What are Small Scale Industries?
Industrialization does not necessarily imply the existence of huge factories spread over hundreds of acres, churning out power and using lots of fuel. This specifically points to large-scale industries. Industrialization also has to do with factories and industries and organizations that operate on a much smaller scale, but generate profits all the same.
In India, particularly, there has always been a push for small-scale industrialization, since the disparities in income and resources will not make it possible for all sections of the population to be engaged in large-scale industrial work. Moreover, India is home to a large number of artisanal crafts, and these cannot prosper under the principles of large-scale work. Even before independence, there was a push for cottage industries to develop and become self-sufficient.
What are Small Scale Industries?
To define a small-scale industry effectively, it is imperative to first learn about the meaning of industry. The term industry refers to a group of companies that are related to each other, based on the primary business activities they undertake. Small scale industries, thus, refer to those partnerships, corporations, or sole proprietorships that function on a lower scale, employing a smaller workforce and generating less revenue than that by normal-sized industries or businesses.
Small scale enterprises can also refer to those businesses that apply for government support or avail preferential tax policies, depending on their area of operation. Following is an elaboration on the types, characteristics, and features of small-scale industries, along with a few examples.
What are the Characteristics of Small Scale Industries?
In accordance with the small scale business meaning, such industries are characterized by the following features –
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.
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.
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.
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.
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.
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.
The classification of these industries can be based on several criteria. For instance, as per the goods and services produced, there are three types of small-scale industries.
Classification of Small Scale Industries
Classification of Small Scale Industries on Basis of Amount of Capital Invested
Small scale enterprises can also be classified based on the amount of capital invested in their operation. In this scenario, these industries can be classified into the following –
In the Manufacturing Sector
In the Service Sector
Objectives and Features of Small Scale Industries
Small scale enterprises are formed to fulfill the following objectives –
They create employment opportunities in developing countries like India. Since capital investment and technology usage is limited in this sector, it mostly relies on manpower, thus generating employment.
These industries help to boost the underdeveloped sectors of the economy – for example, rural and cottage industries. These industries also aid in addressing the problem of financial imbalance between the rural and urban sectors of the economy.
These industries often adopt the implementation of technology that can help to produce quality products at lower costs. India’s export industry is largely dependent on these small-scale enterprises.
Almost half of the goods exported from India are either produced or manufactured in these industries. Thus, small-scale industries with less investment are a vital part that helps to strengthen the economy as a whole.
However, to be established, these industries also have to register themselves under the Ministry of Micro, Small, and Medium Enterprises, through the Directorate of Industries under the State Government.
What are Some Examples of Small Scale Industries in India?
India is home to many small-scale industries, which are actually doing very well in terms of revenue. Some of them have even received international accolades. They are:
Toy manufacturing units
Paper manufacturing units
Bakeries and other eatable manufacturing and processing units
Craft guilds
Jewelry guilds
Incense stick manufacturing units
Pickles manufacturing units
Leather manufacturing and tanning units
The beauty industry
Paper goods manufacturing industries
Firecracker manufacturing units
Handmade cosmetics and khadi units
Tissue manufacturing units
Candle manufacturing units
Chocolate manufacturing units
How Does the Government of India Encourage Small Scale Industries?
There are a number of schemes and offers that encourage people to start small-scale work on their own. For example, a number of small-scale industries enjoy tax-free returns up to a certain amount of revenue. They also enjoy benefits such as help and investment from NGOs and many other governmental bodies. The government always focuses on self-reliance and small-scale industries form an excellent mouthpiece to show how it can work.
FAQs on Small Scale Industries
1. What are the benefits of small-scale industries?
Small scale industries can create a lot of employment opportunities, especially in rural areas where globalization may not have totally permeated. Small scale industries will equip them to not lose out on revenue and not face unemployment. Additionally, these also lead to a vast number of export goods, which can increase the revenue of the government. Traditional items produced in these industries are very high in demand in many countries of the world. A lot of small industries are women-owned and operated, this gives a very handy push to women empowerment too.
2. What are the drawbacks of small-scale industries?
Just like their benefits, there are certain limitations and drawbacks in this case as well. The first is that the business model is not very technically advanced, leading to a lapse in output and productivity. The management of these small-scale industries is also not properly overseen due to technological and educational constraints. There are always issues with the use of raw materials and transportation of both raw materials and finished products. Moreover, they lack proper marketing and advertising which are absolutely essential for any industry today.
3. How can these limitations be overcome?
There are a number of ways these small units can be made more efficient so that there is a better utilization of resources. The first way to go about would be to impart enough technical knowledge and training among everyone involved in operations. This will make them sufficiently equipped and improve productivity. More support and investment need to be added to the quota since the fixed amount does not take into consideration inflationary activities. Outdated techniques of production need to be abandoned and more modern means need to be implemented. Proper allocation of resources is also very essential.
4. How can someone begin a small industry operation?
There are a number of steps to follow in order to establish a legitimate small-scale industry. The first would be to secure all required raw materials and carefully choose a product to be manufactured. There is a need to ensure there would not be a lot of market competition for the product, and that for the first few years, the investment would not increase the revenue generated. After this, it is important to allocate tasks to a trained workforce and make sure everything operates smoothly. Lastly, all legal formalities need to be secured to get the industry started.
5. What are the contributions of small-scale industries to the Indian economy?
Small scale industries work in close association with the agricultural sector in India. These promote not only small-scale industrialization but also help in promoting the agricultural sector. They are directly responsible for making sure that the rural areas do not fall back in terms of development. They are vital to increasing employment opportunities in these areas and have rural folks receive formal industrial training. They add to the total revenue generated in the country very significantly, due to their sheer volume and thus, contribute positively to the GDP. Finally, they increase the welfare of the people.
6. What are Small Scale Industries?
Small scale industries refer to businesses whose operations involve less capital investment, lower labour engagement, and limited integration of technology, as compared to the large scale ones. These industries produce goods and services at a smaller scale but form an integral part of the economy.
7. What is the Role of Small Scale Industries in the Employment Generation?
One of the primary features of small-scale industries is that they are mostly reliant on manpower for their operation, due to the limited availability of technology and capital. Thus, they offer a higher scope of employment generation by undertaking labor-intensive activities in their operations.
8. Why are Small Scale Industries Flexible?
Since their operations have a limited scope, it is easy for the industries to adapt to any unforeseen development in the business. As a result, they are much more flexible when it comes to adjusting to a changing business environment.