enterprises and the workers.

The report states that more than 94 per cent of enterprises in India are in the unorganised sector, many of them in rural India – micro, khadi and village enterprises such as handlooms, handicrafts, coir, leather, apparel, food processing and retail trade, which contribute over 31 per cent to GDP. The Third All India Census of Small Scale Industries (2001-02) says that more than 85 per cent of the total registered small-scale industry (SSI) units did not have access to technical know-how.

The post-liberalisation business environment had become difficult for micro and small enterprises because of increased domestic and international competition. They were not prepared for the ensuing challenges. This report highlights the consequent issues, including low incomes, inadequate credit, low education levels, a lack of training, difficulties in procuring materials, logistics and low sales margins. It lists recommendations to overcome each of these challenges, with a focus on improving the overall efficiency of the sector. 


  1. In  2006-07, there were about 58 million unorganised non-farm sector enterprises in India providing employment to 104 million workers. These included handloom, handicrafts, coir, leather, apparel, food processing and retail trade. The number was estimated to go up to 71 million by the end of the 11th Five Year Plan in 2012. These enterprises contributed to over 31 per cent of the GDP.

  2. The Third All India Census of Small Scale Industries (2001-2002) notes that 0.97 per cent of registered SSIs source their technical know-how from abroad, 7.54 per cent from domestic companies or SSIs they collaborate with, and 6.11 per cent from domestic research and development organisations or special agencies. 

  3. A study by the Society for Economic and Social Transition (New Delhi; based on 2002-03 data for Maharashtra, Delhi, Haryana and Rajasthan) showed that in more than 70 per cent of SSIs using better technology, quality substantially improved, in 46 per cent cost of production reduced, and more than 20 per cent could compete in domestic and international markets. 

  4. Based on their technological needs, unorganised sector enterprises can broadly be seen as ‘modern’ or ‘traditional’. Textiles, leather, metal and engineering are among the important modern industries, while handlooms, handicrafts and woodcarving are among the important traditional industries.

  5. The textile industry has a special place in the Indian economy – it contributes 4 per cent to GDP and 14 per cent to the total industrial production, Its share in the gross export earnings is 7 per cent and it employs about 20 per cent of the organised sector workforce. The Indian textile industry contributes 12 per cent to the global textile production, making it the third largest producer of cotton textiles in the world. 

  6. A case study of the textile industry that looks at the role of the South Indian Textile Research Association (SITRA), set up to help the industry apply science to solve its problems, and an analysis of the workings of the Technology Upgradation Fund Scheme (TUFS) shows that SITRA and TUFS are not tailored to meet the needs of small units.  

  7. The leather industry provides employment to over 2.5 million people, of whom 30 per cent are women. Around 10 per cent of the world’s leather needs are processed in India. 

  8. A case study of small leather units shows that these enterprises are unable to realise their full potential due to financial constraints, problems sourcing good quality hides and a lack of access to modern technology. Even though India accounts for the world’s largest livestock population, the country’s leather industry has barely 3 per cent of the global market share.

  9. Case studies of brass and engineering goods industries show that these enterprises do well when they are a part of clusters. 

  10. Case studies of traditional industries such as handlooms and handicrafts indicate that their major problem is the inability to adopt new technology and adapt to changing requirements, whether it is the chikankari and dhankhali weavers of Hoogly or the makers of bell metal vessels in Bishanpur.

  11. To address the technology needs of micro and small enterprises, it is important to develop links between the enterprises and R&D laboratories or academia. Countries that have done this have succeeded in improving the productivity of their micro and small enterprises.

  12. Almost all central government departments linked to industry, agriculture and rural development are implementing technology-related schemes. But, there is a lack of coordination among ministries, departments and agencies, and the NCEUS has suggested a dovetailing of schemes and an expansion of their reach.

     Focus and Factoids by Aditi Chandrasekhar.


National Commission for Enterprises in the Unorganised Sector, New Delhi

The Commission had the following members: Dr. Arjun K. Sengupta, Dr. K.P. Kannan, Dr. R.S. Srivastava, V.K. Malhotra, Dr. T.S. Papola and B.N. Yugandhar.


National Commission for Enterprises in the Unorganised Sector, New Delhi


01 Apr, 2009