Small Scale Industries

The small scale industries are defined as per the MSMED Act, 2006. According to the Act, the classification of the industries or organizations into micro, small or medium units depends on their capital investment in plant and machinery or equipment. These investments are specified for both manufacturing oriented units as well as service oriented units. The level of investment required is mentioned below.

The Finance Ministry has recently revised the above limits that essentially change the definition of the MSME sector. The revised limits are specified hereunder.

SSI usually provides for the daily needs of the people. Some of the examples of these small scale industries are,

• Tissue manufacturers
• Xerox and printing
• Candle making units
• Bakeries and cafes
• Small garment manufacturing units or textile units
• Packaging units
• Small toy manufacturing units
• Vehicle Servicing units
• Beauty parlors
• Local food processing units

Features of Small Scale Industries

The nature of the SSI is usually beneficial to the small entrepreneurs that have access to limited funds but have the expertise to provide support not only to the local employment but also to the major industries and in many cases the export segment as well.

Some of these features are discussed below.

Flexibility

SSIs are usually flexible or easily adapt to the ever changing consumer demands or needs as well as business environment. This feature is usually absent in large or multinational corporations and businesses as their scale of operations is very huge to suddenly adapt to the necessary changes.

Less capital Intensive

Small Scale Industries requires lesser capital investment. This enables them the ease of set up and establishment of their business as well as faster access to financing options.

Ownership

Ownership of these organizations is usually with a single person or limited persons. The organizations usually that come under the SSIs are either sole proprietary or partnership firms or private limited companies.

Management

Management and ownership of SSIs is usually the same. There are not many buffers that can be found between management and ownership in small scale industries as compared to the larger corporations.

This ensures the involvement of the owners in the day to day running of the business and be well versed with the needs and demands of the business.

Technological dependence

SSIs are usually less dependent on the technology and are mostly labor intensive businesses. This ensures that the local skilled labor is assured of employment and is part of socio-economic development. Their lesser dependence on technology also ensures that the business is not greatly impacted by the ever changing and growing technological advancements of the world.

Ancillary units

Small scale industries as mentioned on many occasions function as ancillary units to large corporations. This means that they essentially supply basic manufactured products or services that are further developed into the final products that are consumed by the ultimate consumer. This interdependency of the SSI and the large corporations ensures the wheels of the economy run smoothly and also ultimately the growth and survival of the small scale industry.

Meets local demands

The nature of the many SSI units makes it easier to meet the local demands as well as utilize the local resources to the optimum level. The requirements of the small scale industries are in turn fulfilled by similar small scale suppliers which thereby ensure a cohesive and conducive atmosphere of interdependence and growth of all the SSI units.

Importance and Objectives of SSI in Indian Economy

Indian economy is considered to be a developing economy. Small Scale industries sum up to be almost half the manufacturing and service organizations as well as our exports. The Government therefore has time and again announced various schemes and incentives to boost this sector and make it achieve higher standards of quality and scale of production or operations.

The need or importance of the SSIs in our country has been highlighted by some of the following points.

• The lesser dependence on automation and technology by the SSIs ensures that the locals get ample employment opportunities.
• The consumption of the products and services of the SSI units is at very local levels. This enables the country to reduce the dependency on imports with the increasing quality and demand for the local produce. Such reduction in dependency on imports and self reliance is hugely responsible in strengthening an economy.
• Products and services from small scale industries, as mentioned earlier, also constitute for almost half of our country’s exports. The revenue generated from these exports provides a huge cushion to the country’s forex reserves.
• Small scale industries are of huge importance to the socio economic development of the nation with their reach to the very grass root levels of the country and understanding the demographic of the nation.

With the above important role of the SSI in the country’s economy, the main objectives of such industries are stated below.

• Creation of socio economic balance in the nation
• Creation of ample employment opportunities for the skilled and unskilled labor of the country
• Optimum utilization of local resources
• Reducing the dependency on imports and thereby easing the burden on the forex reserves of the country
• Raise the standard of living of all the citizens of the nation.
• Bridge the income gaps between the ultra wealthy and the ultra poor of the nation.

Government support to the SSI

The Government of India, realizing the importance of the small scale industries, has created many opportunities for the development and advancement of these units. There are many schemes, initiatives and financer packages that are specifically for the small scale industries that stimulate their growth and development.

For reaping the benefits of such Government schemes, the SSI units have to be duly registered as per the Government guidelines. It is to be noted that registration of the SSI units, per se, is not mandatory in our country, however, registration is mandatory to avail the benefits of the Government schemes.

 Some of these benefits are highlighted below.

• Preference in Government tenders and contracts
• Easily accessible loans from Government, banks and NBFCs
• Reduced rate of interest on loans
• Tax benefits (exemptions/concessions/rebates as the case may be)
• Benefits like concessions from various Government departments
• Support of the State Government 
• Specialized schemes for women entrepreneurs

FAQs – SMALL Scale Industries