Unit II

Concepts and definitions of small scale industries

Small-scale industries (SSIs) refer to businesses that operate on a limited
scale in terms of production, employment, and investment. They are often
characterized by their relatively small size, simplicity, and localized operations.
SSIs play a crucial role in economic development by generating employment
opportunities, supporting entrepreneurship, and contributing to the growth of
various sectors. The definition and classification of small-scale industries can
vary from one country to another. Below are some common concepts and
definitions of small-scale industries:

Micro, Small, and Medium Enterprises (MSMEs):

In many countries, including India, MSMEs are categorized based on

criteria that include the level of investment in plant and machinery, making
distinctions between micro, small, and medium enterprises. These criteria may
change over time and across regions.
Employment Criteria:

Some definitions of SSIs are based on the number of employees. For

example, an SSI might be defined as an enterprise employing a specific number
of workers, often fewer than 500 employees.
Investment Criteria:

Small-scale industries may be defined based on the amount of investment

in fixed assets like plant, machinery, and equipment. Investment limits can vary
depending on the country and sector.
Revenue or Sales Criteria:
 In some cases, the annual revenue or sales turnover of a business is used
to determine its classification as a small-scale industry. The threshold varies by
country and industry.
Registered vs. Unregistered Units:

Some definitions differentiate between registered and unregistered small-

scale units. Registered units typically have government recognition and may
receive certain benefits or incentives.
Sector-Specific Definitions:

In specific industries, SSIs might be defined based on parameters unique

to that sector. For example, in agriculture, it could be based on the size of the
landholding or the scale of crop production.
Technology and Innovation Focus:

In the context of technological innovation, SSIs can be defined as

businesses that use simple, traditional, or less advanced technology in their
production processes.
Geographic Location:

Some definitions consider the location of the business, classifying units as

small-scale industries if they operate in rural or semi-urban areas.
Export-Oriented Units:

Small-scale industries that focus on export-oriented activities might have

specific criteria, including export turnover, to determine their classification.
Small Business Associations:

In some cases, small-scale industry definitions are influenced by industry

associations, chambers of commerce, or government departments that provide
guidance and categorization.
 It's important to note that the classification and criteria for small-scale
industries can evolve over time and may differ from one country to another.
Governments, industry associations, and international bodies often review and
update these definitions to adapt to changing economic conditions and support
the growth of small and medium-sized enterprises. The primary aim is to provide
targeted support, incentives, and policies that promote the development of small-
scale industries and foster economic growth.

Role of SSIs
Small-scale industries (SSIs) play a vital role in economic development,
particularly in emerging and developing economies. Their contributions go
beyond mere production and profit generation. SSIs are often considered the
backbone of the economy due to their significant impact on various aspects of a
nation's well-being and progress. Here are some key roles of SSIs:

Employment Generation:

SSIs are major contributors to job creation. They provide employment

opportunities to a large and diverse workforce, including skilled, semi-skilled, and
unskilled labor.
Poverty Alleviation:

By providing jobs and income to people who might otherwise be

unemployed or underemployed, SSIs contribute to poverty reduction and
improved living standards.
Rural Development:

SSIs often operate in rural or semi-urban areas, thereby promoting rural

development, reducing migration to urban centers, and balancing regional
economic disparities.
Promotion of Entrepreneurship:
 SSIs are fertile grounds for entrepreneurship. They encourage individuals
to start their businesses, fostering innovation and creativity.
Economic Diversification:

SSIs contribute to economic diversification by operating in various sectors

such as manufacturing, agriculture, services, and handicrafts. This diversification
helps reduce dependence on a single industry.
Innovation and Adaptability:

Smaller businesses tend to be more innovative and agile in response to

market changes. They are often at the forefront of adopting new technologies
and business practices.
Local and Niche Markets:

SSIs cater to local, niche, and specialized markets, meeting the unique
demands of their customers and creating a vibrant economic ecosystem.
Value Addition:

Many SSIs add value to raw materials, agricultural products, and

traditional handicrafts, increasing their market worth and contributing to overall
economic growth.
Export Promotion:

SSIs often engage in export activities, earning foreign exchange and

boosting a country's international trade. They can develop niche products that
have demand in global markets.
Social Development:
 SSIs engage in corporate social responsibility (CSR) initiatives, supporting
local communities, educational programs, and health services, which benefit
society.
Adaptation to Local Conditions:

SSIs are more attuned to local needs, culture, and conditions, which
enables them to provide goods and services customized to the preferences of
local consumers.
Promotion of Equity and Inclusivity:

SSIs promote equity by providing opportunities for women, minorities, and

disadvantaged groups to participate in economic activities and entrepreneurship.
Large-Scale Industry Support:

SSIs often serve as suppliers or subcontractors to large-scale industries,

supporting their value chains and contributing to the growth of the overall
industrial sector.
Sustainability and Environmental Responsibility:

Smaller businesses are often more environmentally conscious and

sustainable, as they have a closer relationship with their local ecosystems.
Cultural Heritage Preservation:

SSIs engaged in handicrafts, traditional arts, and heritage industries

contribute to the preservation and promotion of cultural heritage.
The success of SSIs depends on government policies, access to finance,
infrastructure, and supportive business ecosystems. Governments often provide
incentives, subsidies, and credit facilities to promote the growth of small-scale
industries and encourage entrepreneurship. These businesses are essential for
achieving economic growth and inclusive development.
Government Policy and Development of SSIs
 Government policies play a crucial role in fostering the development of
small-scale industries (SSIs). Policies aimed at promoting SSIs are often
designed to provide support, incentives, and a conducive business environment
to help these enterprises thrive. These policies recognize the significant
contributions of SSIs to economic growth, job creation, and poverty alleviation.
Here are some common government policies and initiatives that support the
development of SSIs:

Financial Support:

Access to finance is critical for SSIs. Governments often establish

dedicated funding schemes, such as loans, grants, or credit facilities with lower
interest rates, to help small businesses secure capital for expansion and growth.
Subsidies and Incentives:

Governments may provide subsidies, tax incentives, and concessions to

SSIs to reduce their operational costs and encourage investment. These
incentives can include reduced taxes, customs duty exemptions, and energy
subsidies.
Credit Guarantee Schemes:

Governments may set up credit guarantee schemes to enable SSIs to

access loans and credit with reduced collateral requirements. These schemes
reduce the credit risk for financial institutions, making it easier for small
businesses to obtain financing.
Skill Development and Training:

Skill development programs, vocational training, and technical education

initiatives are often launched to enhance the skills and capabilities of the
workforce in SSIs.
Technology Upgradation:
 Governments may support SSIs in adopting new technologies and modern
production methods through technology parks, research and development
centers, and technology transfer programs.
Marketing and Export Promotion:

Initiatives may be launched to assist SSIs in marketing their products both

domestically and internationally. This can include trade fairs, export promotion
councils, and marketing assistance.
Cluster Development:

Governments encourage the formation of industrial clusters or parks that

bring together similar SSIs in close proximity. These clusters facilitate access to
common infrastructure, shared resources, and knowledge sharing.
Entrepreneurship Development Programs:

Entrepreneurship development programs, including business incubators

and mentoring initiatives, are introduced to encourage new entrepreneurs and
support them in starting and managing their SSIs.
Ease of Doing Business:

Governments strive to simplify regulatory and bureaucratic processes for

SSIs, making it easier for them to obtain licenses, permits, and approvals. This
reduces administrative burdens.
Quality Standards and Certification:

SSIs are encouraged to meet quality standards and obtain certifications to

enhance the credibility and competitiveness of their products. Governments may
provide support in this regard.
Infrastructure Development:
 Investment in infrastructure development, including transportation, power
supply, and industrial parks, is essential to ensure a conducive environment for
SSIs to operate and expand.
Networking and Clustering:

Governments promote networking and collaboration among SSIs,

enabling them to share knowledge, resources, and best practices to increase
their competitiveness.
Research and Development Support:

Support for research and development activities, innovation, and product

development can enhance the capabilities of SSIs to create new products and
services.
Environmental Compliance:

Initiatives are introduced to encourage SSIs to adopt environmentally

responsible practices and comply with environmental regulations.
Government Procurement Policy:

Reserving a percentage of government procurement for products and

services from SSIs can boost their sales and provide a steady source of income.
Government policies aimed at the development of SSIs are essential for
creating an enabling environment for these enterprises to prosper. The
effectiveness of these policies often depends on their implementation, access to
information, and the active participation of SSIs in government programs and
initiatives. Additionally, periodic reviews and adjustments of policies are essential
to address evolving challenges and opportunities in the small-scale industry
sector.

Growth and Performance of SSI sector

 The growth and performance of the Small-Scale Industry (SSI) sector can
vary significantly from one region to another and are influenced by a range of
factors, including government policies, economic conditions, and industry-specific
dynamics. Here are some key aspects of the growth and performance of the SSI
sector:

Contribution to Employment: SSIs are often significant contributors to

employment, particularly in emerging and developing economies. They provide
jobs to a large and diverse workforce, helping reduce unemployment and
underemployment.

Economic Growth: SSIs make valuable contributions to economic growth

by generating income, increasing production, and fostering innovation. They play
a crucial role in the economic development of many countries.

Promotion of Entrepreneurship: The SSI sector encourages

entrepreneurship and self-employment. It provides individuals with opportunities
to start and manage their businesses, fostering a culture of innovation and self-
reliance.

Export Potential: Many SSIs engage in export-oriented activities, helping

countries earn foreign exchange and expand their international trade. They often
produce niche products that have demand in global markets.

Value Addition: SSIs add value to raw materials, agricultural products, and
traditional handicrafts. By doing so, they increase the market worth of these
products and contribute to overall economic growth.

Innovation and Adaptability: Smaller businesses are often more innovative

and agile in response to market changes. They are quick to adopt new
technologies and business practices, contributing to overall industry evolution.
 Diversity of Sectors: SSIs operate in various sectors, including
manufacturing, services, agriculture, and handicrafts. This diversification helps
reduce dependence on a single industry and promotes economic stability.

Local and Niche Markets: SSIs often cater to local, niche, and specialized
markets. They meet the unique demands of their customers, creating a vibrant
and diversified economic ecosystem.

Support to Large Industries: SSIs often serve as suppliers or

subcontractors to large-scale industries, supporting their value chains and
contributing to the growth of the overall industrial sector.

Social Development: SSIs engage in corporate social responsibility (CSR)

initiatives, supporting local communities, educational programs, and health
services, which benefit society at large.

Despite their many advantages and contributions, SSIs face several

challenges that can impact their growth and performance:

Access to Finance: Many SSIs struggle to secure financing from traditional

sources, which can hinder their expansion and modernization efforts.

Technological Constraints: Limited access to advanced technologies and

modern equipment can affect the competitiveness and productivity of SSIs.

Skills and Training: The workforce in the SSI sector may require skill
development and training to adapt to changing market demands.
 Regulatory and Compliance Burden: Navigating complex regulatory and
compliance requirements can be a challenge for smaller businesses, leading to
administrative burdens.

Market Competition: SSIs often face competition from larger corporations

and may need to differentiate themselves and compete effectively.

Access to Markets: Expanding beyond local and niche markets can be a

challenge for some SSIs. Access to global markets may require significant
resources.

Sustainability and Environmental Responsibility: Balancing sustainability

and environmental responsibility while maintaining competitiveness can be a
complex task for SSIs.

Government policies and initiatives play a significant role in addressing

these challenges and promoting the growth and performance of the SSI sector.
Access to finance, skill development, technology adoption, and support for
market access is essential components of effective policy frameworks. Regular
reviews and updates of these policies are necessary to address evolving
challenges and opportunities in the SSI sector.

Reservation of items for SSIs

In many countries, including India, the government has implemented
policies that reserve certain items or products for production by Small-Scale
Industries (SSIs) or Micro, Small, and Medium Enterprises (MSMEs). These
reservations are typically aimed at promoting the growth and development of the
SSI sector, encouraging entrepreneurship, and increasing the competitiveness of
these small businesses. The specific items reserved for SSIs can vary from one
country to another and may be periodically updated. Here are some key points
related to the reservation of items for SSIs:

Items Covered: The government may reserve certain categories of items

or products exclusively for production by SSIs or MSMEs. These items can range
from consumer goods to industrial components and may be divided into various
sectors such as manufacturing, services, and handicrafts.

Objectives: The primary objective of item reservations is to provide SSIs

with a level playing field and protect them from competition with larger
corporations. It aims to boost the growth of the SSI sector, increase job
opportunities, and support local entrepreneurship.

Sector-Specific Reservations: Reservations can be sector-specific. For

example, in India, the Khadi and Village Industries Commission (KVIC) promotes
the production of khadi and village industry products by SSIs.

Percentage of Production: In some cases, the government may specify a

certain percentage of an item's production that must be reserved for SSIs. For
example, a government may mandate that 20% of the production of a particular
item must be by SSIs.

Regulatory Compliance: SSIs that produce reserved items are required to

comply with regulations and certification processes to ensure that they meet the
necessary quality and standards.

Capacity Limits: Some reservations may have capacity limits to define the
maximum production volume that an SSI can engage in for a reserved item.
 Government Procurement: Governments may prefer to procure reserved
items from SSIs to support their growth and to ensure that SSIs have a reliable
market for their products.

Annual Updates: The list of reserved items may be updated periodically to

reflect changes in market demand, technology, and other factors.

Compliance and Enforcement: Regulatory authorities monitor compliance

with item reservations and ensure that SSIs adhere to the stipulated rules.

It's important to note that the specifics of item reservations for SSIs can
vary significantly between countries. The exact list of reserved items and the
associated policies are determined by the respective government and industry
bodies. Entrepreneurs and businesses looking to engage in the production of
reserved items should familiarize themselves with the relevant regulations and
requirements in their jurisdiction to ensure compliance.

Problems Encountered by Small-scale Industries in India

Small-scale industries in India face numerous problems on a daily basis.
They have to live and survive anyhow as they don’t get much open space and
expansion opportunities as large scale industries. In a developing nation like
India, these industries can soar high if they get support from government via
initiatives and schemes favoring them and also when they receive assistance
from giant market players and Non-government organizations as well.

In the past, the Indian government had reserved certain items for getting
produced and manufactured only by small-scale industrial units. Such items that
were reserved for small players in the industry were not permitted to get
produced by large scale industries. However, the principles of liberalization and
globalization have opened the doorway for one and all. Thus, the competition has
increased for SSI.
 The problems encountered by SSIs are-

Financial Scarcity
One of the most daunting problems that SSIs in India face is the issue of
inadequate finance and a shortage of funds to meet the crucial requirements.
These industries are unable to access the local capital market to stir up
resources, and financial constraints hinder their growth. Now, can you even
expect a business to soar high in the sky of accomplishments without sufficient
funds? Well, even in the second thought to you can’t expect the same. Due to
their small capital structure, they fail to tap international markets by issuing
Global Depository Receipts as well as American Depository Receipts.

Their dependency on financial institutions and finance-based government

bodies and NGOs make them feeble to exist and run smoothly. However, in the
last few years, the central government has taken several crucial decisions to
arrange loans for them and uplift their financial position so that they can ride the
vehicle of their business with much ease.

Lack of Market Awareness and Market Trends

 Small-scale industries in India are not much aware of the market
requirements. The lack of market knowledge concerning rivals, preferences of
the consumers and ongoing trends in the market create obstruction on their way
to success. The market of small scale corporations is restricted up to a great
extent as their production volume is not gaining momentum and is low and
cannot meet large quantities’ requirements. These small players have to face
cut-throat competition from domestic industries along with international
competitors who sell highly qualitative products at reduced prices due to the
existence of liberalization and globalization in the market.

For instance, heavily subsidized but better quality imports from China has
dominated the Indian Small-scale units producing/ manufacturing toys, electronic
goods, chemicals, machine tools, locks and paper etc. Small-scale industries in
India must gather information about the marketing tactics, competitors’
strategies, what consumers want, and more knowledge related to the market and
consumers. After the announcement made by Indian Pm Narendra Modi
regarding Aatmnirbhar Bharat and after the birth of Aatmnirbhar Sena last year,
things have started getting better and improved for small scale industries and
medium scale enterprises.

Shortage of Raw Materials

Due to the limited region of conducting business activities and limited
finances, SSIs face difficulty meeting the demand for raw materials. Raw
materials are the driving force for small scale units, and their shortage would
increase the difficulty for those engaged in small-scale industries. As it’s a well-
known fact that the demand for raw material is too high compared to the supply
in the market, thereby pushing the costs to elevated heights.

One of the most growth-hindering problems in the smooth functioning of

small-scale industries in India is the inadequate quantity and shortage of raw
materials. If there were limited raw materials available, it would break the
production part’s consistency and, thereby, hurt the business growth, revenue
and eventually, it would lead to a loss of customers. With the rising support of
government agencies and non-government organizations, small scale industries
have started flourishing at a rapid pace in recent time, and we can just hope that
they will be maintaining the same pace in the years to come.

Lack of Skilled People at Managerial Level

Handling the management part of any organization is not a piece of cake.
It requires a lot of knowledge, experience along with qualified and efficient people
at the managerial position on board. At the project management part, small-scale
industries in India suffer a lot as people who are running such small scale
enterprises or firms are not competent enough in terms of experience or skill.
They fail to understand the current market demand, issues pertaining to
availability of finance, location of the plant, production methods, and future
prospects with respect to the small-scale industries. Marching ahead with
inexperienced promoters would affect the cash flow and processes of production.

Industrial Relations below Par

The pay and benefits associated with large scale businesses are far better
than the pay and benefits provided in small-scale industries in India. As we all
know that the money minted and overall profitability achieved by small scale
enterprises are very low, and even the certainty factor is missing, SSIs can’t
touch the pay and benefits that large scale industries offer. Therefore, the labour
problems exist up to a great extent in SSIs.

Labors working in the SSIs feel that they are not getting their due and
thus, they fail to upgrade their performance level hindering the growth of small-
scale industries in India. Expecting higher wages and other benefits from small
scale enterprises is a pipe dream. In the normal scenario, it has been observed
that such fights for benefits and higher wages has always lead to strikes, losses
or property damage due to violence by employees, and downfall in the
production part, and more negative consequences.

Running with Obsolete Technology

India is leaving its impact with growth and advancement on global
parameters. Nevertheless, the growth of small scale enterprises has not been up
to the mark. Most of the small-scale industrial units are running with outdated
technology behind the times, and thus, there is a lack of quality production and
low productivity from such industries. In order to conduct research and
development activities, the requirement of the fund becomes more significant
than anything else. Thus, due to lack of financial riches and required skillset,
SSIs are unable to immerse themselves into the development of new
technologies and are rather surviving and running anyhow with obsolete
technology.

They can acquire modern technology from different firms, but even that
would cost them too much. In the last few years, the Indian government has
started supporting the SSIs via various schemes introduced to increase the
longevity of small-scale industries and boost their growth. Also, Aatmnirbhar
Sena is willing to bridge the gap between small scale industries and small
business owners by increasing awareness about government policies. Small
sector enterprises must take two points into consideration if they want to flourish
themselves and gear up for the next step of accomplishment, i.e., productivity
and competitiveness. Both these factors would demand up gradation in
technology.

Issues Related to Export

It’s next to impossible for SSIs to penetrate foreign markets as they are far
behind in delivery quality and lack of cost competitiveness. Their scarcity of
knowledge concerning the procedures involved in export, various patterns of
demand, likeability factor linked with the products, international buyer behavior
and foreign currency rates.

In countries such as Taiwan, Japan etc. products developed and produced

by SSIs are exported to various foreign countries. In India, no major impactful
action has been taken to enhance the export competitiveness of SSIs, and it’s an
alarming condition for the growth of export of products produced within the
geographical boundaries of India.

Trapped in the Shackles of Sickness

Due to a lack of strategic planning, most of the small scale units are
suffering on all the grounds. Another issue is that they are operating without
trained and skilled personnel. As customers are not making timely payment, the
burden increases on the head of small scale units. Sickness is widespread
among small scale units. Getting financial assistance from banks or other
financial institutions has been a challenge. The large scale bad debts are
creating hindrances on the path of advancement. Workers performing their tasks
in sick units are being thrown out from their jobs and thereby, affecting the
industrial development. In brief, we can say that small-scale units are trapped in
the shackles of sickness.
Market Competition: SSIs often face stiff competition from larger
corporations, both domestically and internationally. They must find ways to
differentiate themselves and compete effectively

Measures to Withstand and Overcome Problems Faced by SSIs

Ushering small-scale industries in India on the path of growth and all-
round development is possible by framing an overall approach to hold the line
against problems faced by SSIs.

The measures that would be a surefire shot for overcoming problems

faced by small scale industries are-
 .
Embracing Up-to-Date Techniques of Production
The small scale units must incorporate the latest methods and techniques
of production and should use these techniques as a replacement of antiquated
technology.
Upgrading the techniques and methods would ensure the production of
the finest goods matching the industry standards.
Here, the government must take the responsibility of examining and
assessing whether the goods are in accordance with standards or not.
Also, the responsible bodies must ensure that the products are
manufactured without compromising with the quality part.
Malpractices such as misrepresentation, adulteration, etc. need to be
suppressed, and thereafter, the road for small-scale industries in India would be
full of bliss and hope.
The small-scale industries in India must conduct research on various
production techniques as well as methods and should strive to make strides in
the direction of brushing up the production methods along with strategies and
look for embracing modern technology in their small scale industrial units.
 Standardization of products must be a factor that should get considered
for sure.

Strengthening Marketing Framework

A sound marketing framework would ensure better outcomes for small-
scale industries in India.
Adding fuel to market research, intelligence, and knowledge
enlightenment would give strength to the marketing framework, and such results
would assist the small scale units in uplifting their level. Marketing of products at
moneymaking prices is the significant problem most of the small scale industries
are facing nowadays.
Thus, there is a cloudless case for the intervention of the government with
a view to minimizing the disadvantages emerging out of market shortcomings
and flaws.
By strengthening the entire mechanism of marketing, small-scale
industries in India can change their fortune.
The government must set up efficient marketing organizations to eradicate
the comparative limitations compared to large scale establishments in the realm
of marketing.

Equitable Pattern of Allocation

In the equitable allocation pattern of raw materials, required equipment,
and imported components, the small-scale industries in India must get ample
degree of preference.
The government must ensure that things should take place in a fair and on
the up and up.
In addition to this, the government needs to make provision for increasing
the availability of a better quantity of raw materials at reasonable prices and
making sure that quality is as per the market standards.

Imparting Meaningful Industrial Education and Training

 Along with upgrading to latest techniques and methods of production,
imparting technical knowledge related to the industries not only to the
entrepreneurs running their small-scale businesses but also to the workers must
be the substantial component of the plan.
The government must make a mandatory arrangement in order to
dispense meaningful knowledge related to technical education and provide
training to workers engrossed in small-scale industries in India.
The emphasis must be on providing requisite facilities for industrial
education as well as proper training programs should be organized for enhancing
the knowledge of one and all.

Arrangement of Sufficient Finance

The capital invested in the small scale units by promoters is usually not
very high.
They are largely dependent on external sources of financing in a
significant measure.
Thus, the need of the time is an integrated credit system that would meet
the short-term as well as long-term financial requirements of small-scale
entrepreneurs and small scale industrial units.
Short-term and long-term financial credit assistance is possible at a rate of
interest such small-scale undertakings can bear in the future course of time.
In recent time, the government has initiated the process of liberalizing the
practices and rules of banking along with norms of financial institutions assisting
the small-scale industries in India by furnishing credit so that they can meet their
capital demands and smoothly operate their units.

Secured Lodge for Small-scale Industrial Units

A secured lodge will be granted to small scale units after their role in the
Indian economy receive recognition.
The separation of small-scale industrial units and large-scale industrial
units must betide as it would sort out the things for small-scale industries in India.
 All the measures must get interlinked in a single frame and applied
simultaneously to make the journey of small-scale industries in India a plain
sailing one.

Government Schemes for Small-scale Industrial Units in India

In recent years, the Indian government has introduced several schemes
for small-scale industries and baby businesses in India.

Few of the popular government schemes are mentioned below-

PSB Loans in 59 Minutes

PSB Loans in 59 Minutes, known as the scheme of rapid business loans,
introduced by our PM Shri Narendra Modi Ji on the rosy day of Diwali on 2nd
November in the year 2018. Through this scheme, MSMEs can get loan amount
in the range of Rs. 1 lakh to Rs. 5 crore within 59 minutes from public as well as
private sector banks and NBFCs. The interest rate for such type of loan starts
from 8.50%. It’s an initiative to encourage self-employment business model in the
geographical boundaries of India.
 Now, there is no need to wait for 7-8 working days and 30-day long
process time is also reduced after the approval. With PSB Loans in 59 minutes,
the overall process of a Small Business Loan for MSMEs is anticipated to
become hassle free that too with minimal documentation requirements.

MUDRA Loan
MUDRA loan scheme is expanded as Micro Units Development and
Refinance Agency. This scheme endeavors to bring the target audience into the
financial fold. MUDRA scheme can be availed by individuals, MSMEs, SMEs,
Units, businesses engrossed in Trading, Manufacturing, and Services Sectors,
only. The maximum loan amount for MUDRA scheme is Rs. 10 lakh. This
scheme promotes women entrepreneurs by helping them in availing easy loans
at reduced rates.

Three categories of MUDRA Loan scheme are-

SHISHU Loan – Young businesses and emerging startups can avail this
loan up to 50,000 Rs.
KISHOR Loan – Existing enterprises can avail this loan from Rs. 50,001 to
Rs. 5 lakh to purchase raw materials, machinery, equipment, and expand the
business.
TARUN Loan – Established enterprises and businesses can avail this loan
from Rs. 5, 00,001 to Rs. 10, 00,000.

Credit Guarantee Fund Scheme

In order to grant security free or collateral-free credit facility to small as
well as micro-enterprises, the Indian government has introduced a scheme
known as the Credit Guarantee Fund Scheme. The credit facilities that are
eligible to be embedded under this scheme are term loans as well as working
capitals up to Rs.100 lakh each borrowing unit without any collateral or security
or third party guarantee for small and micro-enterprises. For those units
encompassed under the credit guarantee fund scheme, which may fall to factors
beyond the management control, regrowth aid is also enhanced by the lending
institution, which is also incorporated under this scheme.

Stand-up India Scheme

This scheme lends bank loans between the range of Rs. 10 lakh and Rs. 1
crore to at least one SC/ST borrower as well as one woman borrower per bank
branch. Regulated by SIDBI (Small Industries Development Bank of India),
Stand-up India came into existence to grant funding to those who fall under the
category of SC and ST and women entrepreneurs also receive benefits under
this scheme.

Role of Aatmnirbhar Sena

Aatmnirbhar Sena is consistently working to assist the budding
entrepreneurs from small-scale industries in India so that they can reconstruct
their business and uplift their businesses with short-term as well as long-term
loans. The organization is standing up with the government to help the business
organizations and small-scale industries in India avail the benefits of MUDRA
scheme.

Efforts to address these challenges often involve a combination of

government policies, industry associations, and support organizations that
provide financial assistance, training, technical expertise, and market access.
Entrepreneurs and small business owners in the SSI sector can also benefit from
networking and collaboration, accessing business support services, and
continuously improving their business skills and practices.
The growth and progress of Small-scale industries in India would establish
the ground for all-round development of the nation. Once these industries utilize
their utmost potential, they are capable of bringing positive transformation in the
economic structure of our country. In recent years, the Indian government has
introduced several schemes to accelerate the advancement of small-scale
industries in India.

Sickness of SSI: Causes, Symptoms and Cures

The "sickness" of Small-Scale Industries (SSIs) refers to a state of
distress or decline that these businesses can experience due to a combination of
internal and external factors. Identifying the causes, symptoms, and cures for this
sickness is essential for addressing the challenges that SSIs face. Here's an
elaborate discussion of the causes, symptoms, and potential cures for the
sickness of SSIs:

Causes of Sickness in SSIs:

Financial Challenges:

Cause: Inadequate access to capital, high borrowing costs, and cash flow
problems can lead to financial distress.
Impact: Financial challenges can result in delayed payments to suppliers
and employees, limited working capital, and a growing debt burden.
Technological Obsolescence:

Cause: Failure to invest in modern technology or adapt to changing

industry standards can make SSIs less competitive.
Impact: This can lead to reduced product quality, decreased production
efficiency, and difficulties in meeting customer expectations.
Market Competition:

Cause: Intense competition from larger corporations or foreign businesses

can erode market share and pricing power.
Impact: SSIs may struggle to maintain or grow their customer base,
leading to reduced sales and profitability.
 Regulatory Burden:

Cause: Complex and burdensome regulatory requirements, including

compliance and reporting obligations, can be challenging for SSIs to navigate.
Impact: Compliance costs, administrative burdens, and potential legal
issues may arise.
Lack of Skilled Labor:

Cause: A shortage of skilled workers in specific industries or regions can

impact productivity and product quality.
Impact: SSIs may struggle to meet production demands, leading to delays
and lower-quality products.
Market Downturns:

Cause: Economic recessions or market downturns can reduce demand for

SSIs' products and services.
Impact: Reduced sales and lower revenue can lead to financial difficulties
and downsizing.
Supply Chain Disruptions:

Cause: Disruptions in the supply chain, such as raw material shortages,

transportation issues, or vendor problems, can disrupt production.
Impact: Delayed production, increased costs, and potential damage to
customer relationships can result.
Limited Access to Markets:

Cause: Inability to expand beyond local or niche markets can limit growth
opportunities.
Impact: SSIs may miss out on lucrative market segments, affecting their
revenue potential.
Symptoms of Sickness in SSIs:
 Financial Distress:

Frequent cash flow problems, late payments to suppliers or employees,

and a rising debt burden can indicate financial distress.
Reduced Production:

A decline in production levels or underutilization of production capacity

can be a sign of decreased demand.
Loss of Market Share:

SSIs may lose market share to competitors, resulting in reduced sales and
a shrinking customer base.
Quality Issues:

A decrease in product quality due to technological obsolescence, lack of

skilled labor, or operational challenges may be evident.
Employee Layoffs:

To cut costs, SSIs may resort to layoffs or workforce reductions, leading to

job losses and employee morale issues.
Delayed Payments:

Delays in paying suppliers or employees may indicate financial difficulties

and liquidity problems.
Decreased Innovation:

SSIs may struggle to innovate or adapt to changing market conditions,

leading to stagnation.
Potential Cures for Sickness in SSIs:
 Access to Finance:

Governments and financial institutions can provide SSIs with better

access to affordable credit, reducing financial stress.
Technology Adoption:

Encouraging SSIs to adopt modern technologies through training and

subsidies can enhance competitiveness.
Skill Development:

Investment in workforce development and skill training programs can

address labor shortages and improve product quality.
Regulatory Simplification:

Simplifying regulatory procedures and compliance requirements can

reduce administrative burdens.
Market Access Support:

Facilitating market access, including export promotion initiatives, can help

SSIs expand their reach.
Collaboration and Networking:

Encouraging collaboration and networking among SSIs can lead to shared

resources, knowledge, and cost-saving opportunities.
Financial Restructuring:

Financial restructuring measures, such as debt consolidation or

refinancing, can help ease financial stress.
Market Diversification:
 Promoting diversification of products and markets can reduce dependence
on a single market or sector.
Government Support:

Governments can implement supportive policies, incentives, and

infrastructure development to create a conducive environment for SSIs.
Business Consultation:

Seeking advice from business consultants or industry experts can provide

fresh insights and strategies to address specific challenges.
The approach to curing the "sickness" of SSIs will depend on the specific
challenges they face, which can vary widely. Effective solutions often involve a
combination of financial support, skill development, technology adoption, and
streamlined regulations, tailored to the needs of individual businesses and the
industry in which they operate. Collaboration between government agencies,
industry associations, and support organizations is often essential in providing a
holistic approach to addressing these challenges.

Prospects of SSI in free economy

The prospects of Small-Scale Industries (SSIs) in a free-market or free
economy can be quite promising, given the right conditions and policies. A free
economy generally allows for a competitive business environment with minimal
government intervention and regulation. Here are some key prospects and
opportunities for SSIs in a free-market economy:

Entrepreneurship and Innovation:

A free economy encourages entrepreneurship and innovation, making it

easier for individuals to start and grow their businesses. SSIs thrive in such an
environment, as they are often founded on innovative ideas and local market
insights.
 Flexibility and Agility:

SSIs tend to be more flexible and agile in responding to market changes.

In a free economy, where market dynamics can shift rapidly, this adaptability is a
significant advantage.
Competition and Market Niche:

SSIs can identify and target specific market niches or underserved

segments, allowing them to compete effectively with larger corporations.
Local and Community Focus:

SSIs often have a strong local or community focus, which resonates with
consumers in a free economy who appreciate personalized and locally sourced
products and services.
Job Creation:

SSIs are major job creators in a free-market economy, providing

employment opportunities for a significant portion of the workforce.
Innovation Ecosystem:

SSIs can benefit from a vibrant innovation ecosystem in a free economy.

Access to research, technology, and collaboration with research institutions can
drive innovation and product development.
Access to Global Markets:

In a free economy, SSIs have the potential to access global markets,

particularly with the rise of e-commerce and digital platforms. Export
opportunities can boost growth and revenue.
Local Resilience:
 SSIs can contribute to the resilience of local and regional economies by
reducing dependence on a few major employers.
Social Responsibility:

SSIs often engage in social responsibility and community development

initiatives, which align with the values of many consumers in a free-market
economy.
Supply Chain Diversity:

SSIs can contribute to a diversified and robust supply chain in a free

economy, which is essential for economic stability.
Despite these prospects, SSIs in a free economy also face some
challenges:

Competition: They must compete with larger corporations, which can have
more resources and market power.

Access to Finance: Securing capital can be challenging, as traditional

lenders may prefer established or larger businesses.

Regulatory Challenges: While minimal regulation can be an advantage,

SSIs must still navigate complex regulatory environments, including tax, labor,
and environmental regulations.

Market Access: Entering and expanding into new markets, especially on a

global scale, can be daunting.

Technology Adoption: SSIs need to stay updated with technology to

remain competitive.
 Skills and Workforce Development: Access to skilled labor and training
programs is essential for their growth and productivity.

The success of SSIs in a free economy hinges on a combination of

factors, including favorable government policies, access to finance, market
access support, and a strong entrepreneurial spirit. Additionally, embracing
technology, innovation, and sustainable practices can further enhance their
prospects in a free-market environment.

Small-scale industries in India are considered as the line-of-life for the

Indian economy and are the need of the hour for financial and social progress of
the country. Even though these industries are labor intensive, they demand little
capital.

Small scale industries consist of all the small enterprises that are engaged
in the activities related to manufacturing of goods or grant services with the
support of smaller machines along with a small pool of workers as well as
employees. Small scale industries can mainly exist in two forms, i.e.,
manufacturing industries or service providers. The Indian government has set the
guidelines for the enterprises that fall under the category of small-scale industries
in India.

Although small scale industries have made a substantial contribution to

the development and economic progress of the nation, they have failed to utilize
their actual potential to the fullest. The reason behind their underperformance is
that they face certain issues in the functioning part, and most of them run in an
incompetent manner. Since most of the small scale industries are still working on
outdated technology, they are facing hindrances on the path of raising their level
of productivity.
 In India, the government has centralized its vision on formation and
upliftment of small-scale industrial units due to the demand of vendors for
multinational corporations. Through these industries, skilled labors get the right
set of job opportunities to flourish their career. Various small-scale industries and
manufacturing units in India are involved in exporting goods and thereby, pulling
foreign currencies. The inclination of the Indian government in the direction of
enhancing small scale units and small businesses is because of the fact that
these industries and corporations are capable of ushering India on the path of
economic prosperity.