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Government Assistance to Small Industries and Small Business Units and the Future

Last updated date: 21st Feb 2024
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The support system for small scale industries in India is exceptionally comprehensive. Most of these companies belong to the Central Government, while the rest fall under the state governments. The small scale industry sector output is known to contribute at least 40% of the gross industrial value-added, 45% of the total exports from India (both direct and indirect exports). It is the second-largest employer of human resources right after agriculture. The development of small business units and the future has thus been assigned an essential role in India’s national plans.

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Government Assistance to Small Scale Industries

The overall contribution of small industries and businesses to the Indian economy is clearly boundless. They not only build wealth and employment but are also a huge source of social development. In reality, so great is their significance that there is a special ministry dedicated to micro, small and medium industries. Here, the whole concept of government assistance to small industries is explained in a comprehensive way.

Government Assistance to Small Industries and Small Business Units

The Indian government has been continuously supporting and enhancing small unit sectors in multiple ways. India is focusing on rural industries and cottage sectors. In layman’s language, a small business is a project or venture that needs a small budget or is directed by a small group of people. 

Both the central and state government have been highlighting self-employment opportunities in rural industries by offering assistance and support in financing in regards to loans, training in regards to programs, raw materials, infrastructure and technology.

The central aim of the government assistance to small industries and small business units is to use the local workforce and locally available resources that are later transformed into action by agencies, provincial departments and corporations, etc.

Government Assistance to Small Industries

In order to support, promote and protect small businesses and help them become self-supporting, numerous protective and promotional measures have been introduced by the Indian government. 

National Bank for Agriculture and Rural Development (NABARD): It was introduced by the government in 1982 to offer action and promote the rural industries in the best possible way. The plan has adopted multi-purpose strategies to promote rural business in India. It supports small industries, rural industries and artisans, cottage industries and agriculture. Also, it elevates training, counselling, along with development programmes for rural entrepreneurs.

A Rural Small Business Development Centre (RSBDC): It is a government centre sponsored by NABARD for micro, small and medium businesses which are set up by world organizations. The major aim of RSBDC is to work for financially and socially disadvantaged people and groups. The plan does numerous programmes on skill upgradation, awareness, entrepreneurship, training and counselling. Such programmes encourage several unemployed youth and young women to learn various trades and introduce them to other good advantages from it.

Direct Industries Centres (DICs): It was established in May 1978 to offer a ‘focal point’ for the development of small industries. The primary objective to set up these centres was to evolve modern small scale units and offer institutional set up for traditional cottage sectors. The DICs schemes were supposed to provide for all the services and support at pre-investment and post-investment stages like assistance on raw materials, marketing, credit, training and a lot more. These centres act as an intermediate party among the developmental blocs and well-specialized institutions and small scale enterprises.

National Small Industries Corporation (NSIC): It was established in 1995 by the government to expand and support small businesses emphasizing on commercial factors. The vital functions of NSIC are as follows: 

  • Supply imported goods and machines on the hire purchase agreement. 

  • Evolving small businesses by importing their items. 

  • Procurement of supply imported indigenous raw materials. 

  • Create awareness of technical upgradation. 

Also, a new scheme known as performance and credit rating for small units has been introduced by NSIC. It ensures that the more their credit rating, the more their financial assistance for their investment and capital needs.

Small Industries Development Bank of India (SIDBI): It is a leading government bank to offer direct and indirect financial assistance and support under multiple schemes to meet all the credit needs of numerous small businesses. 

The National Commission for Enterprises in the Unorganized Sector (NCEUS): NCEUS was created in September 2004 by the government with the following goals:

  • Strategies to boost the productivity of small industries in the informal sector. 

  • Forming links between small sector and finance, raw materials, infrastructure, technology, etc.

  • To build public and private partnerships for engagement in transmitting skills for the informal sector. 

  • Offering microfinance for the informal sector. 

  • Offering social security for the informal sector. 

  • To introduce competition among small scale industries in a global environment. 

Rural and Women Entrepreneurship Development (RWED): It is a government based organization that focuses on increasing the business environment for women and offering support for women’s business approaches and initiatives. It also provides a manual for training in entrepreneurship and renders advisory services. 

Small Business Units and the Future

Today, the government of India also focuses more on the economic and industrial development of various areas in India like backward, tribal and hilly. There are committees established for government assistance to small industries and small business units. Moreover, small industries are adapting to the changing requirements of the market-driven economy. So, the government should explore new strategies that motivate partnership between small and large industries.

FAQs on Government Assistance to Small Industries and Small Business Units and the Future

Q1. What are the major issues faced by small scale industries?

Ans. Here is the list of major issues faced by small scale industries and business:

  • Poor capacity utilization

  • Incompetent management

  • Inadequate Finance

  • Raw material shortages

  • Lack of marketing support

  • Issues related to working capital

  • Troubles in Export

  • Lack of technology upgradation

Q2. Why is it essential to offer incentives to small scale industries?

Ans. An incentive acts as a source of motivation which convinces an individual to work hard or complete his or her task more productively. The central and state governments offer most incentives both to promote the growth of small-scale industries. It also protects them from the onslaught of the big-scale industries.