Small scale industries sector plays a significant role in the development of any country. Hence, in a country like India, small scale units have made given importance and have lead to significant progress. After the agriculture sector, the small scale industries are the highest employers to the total labor force in the country.
Small scale industries have contributed majorly to the socio-economic transformation of the country. The SSI basically reduces the gap between the rural-urban sector, alleviates poverty and generates employment for the poor and unemployed. The small scale industries sector makes about 80 percent of the total industrial units in the country.
In India, the small scale industries alone have 36 million units, which contributes to 45 percent of the total industrial production, and 40 percent to the export sector and employs over 80 million people. Hence, the small scale industries in a country like India have been given an important place in the industrial sector. The government recognizes the vast potential of the small-scale industries in the country hence it is given significant importance in the framework of economic planning of India.
The small scale industries are rising because of the presence of huge demand. There are some small scale industries that also export their goods hence bringing in foreign currencies.
In developing countries such as India, the small scale industries are the major portion of the economy. They are labor-intensive in nature and helps to create employment. Plus, increasing the per capita income and the utilization of resources in the economy.
Small Scale Industries Types in India:
The government of India has introduced the basic guidelines for the small scale industries in terms of the investment made by the company and the revenue it is generating. There are 3 types of Small scale industries namely, manufacturing/production, ancillary, and service industries.
Manufacturing Small Scale Industries
The Units producing finished goods for the purpose of consumption or for further use in the processing industries are called Manufacturing Industries. These types of small scale industries are mostly individually owned. Examples of Manufacturing small scale industries include power looms, engineering industries, food processing, coin industries, khadi industries, and many others.
Also read: PFMS - All you need to know about the Public Financial Management System
Ancillary Small Scale Industries
The big companies or the Multinational Companies that manufacture finished goods, usually don’t make all the parts by themselves but do the work of assembling the parts to make the final product. The Vendors of such companies are ancillary industries. Ancillary small scale industries are those companies that produce the machines for multinational companies or the medium scale industries.
The service category of the small scale industries includes Repair shops and other maintenance industries.
Some of the examples of small scale industries include Agarbatti making, Chalk making, production of Biodiesel, manufacturing of Sugar candy, Wood making, Rice mill, Potato chips making, Toys making, Microbrewery, Liquid soap, Honey processing, Slippers, Detergent powder, Fruit juice production plant, Spices, Chocolate making, Makhan, ghee, and cheese making and selling, making candles and incense sticks, Toffee and Sugar Dessert making, soda and other flavorful drinks, Fancy Jewelry, Disposable cup-plate and making aluminum utensils such as pots, etc.
Role of the Small Scale Industries in the Indian Economy
The small scale industries contribute in several ways to the economy of the country. Some of these include:
Contribution to the Total Production
The Small scale industries in India make up about 40 percent of the total goods and services manufactured in the Indian economy. These enterprises are one of the major reasons for the growth and development of the Indian economy.
Contribution to the total Employment
The small scale industries are one of the main sources of employment in a developing country like India. The total labor force cannot possibly find work in the formal sector. So, the small sector industries, being labor-intensive in nature provide a livelihood to a large percentage of the workforce.
Contribution to the total Export
Approximately half of the commodities (45-55 percent) that are exported from India are produced by these small scale industries. Around 35 percent of the direct exports and 15 percent of the indirect exports are done by the small scale industries. Hence, the export industry of India is highly dependent on these small enterprises for their growth
Contributions to the Public Welfare
Apart from the other economic reasons, the small scale industries are also crucial to the social growth and development of India. These industries are majorly started by the lower or middle-class people who get the opportunity to earn their livelihood and provide employment to other people as well. Hence, the small scale industries help with the distribution of income as well as an increase in social progress.
Problems faced by the small scale industries
Just like any other sector of the economy, the small scale industries sector is also faced by some problems. These are:
- The inputs are scarce
- There is not enough capital
- There is no marketing infrastructure
- Under-utilization of the capacity
- The high cost of production
- Smaller market size because of low rural incomes, poor access to the larger markets and high competition
- A shortage of raw material
- Shortage of financial capital
- Unavailability of technology in the form of equipment and tools
- Inadequate management and organization
Picture Source: Lendingkart, PCQuest, IndiaFilling
Read More: MNC companies in India | Top Multinational Corporations in India