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Definitions of Small scale industry
Features of small scale industry
Impotence of small scale industry
Problems of small scale industries

Small business forms an importance sector of the Indian economy smallscale industries accounted for 40 percent of the value added by the whole
manufacturing sector and 80 percent of the employment small industries have
contributed to the extent of 42 percent with regard to exports.
Small-scale industries play an important role in the industrialisation of
India. They provide immediate large-scale employment and have a
comparatively higher labour-capital ratio. They need a shorter gestation period,
lower investments, and ensure a equitable distribution of income and facilitate
an effective mobilisation of resources of capital and skill. They also stimulate
the growth of industrial entrepreneurship in the country.
Definitions of small-scale industry:
The definition of small-scale industry varies from one country to another.
It also varies from one time to another in the same country depending upon
stage and level of development, government policy and administrative structure
of the particular country. All these different definitions either relate to capital or
employment or both or any other criteria.
Features of small-scale industries:
It can be said that small-scale industries serve as the seeded of
entrepreneurship due to their following features.
1) Small capital investment is required to set up a small scale industry.
2) Small-scale industries are generally labour-intensive. They do not require
costly tools and techniques.
3) Small-scale industries can be established in a short period.
4) Small entrepreneurs can bring about a more equitable distribution of
5) Small business units also help to create economic stability by diffusing
prosperity and by checking the expansion of monopolies.
6) Small-scale industries meet the increased demand for consumer goods.

7) Small industrial units helps to mobilise the resources of capital and skills
which often would remain inadequately utilized.
8) SSIs are more change susceptible due to fixable nature.
9) These industries are growing at a faster rate even large scale industry.
10) Small amount of risk is involved.
11) Small-scale industries offer a method of ensuring equitable distribution of
national income.
12) Small-scale industries involve a short gestation period.
13) They do not require as heavy and costly infrastructure.
14) They have a favourable capital-output ratio.
Importance of small-scale industries:
Small-scale industries play an important role in industrial development of a
country. It has been estimated that the small-scale industries contribute about 47
percent of gross value of output manufactured in the country.
1) Generation of employment: The small-scale industries are labourintensive industries. A low amount of capital invested in a small-scale
industry provided more employment than the same amount of capital
invested in a large scale industry. Moreover these industries can be set up
anywhere near to these SSIs workers and thereby, provide work for the
unemployed, more work for the underemployed and supplementary work
for the seasonally unemployed workers.
2) Self-employment: The small-scale industries limitless opportunities for
self employment suited country like India where unemployment and
underemployment is the big problem.
3) Lesser capital requirement: Another advantage of small-scale industries
is that they need relatively lesser amount of capital. As capital is very
limited in an underdeveloped country like India. It may be used to greater
advantage in small-scale sector.
4) Mobilisation of capital: Small-scale industries mobilise the savings from
rural areas.

5) Mobilisation of entrepreneurial skill: Another advantage of small-scale

industries is the lesser requirement of skill and expertise which is also
score in a developing country like India.
6) Equitable distribution of income: small-scale industries secure a more
equitable distribution of income and wealth. They are particularly suitable
for the fulfilment of the objective of social justice.
7) Balanced regional development: Small-scale industries use local
resources bring about dispersion of industries and promote balanced
regional tendency towards concentration of industries at few prances
creating many problems like overcrowding pollution creation of slums
8) Savings in foreign exchange: Another advantage of the small-scale
industries in the savings of source foreign exchange resources of the
9) Quick investment: The quick return is there as the time lag between the
execution of investment project and the short of production of goods is
relatively short in case of small-scale industries.
10) Beneficial to large-scale industries: Large-scale industries also depend
upon small-scale industries to SSIs supply their small parts and
semifinishe goods to large scale industries as raw materials etc.
11) Other benefits: These industries also confer certain other social and
political benefits such as overcoming territorial immobility reduction of
pressure on land reliving congestion in urban areas self-employment etc.
Role of small-scale industries in India:
Small-scale and cottage industries have been playing significant role in
Indian economy in term of employment generation and growth. It is estimated
that this sector has been contributing about 40 percent 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 larger-scale sector.

The following are some of the important roles played by small-scale and
cottage industries in India.
1) Number of units: Total number of registered small-scale units been
increasing rapidly from 16,000 in 1950 to 36,000 in 1961 and to 8.53
lakh units in 1985-86 and then finally to 14.96 lakh in 1991-92 moreover
there were about 5.84 lakh unregistered small-scale units in India in
2000-2001 the total number of small-scale units further increased to 33.7
2) Employment generation: Small scale industries are labour-intensive.
They are generating a large number of employment generated by these
small-scale industries has increased to 185.6 lakh in 2000-01.
3) Investment: investment in the small-scale sector has been increasing at a
faster rate. Total amount of investment in the small-scale units in India
has increased significantly from RS:2233 crore in 1972-73 to RS:9588
crore in 1985-86.
4) Output: Total production of the small scale units has increased from Rs:
7,200 crores in 1973-74 to RS:6,45,496 crores in 2000-01.
5) Contribution of exports: The contribution of SSI sector towards export
increasing at a faster rate. The value of exports of the products produced
by the small-scale sector has increased from RS:393 crore in 1973-74 to
RS:53,975 crore in 1990-2000.
6) Equitable distribution of income: small-scale and cottage industries
have been resulting more equitable distribution of national income and
7) Mobilisation of capital: small-scale industries can mobilise a good
amount of savings and entrepreneurial skill from rural and semi-urban
areas remained untouched from the clutches of large-scale sector.
8) Regional dispersal of industries: Small-scale industries are playing an
important role in dispersing the industrial units of the country in the
various parts of the country.

9) Better industrial relations: The small-scale industries are maintaining a

better industrial relation between employees and employer and thus can
lesson the frequency of industrial disputes.
Problems of small-scale industries:

Marketing problems of small business:

1. Poor product quality: There is generally low in demand of the
product produced by the SSIs due to its poor quality must of the
entrepreneurs do not pay much attention towards quality contract.
2. Poor sales promotion: Many small entrepreneurs do not want to
spend any amount on sales promotion activities such as
advertisement in newspaper, trade magazines, cash discount,
calendars or articles on various festivals and offer sales services.
3. Scale of production : Scale of production of small scale
entrepreneurs is low they do not make full use of their plant and
machinery under-utilisation increases the cost of production the
price of the product.
4. Lack of knowledge of marketing: The small units do not adopt
modern marketing techniques and are unable to employ the
personnel having adequate experience and knowledge in the
marketing due to limited financial.
5. Lack of marketing opportunities: Small scale units set up in rural
and backward areas face the problem of findings marketing
opportunities within the local areas and have to search for outlets
elsewhere for which they do not have adequate resources.
6. Absence of suitable marketing channel: Marketing problems of
SSIs vary not only.

The 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.


(2011), Indian Economy, published by new age

international (p) limited, p.p, 320-450.