“A small scale or cottage industry may be defined as an enterprise or series of operations carried on by a workman skilled in the craft on his

responsibility, the finished product of which, he markets himself” -Prof. K.T. Sash


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 Production is traditional and the technique is outdated.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.


SSI 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.


* 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


* 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. used in juxtaposition to large scale industries, which were established under the British patronage. movement.

* In fact, at that time the term „cottage and Small scale industries‟ was * They received encouragement and support during the freedom

* The small scale industries found a prominent place in the economic
programme envisaged by the Indian National Congress.

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. At Present 812 items are in the reserved list.

The limit on the fixed capital investment for SSI‟s was Rs 7.5 lakhs and for ancillaries it was Rs 10 lakhs. After the Industrial Policy, the ceiling for investment for SSI‟s was raised to Rs 60 lakhs and Rs 70 lakhs for ancillaries .


1991 Industrial Policy * Equity participation of upto 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 upto Rs. 10 lakh. Single window loans to cover projects upto 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.
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.

1995 WTO Policy

Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act)
* *
The Act provides the framework fir 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: • Micro: investment upto Rs. 25 lakhs • Small Enterprises: investment above Rs. 25 lakhs and upto Rs. 5 crore • Medium Enterprise: investment above Rs. 5 crore and upto Rs. 10 crore Service Enterprises: • Micro: investment upto Rs. 10 lakhs • Small Enterprises: investment above Rs. 10 lakhs and upto Rs. 2 crore • Medium Enterprise: investment above Rs. 2 crore and upto 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


* 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.


Production From Small Scale Industries

Production (Rs. '000 crores) at 1993-94 prices



150000 Production (Rs. 000' crores) at 1993-94 prices 100000



* 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.


Year 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06

Production per employee (Rs. Employment (Lakh thousand) at 1993Nos.) 94 prices 158.3 54 166 53 174.8 53 182.6 54 191.4 57 197.9 61 205.9 66 213.2 69 220.6 71 229.1 74 238.7 77 249.3 78 260.2 81 271.4 84 282.6 89 294.9 93

* 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%.


* 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. metallic mineral products (14.1), Basic metal industries (13.6) and Electrical machinery and parts (11.2.)

* Next came Cotton textile products (17), Non-

* The lowest figure of 2.4 was in Repair services line.


* 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%).


* 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%.


* No of Employment in Small Scale Industries in

* SSI Sector plays a major role in India's 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 contribute around 15% to exports indirectly. Non traditional products account for more than 95% of the SSI exports.


Export from small sector


The 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.


* Development measures should be spread * Rising productivity needs to be made

* Assistance programs need to be tackled * Skill based needs need to be improved


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