Unit-12
Small Scale Industries Importance and problems in India.
Small scale industries are important because it helps in increasing employment and economic development of India. It improves the expansion of the country by increasing urban and rural growth. Role of Small and medium scale enterprises are to assist the govt in increasing infrastructures and manufacturing industries, reducing issues like pollution, slums, poverty, and lots of development acts. Small scale manufacturing industries and cottage industries play a really important role within the economic development of India. If any amount of capital is invested in small scale industries it'll help in reducing unemployment in India and increasing self-employment. The industry may be a sector during which the assembly of products may be a segment of the economy. Allow us to learn more about the importance of Small scale industries and the way SSI helps in developing the country.
Classification of business
Basics of starting a business
Small Scale Industries Definition
Previously, the definition of small scale industries depended upon the business’s capital and labour. This definition remains wont to demarcate between small, medium and large-scale industries.
The Central Government has the authority to work out capital investment requirements for small-scale industries. These requirements are listed under the Industries (Development and Regulation) Act, 1951.
A small enterprise during which investment in plant & machinery ranges between Rs. 25 lakhs to Rs. 5 crores may be a small-scale industry.
Similarly, for industries that provide services, the investment requirement is between Rs. 10 lakhs and Rs. 2 crores.
Role and Importance of Small Scale Industries
• Increases production
• Increases total exports
• Improves the utilization rate
• Opens new opportunities
• Advances welfare
Every small-scale industry plays an enormous role within the Indian economy. Aside from providing employment to crores of individuals , it's the additional advantage of minimum capital requirements. The govt also offers several tax benefits to SSI for this purpose.
Furthermore, they will exist in urban also as rural areas. Small Scale Industries are ready to compete with large-scale industries and multinational corporations due to this. Thanks to reasons like these, they're of great importance.
Learn more about Characteristics samples of Small Scale Industries here.
The following are some specific roles that SSIs play within the Indian economy:
1. SSI Increases Production
India is one among the world’s fastest growing economies within the world. Consequently, its production output is very large . It's pertinent to notice that SSIs contribute almost 40% of India’s gross industrial value.
These industries produce goods and services worth over Rs. 40 lakhs for each investment of Rs. 10 lakhs. Furthermore, the worth addition during this output increases by over 10%.
Here is another interesting statistic about Small scale industries. The amount of Small Scale Industries in India increased from around 8 lakhs in 1980 to over 30 lakhs in 2000.
This figure has grown even more in recent years due to the government’s ‘Ease of Doing Business’ policies.
As a results of this, the entire industrial production output rose tremendously within the previous couple of years. SSIs are, therefore, strongly liable for the expansion of India’s economy.
2. SSI Increases Export
Apart from producing more goods and services, SSIs are ready to export them in large numbers also .
Almost half India’s total exports lately come from small-scale businesses.
35% of the entire exports account for direct exports by SSIs, while indirect exports amount to fifteen .
Even trading houses and merchants help SSIs export their goods and services to foreign countries.
3. SSI Improves Employment Rate
It is important to notice firstly that tiny Scale Industries employs more people than all industries after agriculture.
Almost four persons can get financial condition if Rs. 10 lakhs are invested in fixed assets of small-scale sectors.
Furthermore, SSIs employ people in urban also as rural areas.
Consequently, this distributes employment patterns altogether parts of the country and prevents unemployment crisis.
4. SSI Open New Opportunities
Small-scale industries offer several advantages and opportunities for investments.
For example, they receive many tax benefits and rebates from the govt . The chance to earn profits from SSIs are big thanks to many reasons.
Firstly, SSIs are less capital intensive. They even receive support and funding easily.
Secondly, procuring manpower and raw materials is additionally relatively easier for them. Even the government’s export policies favour them heavily.
5. SSI Advances Welfare
Apart from providing profitable opportunities, Small Scale Industries play an outsized role in advancing welfare measures within the Indian economy also .
A large number of poor and marginalized sections of the population depend upon them for his or her sustenance.
These industries not only reduce poverty and income inequality but they also raise standards of living of poor people. Furthermore, they allow people to form a living with dignity.
Role of Small-Scale Industries during a Developing Economy
The case for the event of small-scale industries is especially strong in under-developed but developing countries like India.
These small-scale industries satisfy many of the investment criteria that one often prescribes for the planned development of the country.
Labour-intensive:
Firstly, small-scale industries are labour-intensive, i.e., labour-investment ratio in their case is sort of high. A given amount of capital invested in small-scale industrial undertakings is probably going to supply more employment, a minimum of within the short run, than an equivalent amount of capital invested in large-scale undertakings.
This is a really important matter for our country where many people are either unemployed or under-employed. Further, the encouragement of small-scale industry would serve to counteract the seasonal unemployment in agriculture and thus to utilise labour which could otherwise attend waste.
Capital-light:
Secondly, small-scale industries are capital-light, i.e., they have relatively smaller amount of capital than that required by large-scale industries, since the capital-output ratio is far smaller within the case of the previous . Thus, one among the good advantages of small-scale industries is that they create possible economies within the use of capital. Capital is already scarce in an under-developed country like India.
Capital Formation:
Thirdly, besides making possible economies within the use of Ike existing stock of capital, small-scale industry may call into being capital that might not otherwise have inherit existence. The spreading of industries over the countryside would encourage the habits of thrift and investment within the rural areas. Moreover, the enterprising Small manufacturer has got to scrape together capital where he can find it. He often manages to urge it from relatives and friends. This capital probably would never have inherit existence as productive capital, had it not been for the tiny enterpriser.
Skill-light:
Fourthly, the peculiar attraction of small-scale industries lies in their being skill-light. A large-scale industry involves an excellent deal of management and supervising skill—foremen, engineers, accountants, and so on. Like capital, these skills also are in very short supply in our country, and it's important to economies the maximum amount as possible in their use. Small-scale industry provides how of doing this and, at an equivalent time, provides industrial experience and is a training ground for an outsized number of small-scale managers.
In India, with an extended tradition of highly artistic products of industry , there exists a substantial ‘fund’ of local and traditional skill. Small industry could also be better able than large industry to require advantage of those existing traditional skills with minor adaptations.
Import-light:
Fifthly, small-scale industries are import-light, i.e., they use a comparatively low proportion of imported equipment and materials as compared with the entire amount utilized in them. A low-import intensity within the capital structure of the small-scale industries reduces the necessity for foreign capital or exchange , and thus obviates the balance of payments difficulties later, and currently retains within the country an outsized a part of whatever induced effects may materialize.
Quick Investment:
Sixthly, small-scale industries are of the “quick- Investment type”, i.e., those during which the time-lag between the execution of the investment project and therefore the start of flow of consumable goods is comparatively short. During a developing economy, with a high inflationary potential and wish for a rapid rise within the living standards, the importance of such quick-investment type industries can hardly be exaggerated. The small-scale industries have a high fruition co-efficient (i.e., a high ratio between planned output and investment) and also a brief fruition lag.
Decentralisation:
Seventhly, the event of small-scale industries will cause dispersion or decentralisation of industries, and can thus promote the thing of balanced regional development. a serious drawback within the industrial structure of an under-developed country is that regional distribution of industries is exceedingly uneven.
On the one hand, there's a disproportionate growth of large-scale industries during a few areas, and on the opposite , a virtual absence of such industries within the greater a part of the country. The event of small-scale industries will tend to correct this uneven distribution of industries within the country.
Equal Distribution of Income and Wealth:
Eighthly, small-scale and cottage industries have the extra advantage that, with decentralized industries, they secure a more even distribution of income and wealth. The event of large-scale industries tends to concentrate large incomes and wealth during a few hands. This is often undesirable from the social point view, because it leads to the exploitation of man by man. If also creates vested interests which put obstacles within the way of the economy marching towards its got’ of socialistic pattern of society.
Overcoming Territorial Immobility:
Lastly, by carrying the work to the worker, small-scale industries can overcome the difficulties of territorial immobility. Moreover, unlike large industries, small-scale industries don't create problems of slum housing, health and sanitation, etc., and therefore the attendant disease, misery and squalor. Thus, there's a robust case for encouraging small-scale industries in under-developed countries like India.
BOOKS
1. Indian Economy – Rudra Dutt & Sundarram
