Synopsis

Introduction

Meaning of small-scale industries

Types of small-scale industries

 Manufacturing industries
 Ancillary industries
 Service industries
 Feeder industries
 Mining industries

Objectives of small- scale industries

Characteristics of small- scale industries

 Ownership
 Management and control
 Area of operation
 Technology
 Gestation period
 Dispersal of units

Problems faced by small-scale industries

 Scanty credit assistance

 Uneven and poor quality of raw material
 Absence of organized marketing process
 Inadequate infrastructure

Policies and programs to remove disabilities

Conclusion

Introduction

Small scale industries in India and abroad exhibited considerable robustness and pliability in maintaining
an unswerving rate of growth and employment generation during the global recession and economic
slowdown. The Indian economy during the current fiscal years has shown considerable growth
performance by contributing to create livelihood opportunities to millions of people, in magnifying the
export potential and in increasing the overall economic growth of the country. the SSI sector distinctly
crucial in addressing the national objective of bridging the rural urban divide, mitigate poverty and
generating employment for the admirable community of the country.

Meaning of small scale industries

A small scale industry is an industrial undertaking in which the investment under fixed assets in plant and
machinery or equipment, whether held on ownership term or on lease or hire purchase, does not
exceed ₹ 10 crore for manufacturing enterprise and ₹ 5 crore for service enterprise. However, the
investment limit changes overtime as prescribed by the government.

In accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act,
2006 the Micro, Small and Medium Enterprises (MSME) are classified in two classes: 1. Manufacturing
Enterprises: The enterprises engaged in the manufacturing or production of goods pertaining to any
industry specified in the first schedule to the industries (Development and regulation) Act 1951 or
employing plant and machinery in the process of value addition to the final product having a distinct
name or character or use. The Manufacturing Enterprise are defined in terms of investment in Plant and
Machinery. 2. Service Enterprises: The enterprises engaged in providing or rendering of services and are
defined in terms of investment in equipment.

Types of small scale industries

The small scale industries in India whether in manufacturing sector or service sector are split up into five
parts:

1. Manufacturing industries: These units are producing merchantable articles for direct consumption and
also for processing industries, example: khadi industries, food processing industries, power looms, etc.

2. Ancillary industries: The ancillary industries produce parts and components for large industries.

3. Service industries: Service industries are known for covering all light repairs shop that is essential to
maintain mechanical equipment. These industries completely depend on machinery.

4. Feeder industries: These industries produce certain specialised products like electroplating, casting,
welding, etc.

5. Mining or Quarries: These industries caters the demand of different types of stones and minerals of
the Indian and foreign market

Objectives of small scale industries

1. To create more employment opportunities with less investment.

2. To remove economic backwardness of rural and less developed regions of the economy.

3. To reduce regional imbalances.

4. To mobilize and ensure optimum utilization of unexploited resources of the country.

5. To improve standard of living of people.

6. To ensure equitable distribution of income and wealth.

7. To solve unemployment problem.

8. To attain self-reliance.

9. To adopt latest technology aimed at producing better quality products at lower costs.

Characteristics of Small-Scale Industries:

(i) Ownership: Ownership of small scale unit is with one individual in sole-proprietorship or it
can be with a few individuals in partnership.
(ii) Management and control: A small-scale unit is normally a one man show and even in case of
partnership the activities are mainly carried out by the active partner and the rest are
generally sleeping partners. These units are managed in a personalized fashion. The owner is
activity involved in all the decisions concerning business.
(iii) Area of operation: The area of operation of small units is generally localized catering to the
local or regional demand. The overall resources at the disposal of small-scale units are
limited and as a result of this, it is forced to confine its activities to the local level.
(iv) Technology: Small industries are fairly labour intensive with comparatively smaller capital
investment than the larger units. Therefore, these units are more suited for economics
where capital is scarce and there is abundant supply of labour.
(v) Gestation period: Gestation period is that period after which teething problems are over
and return on investment starts. Gestation period of small-scale unit is less as compared to
large scale unit.
(vi) Dispersal of units: Small scale units use local resources and can be dispersed over a wide
territory. The development of small scale units in rural and backward areas promotes more
balanced regional development and can prevent the influx of job seekers from rural areas to
cities

Problems faced by small scale industries

In spite of expedient contribution by the SSIs towards the Indian economy, SSIs does not get the
indispensable support from the concerned Government departments, financial institutions, Banks, credit
societies and corporate thus the SSIs are becoming handicap in the face of competition at national and
international markets. The major problems faced by the SSIs are discussed below:

1. Scanty credit assistance Scanty and timely supply of credit is one of the major problems faced by SSIs
in India. Scarcity of finance and weak creditworthiness is the main barrier for the development of SSIs in
India. The creditworthiness of these small borrowers is generally weak and therefore they face unwilling
creditors who may be persuading to lend only at high rate of interest.

2. Uneven and poor quality of raw material SSI units face extreme problems in procurement of raw
materials whether from local or international market. The problems arise due to absence of sufficient
quantity of raw materials, poor quality of raw material at exorbitant price. The entrepreneur of SSI units
has lack of knowledge about the procurement from foreign market. Large scale industries enjoy
economies of large scale operation hence can procure the quality raw material at very reasonable price,
thus can sell the products at cheaper price as compared to SSIs
3. Absence of organised marketing process SSI units do not have any organised marketing process and
even does not appoint any marketing organisation for marketing of products or services and hence their
products compare unfavourably with the quality of the products of large scale industries. They suffer
competitive disadvantages in comparison to large scale industries, as large scale industries infuse large
amount of money on branding and promotion activities.

4. Inadequate infrastructure Inadequate infrastructure is a major problem for the SSI units to grow and
prosper. Most of the SSI units are located in semiurban, urban and rural areas where the power supply is
inadequate to run big machines, several times power cut off, and poor road connectivity. Thus absence
of adequate infrastructure adversely affects the productive schedule of the enterprise leading to
underutilization of capacity. More over the machineries, equipment’s and technology employed by the
SSIs are out dated, where the large scale organization enjoys the competitive advantages. Beside the
above mentioned problems SSI units suffer from a number of other problems also poor managerial
capabilities, lack of adequate warehousing for free supply of goods, lack of skilled manpower, lack of
appropriate information, etc. Due to all these problems the progress and development of Small scale
industries could not reach the distinguished stage

Policies and Programs to Remove Disabilities

 Credit and Finance: Banks do not want to advance credit to the SSIs because the latter are not
always in a position to repay. The internal resources of SSIs are so meagre that they cannot
sustain on it, in times of business slowdown. The evolution of an integrated credit system is
needed whereby long-term capital and short-term credit are adequately provided at a
reasonable rate of interest.
 Marketing Assistance: The products of SSIs being non-standardised and of variable quality, are
often hard to market. The government has a task to provide required assistance to bring
producers and dealers into close contact so that imperfection is eliminated.
 Allocation of Raw Materials, Imported Components and Equipment: It is observed that the SSIs
have not proportionately received a fair share of supply of raw materials. The Government has,
therefore, started giving priority in raw materials allocation to the small scale sector.
 Technical Assistance: SSI development is often hampered due to low level of technology and
shortage of trained and experienced personnel. Provision of technical service is essential to
stimulate increased productive efficiency. Encouraging new product lines is another need as the
small scale sector lacks in tha

Conclusion

The furtherance and advancement of SSIs is essential for the development of Indian economy to achieve
impartial distribution of income and wealth, economic self-dependence and economic sustainable
developments. To boost the SSI sector so that it can take deserved place in the growth mechanism of
Indian economy, it is essential to support MSMEs by educating them to make optimum utilisation of
inbuilt capacity to be successful both under human and economic activity. Some appropriate measures
to be taken by the government in providing financial assistance at minimum formalities, a platform to be
built by government to help the MSMEs in procurement of quality raw material and train them for
organised marketing process.