of productlon and

improve quality
services. Ess to conrol cost actor and

BRIEF oVERVIEW
3.1 Introduction:
power
arc
recognised
as
Small Scal
Smalls
and
Small scale Industries.
in industry plays
important role
an two categories of Small Sca
Scale
developing countries having
scarcity of capita
Inittally.
vi2. () Manufact
and abundant
labour. In uhe post independence
industries were recognised
Sector. An
An Incs..aring
industrta
period. more Sector a n d ()
Services

cmphasis Is
given to the
the capital ent
investment lIm
development of Small Scale Industries. However. unit which
fullils
the problem of Government of India according
unemployment is not overcome fixed by the
Enterp
as it was

country.
expected.
it is
In India. as adeveloping Micro
Small
and
Medium

1s calegorised as
Enterprise
s
essential to make
labour and other
avallable capital. Development
Act 2006
classification
of Business
Smal
on
resources for the development B u s i n e s s . The
of Small Scale according to Micro
industries. basis of investments Sma
3.1.1 Meaning Enterprises Develon.
Medtum
Scale and
Traditionally. Industries which produce goods (MSMED) are:
and services with
the help of machines. labour
Medium
Business Micro Small
25 lakhs
More t h a n55 crore
(1) Manufacturing Does not exceed 2 5 More than
exceed but does not exceed
Sector lakhs but does not
710crores.
5 crores.

(2) Service Sector Does not exceed 10 More than 10 lakhs

More than 7 2 crore
but does not
lakhs but does not exceed exceed
5 crores.
T 2 crores
. L . 2 : Definition : Any industrial unit is considered as Small Scale industy il its investmen
ent
Dxed assets like plant and equipment either held on ownership terms or on lease or hire purch

should not be more than one crore. However. the unit in no way can be owned or controlled .

auxiliary for any other industrial unit.

Classification of Small Scale Industries

Traditional Small Scale Industries Modern Small Scale Industries

(1) Handloom (1) Bicycle Parts

(2) Handicraft (2) Sewing Machines

(3) Coir (3) Blades, Razors
(4) Sericulture (4) Electric Appliances
(5) Khadi and Village Industries (5) Spare Parts

66 ORGANISATION OF COMMERCE AND MANAGEMENT DIGEST: STANDARD XI

3.2 Importance: The
Importance of small 3.3 Advantages of Small
Scale
Advantages :
endustries is shiown in the lollowlng chart:
scale Industrles are shown In the following chart:
Importance of Small Scale Industries
Advantages of Small Scale Industrles
Job opportunities
Large scale cmployment
Regional balance
Less capilal requlrement
Increase competitive strength
Uullsatlon of domestlc rcsources
Maximum use of natural resources
Increascs Industrlal output
Reduce migration Contributlon to export
Support large scale lndustries Equltable distribution
Developing new entreprencurs
Earning forcign exchange
(1) Job opportunities: Small business units Opportunitics for entreprencurshipP
(industries) have immensc Cost eflctency
employment
enerattng potentials and therefore provide Reduces migralton
areater employment opportunities to surplus Flextbility in operation
amount of labour i rural India. scale employment: Small scale
(1) Large
(2) Reglonal balance: As small scalc industries are labour Intensive. So they have

industries establishcd. spread and scattered all Immense employment generating potenials
and

over the rural areas. they help to remove provlde employment opportunities to large
reglonal
disparities. increase industriallsation and number of people.
contribute slgniflcantly to the balanced Small scale
(2) Less capital requirement:
development of the country.
industries necd less capital to run and manage
(3) Increase competitive strength: Small in comparison to large scale industrles.
scale industries use local resources at low cost
and thus enjoy thec advantages of low cost of (3) Utilisation of domesticresources: Small
scale industrics make use of local resources
productton. low overheads, low prices which in
which are avallable in large quantity. These
turn increase turnover and competitive strength.
Industrics mobilise and channelise savings into
(4) Maximum use of natural resources:
productive investnents which in turn increases
Small scale industrles ulisce the available
capital formation.
natural resources. labour and raw materials
from local arcas which resulls in low cost of (4) Increases industrial output: Small
production. They can alford to sell the goods at scale Industries produce both consumer goods
reasonable prices. and industrlal goods. A significant portion of
(5) Reduce migration: Small scale industries industries output of the nation is produced by
generate employment opporlunities and create the small scale industrles.
self employment. This ulttmalely reduces (5) Contribution to export: Nearly 40% of
migration of people from rural to urban arcas. total exports of Indla comes from small scale
(6) Support large scale industries: Many Industrial sector. The fînished and semi finished
small scale industrles provlde raw materlal, products of small scalc Industries are used by
semi finished goods to large scale industries. the large scale industries to produce goods for
c.g spare parts. export purpose. Thus small scale industries
(7) Developing new entrepreneurs: Small contribute directly and indirectly to Indla's
scale industries attract. create and develop exports.
entrepreneurs.

3. SMALL CALE INDUSTRY AND BUSINESS

67
 (0) Equltable dlatributlon : Tr growth and n:The
(1) Old methoda of productlon: The na
dcvelopuent of nall buses n rural seetor sECale mdustries use outdated technology
iVOd
rorntratton of ncomes and weallh Inn a
old inetods of productlon whlch alfors ang
th
Iw hndn.
Thin reilla in hotli
cconomic i productivity adversely
oclal welfare. (2) Inadequate lnance: L.ack of fin:.
(7)
Earning forclgn Inders the growth and development of
Inanee
portlon of exchange: The major smal
the scale Industrles In Indla.
produrts mnufacturcd by ne
Iallscale Industrles are (3) Problem of raw materlal: Free
different countrles of cxporlcd to tne shortage and infertor quality of raw mater
quenm
the world which
valuable forclgn exchange. brings laly
affect capacity utlisatlon and profilablity
(8)
Opportunitles for small scale Industrles
The growth and entreprencurship:
devclopment of small (4) Labour problem: The problems l
Industries create scale
cntreprencurs. They contribute low labour productivity. absentectsm. labour
greatly to the
nation's dissatlsfaction, Improper shifts, lack of
(9) Cost development. Job
efficlency: Small scale
Industrles
securlty, lack of skilled labour, etc. hinder
the
mlcro
usc
productlon methods which progress of small scale industrles.
better quallty produce
products and more
varicty at
(5) Marketing problem: Marketng problem.
ms
lesser cost. Thclr overall
such as lack of advertising and
Thus they are most cost
expenscs arc
very low. publcth
effecüve. production of non-branded products, po
0or
(10) Reduces migration: The standard of quality, exploltatlon by
growth and middlemen
development of small scale
Industrles generate low prices, delayed payments, etc.
redue
cmployment opportunities. The people reslding turnover and ulumately production.
In rural areas (6) Problem of
get galnful employment and hence transport: On account af
do not lack of proper
migrate to
areas. urban
Thus, the transport system. it Is
diflcult to
Industries help In mlnimising transfer raw materlals from the
migration. places of origin
to the place of
(11) Flexibility factory and finished goods from
in
operation: The small
the place of
scale industrics are more flexible than factory to the consumers.
large (7) Sickness: Prevalence
scale industries. These Industries can sickness in
easily industrial units in rural areas is due to
adopt themsclves to changng market internal
causes such lack of skilled and
as
requlrements. labour. lack of
trained
managerlal and marketing skill
3.4 Challenges beforeScale Small ctc. and external causes such as
industries : Challenges before Small Scale delayed
payment, shortage of working capital,. raw
are shown In the following naterlals, etc.
chart
Challenges before Small Scale Industries (8) Power shortage and
irregular
Old methods of Problems of infrastructure such assupply:
producton acute
Inadequate finance shortage of powe. power cuts.
high power
Problem of raw materlal charges. low voltage level, etc.
hamper the
Labour problem growth and progress of small scale
industries.
Marketing problem (9) Global competition: Small
Scale
Problem of transport industries face problems on the
context of
SIckness Liberallsation. Privatisation and Globalilsation
Power shortage and irregular supply (LPG) policles being followed by many countries

Global competitlon in the world.

ORGANISATION OF cOMMERCE AND MANAGEMENT DIGEST: STANDARD XI

 superlor uality
o
of helter and
.5 Steps in setting up of a Small Scale production

Hoods and servlces

Business: The stleps n scttng up of a proposal: The
assessment

(6) Business
Small Scale Biuslness are shown n the scheme and projects
buslncss
(appralsal) of flnanclal,
following chart cconomlc,
tcchnlcal.
from
carefully of vlew Is
Steps in setting up of a management
polnt
sOclal and
buslness.
small
Small Scale Business necessary
beforc sctting up
of adequate
Declslon of business arca Finance: The
provlslon
(7) and manage
run
Study of business cnvironment to start,
finance Is requlred to
is requlred
Sclectlon of product small busIncss.
The cntrcpreneur
sources.
from diferent
Selection of place flnance
ralse needed
bencfits
obtain various
Selectuon of technology (8) Registration:To has to
the entreprencur
Business proposal from the government, Distrlet
business with
Finance hls proposcd
register documents.
with relevant
Reglstratlon Industries Ccntre (DIC)
of resources

Actual arrangement of resources (9) Actual arrangement

The entrepreneur
Production and marketng of product (1) Physical
resources:

industrlal
sufmctent space for
Review fecdback for future changes
or has to allocate
sultable production method.
(1) Decision of business area: The entre- actlvitles, sclect
install machlnerles, appoint
preneur has to decide whether he wishes to set purchase and

up sole proprletary concern. partnershlp workers, etc.

and water
organisation or corporauon. He has to analyse (i) Arrangement of power
to estimate the total
his strength and wealkness while deciding on an supply: He has
and deternmine the
entrepreneurship career. requlrements of power
make power avallable.
He has to
(2) Study of business environment: The nearest pole to

entrepreneur has to study and understand the the adequate water supply.
make arrangement to
and
business environment in whích the : He has to recruit qualified
(i) Staftlng
prevailing
business wll operate such as industrial policy. for different departments.
capable personnel
economic polcy, licensing policy. legal and This follows tralning and placement of recrulted
technological environment, etc. candidates.
(3) Selection of product: The entrepreneur (10) Production and marketing of product:
has to start the
must decide the product to manufacture or the The entrepreneur then
He has to
service to offer. For this, he has to conduct productton of goods and services.

declde about the marketing of those goods and

market research and understand the prevailing
competition in the market. servlces. He has to make proper arrangement of
(4) Selection of place : The entrepreneur is online business directions and varlous
traditional forms of selling. Advertising can be
required to select that place where transport.
used to gain exposure for the business.
labour, raw materials, banking facilities, market
(11) Review or feedback for future
are easily available. The success of small
changes: The entrepreneur has to carryout
business mostly depends on selection of right
place l.e. location.
perlodical evaluation of market, production
quality and profitablity. Accordingly. he has to
(5) Selection oftechnology: The installation
make necessary changes in quality and methods
and use of modern and sophisticated technology
of production for future growth.
and equipment are more important for

3. SMALL SCALE INDUSTRY AND BUSINESS 69