Small Scale Final Project

MSSI Er. H. Manjunath

INTRODUCTION

Small-Scale industries are the backbone of the Indian industrial structure. They provide a variety of non-traditional low technology product. They are also engaged in the processing, preserving, manufacturing and servicing activities.

Small-Scale industries play a key role in the industrialisation of developing country. This is because they provide large-scale employment and have a comparatively higher labour-capital ratio. They need a shorter gestation period and relatively smaller market to be economic. They need a lower investment, and facilitate an effective mobilisation of resource of capital and skill which might otherwise remain unutilized.

Small-Scale industry sector, manufacturing a wide range of more than 7500 products, not only caters to the needs of the lower income group, but also acts as a nursery for the development of the entrepreneurial talent. It produces mass consumption items such as leather, electro-medical systems, hearing aids, tape-recorders, process electro instruments etc.

Small-Scale industries in India has been given a distinct identity and the Govt. has accorded high priority to this sector on account of the vital role it plays in balanced and sustainable economic growth.

Rizvi College Role of SSI in India


CONCEPT AND DEFINATION OF SSI

1. Small-Scale Industries: The definition of small-scale industries [SSI] is broadly based on the criterion of original value of plant and machinery which has been revised over the years. At present the finance minister in his union budget, 2007-08, presented to the parliament on February 28, 2007 has raised this limit to Rs 1.5crore. However to facilitate technology upgradation and enhance competitiveness, the investment limit [in Plant and machinery] has been raised to 5crore in respect of 71hi-tech export oriented items in the hosiery/knitwear, hand tools, drugs and pharmaceuticals, stationery and sports goods sector. It is also necessary to point out at this juncture that the sector now includes not only the SSI units but also small-scale service and business enterprises [SSSBEs] and is thus referred to as the small enterprises sector.

2. Tiny Enterprise: The investment limit in plant and machinery of tiny units is Rs.25lacs irrespective of the location of the unit.

3. Women Enterprises: Are those small-scale units where one more women entrepreneurs have not less than 51% financial holding.

4. Small-Scale Service and Business (Industry-related) enterprises (SSSBEs): SSSBEs are Industry-related service and business related enterprises with investment in fixed assets, excluding Land and Building upto Rs.10lakhs irrespective of location as on 31st march 2001.



CLASSIFICATION OF SMALL-SCALE INDUSTRIES

Small-scale industries can be classified into five main groups.

(1) Manufacturing Industries i.e. industries manufacturing complete article.

(2) Serving Industries - It covers light repairs shops necessary to maintain mechanical equipment.

(3) Feeder Industries – It specializes in certain type of products and services e.g. electroplating, casting, welding etc.

(4) Ancillary to large Industries – It produce part and components and rendering services.

(5) Mining or quarrying.

SMALL SCALE ENTERPRISES

MANUFACTURING TRADING SERVICES

(a)Village & Cottage (a) Wholesale (a) Professional services Industries (b) Retail e.g. medicine, law

(b) Handloom & Handicrafts (c)Commission accounting consultancy etc.

(c) Modern SSI Agents (b) Commercial services

(i) Small scale unit e.g. real estate Warehousing repair shop etc.

(ii) Ancillary units c) Personal services

(iii) Tiny units Fashion shops dry cleaning



Characteristics of Small Scale Industries

1) Small Capital Investment : Small scale industries require less capital compared to large scale industries . Cottage industries require very less capital, family could also start business with just a few hundred rupees.

2) Generate Employment: Small scale industries are generally labour intensive and hence create employment opportunities. It is very helpful in a developing country like India where we have a lot of unemployment problems.

3) Personal Contact: There is a personal supervision of all the activities i.e., production, purchase, labour and marketing of goods it is done by the entrepreneur himself.

4) Location: Small scale industries are generally located in Rural and semi urban areas. They can be easily located anywhere provided raw material; labour and finance are easily available.

5) Exploitation of human Resource: Child and woman labour in particular are exploited by small scale industries. The exploitation takes place in industries located in rural areas. A great amount of child labour is used in these industries.

6) Entrepreneurial Growth: Small scale industries activity is a beehive of entrepreneurship. The small scale industrial activity has been growing at faster rate even then the large scale sector.

7) Technology: Small scale industries do not require high level of technology. Indigenous technology is used as far as possible. Being labor intensive not much of capital is needed.

8) Dispersal of manufacturing Activity: The metropolitan cities have become overcrowded. Small scale industries make it possible to



transfer manufacturing activities from overcrowded metropolitan cities to the rural and semi urban areas.

9) Poor Organization and Management: The management and organization of small scale industries is poor and negligible. Very often the management is on trial and error basis. There is no delegation of authority.

10) Ownership: Most of the small scale industries are privately owned and organized as sole proprietorship. The owner and the family worker generally from the largest component of small scale.

OBJECTIVE OF SMALL SCALE INDUTRIES:

1) To create vast employment opportunities for people.

2) To effect decentralization of industries by creating industrial estates.

3) Redistribution of economic power as income.

4) To raise the standard of living of the people.

5) To increase industrial production.

6) To facilitate mobilization of resources for capital and skill.

7) To utilize the available resources.

8) Promoting industrial development of backward areas.

9) To bring about an integration of rural economy on one hand and large scale industries on other hand.

10) To tap latent resources like entrepreneurial ability, hoarded wealth.



IMPORTANCE/SIGNIFICANCE OF SMALL-SCALE INDUSTRIES.

Small-Scale industries play an important role in the process of country’s industrial development. It accounts for 40% of total value of industrial production and contributes directly about 33% of the aggregate exports.

In a developing country like INDIA it is a small-scale industry that constitutes the backbone of the industrial structure. Its development has created vast employment opportunities and has also brought about decentralization.

The following advantages suggest the importance/significance of small-scale industries.

1.Labour Incentives: Small-scale industries do not require large amount of capital. They are labour intensive and can provide employment to large amount of people.

2.Equitable Distribution of Income and Wealth: By creating opportunities for small business, small enterprise can bring about more equitable distribution of income and wealth which is socially necessary and desirable.

3.Production: Small-scale industries can be under taken in a short period and hence can increase the production in the short run and long run. The small-scale sector produces a large proportion of the national products.

4.Dispersal of Manufacturing Activities: Small-scale industries will make possible transfer of manufacturing activity from congested cities to the rural and semi urban areas. This will help bringing in a balanced regional growth.



5.Linkages: The large-scale industries create an opportunity or facility for the growth of small-scale industry. The growth of large motor industry will create opportunities for setting up of small service station and repair station.

6.Own Identity: Small-scale enterprises have their own place in the countries economy. Imperfect competition protects the small firms market and enables them to exist even if they are not efficient in terms of cost.

7.Training Ground for Local Entrepreneur: Small-scale industrial enterprise are the training ground for local entrepreneurs. Small-scale industry knowledge and skill can be transferred to other enterprise.

8.Mobilisation of Services: In the rural areas savings are generally used in unproductive consumption. The growth of cottage and small-scale industry can offset the investment opportunities to people living in under-developed countries.

9.Facilitates Capital Formation: The development of small-scale industries will generate additional incomes and additional savings, this will facilitate capital formation in the economy.

10. Export Potential: Nearly 20% of the total value of export comes from small-scale industries. The main items of exports of small-scale sectors include engineering goods, pharmaceuticals, sports goods, finished leather, ready made cotton garments, processed foods, etc

Apart from this, the small-scale enterprises have the following advantages too.

1) They are innovative and productive.2) The products of these enterprises earn a substantial foreign exchange.3) They have a favorable capital output ratio.



4) They meet substantial part of increasing demand for consumer goods including human consumption goods.

5) They require a short gestation period.

ROLE AND PERFORMANCE OF SMALL-SCALE INDUSTRIES IN INDIA.

Small-scale and cottage industries are the most important employment providing sectors of the economy. They also contribute a substantial part of manufacturing output.

1) Expansion of Small-Scale Sector and its Share in Industrial Output: The total number of small-scale units both registered and unregistered stood at 101.10 lacs in 2000-01 and this rose to 123.42 lacs in 2005-06. The average annual growth rate over the period of these six years was around 4.1%. The output of small-scale units was Rs. 1, 84,401 crore in 2000-01 and this rose to Rs. 2, 72,668 crore in 2005-06. The average annual growth rate of production over these six years was around 8.5%.

2) Employment Generation: The small-scale units employed 239.09 lakh people in 2000-01 and this number has consistently risen to 294.91 lakh people in 2005-06 i.e. about three crore. As there is unemployment problem in India, creation of employment opportunities depends crucially on the development of small-scale and cottage industries. There is already surplus labour in agriculture while the large-scale industrial sector, being capital intensive in nature, has limited employment opportunities.



3) Relative Efficiency as compared with Large-scale sector: According to a study the small-scale industries, by investing only 7% to 15% of the total Manufacturing sectors capital contributing to nearly 1/5 of the industrial output and 35% to 40% of total employment in the industrial sector. Between 1980-94 labour productivity and capital productivity in small-scale grew at a faster rate than the larger-scale sector.

4) Equitable Distribution of National Income: The small-scale and cottage industries ensure a more equitable distribution of national income wealth. This happens because of the ownership of small-scale industries being more widespread and they possess a much larger employment potential as compared to large-scale industries.

5) Mobilization of capital and entrepreneurial skills: A number of entrepreneurs are spread over small towns and villages of the country. Obviously, large-scale industries cannot utilize them as effectively as small-scale and village industries which are distributed over the entire length and breadth of the country. Similarly, large industries cannot mobilize savings done by people in areas far-flung from urban centre’s.

6) Regional dispersal of industries: There has been concentration of large-scale industries in the state of Maharashtra, West Bengal, Gujarat, and Tamil Nadu. Therefore, disparities in industrial development have increased. More industries in the urban areas have created pollution problems. As against this, the small-scale industries are mostly set up to satisfy local demand and they can be dispersed over all the state very easily.

Contribution to Exports: With the establishment of a large number of modern small-scale industries in the post-independence period, the



contribution of the small-scale sector in export earnings has increased by leaps and bounds.

Problems of Small Scale Industries

(1) Problem in production.(2) Problem in marketing.(3) Problem in inputs.(4) Problem in cost of production.(5) Problem in overheads.(6) Financial problem.(7) Other problem.


Documents

Small Scale Final Project