Small Scale IndustriesIntroductionThe Small Scale Industry is an
enterprise whose employee count and revenue falls below certain
levels. Small Scale Industries in India provide job opportunity to
more than 65 million people. Internationally SMEs report for 98% of
business statistics and are accountable for triggering originality
and competition.Small scale industry in India is renowned for its
socio economic growth factors and even industrial expansion. One of
the unique features of small scale industry is that its growth has
generated better job prospects helping free enterprise and
inculcation of expertise besides guaranteeing better utilization of
limited fiscal reserves and technology. Additionally, they play an
important part in attaining the economic targets and sociopolitical
aims.
Establishing a small scale enterprise requires detailed project
report so that promoters can understand that in how many years the
endowments can be forfeited. Project Report for Small Scale
Industry helps in identifying the product line and target market of
the sector, besides evaluating the level of skill and accuracy.
Hence, a small scale industry project report must contain 5-7 years
evaluations in context of revenues, expenditures, cash flows and
outflows, balance sheet of legal responsibilities and assets in
hand, and reimbursement agendas of working capital and long-term
loans, etc. In this way the endorsers can make use of the
estimations provided by the firm in the project reports and compare
it with the real performance and accordingly take remedial steps
against the negative disparities.
The promoters establishing their commercial enterprises without
considering the project reports are taking a big risk as they are
equipped with any measuring units to assess the firm's performance.
In the competitive market ambiance, industrialist must not make a
foray into a new sector or set up a new business without preparing
Project Reports.
While preparing the project report for small scale industry
always keep in mind that the statistical figures are not
discouraging for the promoters. The project valuation should
encourage a sense of practicality among them.
The other users who could require the project reports are
industrialists, Financiers, banks, Financial Analysts, merchants,
clients, certifying authorities, Management Accountants, etc
MeaningSmall scale industries were defined on different basis
but since March1, 1999, small industries include all those units
having a fixe capital of Rs. 1Crore invested therein. It was
previously Rs. 3 Crore. Industries with a fixed capital of Rs.25
lacks (earlier Rs. 50 lacks) are calling Tiny industries. Small
scale industries employees hired labor and machines and power are
used. Scientific instruments industry in Ambala, carpet
manufacturing industry in panipat ,hosiery industry at Ludhiana,
T.V. manufacturing units in Delhi are some of the examples of small
scale industries
HistoryThe Institute for Small-Scale Industries was established
on March 2, 1966 through a bilateral agreement between the Republic
of the Philippines and the Government of the Kingdom of the
Netherlands. Its principal objective then as now was to assist and
promote the development and growth of the small-scale industrial
sector in the Philippines. Originally set up as the training
institute for the Philippine small industries, it gradually built
up its capabilities and expanded its activities to include
research, extension, and information programs.On August 4, 1969,
the Institute was established through Republic Act No. 6041 as a
research and extension unit of the University of the
Philippines.The Institute had its permanent home with the
completion of the four storey E. Vibrate Hall in 1986.From then, UP
ISSI conducted several consultancy training courses, seminars,
technical studies in the field of medium and small-scale industries
with emphasis on Philippine industriesTINY ENTERPRISESGovernment
have already announced increase in the investment limits in plant
and machinery of small scale industries, ancillary units and export
oriented units to Rs 6 million, Rs 7.5 million, and Rs 200 thousand
respectively. Such limits in respect of "TINY" ENTERPRISES would
now be increased from the present Rs 200 thousand to Rs. 500
thousand, irrespective of location of the unit. Limit in plant and
machinery for determining the status of SSI/Ancillary units as on
date is Rs 10 million. For tiny it is Rs 2.5 million and for SSSBE
Rs 500 thousand.Service sub-sector is a fast growing area and there
is need to provide support to it in view of its recognized
potential for generating employment. Hence all Industry-related
service and business enterprises, recognized as small scale
industries and their investment ceilings would correspond to those
of Tiny enterprises.A separate package for the promotion of Tiny
Enterprises is now being introduced. This constitutes the main
thrust of Governments new policy.While the small scale sector
(other than Tiny Enterprises) would be mainly entitled to one-time
benefits (like preference in land allocation/power connection,
access to facilities for skill/technology up gradation), the Tiny
enterprises would also be eligible for additional support on a
continuing basis, including easier access to institutional finance,
priority in the Government Purchase Programed and relaxation from
certain provisions of labor laws.It has also been decided to widen
the scope of the National Equity Fund Scheme to cover projects up
to Rs. 1 million for equity support (up to 15 per cent). Single
Window Loan Scheme has also been enlarged to cover projects up to
Rs 2 million with working capital margin up to Rs 1 million.
Composite loans under Single Window Scheme, now available only
through State Financial Corporations (SFCs) and twin function State
Small Industries Development Corporation (SSIDCs), would also be
channelized through commercial banks. This would facilitate access
to a larger number of entrepreneurs.FINANCIAL SUPPORT
MEASURESInadequate access to credit both short term and long term
remains a perennial problem facing the small scale sector. Emphasis
would henceforth shift from subsidized/cheap credit, except for
specified target groups, and efforts would be made to ensure both
adequate flow of credit on a normative basis, and the quality of
its delivery, for viable operations of this sector. A special
monitoring agency would be set up to oversee that the genuine
credit needs of the small scale sector are fully met.To provide
access to the capital market and to encourage modernization and
technological up gradation, it has been decided to allow equity
participation by other industrial undertakings in the SSI, not
exceeding 24 per cent of the total shareholding. This would also
provide a powerful boost to ancillarisation & sub-contracting,
leading to expansion of employment opportunities.Regulatory
provisions relating to the management of private limited companies
are being liberalized. A Limited Partnership Act will be introduced
to enhance the supply of risk capital to the small scale sector.
Such an Act would limit the financial liability of the new and
non-active partners/entrepreneurs to the capital invested.A
beginning has been made towards solving the problem of delayed
payments to small industries by setting up of factoring services
through Small Industries Development Bank of India (SIDBI). Network
of such services would be set up throughout the country and
operated through commercial banks. A suitable legislation will be
introduced to ensure prompt payment of Small Industries
bills.INFRASTRUCTURAL FACILITIESTo facilitate location of
industries in rural/backward areas and to promote stronger linkages
between agriculture and industry, a new Scheme of Integrated
Infrastructural Development (including Technological Back-up
Services) for Small Scale Industries would be implemented with the
active participation of State Governments and financial
institutions. A beginning in this direction will be made this year
itself.A Technology Development Cell (TDC) would be set up in the
Small Industries Development Organization (SIDO) which would
provide technology inputs to improve productivity and
competitiveness of the products of the small scale sector. The TDC
would coordinate the activities of the Tool Rooms,
Process-cum-Product Development Centers (PPDCs), existing as well
as to be established under SIDO, and would also interact with the
other industrial research and development organizations to achieve
its objectives.Adequacy and equitable distribution of indigenous
and imported raw materials would be ensured to the small scale
sector.MARKETING AND EXPORTSIn spite of the vast domestic market,
marketing remains a problem area for small and tiny enterprises.
Mass consumption labor intensive products are predominantly being
marketed by the organized sector. The tiny/small scale sector will
be enabled to have a significant share of such markets. In addition
to the existing support mechanism, market promotion would be
undertaken through cooperative/public sector institutions, other
specialized/professional marketing agencies and consortia approach,
backed up by such incentives, as considered necessary.National
Small Industries Corporation (NSIC) would concentrate on marketing
of mass consumption items under common brand name and organic links
between NSIC and SSIDCs would be established.Government recognizes
the need to widen and deepen complementarily in production programs
of large/medium and small industrial sectors. Parts, components,
sub-assemblies, etc. required by large public/private sector
undertakings would be encouraged for production in a
techno-economically viable manner through small scale ancillary
units. Industry associations would be encouraged to establish
sub-contracting exchanges, in addition to strengthening the
existing ones under the SIDO. Emphasis would also be laid on
promotion of a viable and competitive component market.Though the
Small Scale Sector is making significant contribution to total
exports, both direct and indirect, a large potential remains
untapped. The SIDO has been recognized as the nodal agency to
support the small scale industries in export promotion. An Export
Development Centre would be set up in SIDO to serve the small scale
industries through its network of field offices to further augment
export activities of this sector.MODERNISATION,TECHNOLOGICAL AND
QUALITY UPGRADATIONA greater degree of awareness to produce goods
and services conforming to national and international standards
would be created among the small scale sector.Industry Associations
would be encouraged and supported to establish quality counseling
and common testing facilities. Technology Information Centers to
provide updated knowledge on technology and markets would be
established.Where non-conformity with quality and standards
involves risk to human life and public health, compulsory quality
control would be enforced.A reoriented programme of modernization
and technological up gradation aimed at improving productivity,
efficiency and cost effectiveness in the small scale sector would
be pursued. Specific industries in large concentrations/clusters
would be identified for studies in conjunction with SIDBI and other
banks. Such studies will establish commercial viability of
modernization prescriptions, and financial support would be
provided for modernization of these industries on a priority
basis.PROMOTION OF ENTREPRENEURSHIPGovernment will continue to
support first generation entrepreneurs through training and will
support their efforts. Large number of EDP trainers and motivators
will be trained to significantly expand the Entrepreneurship
Development Programmes (EDP). Industry Associations would also be
encouraged to participate in this venture effectively.EDP would be
built into the curricula of vocational and other degree level
courses.Women entrepreneurs will receive support through special
training programme. Definition of "Women Enterprises" would be
simplified. The present stipulation regarding employment of
majority of women workers would be dispensed with and units in
which women entrepreneurs have a majority shareholding and
management control, would be defined as "Women
Enterprises".SIMPLIFICATION OF RULES AND PROCEDURESThe persistent
complaint of small scale units of being subjected to a large number
of Acts and Laws, being required to maintain a number of registers
and submit returns, and face an army of inspectors, would be
attended to within a specified time frame of three
months.Procedures would be simplified, bureaucratic controls
effectively reduced, unnecessary interference eliminated and paper
work cut down to the minimum to enable the entrepreneurs to
concentrate on production and marketing functions.Difference: Large
Scale, Small and Cottage IndustryThe difference among the
industries is defined on the basic of use of capital equipment
according to instruction of the Government.According to instruction
of the Government of 1985, industries whose investment on fixed
capital like machineries and equipments is less than Rs. 35 lakhs
is known as Small Scale Industries. For large scale industries,
promoter or entrepreneur as one person or two persons are not able
to provide capital for construction of large scale industries.So
the entrepreneurs or promoters of large scale industries collect
the required capital through the shares of small values. They also
get loan from the market through different ways. But small scale
industries are not able to get the required capital through all
these sources.As large scale industries produce more than small
scale industries, the extent of market is more for large scale
industries. Small scale industries can manage themselves with their
local market but large scale industries cannot. Large scale
industries cannot function if they do not get adequate
market.Cottage industries are also known as small scale industries
because of the investment. Still then there are some differences
between small scale industries and cottage industries.According to
Fiscal Commission, 1950, a cottage industry is one which is carried
on wholly or primarily with the members of the family either as a
whole or as a part-time occupation. According to Fiscal Commission,
1950, a small scale industry is one which employs hired labor from
10 to 50. In cottage industry, there is an owner but no hired
labourers but in small scale industries both owner and hired labor
are present.Cottage industries mainly use traditional techniques of
production or simple methods of production but small scale
industries use power, new techniques of production and new
machineries etc.Khadi and Gramodyog, handlooms, ornamental products
of silver and gold and small industries are the examples of cottage
industries. TVs, radios, electronic products and other consumer
goods are examples of small scale industriesDifference between
Small Scale Industry and Large Scale IndustrySmall Scale Industry1.
These industries employ less number of persons and capital.2. Most
of the work is done by manpower, small machines and tools.3. Raw
materials used are less and the production is consequently less.4.
They are scattered in rural and urban areas and are in the private
sector, e.g., cycle, T.V., radio.
Large Scale Industry(i) These industries employ a larger number
of persons and capital.(ii) The work is done mostly by larger
machines and laborers.(iii) Raw materials and used is large and
there is mass production.(iv) They are located in urban centers and
are in the public sector or run by big industrialists, e.g., Cotton
textiles, Jute textiles.VILLAGE AND SMALL INDUSTRIESVillage and
small industries in their different aspects are an integral and
continuing element both in the economic structure and in the scheme
of national planning. The primary object of developing small
industries in rural areas is to extend work opportunities, raise
incomes and standard of living and to bring about a more balanced
and integrated rural economy. Inevitably, in rural areas, the
traditional industries have to be given immediate consideration. As
the rural economy develops, technical changes will take place in
different fields and correspondingly, the pattern of rural
industrialization will also change from simple crafts meeting
elementary needs to small industries based on steadily improving
techniques and designed to satisfy the needs of a more advanced
character. These developments will necessarily be spread over a
long period; in the meantime, support through legislation and
various positive measures of organization and assistance for the
existing village industries is absolutely vital to the stability
and growth of the village economy. Thus, the sector of village and
small industries is not to be viewed as a static part of the
economy, but rather as a progressive and efficient decentralized
sector which is closely integrated, on the one hand, with
agriculture and, on the other, with large-scale industry. The main
considerations which influence the priority given to village and
small industries in rural and industrial development programs were
set out at length in the first Five-Year Plan. During the past
three years, with the setting up of various special organizations,
the ground has been prepared for programs of larger
magnitude.OBJECTIVES AND BASIC POLICIES The Village and Small Scale
Industries Committee: The programme for village and small
industries to be carried out during the second plan period is
con-'siderably larger than in the first. Programmes for the second
plan and problems connected with their implementation have been
recently reviewed by a committeethe Village and Small Scale
Industries (Second Five Year Plan) Committee, commonly known as the
Karve Committee, which was appointed by the Planning Commission in
June, 1955. In making its proposals the Committee kept three
principal aims in view, namely,1. to avoid as far as possible,
during the period of the second plan, further technological
unemployment such as occurs specially in the traditional village
industries;2. to provide for as large a measure of increased
employment as possible during the plan period through different
village and small industries; and3. to provide the basis for the
structure of an essentially decentralized society and also for
progressive economic development at a fairly rapid rate.The
Committee, however, envisaged that even in the traditional village
industries, to the extent immediately possible, technical
improvements should be adopted, and for the future there should be
a regular programme of gradual transition to better techniques. At
the same time, where new capital investment had to be made it
should be, as far as possible, on improved equipment, the
improvement being in some cases in the nature of additions to or
adaptations of existing equipment. The concept of a decentralized
economy is not necessarily related to any given level of technique
or mode of operation. What it implies is that technical
improvements will be adopted in such a manner and to such.extent as
will permit comparatively small units which are widely scattered or
dispersed throughout the country to undertake economic activities.
On this view, whatever the villagers can undertake by way of
improved industry in their own village should be organized on a
village basis. The Committee considered that the progressive
expansion and modernization of rural industry could be best brought
about by the-establishment of small industrial units, along with
the necessary services in large villages and small towns located
all over the country. Industrial expansion on the periphery of
large towns could scarcely be said to reduce the concentration of
industry. What was needed, therefore, was a pattern of industrial
activity in which a group of villages converging on their natural
industrial and urban centre form a unit or, to use the Committee's
expression, "a pyramid of industry broad-based on a progressive
rural economy". Economies of scale and organization should also be
secured for small units through organized cooperative working, as
in rural community workshops. In the Industrial Policy Resolution
of 30th April, 1956, reference has been made to the policy of
supporting cottage and village and small-scale industries, which
the State has been following by restricting the volume of
production in the large-scale sector, by differential taxation, or
by direct subsidies. It is stated that while such measures will
continue to be taken, whenever necessary, the aim of the State
policy will be to ensure that the decentralized sector acquires
sufficient vitality to be self-supporting and its development is
integrated with that of large-scale industry. The State will
therefore, concentrate on measures designed to improve the
competitive strength of the small-scale producers. For this it is
essential that the technique of production should be constantly
improved and modernised, the pace of transformation being regulated
so as to avoid, as far as possible, technological unemployment.
Lack of technical and financial assistance and suitable working
accommodation and inadequacy of facilities for repair and
maintenance are among the serious handicaps of small-scale
producers. The Resolution mentions in this connection that a start
has been made with the establishment of industrial estates and
rural community workshops to make good these dificien-cies. The
extension of rural electrification and the availability of power at
prices which the workers can afford will also be of considerable
help. Emphasis is laid in the Resolution on the organization of
industrial cooperatives which greatly assist many of the activities
relating to small-scale production. Such cooperatives should be
encouraged in every way and the State should give constant
attention to the development of cottage, village and small-scale
industries.Proposals for non-expansion of the capacity of a
large-scale industry have to be considered from two different
points of view. The first is the extent to which such a measure
would enlarge the market for small units. It may sometimes be that
for lack of organization or other similar reasons full advantage
may not be taken of the available market. The second aspect to
consider is the volume of production of a commodity that may be
required in the economy. In this connection the likely trends of
future demand are specially relevant during a period of development
in which considerable public and private outlay will occur. Within
the limits set by the need to avoid shortage of goods on the one
hand, and the extent to which production in small units can be
organized effectively to take advantage of a larger market, in any
individual case, on the other the balance of public advantage will
determine whether and at what level the capacity of a large-scale
industry should be limited. In applying the policy there is need
for review from time to time in the light of changing economic
conditions- It is therefore necessary that licensing of industries,
which already applies to industries listed in the schedule to tlie
Industries (Development and Regulation) Act, 1951, should also be
extended to the field of agricultural processing, especially to
rice mills. Appropriate legislation for this purpose should be
enacted. In Imposing a chess or an excise duty oa the pro-ductioil
of a large industry, as the Village and Small-Scale Industries
Committte pointed out, the objects are, firstly, to raise funds
from the consumers of a product; secondly, to take away a portion
of the additional profits accruing to large units in consequence of
a limit on expansion of capacity or production; and thirdly, to
provide for a limited price differential in favour of small units.
The imposition of chess or an excise duty in appropriate situations
is a well-recognized fiscal device and each case has to be
considered on its merits. The question of subsidies which are
sometimes proposed raises issues of a different character. The
Village and Small Scale Industries Committee did not generally
express itself in favour of new measures for introducing subsidies
on production or rebates on sales. It felt that the cost of schemes
of protection afforded to any activity should be readily measurable
and schemes of protection for normal economic activity should be so
planned that they could be withdrawn in a reasonable time. There
are a few limited exceptions which the Committee has suggested as,
for instance, the proposal for a small subsidy for improved
equipment used in the hand-p'ounding of rice. In the proposals of
the Village and Small Scale Industries Committee, for all the
village industries taken together, the total amount of production
subsidy envisaged is estimated to be about Rs. 8 cores. Rebates on
the sale ofhandloom and traditional khaki are estimated to involve
expenditure respectively of about Rs. 20 cores and Rs. 7 cores. The
devices for giving effect to the idea of common production programs
which have been discussed above represent only a part of the
totality of action to be taken for the development of village and
small industries. They are intended ordinarily to afford time and
opportunity to the sector of village and small industries to gain
the necessary strength to develop on its own. They have to be
supplemented, wherever feasible, by common marketing arrangements
through cooperative organizations in which the State may
participate. A great deal of attention must be given to ensuring
that the positive measures of organization and assistance succeed
and succeed without loss of time. Industrial Cooperative and
Associations.It is common ground that in village and small
industries co-operatives have to be developed to the greatest
extent possible. The experience of the Handloom Board in
encouraging the formation of weavers' cooperatives illustrates some
of the conditions needed for the growth of co-operation in small
industry. The number of handlooms included in the co-operative fold
increased from 626,119 in 1950-51 to 788,664 in 1953-54 and to
878,984 in 1954-55 and was expected to reach a million *y the end
of the first Plan. For the formation of co-operatives the Handloom
Board has provided assistance to weavers in share capital and in
working capital from 75 to 87% per cent of the share value is
contributed as loan by the Government and die balance is provided
by the weaver. Working capital will be provided at uniform rates
ofRs. 200 per cotton loom and Rs. 500 per silk loom. Weavers'
co-operative organizations at different levels are federated so
that there are central agencies available for supplying raw
materials, offering technical advice, arranging for credit from
co-operative sources, and providing better marketing facilities. In
the coir industry, 120 primary coir marketing societies, 22 husk
co-operative societies and 2 central coir marketing cooperative
societies have been formed. In some states, progress has been made
among particular classes of artisans, as among tanners and leather
workers in Bombay, Uttar Pradesh and Punjab, and among palm gur
manufacturers in Madras. A combination of factors is required,
first for establishing industrial co-operatives and, secondly, for
maintaining and developing them. In almost all village and small
industries there is scope for supply and marketing cooperatives.
Producer co-op'-ratives, however, have greater possibilities in
some fields than in others. Supply and marketing co-operatives are
in themselves an important means of aiding small units and securing
steady improvement in techniques, including quality control holding
of stocks against future demand and supply of credit The setting up
of co-operatives of either type will enable small scale industry to
utilise in increasing measure financial assistance from the
Government and from institutions and also guidance from technical
service institutes, training centres and mobile technical services.
For small-scale industries, especially those run by small
entrepreneurs, a common form of organization will be the trade
association set up for either purchase of raw-materials or sale of
finished products or both. It is possible that members of such
associations may, after a certain period of working together for
specific purposes, like to form themselves into cooperatives. Trade
associations may, thus, be an independent form of organization as
well as a step leading on to the establishment of cooperatives. In
organising cooperatives for the various village and small
industries it will be desirable to have targets to be attained
during the plan period. Both for organising supply and marketing
cooperatives, and producer co-operatives, it is essential that
Industries Departments in the States should build up efficient
extension organizations which can reach artisans in the main urban
centres and in groups of villages. An extension organization is
particularly needed in rural areas where, because of the intimate
relationship between community production and community demand,
favourable conditions exist for forming artisans' co-operatives. A
small beginning in this direction is being made In 25 pilot areas
selected under the national extension and community development
programme.A network of well-organized industrial cooperatives for
supply and marketing will be essential if a scheme of assured
marketing as envisaged by the Village and Small-Scale Industries
Committee is to be tried out. The principal objective of such a
scheme is to provide an incentive for continuous and increased
production by offering to purchase the entire output of selected
products or varieties at a pre-determined price or at a margin
between the price of the raw material and the price of the final
product which gives the artisan an adequate wage. The Committee
suggested that the scheme may be introduced in the first instance
on an experimental basis for handloom cloth in a few selected
centres and for selected varieties. The modus operandi will be that
the estimates of overall demand for an article will be broken up
into requirements of production from various regions and centres in
the country and on that basis arrangement will be made to supply
raw materials to the producers and to take over their entire output
The finished product will be purchased by cooperative institutions
on behalf of the State and goods so purchased may be held in stock
until the time of sale. The price and terms of sale will be
determined by the State and any losses that cooperative
institutions may incur will be made good provided they are in
excess of the losses normally arising out of trade operations.
While the details of such a scheme will have to be worked out
before it can be introduced even on experimental scale in respect
of any village or small industry product, it can, in certain
circumstances be an improvement on the system of fixed rebates
which exists in certain industries. It is desirable that experience
in operating such a scheme should be gained at selected centres in
one or two fields in which possible losses are not likely to exceed
appreciably the cost of existing rebates. The various operations
connected with the purchase of raw materials and equipment and the
sale of finished products through industrial co-operatives
necessarily involve a large organisational effort as also suitable
arrangements for stocking and warehousing. In respect of
agricultural products a scheme of co-operative marketing and rural
warehousing has alrady been worked out and legislation for the
setting up of the necessary machinery is on the anvil. There may be
some difficulty in bringing co-operatives of agricultural producers
and industrial co-operatives within the framework of the same
scheme, but there should be scope for mutual assistance. To some
extent it may be possible to use warehousing and godown facilities
organized for agricultural products for products of village and
small industries. A stores purchase policy sympathetic to the
requirements of small units can be an important factor in the
success of programs in the decentralized sector. The purchasing
procedures will need to be re-orientated where necessary so that
the small units are assured of definite opportunities in the
context of Government procurement and are thus able to utilise
their potential capabilities. Marketing research provides the basis
of knowledge and information for shaping and properly orientating
the production programs of the various industries. Such research
can be organized either by a series of ad hoc investigations or can
be combined with schemes ofreserach or marketing. The object in
both cases, however, would be to make a close study of the needs
and tastes of consumers, consumer behaviour towards competing
products and services, changes in prices and their influence on
demand etc. This is a field in which not much work has been done so
far. It is suggested that studies in respect of the marketing of
the more important products of village and small industries may be
undertaken and on the basis of results obtained, the scope of
marketing studies can be gradually extended.As small town and rural
electrification is extended, a larger number of small industries
will be worked outby power and the adoption of improved techniques
will be facilitated. In the chapter on Irrigation and Power, the
econo'mic aspects of small town and rural electrification have been
described at some length. During the second five year plan the
number of places with population less than 10,000 which have
electricity is expected to increase from 6,500 to 16,559. In the
first instance extension of power supply can take place most
conveniently in villages which are situated close to urban areas or
which lie along the routes of grid transmission lines from which
subsidiary lines can be constructed. It has been recommended that
urban and rural electrification schemes should be worked in an
integrated manner, so that the suplus from revenue realised from
urban and industrial consumers can be utilised for reducing rates
to rural consumers. It is also emphasised that even with the
existing programme of power development a larger number of villages
than that now proposed can be provided electricity if an organized,
co-operative approach is adopted for its utilisation in rural
areas. Further, it is suggested that where there is scope for
utilisation of electricity in agriculture and the small industries,
local schemes could be undertaken in the form of diesel
installations or in hilly areas through hydro-electric stations. It
is hoped also to evolve some small working units for the
development of wind power. Housing of Artisans.Improvement of
housing conditions of artisans should be an important item in the
programs of decentralized industrial development, as often the
house of the artisan is also his workplace. Provision for this may
be found to the extent possible from the allotment for individual
industries but this will need to be supplemented by giving due
attention to the needs of those engaged in cottage, village and
small industries in the national housing programme. While framing
projects under the rural housing programme, the requirements of
village artisans should be kept especially in view. Credit and
Finance.Satisfactory arrangements for meeting the requirements of
finance hayed a vital part in the development programs for village
and small industries. Besides short-term or working capital needed
for purchase and stocking of raw materials and for the stocking of
finished goods, finance is also needed for enabling artisans to
contribute to the share capital of co-operatives, for the purchase
of tools antf equipment and for investment in land, buildings,
machines and other equipment. Loans for share capital will not be
required to the same extent in small-scale industries (many of
which are in the hands of small entrepreneurs) as in village
industries where the co-operative form of organization is of the
utmost importance. Working capital and medium-term and long-term
finance are needed in all village and small industries, although
the need for long-term finance will be relatively greater in those
industries which use better techniques and equipment and need
specially constructed premises. Existing arrangements for provision
of finance are far from satisfactory. Some part of the finance
required is supplied by State Governments under the provisions of
their State Aid to Industries Acts. To a very limited extent medium
and long-term finance is beginning to be provided by State Finance
Corporations. Co-operative institutions are able to obtain some
working capital through banking channels. The Reserve Bank of India
and the State Bank of India will have a large role in any
integrated scheme of finance for village and small industries.
Assistance under State Aid to Industries Acts has been recently
liberalized to some extent and larger powers of sanction are being
delegated to local authorities, but the amounts available from this
source are yet small. There can be no doubt that normal banking and
institutional agencies will have to be utilised far more than at
present if the credit needs of village and small industries are to
be met in any large measure. A coordinated policy based on close
collaboration between the Reserve Bank, the State Bank of India,
State Finance Corporations and central cooperative banks is
necessary. A beginning in this direction is being made by
undertaking pilot schemes for enlarging and coordinating credit
facilities available to small scale industries in selected centres.
These schemes are to be worked under the auspices of the State Bank
of India and will be supervised and guided by local co-ordination
committees. In the scheme of co-ordination which has been drawn up
State Governments co-operative credit agencies, State Finance
Corporations and the State Bank of India will all function
together. Each agency will meet specific credit needs and at the
same time overlapping will be avoided. These pilot schemes will
provide experience for drawing up similar integrated schemes for
each group of village and small industries with reference to its
specific requirements. In some fields for instance, provision of
finance for share capital has the first priority, as in
cooperatives of handloom weavers. In its report, the Rural Credit
Survey Committee emphasises the need for the Reserve Bank of India
to take an active role in the provision of short-term credit for
industrial cooperatives. The necessary legislation for this purpose
has now been enacted.OUTLAY ON VILLAGFE AND SMALL
INDUSTRIESExpenditure incurred on the development of village and
small industries during the first five year plan is shown
below:Expenditure on village and Small Industries in the First
Plan1951-55Rs. cores) 1955-56 (Budget)1951-56
(1)(2)(3)(4)
Handlooms6.54.611.1
Khad4.9358.4
Village industries1,13.04.1
Small-scale industries2.03-253.
Handicrafts0.40.61.0
Silk and sericulture0.80.51.3
Coir0.10.1
Total15.715.531.2
The draft plans for the second five year period prepared by the
various Boards and by State Governments were considered by the
Village and Small Scale Industries Committee which had been set the
task of preparing proposals, by industries and wherever possible,
by States, for the utilisation of resources which were expected to
be available during the second plan for the development of village
and small-scale industries. The Committee recommended programs and
allocations involving a total outlay of about Rs. 260 cores which
also included provision for working capital which is estimated to
amount to about Rs. 65 cores. An allocation of Rs. 88 cores was
proposed for the handloom industry including cotton, silk and wool,
Rs. 2.2 cores for wool spinning and weaving (khaki), Rs. 23 cores
for decentralized cotton spinning and khaki, Rs. 47.4 cores for the
various village industries, Rs. 11 cores for handicrafts, Rs. 65
cores for small scale industries, Rs, 6 cores for sericulture, Rs.
2 cores for coir spinning and weaving and Rs. 15 cores for general
schemes. As explained below, the plan provides an outlay ofRs. 200
cores, in addition to working capital require ments. The
distribution of outlay between different industries as proposed
tentatively for the second five year plan is given
below:Distribution of Outlay for Village and Small Industries(Rs.
cores)Industry Outlay1.Handloom
Cotton weaving56.0
Silk weavingI.5
Wool weaving2.0
59.5
2.Khadi Wool spinning and weaving1.9
Decentralised cotton spinning, and khaki14.8
16.7
3.Village Industries
Hand pounding of rice5.0
Vegetable oil (ghani)6.7
Leather footwear .& tanning (village)5.0
Gur and Khandsari7.0
Cottage match1.1
Other village industries14.0
38.8
4Handicrafts9.0
5.Small Scale industries55.0
6.Other industries
Sericulture5.0
Coir spinning and weaving1.0
7.General schemes (Administration, research, etc.)15.0
Total200.0
The outlay of Rs. 200 cores does not include any specific
provision for the Ambar Charkha programme which will be considered
further after tests now in progress have been completed. The
provision for working capital required for the development of the
various villages and small industries will be made by G6vem-ment in
the initial years of the plan period, that is until adequate
arrangments for the supply of working capital through normal
banking and institutional channels become available. The provision
for working capital will be in addition to the plan provision of
Rs. 200 cores. The Boards concerned with the development of various
village and small industries as well as State Governments will
estimate their requirements of working capital for the first two or
three years of the plan period and indicate them separately when
working out detailed programs for these industries. The All-India
Khadi and Village Industries Board have estimated their
requirements of working. capital for the entire plan period at
about Rs. 2 5 cores of which about Rs. 7 cores is for khaki and the
balance for village industries. It is envisaged that as early as
possible the bulk of the working capital needed should come from
co-operative and other banking agencies. The outlay of Rs. 200
cores provided in the plan will cover the cost of schemes to be
implemented directly by the Centre, Central assistance for the
State schemes. States' contribution for the centrally assisted
schemes and any expenditure which States may incur from their own
resources on schemes which are not centrally assisted. Besides this
provision, in the programme for the rehabilitation of displaced
persons, Rs. 11 cores have been provided for cottage and medium
industries and industrial loans and Rs. 7 cores for vocational and
technical training. Programmes for the welfare of backward classes
also have some provision for vocational and technical training and
for selected village and small industries. In the programme budget
of community development blocks also there is provision to the
extent of Rs. 4 cores for rural arts and crafts. Part of the
programme for village and small industries will be implemented
directly by the Central Ministries or by all-India Boards
functioning under their aegis. The remaining programs will be
implemented by States on the advice of the Ministries and the
Boards. The following allocations represent the tentative cost of
the schemes to be implemented centrally and by the States:
Expenditure on Village and Small Industries in the Second
Plan(Rs. cores)IndustryCentreStates
(1)(2)(3)
Handloom1.558.0
Khadi & Village Industries4.051.5
Handicrafts3.06.0
Small scale industries10.045.0
Sericulture024.8
Coir spinning and weaving .0.30.7
General schemes6.09.0
Total25.0175.0
The great majority of the schmeswillbe implemented by the State
Governments or in the case ofkhadi and village industries by State
Boards and registered institutions functioning in the States. The
schemes to be centrally implemented will be generally those which
are of an all-India character and can best be undertaken by the
Centre. These schemes relate to such aspects as the provision for
central organizations, publicity, training and research,
exhibitions and fairs, hire-purchase of machinery and the work of
special institutions like the National Small Industries
Corporation. These schemes are explained later in this chapter. In
the revised plans of States the total allocation made for village
and small industries is about Rs. ,120 cores. In due course these
allocations will be revised so as to accord more closely with the
pattern of distribution visualised in the Village and Small Scale
Industries Committee's Report The Central Ministries and the
all-India Boards have also worked out tentative distribution
between States of the allocations proposed for industries with
which they are concerned. These will be taken into consideration in
revising allocations in the States. The 'general schemes' for which
a provision of Rs. 15 cores has been made relate to more than one
industry or to groups of industries, such as
production-cum-training centres, research institutions and emporia
and sales depots. A sum of Rs. 6 cores out of the provision of Rs.
15 cores has been earmarked for the general schemes of the
All-India Khadi and Village Industries Board, including those
pertaining to intensive area development, training programs and
technical research. A sum of Rs. 3 cores has been allotted for
strengthening staffs of State Industries Departments. From the
balance ofRs. 6 cores schemes for research, training, emporia,
etc., which are to be implemented mostly by State Governments will
be financed. In implementing village and small industries programs
the common procedure is for proposals of States to be scrutinised
by the all-India Boards concerned before they are approved by the
Central Government. Schemes relating to khaki and village
industries however, are in a separate category, since much of the
initiative in proposing schemes comes from the All-India and State
Khadi and Village Industries Boards and the schemes are carried out
mainly by their registered or recognized institutions and by
societies. The patterns of financial assistance which have been
evolved over the past three or four years need to be reviewed in
relation to programs for the second five year plan.Small Scale
Industries Industries falling in this group are of varied types,
but their common features at present are their urban or semi-urban
location and use of machines, power and modem techniques. They are
run by small entrepreneurs or self-supporting workers, and
sometimes by cooperatives. Some units in this field, e.g., those
manufaturing bicycle parts or sewing machine parts, may be
ancillary to large industries but as a rule they are not linked to
them by well-established sub-contracting system but as suppliers of
products against occasional orders. The working definition adopted
by the Small Scale Industries, Board brings within the scope of the
term 'small scale industries' all units or establishments having a
capital investment of less than Rs. 5 lakhs and employing less than
50 persons when using power. For development in this field the
principal needs are the imparting of training and technical advice
regarding the adoption of improved tools, machines and new
techniques, supply of raw materials and power at reasonable rates,
supply of adequate finance on fair terms, facilities for importing
or purchasing machines and assistance in the marketing of products.
Problems of marketing are simplified to the extent that small-scale
industries are developed as ancillaries of large industries. Such
coordination between the two sectors of industry requires, however,
that (a) purchase of articles or parts from small industries is
specifically provided lor while planning the production programmes
of the large units, and (b) the small industries are brought up to
a level where they can maintain an assured supply of products of
the requisite standard and specifications. The practice has
recently been introduced of laying down appropriate conditions and
reservations at the time of licensing the establishment or
substantial expansion of a large industry, so as to provide scope
for the products of the related smaH industries.Small Industries
Service Institutes.The programme to be undertaken directly by the
Central Government involving an expenditure of about Rs. 10 cores
includes further extension of technical servicing through the Small
Industries Service Institutes and the establishment of an
industrial extension service, a scheme for hire-purchase of
machinery, establishment of a marketing service and the undertaking
of pilot projects in selected centres and industries. It is
proposed to increase the number of Small Industries Service
Institutes from four to 20, so that each State has at least one
Institute. The Institutes will not merely provide technical advice
in response to enquiries from small units regarding improved types
of machines, equipment and processes, use of raw materials and
methods of reducing cost, but their technical staff will contact
small units and advise on their problems, thus providing a useful
extension service. The Institutes will also arrange to give
demonstrations in the use of improved technical services and
machines through their own workshops as well as through model
workshops set up in centres outside the Institutes and through
mobile workshops mounted on trucks. Further they will operate on
behalf of the National Small Industries Corporation in regard to
the supply of machinery and equipment to small industrialists on a
hire-purchase system. They will also provide a marketing service by
giving advice and information to small industries on existing and
potential markets and on adaptation of their production to suit
such markets. Schemes for the hire-purchase of machinery and
equipment and for a marketing service are a natural corollary of
the industrial extension service. The terms for the hire-purchase
of machinery at present are 20 per cent initial payment for general
purposes machines and up to 40 per cent. for special machines and
the rate of interest is 4Vt per cent but, if necessary these terms
will be liberalised.The marketing service is to be operated along
three lines. Firstly, wholesale depots will be opened for certain
articles in related centres, for example, footwear in Agra and
locks in Aligarh, and the National Small Industries Corporation
will purchase these goods according to certain quality standards
and sell them to retailers in adjacent areas or other centres.
Mobile sales-vans will be operated for arranging the sale of these
goods in distant areas and for selecting suitable retail shops at
which the goods will be sold at market prices. Secondly, the
National Small Industries Corporation will negotiate with the
Director-General of Supplies and Disposals for placing stores
purchase orders with small industries. Thirdly, the Small
Industries Service Institutes through a special whole-time
technical officer will explore the scope for obtaining orders from
large industries for various components and parts which small units
can manufacture.As the marketing service and the hire-purchase
system of machinery are extend on a large scale it will become
necessary to set up subsidiary corporations of the National Small
Industries Corporation. It is proposed to set up four such
subsidiaries at Bombay, Calcutta, Madras, and Delhi. These
corporations may in addition stock and supply iron and steel and
other raw materials required for the use of small industries which
Government wish to promote as ancillaries to large units and for
other similar developmental purposes. As a part of the technical
service programme of the Central Government, the services of
foreign experts for selected industries such as footwear, surgical
instruments, lock-making, surveying and drawing instruments and
electroplating and galvanising, have been obtained. Industrial
estates.A provision of Rs. 10 cores has been made for setting up
industrial estates in the second five year plan with a view to
providing conditions favourable to working efficiency, maintenance
of uniform standards in production and economic utilisation of
materials and equipment. The principal objective is to enable a
number of small-scale units to have the advantage of common
services and other facilities, such as, a good site, electricity,
water, gas, steam, compressed air, railway sidings, watch and ward,
etc. Being located near one another, some units may be better able
to use the goods and services of others, so that they become
interdependent and complementary. Two types of industrial estates,
large ones costing from .Rs. 40 to 50 lakhs and small ones costing
from Rs. 20 to 25 lakhs are expected to be established. It is
proposed that the responsibility for contruction and management
should vest in the State Governments but that the Central
Government should advance to Stale Governments the entire cost of
the estates in the form of loans. State Governments will run the
estates through corporations or such other agencies as they may
decide to set up. Sites in the estates will be sold outright to
industrial units or given to them on hire purchase terms. In some
cases buildings will be erected on sites and let out on a rental or
a rent-cum-purchase basis or, if necessary, sold out-right. Ten
large industrial estates have already been approved for Rajkot,
Delhi, Madras, West Bengal, Mysore, Travancore-Cochin and in the
U.P. For the small industrial estates eight areas have been
tentatively selected.The Village and Small Scale Industries
Committee expressed the view that industrial estates should be
located in such a way that they do not encourage further
concentration of population in large urban centres. In deciding the
location of the estates, especially the smaller estates, this
consideration should be kept in view so that preferably they are
developed in or near towns of comparatively small size. Schemes in
Slate p!ans-T}ie technical service schemes of the Centre and tlie
schemes of industrial estates will influence the general direction
and the pace of development of small-scale industries but the
pattern of development of these industries will really be set by
the manner in which various schemes are framed and carried out in
the States. State schemes are broadly of four types, namely,a.
technical service and research schemes, e.g.,
training-cum-production or training-cum-demonstration centres and
polytechnics;b. production schemes of a pilot character initiated
departmentally with a view to-being turned over to industrial
co-operatives or private enterprises;c. production schemes of a
commercial character and loans to private concerns under State Aid
to Industries Acts; andd. Schemes for supply of power. The training
and technical service programmes in the States will supplement the
Central programme to be implemented through the Small Industries
Service Institutes. The need forcoordina tion in this matter as
well as in other development activities as between the Small
Industries Service Institutes and Industries Departments in the
States has been recognised and steps have been taken to define the
relative sphere of activity of the two and the manner in which they
will coordinate their respective functions. While the Institutes
are intended to serve primarily as a technical service agency.
State Industries Departments will continue to handle all matters
regarding enquiries for starting industries, financial and other
forms of assistance needed by industries, organization of
industrial cooperatives, etc. There will be mutual consultation in
such matters as pilot schemes of Central Government, such as, model
workshops, arranging for the services of technical experts and
preparation of lists of industries suitable for different regions.
Model schemes for some industries have already been prepared by the
office of the Development Commissioner for small scale
industries.In proposing schemes for developing various small-scale
industries conditions of demand, availability of raw materials and
other relevant factors have to be studied carefully. It could be
useful to select for different regions the industries for which
favourable conditions exist and which should, therefore, be
specially promoted and assisted. In preparing departmental schemes
and in scrutinising the applications from private persons for loans
and other assistance, reference to lists of selected industries
could be of much assistance. Exploratory surveys as well as
intensive studies are needed for their preparation and for the
necessary modifications in the light of changing conditions. A
programme of investigations has already been initiated by the
Small-scale Industries Board and a team has completed reports on
four industries in the northern region, namely sports goods, sewing
machines and parts, bicycles and parts and leather footwear and one
industry on an all-India basis, namely, automobile batteries for
the northern region. Similar teams for the eastern, southern and
western regions have also started working. Pending the completion
of these studies, tentative lists of industries could be drawn up
by State Industries Departments on the basis of their own
experience and judgement, so that a measure of direction and
guidance can be given to developments in this field.Sericulture
Sericulture has a high employment potential and provides
supplementary occupation to large numbers of rural families. As
silk fabrics have to compete in the market with other textiles the
stability and expansion of the industry can be ensured only by
continuous effort to improve quality and reduce cost. Schemes for
the improvement and development of both mulberry and non-mulberry
silk have been in operation during the first plan period, but in
all directions a larger effort is envisaged in the second five year
plan. The bulk of the programme will be implemented in the State,
Central schemes being confined to general coordination and
all-India research centres. In regard to mulberry silk an important
item in the development programme is the reduction in costs of
mulberry leaf through substitution of existing mulberry with higher
yielding grafts both in rainfed and in irrigated areas, evolving
new varieties of mulberry of higher yield and improvemen't in
cultivation methods, manuring, etc. These and other measures for
bringing about improvement in mulberry and cocoons will be
supplemented by steps for the modernisation of silk reeling, by
encouraging the substitution of improved basins for country
charkhas and Dy converting of improved basins for filatures into
multi-end basins and introducing central cooking system and drawing
chambers. Utilisation of bye-products in the spun silk industry is
necessary for the service of the reeling industry and steps will be
taken to rehabilitate and extend the spun silk industry. As an
experimental measure cooperative societies for raising young worms
of the first and second stages collective are to be established.
Cooperative marketing and testing of cocoons, grading of cocoons
and introduction of a system of payment of cocoon prices on actual
yield will also be undertaken. Work in the conditioning houses at
Calcutta and Bangalore and at the Berhampur station will be further
developed. Two training institutes are to be established for
training personnel for sericulture departments in the States.As
regards non-mulberry silk the development programme provides for
plantations as well as improvement of basic seed cocoon production
for eri, muga and tassar. Organisation of seed supply, improvement
of spinning and reeling, marketing and training and research will
be undertaken more or less on the same lines as for the mulberry
silk industry.Coir Industry The coir industry has two main
branches, namely, manufature of coir yarn from husk and the
manufacture of coir goods such as mats, mattings, carpets and rugs
from coir yam. The development programme for the second plan period
will be directed mainly to the solution of the main problem of the
industry, namely, to strengthen the position of the producers
through the organization of co-operative societies. Thondu (husk)
co-operative societies will be organised for the collection of
husks and their distribution to primary co-operative societies.
Primary co-operative societies will be organised for retting,
distribution of retted husk to members for the production of coir
yam and for the collection of yam. Coir marketing societies will be
organised for the sale of the yam received from primary societies.
An encouraging beginning with co-operative organization was made
during first plan period but the programme envisaged for the second
plan period is on a much larger scale. Unions are also to be set up
for exercising supervision and control over primary societies.
Co-operatives are to be assisted by grants towards establishment
expenses and by loans to meet-their working capital
requirements.The development programme for the manufacture of coir
goods is concerned chiefly with the reorganisation of some of the
small factories and individual manufacturers into mat and matting
cooperative societies and the establishment of a central coir
products marketing society. Experimental work on the mecnanisation
ot the processes of coir weaving will be continued and further
developed, and a central coir research institute and a pilot plant
are proposed to be established. By opening show rooms and
warehouses abroad and by sending trade delegations to foreign
countries, the foreign market for coir and coir products is to be
developed furtherWhat are the problems faced by Small Scale
Industries in India?Small-scale industries in India could not
progress satisfactorily due to various problems that they are
confronted with while running enterprises. In spite of having huge
potentialities, the major problems, small industries face are given
below. Problem of skilled manpower:The success of a small
enterprise revolves around the entrepreneur and its employees,
provided the employees are skilled and efficient. Because
inefficient human factor and unskilled manpower create innumerable
problems for the survival of small industries. Non-availability of
adequate skilled manpower in the rural sector poses problem to
small-scale industries. Inadequate credit assistance:Adequate and
timely supply of credit facilities is an important problem faced by
small-scale industries. This is partly due to scarcity of capital
and partly due to weak creditworthiness of the small units in the
country.Irregular supply of raw material:Small units face severe
problems in procuring the raw materials whether they use locally
available raw materials or imported raw materials. The problems
arise due to faulty and irregular supply of raw materials.
Non-availability of sufficient quantity of raw materials, sometimes
poor quality of raw materials, increased cost of raw materials,
foreign exchange crisis and above all lack of knowledge of
entrepreneurs regarding government policy are other few hindrances
for small-scale sector. Absence of organized marketing:Another
important problem faced by small-scale units is the absence of
organized marketing system. In the absence of organized marketing,
their products compare unfavorably with the quality of the product
of large- scale units. They also fail to get adequate information
about consumer's choice, taste and preferences of the type of
product. The above problems do not allow them to stay in the
market. Lack of machinery and equipment:Small-scale units are
striving hard to employ modern machineries and equipment in their
process of production in order to compete with large industries.
Most of the small units employ outdated and traditional technology
and equipment. Lack of appropriate technology and equipment create
a major stumbling block for the growth of small-scale industries.
Absence of adequate infrastructure:Indian economy is characterized
by inadequate infrastructure which is a major problems for small
units to grow. Most of the small units and industrial estates found
in towns and cities are having one or more problems like lack of of
power supply, water and drainage problem, poor roads, raw materials
and marketing problem.Thus absence of adequate infrastructure
adversely affect the quality, quantity and production schedule of
the enterprises which ultimately results in under-utilization of
capacity. Competition from large-scale units and imported
articles:Small-scale units find it very difficult to compete with
the product of large-scale units and imported articles which are
comparatively very cheap and of better quality than small units
product.Other problems:Besides the above problems, small-scale
units have been of constrained by a number of other problems also.
They include poor project planning, managerial inadequacies, old
and orthodox designs, high degree of obsolescence and huge number
of bogus concerns. Due to all these problems the development of
small-scale industries could not reach a prestigious stage.
What is the Role and Importance of Small Scale Industry in
India?
1. A small scale or cottage industry may be defined as an
enterprise or seriesof operations carried on by a workman skilled
in the craft on hisresponsibility, the finished product of which,
he markets himself -Prof. K.T. Sash 2. Indian economy is an under
developed economy. Its vast resources are either unutilized or
under-utilized. A major section of man power is lying idle. The per
capita income is low. Capital is shy and scarce and investment is
lean. Production is traditional and the technique is outdated. The
output is insufficient and the basic needs of the people remain
unfulfilled . Industrialization is the only answer to this present
state of disrupted economy. The problem is of the approach which
should be direct, utilitarian and pragmatic. Such industries do not
require huge capital and hence suitable for a country like India .
The small scale industries have a talent of dispersal. They can be
accessible to the remote rural areas of the country and do not lead
to regional imbalances and concentration of industries at one
place, which is responsible for many economic resources such as
entrepreneurship and capital. 3SSI means small scale industries,
which is an industrial undertaking with the investment not
exceeding Rs.100 lakhs in plant and machinery. In cases of
auxiliary industries the investment ceiling on plant and machinery
is also Rs.100 lakhs. 4 Small Scale Industries help the economy in
promoting balanced development of industries across all the regions
of the economy. Small Scale Industries are adept in distributing
national income in more efficient and equitable manner among the
various participants in the process of good production than their
medium or larger counterparts. Small Scale Industries enjoy a lot
of help and encouragement from the government through protecting
these industries from the direct competition of the large scale
ones, provision of subsidies in the form of capital, lenient tax
structure for this industry 5. Before Independence, the present
small scale industry was meant to denote the village and the urban
cottage industry .This group included a variety of industries
ranging from manufacturing of Iron safes, locks, carpets, marble
jigs, baskets, hand-loom cloth and the like. In fact, at that time
the term cottage and Small scale industries was used in
juxtaposition to large scale industries, which were established
under the British patronage. They received encouragement and
support during the freedom movement. The small scale industries
found a prominent place in the economic programme envisaged by the
Indian National Congress. 6. After 1947 Jawaharlal Nehru maintained
separate entities of small scale industries. He was of the view
that a small industry was the middle sector and it would overlap
both the cottage and the large industries.1977 industrial Policy
The basic policy support of SSI sector had its roots in the
Industrial Policy Resolution 1977, laid emphasis on reservation of
items. The reservation economically viable and technologically
feasible products to be exclusively manufactured by small scale
industry began with a list of 47 items which was gradually extended
to too many products. 7. 1991 Industrial Policy Equity
participation of up to 24% by other industrial undertakings
including foreign companies. Hike in investment limit for tiny
sector from Rs. 2 lakh to Rs. 5 lakh. Support from National Equity
Fund for projects up to Rs. 10 lakh. Single window loans to cover
projects up to Rs. 20 lakhs. Banks to be involved. Relaxation of
certain provisions of labor laws. Subcontracting Exchanges to be
set up by industry associations Factoring services through SIDBI to
overcome the problem of delayed payments. Women enterprises
redefined Package for handloom and handicraft sector Export
development centre in SIDO Marketing of mass consumption items by
NSIC under a common brand name.1995 WTO Policy The formation of WTO
in 1995 resulted in a major challenge to the well being of the SSI.
The protection given to the SSI in the form of reservation and
quantitative restrictions has been withdrawn. More than 160 items
reserved under the SSI category have been de reserved. 8. Micro,
Small and Medium Enterprises Development Act, 2006(MSMED Act)* The
Act provides the framework for recognition of enterprises
(Manufacturing and services) and integrating the micro, small and
medium enterprises. Categorization of SMEs: SMEs have been
categorized into manufacturing and service industry within which
the classification based on investment in plant and machinery or in
equipment has been made: Manufacturing Enterprise: 9 Micro:
investment up to Rs. 25 lakhs Small Enterprises: investment above
Rs. 25 lakhs and up to Rs. 5 crore Medium Enterprise: investment
above Rs. 5 crore and up to Rs. 10 crore Service Enterprises:
Micro: investment up to Rs. 10 lakhs Small Enterprises: investment
above Rs. 10 lakhs and up to Rs. 2 crore Medium Enterprise:
investment above Rs. 2 crore and up to Rs. 5 crore Other Features:
Establishment of funds for promotion, development and enhancement
of competitiveness of these enterprises. Progressive Credit
Policies and practices. Preference in Government procurement of
products and services of micro and small enterprises. More
effective mechanism for mitigating problem of delayed payment to
micro and small enterprises. Simplification of process for closure
of business by all three categories of business 10. It contributes
almost 40% of the gross industrial value added in the Indian
economy. It has been estimated that a million Rs. of investment in
fixed assets in the small scale sector produces 4.62 million. The
number of small scale units has increased from an estimated 8.74
lakhs units in the year 1980-81 to an estimated 31.21 lakhs in the
year 1999. 11. Production From Small Scale Industries Production
(Rs. 000 cores) at 1993-94 prices300000250000200000150000
Production (Rs. 000 cores) at 1993-94 prices100000 50000 0 12. SSI
Sector in India creates largest employment opportunities for the
Indian populace, next only to Agriculture. It has been estimated
that 100,000 rupees of investment in fixed assets in the
small-scale sector generates employment for four persons. 13. Food
products industry has ranked first in generating employment,
providing employment to 0.48 million persons (13.1%). The next two
industry groups were Non-metallic mineral products with employment
of 0.45 million persons (12.2%) and Metal products with 0.37
million persons (10.2%). In Chemicals & chemical products,
Machinery parts, Wood products, Basic Metal Industries, Paper
products & printing, Hosiery & garments, Repair services
and Rubber & plastic products, the contribution ranged from 9%
to 5%, the total contribution by these eight industry groups being
49%. In all other industries the contribution was less than 5%. 14.
Per unit employment was the highest (20) in units engaged in
beverages, tobacco & tobacco products mainly particularly in
Maharashtra, Andhra Pradesh, Rajasthan, Assam and Tamil Nadu. Next
came Cotton textile products (17), Non- metallic mineral products
(14.1), Basic metal industries (13.6) and Electrical machinery and
parts (11.2.) The lowest figure of 2.4 was in Repair services line.
15. Rural Non-metallic products contributed 22.7% to employment
generated in rural areas. Food Products accounted for 21.1%, Wood
Products and Chemicals and chemical products shared between them
17.5%.Urban As for urban areas, Food Products and Metal Products
almost equally shared 22.8% of employment. Machinery parts except
electrical, Non-metallic mineral products, and Chemicals &
chemical products between them accounted for 26.2% of employment.
In metropolitan areas the leading industries were Metal products,
Machinery and parts except electrical and Paper products &
printing (total share being 33.6%). 16. Tamil Nadu (14.5%) made the
maximum contribution to employment. This was followed by
Maharashtra (9.7%), Uttar Pradesh (9.5%) and West Bengal (8.5%) the
total share being 27.7%. Gujarat (7.6%), Andhra Pradesh (7.5%),
Karnataka (6.7%) and Punjab (5.6%) together accounted for another
27.4%. 17. No of Employment in Small Scale Industries in India. 18.
SSI Sector plays a major role in Indias present export performance.
This takes place through merchant exporters, trading houses and
export houses. They may also be in the form of export orders from
large units or the production of parts and components for use for
finished exportable goods. The product groups where the SSI sector
dominates in exports are sports goods, readymade garments, woollen
garments and knitwear, plastic products, processed food and leather
products. SSI Sector contributes about 45%-50% of the Indian
Exports. Direct exports from the SSI Sector account for nearly 35%
of total exports. It contributes around 15% to exports indirectly.
Nontraditional products account for more than 95% of the SSI
exports. 19. Export from small sector 20. The opportunities in the
small-scale sector are enormous due to the followingfactors:Less
Capital Intensive Extensive Promotion & Support by Government
Reservation for Exclusive Manufacture by small scale sector Project
Profiles Funding - Finance & Subsidies Machinery Procurement
Raw Material Procurement Manpower Training Technical &
Managerial skills Tooling & Testing support Reservation for
Exclusive Purchase by Government Export Promotion Growth in demand
in the domestic market size due to overall economic growth
Increasing Export Potential for Indian products Growth in
Requirements for ancillary units due to the increase in number of
greenfield units coming up in the large scale sector. Small
industry sector has performed exceedingly well and enabled our
country to achieve a wide measure of industrial growth and
diversification. 21. Development measures should be spread Rising
productivity needs to be made sustainable Assistance programs need
to be tackled Skill based needs need to be improved
In a developing country like India, the role and importance of
small-scale industries is very significant towards poverty
eradication, employment generation, rural development and creating
regional balance in promotion and growth of various development
activities.It is estimated that this sector has been contributing
about 40% of the gross value of output produced in the
manufacturing sector and the generation of employment by the
small-scale sector is more than five times to that of the
large-scale sector.This clearly shows the importance of small-scale
industries in the economic development of the country. The
small-scale industries have been playing an important role in the
growth process of Indian economy since independence in spite of
stiff competition from the large sector and not very encouraging
support from the government.The following are some of the important
role played by small- scale industries in India. Employment
generation:The basic problem that is confronting the Indian economy
is increasing pressure of population on the land and the need to
create massive employment opportunities. This problem is solved to
larger extent by small-scale industries because small- scale
industries are labor intensive in character. They generate huge
number of employment opportunities. Employment generation by this
sector has shown a phenomenal growth. It is a powerful tool of job
creation.
Mobilisation of resources and entrepreneurial skill:Small-scale
industries can mobilize a good amount of savings and
entrepreneurial skill from rural and semi-urban areas remain
untouched from the clutches of large industries and put them into
productive use by investing in small-scale units. Small
entrepreneurs also improve social welfare of a country by
harnessing dormant, previously overlooked talent.Thus, a huge
amount of latent resources are being mobilised by the small-scale
sector for the development of the economy. Equitable distribution
of income:Small entrepreneurs stimulate a redistribution of wealth,
income and political power within societies in ways that are
economically positive and without being politically disruptive.Thus
small-scale industries ensures equitable distribution of income and
wealth in the Indian society which is largely characterised by more
concentration of income and wealth in the organised section keeping
unorganised sector undeveloped. This is mainly due to the fact that
small industries are widespread as compared to large industries and
are having large employment potential. Regional dispersal of
industries:There has been massive concentration of industries m a
few large cities of different states of Indian union. People
migrate from rural and semi urban areas to these highly developed
centres in search of employment and sometimes to earn a better
living which ultimately leads to many evil consequences of
over-crowding, pollution, creation of slums, etc. This problem of
Indian economy is better solved by small- scale industries which
utilise local resources and brings about dispersion of industries
in the various parts of the country thus promotes balanced regional
development. Provides opportunities for development of
technology:Small-scale industries have tremendous capacity to
generate or absorb innovations. They provide ample opportunities
for the development of technology and technology in return, creates
an environment conducive to the development of small units. The
entrepreneurs of small units play a strategic role in
commercialising new inventions and products. It also facilitates
the transfer of technology from one to the other. As a result, the
economy reaps the benefit of improved technology.
Indigenisation:Small-scale industries make better use of indigenous
organisational and management capabilities by drawing on a pool of
entrepreneurial talent that is limited in the early stages of
economic development. They provide productive outlets for the
enterprising independent people. They also provide a seed bed for
entrepreneurial talent and a testing round for new ventures.
Promotes exports:Small-scale industries have registered a
phenomenal growth in export over the years. The value of exports of
products of small-scale industries has increased to Rs. 393 cores
in 1973-74 to Rs. 71, 244 cores in 2002-03. This contributes about
35% India's total export. Thus they help in increasing the
country's foreign exchange reserves thereby reduces the pressure on
country's balance of payment. Supports the growth of large
industries:The small-scale industries play an important role in
assisting bigger industries and projects so that the planned
activity of development work is timely attended. They support the
growth of large industries by providing, components, accessories
and semi finished goods required by them. In fact, small industries
can breathe vitality into the life of large industries. Better
industrial relations:Better industrial relations between the
employer and employees help in increasing the efficiency of
employees and reducing the frequency of industrial disputes. The
loss of production and man-days are comparatively less in small-
scale industries. There is hardly any strikes and lock out in these
industries due to good employee-employer relationship.Of course,
increase in number of units, production, employment and exports of
small- scale industries over the years are considered essential for
the economic growth and development of the country. It is
encouraging to mention that the small-scale enterprises accounts
for 35% of the gross value of the output in the manufacturing
sector, about 80% of the total industrial employment and about 40%
of total export of the countryProductionThe small-scale industries
sector plays a vital role in the growth of the country. It
contributes almost 40% of the gross industrial value added in the
Indian economy.It has been estimated that a million Rs. of
investment in fixed assets in the small scale sector produces 4.62
million worth of goods or services with an approximate value
addition of ten percentage points.The small-scale sector has grown
rapidly over the years. The growth rates during the various plan
periods have been very impressive. The number of small-scale units
has increased from an estimated 0.87 million units in the year
1980-81 to over 3 million in the year 2000.When the performance of
this sector is viewed against the growth in the manufacturing and
the industry sector as a whole, it instills confidence in the
resilience of the small-scale sector.YearTargetAchievement
1991-923.03.1
1992-935.05.6
1993-947.07.1
1994-959.110.1
1995-969.111.4
1996-979.111.3
1997-98*8.43
1998-99*7.7
1999-00*8.16
2000-01 (P)*8.90
P-Projected (April-December)
EmploymentSSI Sector in India creates largest employment
opportunities for the Indian populace, next only to Agriculture. It
has been estimated that 100,000 rupees of investment in fixed
assets in the small-scale sector generates employment for four
persons.
Generation of Employment - Industry Group-wiseFood products
industry has ranked first in generating employment, providing
employment to 0.48 million persons (13.1%). The next two industry
groups were Non-metallic mineral products with employment of 0.45
million persons (12.2%) and Metal products with 0.37 million
persons (10.2%).In Chemicals & chemical products, Machinery
parts except Electrical parts, Wood products, Basic Metal
Industries, Paper products & printing, Hosiery & garments,
Repair services and Rubber & plastic products, the contribution
ranged from 9% to 5%, the total contribution by these eight
industry groups being 49%.In all other industries the contribution
was less than 5%.Per unit employmentPer unit employment was the
highest (20) in units engaged in beverages, tobacco & tobacco
products mainly due to the high employment potential of this
industry particularly in Maharashtra, Andhra Pradesh, Rajasthan,
Assam and Tamil Nadu.Next came Cotton textile products (17),
Non-metallic mineral products (14.1), Basic metal industries (13.6)
and Electrical machinery and parts (11.2.) The lowest figure of 2.4
was in Repair services line.Per unit employment was the highest
(10) in metropolitan areas and lowest (5) in rural areas.However,
in Chemicals & chemical products, Non-metallic mineral products
and Basic metal industries per unit employment was higher in rural
areas as compared to metropolitan areas/urban areas.In urban areas
highest employment per unit was in Beverages, tobacco products (31
persons) followed by Cotton textile products (18), Basic metal
industries (13) and Non-metallic mineral products
(12).Location-wise Employment Distribution - RuralNon-metallic
products contributed 22.7% to employment generated in rural areas.
Food Products accounted for 21.1%, Wood Products and Chemicals and
chemical products shared between them 17.5%.UrbanAs for urban
areas, Food Products and Metal Products almost equally shared 22.8%
of employment. Machinery parts except electrical, Non-metallic
mineral products, and Chemicals & chemical products between
them accounted for 26.2% of employment.In metropolitan areas the
leading industries were Metal products, Machinery and parts except
electrical and Paper products & printing (total share being
33.6%).State-wise Employment DistributionTamil Nadu (14.5%) made
the maximum contribution to employment.This was followed by
Maharashtra (9.7%), Uttar Pradesh (9.5%) and West Bengal (8.5%) the
total share being 27.7%.Gujarat (7.6%), Andhra Pradesh (7.5%),
Karnataka (6.7%) and Punjab (5.6%) together accounted for another
27.4%.Per unit employment was high - 17, 16 and 14 respectively -
in Nagaland, Sikkim and Dadra & Nagar Haveli.It was 12 in
Maharashtra, Tripura and Delhi.Madhya Pradesh had the lowest figure
of 2. In all other cases it was around the average of 6.YearTarget
(lakh nos.)Achievement (lakh nos.)Growth rate
1992-93128.0134.063.28
1993-94133.0139.383.28
1994-95138.6146.565.15
1995-96144.4152.614.13
1996-97150.5160.004.88
1997-98165167.204.50
1998-99170.1171.582.61
1999-00175.4177.33.33
P-Provisional
ExportSSI Sector plays a major role in India's present export
performance. 45%-50% of the Indian Exports is contributed by SSI
Sector. Direct exports from the SSI Sector account for nearly 35%
of total exports. Besides direct exports, it is estimated that
small-scale industrial units contribute around 15% to exports
indirectly. This takes place through merchant exporters, trading
houses and export houses. They may also be in the form of export
orders from large units or the production of parts and components
for use for finished exportable goods.It would surprise many to
know that non-traditional products account for more than 95% of the
SSI exports.The exports from SSI sector have been clocking
excellent growth rates in this decade. It has been mostly fuelled
by the performance of garments, leather and gems and jewellery
units from this sector.The product groups where the SSI sector
dominates in exports are sports goods, readymade garments, woollen
garments and knitwear, plastic products, processed food and leather
products.The SSI sector is reorienting its export strategy towards
the new trade regime being ushered in by the WTO.YearExports(Rs.
Crores)(at current prices)
1994-9529,068(14.86)
1995-9636,470(25.50)
1996-9739,249(7.61)
1997-9843946(11.97)
1998-9948979(10.2)
1999-00 (P)53975(10.2)
P-Provisional
MajorExportMarketsAn evaluation study has been done by M/s A.C.
Nielsen on behalf of Ministry of SSI. As per the findings and
recommendations of the said study the major export markets
identified having potential to enhance SSIs exports are US, EU and
Japan. The potential items of SSIs have been categorized into three
broad categories.ExportDestinationsthe Export Destinations of SSI
products have been identified for 16 product groups.
OpportunityThe opportunities in the small-scale sector are
enormous due to the following factors: Less Capital Intensive
Extensive Promotion & Support by Government Reservation for
Exclusive Manufacture by small scale sector Project Profiles
Funding - Finance & Subsidies Machinery Procurement Raw
Material Procurement Manpower Training Technical & Managerial
skills Tooling & Testing support Reservation for Exclusive
Purchase by Government Export Promotion Growth in demand in the
domestic market size due to overall economic growth Increasing
Export Potential for Indian products Growth in Requirements for
ancillary units due to the increase in number of Greenfield units
coming up in the large scale sector. Small industry sector has
performed exceedingly well and enabled our country to achieve a
wide measure of industrial growth and diversification.By its less
capital intensive and high labor absorption nature, SSI sector has
made significant contributions to employment generation and also to
rural industrialization. This sector is ideally suited to build on
the strengths of our traditional skills and knowledge, by infusion
of technologies, capital and innovative marketing practices. This
is the opportune time to set up projects in the small-scale sector.
It may be said that the outlook is positive, indeed promising,
given some safeguards. This expectation is based on an essential
feature of the Indian industry and the demand structures. The
diversity in production systems and demand structures will ensure
long term co-existence of many layers of demand for consumer
products / technologies / processes. There will be flourishing and
well grounded markets for the same product/process, differentiated
by quality, value added and sophistication. This characteristic of
the Indian economy will allow complementary existence for various
diverse types of units. The promotional and protective poli