Small scale industries: all Scale Industries

 Small scale industries are referred to as those industries in which the process of
manufacturing, production and servicing are done on a small scale.
 The investment on such industries is one time and these investments are mostly done on
plant and machinery, the total investment on such industries do not exceed 1 crore.
 In small scale industries, the manufacturing of goods and rendering of services are done
with the help of smaller machines and very limited manpower.
 Small scale industries or SSIs are known as the lifeline of an economy, which is very
important for a country like India. Being a labor intensive industry, it is very helpful in
creating employment opportunities for the population of the country.
 They are also a crucial part of an economy from a financial standpoint, as they help in
stabilising the per capita income of the country.

Characteristics of Small Scale Industries

In accordance with the small scale business meaning, such industries are characterized by the
following features –
I. Ownership
Generally, such businesses are sole proprietorships or, in some cases, partnerships. It
means that the ownership of the business rests on a single individual, in most cases.
II. Labor Requirements
Since capital investment in such industries is comparatively lower than that of the large-
scale ones these mostly rely on manpower, to carry out production activities.
III. Management
One of the most significant characteristics of SSI is that both the control and management
of such businesses lie with owners. The owner, thus, participates actively in the day-to-
day business conduction.
IV. Flexible
Since they operate on a smaller scale, these industries are more privy to sudden and
unforeseen developments on the business front. They are more adaptable to changes in
the business environment.
V. Optimal Usage of Resources
Since they do not have excess resources at their disposal, small-scale industries make
optimal usage of the available resources without wastage.
VI. Operation Restrictions
Most small-scale businesses are limited in their area of operation. As a result, they only
operate either locally or regionally. These are a few of the characteristics of a small
business that helps to effectively gauge its operation, administration, and scope.
Objectives of Small Scale Industries:
The objectives of small scale industries are as follows:

1. To create job opportunities for the population.

2. To help in the development of the rural areas of the economy.
3. To play an active role in reducing the regional imbalances in the nation.
4. To help in improving the standard of living for people in rural areas.
5. To ensure there is equal distribution of wealth and income

Roles and importance of small scale industries in India : Importance of Small Scale
Industries
Small scale industries are those industries in which production, manufacturing and providing the
services are executed on a small or micro scale.
In a country like India, the small scale industries play a very important role in generating
employment, improving the financial status of people, development of rural areas and removing
the regional imbalances.
Let us look into the roles and importance of small scale industries in India:
1. Employment generation: Small scale industries are one of the best sources of employment
generation in India. Employment is one of the most important factors that determines the growth
of a nation. Therefore, development of small scale industries should be encouraged for the
development of more employment opportunities in the nation.
2. Less Capital Requirement: Small scale industries are less capital intensive than the large
scale industries. Capital is scarce in developing countries like India and therefore, small scale
industries are most suitable for maintaining the balance.
3. Use of resources and development of entrepreneurial skills: Small scale industries allow
for the development of entrepreneurial skills among the rural population which is not having the
scope of large scale industries. These industries help in the appropriate use of the resources
available in the rural areas, which leads to development of rural areas.
4. Equal income distribution: Small scale industries by generating employment opportunities
create equal income opportunities for the youth of the underdeveloped areas. This leads to the
growth of the nation in terms of employment, human development.
5. Maintains regional balance: It has been seen that large scale industries are mostly
concentrated in the large cities or restricted to areas which leads to migration of people in search
of employment to these cities. The result of such a migration is overcrowding of the city and
damage to the environment. For sustaining a large population, more of natural resources need to
be utilised.
6. Short production time: Small scale industries have a shorter production time than the large
scale industries which results in flow of money in the economy.
7. Supporting the large scale industries: Small scale industries help in the growth of the large
scale industries by producing ancillary products for the large industries or producing small
components that will be useful for the assembling of final products by the large scale industries.
8. Improvement in Export: Small scale industries contribute to around 40% of the total exports
done by India, which forms a significant part of the revenue earned from the exports. Small scale
industries work towards increasing the forex reserves of the country that reduces the load on
balance of payment of the country.
9. Reduce the dependence of agriculture: Most of the rural population will be dependent on
agriculture and this creates a burden on the agricultural sector. Small scale industries by
providing employment opportunities to the rural population provides more avenues for growth
and also paves way for a more arranged distribution of occupation.

Types of Small Scale Industries

Generally, Small Scale industries are classified into 3 types, based on their nature of work:

Manufacturing Industries:
These industries specialize in producing finished goods for human consumption or are used
further in processing industries. Usually, such industries have a single ownership structure.

Ancillary Industries:
These industries act as feeder units to the bigger manufacturing industries. Large or medium-
scale industries generally do not produce all the parts of their products. They buy the required
parts from such small scale industries.

Service Industries:
Such industries are not involved in any type of manufacturing or production, rather are only
involved in offering repair and maintenance services.

Other types of SSIs are as follows:

Village Industries:
A village industry is a modest-scale enterprise established in rural regions with constrained
resources. These industries rely entirely on human labor for their production processes.

Cottage industries:
Cottage units are classified as Small Scale Industries (SSIs) when they operate without a
dedicated facility and are conducted within the living spaces or residences of their owners.

Export units:
An Small Scale Industry (SSI) is recognized as an export unit when over 50% of its production is
directed towards exports.
Some of the examples of small-scale industries in India’ as follows:-

Food processing units Engineering units Power looms

Agarbatti production Sugar candy production Wood production

Rice mill production Potato chips making liquid soap

Toy Making Rearing of Honey bees Detergent powder production

Some of the small industries also include rice mills, agarbatti production, sugar candy
manufacturing, toys, detergent powder, spices, chocolates, honey processing, biodiesel
production, etc.

Registration of Small Scale Industries in India:

The Government of India offers different schemes, incentives and subsidies to registered small-
scale industries. Though such registrations are voluntary. The registration process falls under the
purview of the Ministry of Micro, Small and Medium Enterprises through the Directorate of
Industries of the State Government.

Follow the guide below to register your Small Scale industry through the official government
portal ‘UDYAM’. Any registration through a private body shall not be recognized as a Small
Scale Industry.

 Visit the official government registration portal – UDYAM.

 On the given page, select the tab ‘For New Entrepreneurs who are not registered yet as
MSME or those with EM-II”.
 On the following page, enter your Aadhaar number and your name for verification. You
will receive OTP on your registered mobile number.
 After verification, the PAN Verification page opens up. Enter your PAN details and click
on the “Validate PAN” tab.
 Next, the UDYAM Registration page opens up. Proceed to fill in all the required details
and then select the option of “Submit and Get Final OTP” tab.
 Now, after successfully registering yourself on the MSME portal, you will receive a
notification acknowledging the receipt of your application with a reference number. Once
your registration is verified, you will receive your MSME registration certificate.

You can also register for more than one industry on the platform using the same Aadhaar and
PAN details. No registration fees are levied for such registration.
Benefits of SSI Registration

The Government of India offers various incentives to Small-scale industries to promote the Make
in India scheme and entrepreneurship among the citizens. Some benefits are:

 Tax rebates
 Easy access to credit under specific government tenders
 A credit for Minimum Alternate Tax is allowed to be carried forward up to 15 years
 Concessions on cost of acquiring patent, setting up plants and offices
 Higher preferences to registered industries for government licenses and certification.

Government Schemes for Small Scale Industries

To promote the MSME sector in India, the Government has come up with various initiatives
to support the upcoming I ndustries and businesses in this Sector. Various announcements have
been made under the ‘Atmanirbhar Bharat’ scheme, such as collateral-free automatic loans up to
INR 3 lakh, disallowing global tenders to offer better opportunities to the MSMEs, and clearing
of the MSME dues by the PSUs within 45 days.

Initiatives for the development of Khadi, village

The Credit support initiative
and coir industries

Prime Minister Employment

Market promotion and development scheme
Generation Programme

Credit Guarantee Trust Fund for Revamped Scheme of Fund for Regeneration of
Micro and Small Enterprises Traditional Industries

Credit Linked Capital Subsidy for

Coir Vikas Yojana
Technology Upgradation

A Scheme for Promotion of Innovation, Rural

Industries and Entrepreneurship (ASPIRE)

rge Scale Industries

Large Scale Industries
There are different forms of business organisations ranging from a sole proprietorship to large
scale businesses that employ over a thousand employees. Based on the scale of the business,
various classifications can be done, such as small scale industries, large scale industries, public
enterprises and multinational corporations.
What are Large Scale Industries?
Large scale industries are referred to as those industries that are having huge infrastructure, raw
material, high manpower requirements and large capital requirements. Those organisations
having a fixed asset of more than 10 crore rupees are considered to be large scale industries.
The growth of the economy is very much dependent on these industries. Such industries work
towards bringing in foreign reserves, generating employment opportunities and paving the way
for economic growth.

Large Scale Industries in India

Large scale industries in India can be categorised into the following types of industries:
1. Iron and Steel Industry
2. Automobile Industry
3.Textile Industry
4.Telecommunication Industry
5. Information Technology Industry
6. Petroleum and Natural Gas Industry
7. Silk Industry
8. Fertiliser Industry
9. Jute Industry
10. Paper Industry
11. Cement Industry

Advantages of Large Scale Industries:

Large scale industries offer the following advantages:
1. Large scale industries use the latest machinery and technology, which helps in improving the
production. Due to large scale production, the companies benefit as well as it is beneficial for the
economy as a whole.
2. Large scale industries help in the development of industries in the economy, which is essential
for industrialisation.
3. Large scale industries require skilled workers and therefore, the development of large scale
industries help in the development of a skilled workforce in the country.
4. Large scale industries require large amounts of raw materials, which opens up employment
opportunities in the related sectors.
5. As large scale industries are involved in large scale production, it provides an opportunity to
reduce the cost of goods and services as these are produced in bulk.
6. Large scale industries help in the development of small scale industries, as the requirement of
items cannot be met only by a single industry.
Hence, small scale industries are required to produce the ancillary products and therefore small
scale industries thrive on the growth of large scale industries.
7. Large scale industries can incur expenses required for research and development as they have
a high influx of capital. Such research will help in generating more profits in future.
8. Large scale industries also help improve the quality of life of its employees by providing them
with adequate remuneration and other benefits.

Comparison Chart

BASIS FOR
COMPARISON
SMALL SCALE INDUSTRY LARGE SCALE INDUSTRY

Meaning Small scale industry is an Large scale industry encompasses

industrial undertaking in big industrial units whose
which there is a definite investment in their plant and
capital investment in its plant machinery is beyond the limit
and machinery. specified by the Government.

Industry type Labor-intensive industry Capital intensive industry

Geographical Small Large

area covered

Skills required It requires semi-skilled labors. It requires highly skilled labors.

Technology Indigenous technology State-of-the-art technology

used

Raw materials Procured from the local Procured from various suppliers of
suppliers raw materials are there from
within and outside the country.

Objective To generate employment To produce consumer goods and

 opportunities with less capital goods within the country,
investment. to make it self reliant.

Government Policies for Development and Promotion of Small-Scale Industries in India

Some of the Government Policies for development and promotion of Small-Scale Industries in
India are: 1. Industrial Policy Resolution (IPR) 1948, 2. Industrial Policy Resolution (IPR) 1956,
3. Industrial Policy Resolution (IPR) 1977, 4. Industrial Policy Resolution (IPR) 1980 and 5.
Industrial Policy Resolution (IPR) 1990.

Since Independence, India has several Industrial Policies to her credit. So much so that Lawrence
A. Veit tempted to say that “if India has as much industry as it has industrial policy, it would be a
far well-to-do nation.” With this background in view, in what follows is a review of India’s
Industrial Policies for the development and promotion of small-scale enterprises in the country.

1. Industrial Policy Resolution (IPR) 1948:

The IPR, 1948 for the first time, accepted the importance of small-scale industries in the overall
industrial development of the country. It was well realized that small- scale industries are
particularly suited for the utilization of local resources and for creation of employment
opportunities.

However, they have to face acute problems of raw materials, capital, skilled labour, marketing,
etc. since a long period of time. Therefore, emphasis was laid in the IPR, 1948 that these
problems of small-scale enterprises should be solved by the Central Government with the
cooperation of the State Governments. In nutshell, the main thrust of IPR 1948, as far as small-
scale enterprises were concerned, was ‘protection.’

2. Industrial Policy Resolution (IPR) 1956:

The main contribution of the IPR 1948 was that it set in the nature and pattern of industrial
development in the country. The post-IPR 1948 period was marked by significant developments
taken place in the country. For example, planning has proceeded on an organised manner and the
First Five Year Plan 1951-56 had been completed. Industries (Development and Regulation) Act,
1951 was also introduced to regulate and control industries in the country.

The parliament had also accepted ‘the socialist pattern of society’ as the basic aim of social and
economic policy during this period. It was this background that the declaration of a new
industrial policy resolution seemed essential. This came in the form of IPR 1956.

The IPR 1956 provided that along with continuing policy support to the small sector, it also
aimed at to ensure that decentralised sector acquires sufficient vitality to self- supporting and its
development is integrated with that of large- scale industry in the country. To mention, some 128
items were reserved for exclusive production in the small-scale sector.
Besides, the Small-Scale Industries Board (SSIB) constituted a working group in 1959 to
examine and formulate a development plan for small-scale industries during the, Third Five Year
Plan, 1961-66. In the Third Five Year Plan period, specific developmental projects like ‘Rural
Industries Projects’ and ‘Industrial Estates Projects’ were started to strengthen the small-scale
sector in the country. Thus, to the earlier emphasis of ‘protection’ was added ‘development.’ The
IPR 1956 for small-scale industries aimed at “Protection plus Development.” In a way, the IPR
1956 initiated the modem SSI in India.

3. Industrial Policy Resolution (IPR) 1977:

During the two decades after the IPR 1956, the economy witnessed lopsided industrial
development skewed in favour of large and medium sector, on the one hand, and increase in
unemployment, on the other. This situation led to a renewed emphasis on industrial policy. This
gave emergence to IPR 1977.

4. Industrial Policy Resolution (IPR) 1980:

The Government of India adopted a new Industrial Policy Resolution (IPR) on July 23, 1980.
The main objective of IPR 1980 was defined as facilitating an increase in industrial production
through optimum utilization of installed capacity and expansion of industries.

5. Industrial Policy Resolution (IPR) 1990:

The IPR 1990 was announced during June 1990. As to the small-scale sector, the resolution
continued to give increasing importance to small-scale enterprises to serve the objective of
employment generation.

Steps to start small scale Industries

Hence the various steps to start small scale industries involved in establishment of an enterprise
through which the entrepreneur may pass are the following.

Step 1: Decision to be Self-Employed

This is the most crucial decision a youth has to take, shunning wage employment and opting for
self- employment or entrepreneurship to steps to start small scale industries.

Step 2: Analyzing Strengths, Weakness, Opportunities and Threats

The Potential entrepreneur has to analyze his strengths, weakness, opportunities and Threats,
while deciding to go for entrepreneur career. It is also call SWOT analysis.

Step 3: Scanning of Business Environment

It is always essential on the part of the entrepreneur to study and understand the prevailing
business environment.

In order to ensure success if his enterprise, entrepreneur should scan the business opportunities
and threats in the environment.

Step 4: Training

Before going to start the enterprise, the potential entrepreneur must assess his own deficiencies
which he can compensate through training.

He can avail the facilities of various training institutes like EDI, NIESBUS, IEDs existing in our
country.

Step 5: Product Selection

The most important steps to start small scale industries is to decide what business to venture into,
the product or range of products that shell be selected for manufacture and in what quantity.

The level of activity will help in determining the size of business and thus form of ownership.

Step 6: Market Survey

It is important convenient to manufacture an item but difficult to sell.

Market survey implies systematic collection of data by the entrepreneur about the product for
manufacture, demand-supply lag, extent of competition, frequency of demand, pattern and
design of demand, its potential share in the marketing pricing, distribution policy etc.

Step 7: From of organization

A firm can be constituted as proprietorship, partnership, limited company, cooperative society,

etc.

This will depend upon the type, purpose and size of entrepreneur’s business.

Step 8: Location

The next step will be to decide the location where the unit is to be established. This size of plot,
covered and open area and the exact site will have to be decided.

Step 9: Technology

Information on all available technologies should be collected by the entrepreneur and the most
suitable one to be identified.

Step 10: Machinery and Equipment

Having chosen the technology, the machinery and equipment required for manufacturing the
chosen products have to be decided.

Step 11: Project Report Preparation

This the most important steps to start small scale industries. After deciding the form of the
ownership, location, technology, machinery, and equipment, the entrepreneurs should be ready to
prepare his project report the feasibility study.

A project report that may now be prepared will be helpful in formulating the production,
marketing, financial and management plans.

Step 12: Project Appraisal

Project appraisal implies the assessment of a project. It is technique for ex-ante analysis of a
scheme or project.

While preparing to set up an enterprise, the entrepreneur has to carefully appraise the project
form the standpoint of economic, financial, technical, market, managerial and social aspects to
arrive at the most socially-feasible enterprise.

The following appraisals can be performed at the preliminary level :-

 Economical appraisal
 Financial appraisal
 Technical appraisal
 Management appraisal
 Organizational appraisal
 Market appraisal

Step 13: Finance

Finance is the lifeblood of the enterprise. Entrepreneur has to take certain steps and follow
specified norms of the financial institutions and banks to obtain it.

Step 14: Provisional Registration

It is always worthwhile to get the unit registered with the government.

The entrepreneur has to obtain the prescribed application from the provisional registration under
DIC or Directorate of industries.

This will enable the entrepreneur to avail various government facilities, incentives, and
assistance schemes including financial assistance from NSIC/SFCs/KVIC.

Step 15: Technical Know-How

Technical know-how may be arranged for setting up enterprise.

Facilities are also available to SSI for making technical know-how arrangements including turn-
key jobs.

Step 16: Power and water connection

The sites, where the enterprise will be located, should either have adequate power connections or
this should be arranged.

Entrepreneur can calculate the total power requirement and water connection will have to be
obtained.

Step 17: Installation of Machinery

Having completed the above formalities, the next step is to procure the machinery for
installation. Machinery should preferably be installed as per the plan layout.

Step 18: Recruitment of Manpower

Once machines are installed, the need for manpower arises to run them.

This presupposes the skilled, unskilled and semiskilled labour, administrative staff etc.

Step 19: Procurement of Raw materials

Raw materials are the important ingredients for running an enterprise. The labour will require
raw materials to work upon the installed machinery.

Step 20: Production

The unit established should have an organizational setup. To operate optimally,the organization
should employ its manpower, machinery and methods effectively.

There should not be any wastage of manpower, machinery and materials. Production of the
proposed item should be taken up in two stages.

 Trail Production
 Commercial Production

Trail production will help tackling problems confronted in production and test marketing of the
product. Commercial production should be commenced after the test-marketing of the product.

Step 21: Marketing

Marketing is the most important activity as far as the entrepreneurial development is concerned.
Various aspects like how to reach the customer, distribution channels, commission structure,
pricing, advertising, publicity etc., have to be decided by the entrepreneur.

Marketing is in two stages namely:

 Test stage
 Commercial marketing stage

Test marketing is necessary to save the enterprise from going into disrepute in case the product
launched is not well accepted by the customers.

Commercial marketing can be undertaken. The entrepreneur can contact the small industries
marketing cooperation.

Step 22: Quality assurance

Before marketing, the product quality certification from BIS (Bureau of Indian standards)

If there is no quality standards specified for the products, the entrepreneur should evolve his own
quality control parameters.

Step 23: Permanent Registration

After the small scale unit goes into production and marketing, it becomes eligible to get
permanent registration based on its provisional registration from DIC.

Step 24: Market Research

There is strong need for continuous market research to assess needs and areas for modification,
up- gradation and growth.

Market becomes Waterloos for most SSI entrepreneurs as they ignore the vital day-to-day
operation. These are 24 steps to start small scale industries in anywhere and they are most
important factor whose nobody ignores an successful entrepreneurs.