Small Scale Industries in India : Definition and Small Scale Business Ideas

Small Scale Industries

Small scale industries (SSI) are those industries in which manufacturing, providing services, productions are done on a small scale or micro scale. For example, these are the ideas of Small scale industries: Napkins, tissues, chocolates, toothpick, water bottles, small toys, papers, pens. Small scale industries play an important role in social and economic development of India. These industries do a one-time investment in machinery, plants, and industries which could be on an ownership basis, hire purchase or lease basis. But it does not exceed Rs. 1 Crore. Let us discuss in detail about it.

Essentially small scale industries comprise of small enterprises who manufacture goods or services with the help of relatively smaller machines and a few workers and employees. Basically, the enterprise must fall under the guidelines set by the Government of India. At the time being such limits are as follows,

  • For Manufacturing Units for Goods: Investment in plant and machinery must be between 25 lakhs and five crores.
  • For Service Providers: Investment in machinery must be between 10 lakhs and two crores.

In developing countries like India, these small scale industries are the lifeline of the economy. These are generally labour-intensive industries, so they create much employment. They also help with per capita income and resource utilization in the economy. They are a very important sector of the economy from a financial and social point of view.

Characteristics Of Small Scale Industries

  • Ownership: SSI ’s generally are under single ownership. So it can either be a sole proprietorship or sometimes a partnership.
  • Management: Generally both the management and the control is with the owner/owners. Hence the owner is actively involved in the day-to-day activities of the business.
  • Labor Intensive: SSI’s dependence on technology is pretty limited. Hence they tend to use labour and manpower for their production activities.
  • Flexibility: SSI’s are more adaptable to their changing business environment. So in case of amendments or unexpected developments, they are flexible enough to adapt and carry on, unlike large industries.
  • Limited Reach: Small scale industries have a restricted zone of operations. Hence, they can meet their local and regional demand.
  • Resources utilisation: They use local and readily available resources which helps the economy fully utilise natural resources with minimum wastage.

Role in the Indian economy

  • Employment: SSI’s are a major source of employment for developing countries like India. Because of the limited technology and resource availability, they tend to use labour and manpower for their production activities.
  • Total Production: These enterprises account for almost 40% of the total production of goods and services in India. They are one of the main reasons for the growth and strengthening of the economy.
  • Make in India: SSI’s are the best examples for the Make in India initiative. They focus on the mission to manufacture in India and sell the products worldwide. This also helps create more demands from all over the world.
  • Export contribution: India’s export industry majorly relies on these small industries for their growth and development. Nearly half of the goods that are exported from India are manufactured or produced by these industries.
  • Public Welfare: These industries have an opportunity to earn wealth and create employment. SSI’s are also important for the social growth and development of our country.

4. Objectives of Small Scale Industries

The objectives of the small scale industries are:

  • To create more employment opportunities.
  • To help develop the rural and less developed regions of the economy.
  • To reduce regional imbalances.
  • To ensure optimum utilisation of unexploited resources of the country.
  • To improve the standard of living of people.
  • To ensure equal distribution of income and wealth.
  • To solve the unemployment problem.
  • To attain self-reliance.
  • To adopt the latest technology aimed at producing better quality products at lower costs.

Sector wise Growth of Small Businesses in India

We can have an overview of how small scale industries are growing sector wise by the figures of employment generated by those sectors. Food products industry comes on top in terms of employment generation, providing jobs to nearly 5 lakh people. The second rank goes to non-metallic mineral products which created 4.5 lakh jobs and metal products industry is ranked three with an employment of 3.75 lakh people.

It is followed by small businesses of wood products, basic metal industries, chemicals & chemical products, machinery parts, hosiery & garments units, repair services, paper products & printing industry, and rubber & plastic products, with a contribution in employment generation of anywhere between 10% and 5%.

Therefore the total contribution in employment generation by the above mentioned sectors was around 50%. The rest of the small scale businesses had a less than 5% part in the total employment creation.

Hope this article will help you to understand what is small scale industry and its characteristics. Share this article “Small Scale Industries in India : Definition and Small Scale Business Ideas” to your friends.

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