Industrial sickness in India: need for comprehensive identification criteria

Abstract

Prevention is better than cure—this adage is particularly significant in the context of growing industrial sickness in the country. Fundamental to the criteria used by financial institutions and government agencies to identify sickness is the recurrence of cash loss. Dholakia argues that use of various criteria based on the cash loss syndrome delays identification of sickness and results in a high proportion of terminally sick units. According to Dholakia, what is needed is a comprehensive set of empirically tested criteria which would serve as an early warning system. Abnormal fluctuations in a firm's relative position within the industry to which it belongs should be explicitly used to determine sickness at the incipient stage. This is likely to help prevent industrial sickness. However, this would require restructuring of existing systems and procedures adopted by the financial institutions.