Small Scale IndustriesIntroductionThe Small Scale Industry is an enterprise whose employee count and revenue falls below certain levels. Small Scale Industries in India provide job opportunity to more than 65 million people. Internationally SMEs report for 98% of business statistics and are accountable for triggering originality and competition.Small scale industry in India is renowned for its socio economic growth factors and even industrial expansion. One of the unique features of small scale industry is that its growth has generated better job prospects helping free enterprise and inculcation of expertise besides guaranteeing better utilization of limited fiscal reserves and technology. Additionally, they play an important part in attaining the economic targets and sociopolitical aims.

Establishing a small scale enterprise requires detailed project report so that promoters can understand that in how many years the endowments can be forfeited. Project Report for Small Scale Industry helps in identifying the product line and target market of the sector, besides evaluating the level of skill and accuracy. Hence, a small scale industry project report must contain 5-7 years evaluations in context of revenues, expenditures, cash flows and outflows, balance sheet of legal responsibilities and assets in hand, and reimbursement agendas of working capital and long-term loans, etc. In this way the endorsers can make use of the estimations provided by the firm in the project reports and compare it with the real performance and accordingly take remedial steps against the negative disparities.

The promoters establishing their commercial enterprises without considering the project reports are taking a big risk as they are equipped with any measuring units to assess the firm's performance. In the competitive market ambiance, industrialist must not make a foray into a new sector or set up a new business without preparing Project Reports.

While preparing the project report for small scale industry always keep in mind that the statistical figures are not discouraging for the promoters. The project valuation should encourage a sense of practicality among them.

The other users who could require the project reports are industrialists, Financiers, banks, Financial Analysts, merchants, clients, certifying authorities, Management Accountants, etc

MeaningSmall scale industries were defined on different basis but since March1, 1999, small industries include all those units having a fixe capital of Rs. 1Crore invested therein. It was previously Rs. 3 Crore. Industries with a fixed capital of Rs.25 lacks (earlier Rs. 50 lacks) are calling Tiny industries. Small scale industries employees hired labor and machines and power are used. Scientific instruments industry in Ambala, carpet manufacturing industry in panipat ,hosiery industry at Ludhiana, T.V. manufacturing units in Delhi are some of the examples of small scale industries

HistoryThe Institute for Small-Scale Industries was established on March 2, 1966 through a bilateral agreement between the Republic of the Philippines and the Government of the Kingdom of the Netherlands. Its principal objective then as now was to assist and promote the development and growth of the small-scale industrial sector in the Philippines. Originally set up as the training institute for the Philippine small industries, it gradually built up its capabilities and expanded its activities to include research, extension, and information programs.On August 4, 1969, the Institute was established through Republic Act No. 6041 as a research and extension unit of the University of the Philippines.The Institute had its permanent home with the completion of the four storey E. Vibrate Hall in 1986.From then, UP ISSI conducted several consultancy training courses, seminars, technical studies in the field of medium and small-scale industries with emphasis on Philippine industriesTINY ENTERPRISESGovernment have already announced increase in the investment limits in plant and machinery of small scale industries, ancillary units and export oriented units to Rs 6 million, Rs 7.5 million, and Rs 200 thousand respectively. Such limits in respect of "TINY" ENTERPRISES would now be increased from the present Rs 200 thousand to Rs. 500 thousand, irrespective of location of the unit. Limit in plant and machinery for determining the status of SSI/Ancillary units as on date is Rs 10 million. For tiny it is Rs 2.5 million and for SSSBE Rs 500 thousand.Service sub-sector is a fast growing area and there is need to provide support to it in view of its recognized potential for generating employment. Hence all Industry-related service and business enterprises, recognized as small scale industries and their investment ceilings would correspond to those of Tiny enterprises.A separate package for the promotion of Tiny Enterprises is now being introduced. This constitutes the main thrust of Governments new policy.While the small scale sector (other than Tiny Enterprises) would be mainly entitled to one-time benefits (like preference in land allocation/power connection, access to facilities for skill/technology up gradation), the Tiny enterprises would also be eligible for additional support on a continuing basis, including easier access to institutional finance, priority in the Government Purchase Programed and relaxation from certain provisions of labor laws.It has also been decided to widen the scope of the National Equity Fund Scheme to cover projects up to Rs. 1 million for equity support (up to 15 per cent). Single Window Loan Scheme has also been enlarged to cover projects up to Rs 2 million with working capital margin up to Rs 1 million. Composite loans under Single Window Scheme, now available only through State Financial Corporations (SFCs) and twin function State Small Industries Development Corporation (SSIDCs), would also be channelized through commercial banks. This would facilitate access to a larger number of entrepreneurs.FINANCIAL SUPPORT MEASURESInadequate access to credit both short term and long term remains a perennial problem facing the small scale sector. Emphasis would henceforth shift from subsidized/cheap credit, except for specified target groups, and efforts would be made to ensure both adequate flow of credit on a normative basis, and the quality of its delivery, for viable operations of this sector. A special monitoring agency would be set up to oversee that the genuine credit needs of the small scale sector are fully met.To provide access to the capital market and to encourage modernization and technological up gradation, it has been decided to allow equity participation by other industrial undertakings in the SSI, not exceeding 24 per cent of the total shareholding. This would also provide a powerful boost to ancillarisation & sub-contracting, leading to expansion of employment opportunities.Regulatory provisions relating to the management of private limited companies are being liberalized. A Limited Partnership Act will be introduced to enhance the supply of risk capital to the small scale sector. Such an Act would limit the financial liability of the new and non-active partners/entrepreneurs to the capital invested.A beginning has been made towards solving the problem of delayed payments to small industries by setting up of factoring services through Small Industries Development Bank of India (SIDBI). Network of such services would be set up throughout the country and operated through commercial banks. A suitable legislation will be introduced to ensure prompt payment of Small Industries bills.INFRASTRUCTURAL FACILITIESTo facilitate location of industries in rural/backward areas and to promote stronger linkages between agriculture and industry, a new Scheme of Integrated Infrastructural Development (including Technological Back-up Services) for Small Scale Industries would be implemented with the active participation of State Governments and financial institutions. A beginning in this direction will be made this year itself.A Technology Development Cell (TDC) would be set up in the Small Industries Development Organization (SIDO) which would provide technology inputs to improve productivity and competitiveness of the products of the small scale sector. The TDC would coordinate the activities of the Tool Rooms, Process-cum-Product Development Centers (PPDCs), existing as well as to be established under SIDO, and would also interact with the other industrial research and development organizations to achieve its objectives.Adequacy and equitable distribution of indigenous and imported raw materials would be ensured to the small scale sector.MARKETING AND EXPORTSIn spite of the vast domestic market, marketing remains a problem area for small and tiny enterprises. Mass consumption labor intensive products are predominantly being marketed by the organized sector. The tiny/small scale sector will be enabled to have a significant share of such markets. In addition to the existing support mechanism, market promotion would be undertaken through cooperative/public sector institutions, other specialized/professional marketing agencies and consortia approach, backed up by such incentives, as considered necessary.National Small Industries Corporation (NSIC) would concentrate on marketing of mass consumption items under common brand name and organic links between NSIC and SSIDCs would be established.Government recognizes the need to widen and deepen complementarily in production programs of large/medium and small industrial sectors. Parts, components, sub-assemblies, etc. required by large public/private sector undertakings would be encouraged for production in a techno-economically viable manner through small scale ancillary units. Industry associations would be encouraged to establish sub-contracting exchanges, in addition to strengthening the existing ones under the SIDO. Emphasis would also be laid on promotion of a viable and competitive component market.Though the Small Scale Sector is making significant contribution to total exports, both direct and indirect, a large potential remains untapped. The SIDO has been recognized as the nodal agency to support the small scale industries in export promotion. An Export Development Centre would be set up in SIDO to serve the small scale industries through its network of field offices to further augment export activities of this sector.MODERNISATION,TECHNOLOGICAL AND QUALITY UPGRADATIONA greater degree of awareness to produce goods and services conforming to national and international standards would be created among the small scale sector.Industry Associations would be encouraged and supported to establish quality counseling and common testing facilities. Technology Information Centers to provide updated knowledge on technology and markets would be established.Where non-conformity with quality and standards involves risk to human life and public health, compulsory quality control would be enforced.A reoriented programme of modernization and technological up gradation aimed at improving productivity, efficiency and cost effectiveness in the small scale sector would be pursued. Specific industries in large concentrations/clusters would be identified for studies in conjunction with SIDBI and other banks. Such studies will establish commercial viability of modernization prescriptions, and financial support would be provided for modernization of these industries on a priority basis.PROMOTION OF ENTREPRENEURSHIPGovernment will continue to support first generation entrepreneurs through training and will support their efforts. Large number of EDP trainers and motivators will be trained to significantly expand the Entrepreneurship Development Programmes (EDP). Industry Associations would also be encouraged to participate in this venture effectively.EDP would be built into the curricula of vocational and other degree level courses.Women entrepreneurs will receive support through special training programme. Definition of "Women Enterprises" would be simplified. The present stipulation regarding employment of majority of women workers would be dispensed with and units in which women entrepreneurs have a majority shareholding and management control, would be defined as "Women Enterprises".SIMPLIFICATION OF RULES AND PROCEDURESThe persistent complaint of small scale units of being subjected to a large number of Acts and Laws, being required to maintain a number of registers and submit returns, and face an army of inspectors, would be attended to within a specified time frame of three months.Procedures would be simplified, bureaucratic controls effectively reduced, unnecessary interference eliminated and paper work cut down to the minimum to enable the entrepreneurs to concentrate on production and marketing functions.Difference: Large Scale, Small and Cottage IndustryThe difference among the industries is defined on the basic of use of capital equipment according to instruction of the Government.According to instruction of the Government of 1985, industries whose investment on fixed capital like machineries and equipments is less than Rs. 35 lakhs is known as Small Scale Industries. For large scale industries, promoter or entrepreneur as one person or two persons are not able to provide capital for construction of large scale industries.So the entrepreneurs or promoters of large scale industries collect the required capital through the shares of small values. They also get loan from the market through different ways. But small scale industries are not able to get the required capital through all these sources.As large scale industries produce more than small scale industries, the extent of market is more for large scale industries. Small scale industries can manage themselves with their local market but large scale industries cannot. Large scale industries cannot function if they do not get adequate market.Cottage industries are also known as small scale industries because of the investment. Still then there are some differences between small scale industries and cottage industries.According to Fiscal Commission, 1950, a cottage industry is one which is carried on wholly or primarily with the members of the family either as a whole or as a part-time occupation. According to Fiscal Commission, 1950, a small scale industry is one which employs hired labor from 10 to 50. In cottage industry, there is an owner but no hired labourers but in small scale industries both owner and hired labor are present.Cottage industries mainly use traditional techniques of production or simple methods of production but small scale industries use power, new techniques of production and new machineries etc.Khadi and Gramodyog, handlooms, ornamental products of silver and gold and small industries are the examples of cottage industries. TVs, radios, electronic products and other consumer goods are examples of small scale industriesDifference between Small Scale Industry and Large Scale IndustrySmall Scale Industry1. These industries employ less number of persons and capital.2. Most of the work is done by manpower, small machines and tools.3. Raw materials used are less and the production is consequently less.4. They are scattered in rural and urban areas and are in the private sector, e.g., cycle, T.V., radio.

Large Scale Industry(i) These industries employ a larger number of persons and capital.(ii) The work is done mostly by larger machines and laborers.(iii) Raw materials and used is large and there is mass production.(iv) They are located in urban centers and are in the public sector or run by big industrialists, e.g., Cotton textiles, Jute textiles.VILLAGE AND SMALL INDUSTRIESVillage and small industries in their different aspects are an integral and continuing element both in the economic structure and in the scheme of national planning. The primary object of developing small industries in rural areas is to extend work opportunities, raise incomes and standard of living and to bring about a more balanced and integrated rural economy. Inevitably, in rural areas, the traditional industries have to be given immediate consideration. As the rural economy develops, technical changes will take place in different fields and correspondingly, the pattern of rural industrialization will also change from simple crafts meeting elementary needs to small industries based on steadily improving techniques and designed to satisfy the needs of a more advanced character. These developments will necessarily be spread over a long period; in the meantime, support through legislation and various positive measures of organization and assistance for the existing village industries is absolutely vital to the stability and growth of the village economy. Thus, the sector of village and small industries is not to be viewed as a static part of the economy, but rather as a progressive and efficient decentralized sector which is closely integrated, on the one hand, with agriculture and, on the other, with large-scale industry. The main considerations which influence the priority given to village and small industries in rural and industrial development programs were set out at length in the first Five-Year Plan. During the past three years, with the setting up of various special organizations, the ground has been prepared for programs of larger magnitude.OBJECTIVES AND BASIC POLICIES The Village and Small Scale Industries Committee: The programme for village and small industries to be carried out during the second plan period is con-'siderably larger than in the first. Programmes for the second plan and problems connected with their implementation have been recently reviewed by a committeethe Village and Small Scale Industries (Second Five Year Plan) Committee, commonly known as the Karve Committee, which was appointed by the Planning Commission in June, 1955. In making its proposals the Committee kept three principal aims in view, namely,1. to avoid as far as possible, during the period of the second plan, further technological unemployment such as occurs specially in the traditional village industries;2. to provide for as large a measure of increased employment as possible during the plan period through different village and small industries; and3. to provide the basis for the structure of an essentially decentralized society and also for progressive economic development at a fairly rapid rate.The Committee, however, envisaged that even in the traditional village industries, to the extent immediately possible, technical improvements should be adopted, and for the future there should be a regular programme of gradual transition to better techniques. At the same time, where new capital investment had to be made it should be, as far as possible, on improved equipment, the improvement being in some cases in the nature of additions to or adaptations of existing equipment. The concept of a decentralized economy is not necessarily related to any given level of technique or mode of operation. What it implies is that technical improvements will be adopted in such a manner and to such.extent as will permit comparatively small units which are widely scattered or dispersed throughout the country to undertake economic activities. On this view, whatever the villagers can undertake by way of improved industry in their own village should be organized on a village basis. The Committee considered that the progressive expansion and modernization of rural industry could be best brought about by the-establishment of small industrial units, along with the necessary services in large villages and small towns located all over the country. Industrial expansion on the periphery of large towns could scarcely be said to reduce the concentration of industry. What was needed, therefore, was a pattern of industrial activity in which a group of villages converging on their natural industrial and urban centre form a unit or, to use the Committee's expression, "a pyramid of industry broad-based on a progressive rural economy". Economies of scale and organization should also be secured for small units through organized cooperative working, as in rural community workshops. In the Industrial Policy Resolution of 30th April, 1956, reference has been made to the policy of supporting cottage and village and small-scale industries, which the State has been following by restricting the volume of production in the large-scale sector, by differential taxation, or by direct subsidies. It is stated that while such measures will continue to be taken, whenever necessary, the aim of the State policy will be to ensure that the decentralized sector acquires sufficient vitality to be self-supporting and its development is integrated with that of large-scale industry. The State will therefore, concentrate on measures designed to improve the competitive strength of the small-scale producers. For this it is essential that the technique of production should be constantly improved and modernised, the pace of transformation being regulated so as to avoid, as far as possible, technological unemployment. Lack of technical and financial assistance and suitable working accommodation and inadequacy of facilities for repair and maintenance are among the serious handicaps of small-scale producers. The Resolution mentions in this connection that a start has been made with the establishment of industrial estates and rural community workshops to make good these dificien-cies. The extension of rural electrification and the availability of power at prices which the workers can afford will also be of considerable help. Emphasis is laid in the Resolution on the organization of industrial cooperatives which greatly assist many of the activities relating to small-scale production. Such cooperatives should be encouraged in every way and the State should give constant attention to the development of cottage, village and small-scale industries.Proposals for non-expansion of the capacity of a large-scale industry have to be considered from two different points of view. The first is the extent to which such a measure would enlarge the market for small units. It may sometimes be that for lack of organization or other similar reasons full advantage may not be taken of the available market. The second aspect to consider is the volume of production of a commodity that may be required in the economy. In this connection the likely trends of future demand are specially relevant during a period of development in which considerable public and private outlay will occur. Within the limits set by the need to avoid shortage of goods on the one hand, and the extent to which production in small units can be organized effectively to take advantage of a larger market, in any individual case, on the other the balance of public advantage will determine whether and at what level the capacity of a large-scale industry should be limited. In applying the policy there is need for review from time to time in the light of changing economic conditions- It is therefore necessary that licensing of industries, which already applies to industries listed in the schedule to tlie Industries (Development and Regulation) Act, 1951, should also be extended to the field of agricultural processing, especially to rice mills. Appropriate legislation for this purpose should be enacted. In Imposing a chess or an excise duty oa the pro-ductioil of a large industry, as the Village and Small-Scale Industries Committte pointed out, the objects are, firstly, to raise funds from the consumers of a product; secondly, to take away a portion of the additional profits accruing to large units in consequence of a limit on expansion of capacity or production; and thirdly, to provide for a limited price differential in favour of small units. The imposition of chess or an excise duty in appropriate situations is a well-recognized fiscal device and each case has to be considered on its merits. The question of subsidies which are sometimes proposed raises issues of a different character. The Village and Small Scale Industries Committee did not generally express itself in favour of new measures for introducing subsidies on production or rebates on sales. It felt that the cost of schemes of protection afforded to any activity should be readily measurable and schemes of protection for normal economic activity should be so planned that they could be withdrawn in a reasonable time. There are a few limited exceptions which the Committee has suggested as, for instance, the proposal for a small subsidy for improved equipment used in the hand-p'ounding of rice. In the proposals of the Village and Small Scale Industries Committee, for all the village industries taken together, the total amount of production subsidy envisaged is estimated to be about Rs. 8 cores. Rebates on the sale ofhandloom and traditional khaki are estimated to involve expenditure respectively of about Rs. 20 cores and Rs. 7 cores. The devices for giving effect to the idea of common production programs which have been discussed above represent only a part of the totality of action to be taken for the development of village and small industries. They are intended ordinarily to afford time and opportunity to the sector of village and small industries to gain the necessary strength to develop on its own. They have to be supplemented, wherever feasible, by common marketing arrangements through cooperative organizations in which the State may participate. A great deal of attention must be given to ensuring that the positive measures of organization and assistance succeed and succeed without loss of time. Industrial Cooperative and Associations.It is common ground that in village and small industries co-operatives have to be developed to the greatest extent possible. The experience of the Handloom Board in encouraging the formation of weavers' cooperatives illustrates some of the conditions needed for the growth of co-operation in small industry. The number of handlooms included in the co-operative fold increased from 626,119 in 1950-51 to 788,664 in 1953-54 and to 878,984 in 1954-55 and was expected to reach a million *y the end of the first Plan. For the formation of co-operatives the Handloom Board has provided assistance to weavers in share capital and in working capital from 75 to 87% per cent of the share value is contributed as loan by the Government and die balance is provided by the weaver. Working capital will be provided at uniform rates ofRs. 200 per cotton loom and Rs. 500 per silk loom. Weavers' co-operative organizations at different levels are federated so that there are central agencies available for supplying raw materials, offering technical advice, arranging for credit from co-operative sources, and providing better marketing facilities. In the coir industry, 120 primary coir marketing societies, 22 husk co-operative societies and 2 central coir marketing cooperative societies have been formed. In some states, progress has been made among particular classes of artisans, as among tanners and leather workers in Bombay, Uttar Pradesh and Punjab, and among palm gur manufacturers in Madras. A combination of factors is required, first for establishing industrial co-operatives and, secondly, for maintaining and developing them. In almost all village and small industries there is scope for supply and marketing cooperatives. Producer co-op'-ratives, however, have greater possibilities in some fields than in others. Supply and marketing co-operatives are in themselves an important means of aiding small units and securing steady improvement in techniques, including quality control holding of stocks against future demand and supply of credit The setting up of co-operatives of either type will enable small scale industry to utilise in increasing measure financial assistance from the Government and from institutions and also guidance from technical service institutes, training centres and mobile technical services. For small-scale industries, especially those run by small entrepreneurs, a common form of organization will be the trade association set up for either purchase of raw-materials or sale of finished products or both. It is possible that members of such associations may, after a certain period of working together for specific purposes, like to form themselves into cooperatives. Trade associations may, thus, be an independent form of organization as well as a step leading on to the establishment of cooperatives. In organising cooperatives for the various village and small industries it will be desirable to have targets to be attained during the plan period. Both for organising supply and marketing cooperatives, and producer co-operatives, it is essential that Industries Departments in the States should build up efficient extension organizations which can reach artisans in the main urban centres and in groups of villages. An extension organization is particularly needed in rural areas where, because of the intimate relationship between community production and community demand, favourable conditions exist for forming artisans' co-operatives. A small beginning in this direction is being made In 25 pilot areas selected under the national extension and community development programme.A network of well-organized industrial cooperatives for supply and marketing will be essential if a scheme of assured marketing as envisaged by the Village and Small-Scale Industries Committee is to be tried out. The principal objective of such a scheme is to provide an incentive for continuous and increased production by offering to purchase the entire output of selected products or varieties at a pre-determined price or at a margin between the price of the raw material and the price of the final product which gives the artisan an adequate wage. The Committee suggested that the scheme may be introduced in the first instance on an experimental basis for handloom cloth in a few selected centres and for selected varieties. The modus operandi will be that the estimates of overall demand for an article will be broken up into requirements of production from various regions and centres in the country and on that basis arrangement will be made to supply raw materials to the producers and to take over their entire output The finished product will be purchased by cooperative institutions on behalf of the State and goods so purchased may be held in stock until the time of sale. The price and terms of sale will be determined by the State and any losses that cooperative institutions may incur will be made good provided they are in excess of the losses normally arising out of trade operations. While the details of such a scheme will have to be worked out before it can be introduced even on experimental scale in respect of any village or small industry product, it can, in certain circumstances be an improvement on the system of fixed rebates which exists in certain industries. It is desirable that experience in operating such a scheme should be gained at selected centres in one or two fields in which possible losses are not likely to exceed appreciably the cost of existing rebates. The various operations connected with the purchase of raw materials and equipment and the sale of finished products through industrial co-operatives necessarily involve a large organisational effort as also suitable arrangements for stocking and warehousing. In respect of agricultural products a scheme of co-operative marketing and rural warehousing has alrady been worked out and legislation for the setting up of the necessary machinery is on the anvil. There may be some difficulty in bringing co-operatives of agricultural producers and industrial co-operatives within the framework of the same scheme, but there should be scope for mutual assistance. To some extent it may be possible to use warehousing and godown facilities organized for agricultural products for products of village and small industries. A stores purchase policy sympathetic to the requirements of small units can be an important factor in the success of programs in the decentralized sector. The purchasing procedures will need to be re-orientated where necessary so that the small units are assured of definite opportunities in the context of Government procurement and are thus able to utilise their potential capabilities. Marketing research provides the basis of knowledge and information for shaping and properly orientating the production programs of the various industries. Such research can be organized either by a series of ad hoc investigations or can be combined with schemes ofreserach or marketing. The object in both cases, however, would be to make a close study of the needs and tastes of consumers, consumer behaviour towards competing products and services, changes in prices and their influence on demand etc. This is a field in which not much work has been done so far. It is suggested that studies in respect of the marketing of the more important products of village and small industries may be undertaken and on the basis of results obtained, the scope of marketing studies can be gradually extended.As small town and rural electrification is extended, a larger number of small industries will be worked outby power and the adoption of improved techniques will be facilitated. In the chapter on Irrigation and Power, the econo'mic aspects of small town and rural electrification have been described at some length. During the second five year plan the number of places with population less than 10,000 which have electricity is expected to increase from 6,500 to 16,559. In the first instance extension of power supply can take place most conveniently in villages which are situated close to urban areas or which lie along the routes of grid transmission lines from which subsidiary lines can be constructed. It has been recommended that urban and rural electrification schemes should be worked in an integrated manner, so that the suplus from revenue realised from urban and industrial consumers can be utilised for reducing rates to rural consumers. It is also emphasised that even with the existing programme of power development a larger number of villages than that now proposed can be provided electricity if an organized, co-operative approach is adopted for its utilisation in rural areas. Further, it is suggested that where there is scope for utilisation of electricity in agriculture and the small industries, local schemes could be undertaken in the form of diesel installations or in hilly areas through hydro-electric stations. It is hoped also to evolve some small working units for the development of wind power. Housing of Artisans.Improvement of housing conditions of artisans should be an important item in the programs of decentralized industrial development, as often the house of the artisan is also his workplace. Provision for this may be found to the extent possible from the allotment for individual industries but this will need to be supplemented by giving due attention to the needs of those engaged in cottage, village and small industries in the national housing programme. While framing projects under the rural housing programme, the requirements of village artisans should be kept especially in view. Credit and Finance.Satisfactory arrangements for meeting the requirements of finance hayed a vital part in the development programs for village and small industries. Besides short-term or working capital needed for purchase and stocking of raw materials and for the stocking of finished goods, finance is also needed for enabling artisans to contribute to the share capital of co-operatives, for the purchase of tools antf equipment and for investment in land, buildings, machines and other equipment. Loans for share capital will not be required to the same extent in small-scale industries (many of which are in the hands of small entrepreneurs) as in village industries where the co-operative form of organization is of the utmost importance. Working capital and medium-term and long-term finance are needed in all village and small industries, although the need for long-term finance will be relatively greater in those industries which use better techniques and equipment and need specially constructed premises. Existing arrangements for provision of finance are far from satisfactory. Some part of the finance required is supplied by State Governments under the provisions of their State Aid to Industries Acts. To a very limited extent medium and long-term finance is beginning to be provided by State Finance Corporations. Co-operative institutions are able to obtain some working capital through banking channels. The Reserve Bank of India and the State Bank of India will have a large role in any integrated scheme of finance for village and small industries. Assistance under State Aid to Industries Acts has been recently liberalized to some extent and larger powers of sanction are being delegated to local authorities, but the amounts available from this source are yet small. There can be no doubt that normal banking and institutional agencies will have to be utilised far more than at present if the credit needs of village and small industries are to be met in any large measure. A coordinated policy based on close collaboration between the Reserve Bank, the State Bank of India, State Finance Corporations and central cooperative banks is necessary. A beginning in this direction is being made by undertaking pilot schemes for enlarging and coordinating credit facilities available to small scale industries in selected centres. These schemes are to be worked under the auspices of the State Bank of India and will be supervised and guided by local co-ordination committees. In the scheme of co-ordination which has been drawn up State Governments co-operative credit agencies, State Finance Corporations and the State Bank of India will all function together. Each agency will meet specific credit needs and at the same time overlapping will be avoided. These pilot schemes will provide experience for drawing up similar integrated schemes for each group of village and small industries with reference to its specific requirements. In some fields for instance, provision of finance for share capital has the first priority, as in cooperatives of handloom weavers. In its report, the Rural Credit Survey Committee emphasises the need for the Reserve Bank of India to take an active role in the provision of short-term credit for industrial cooperatives. The necessary legislation for this purpose has now been enacted.OUTLAY ON VILLAGFE AND SMALL INDUSTRIESExpenditure incurred on the development of village and small industries during the first five year plan is shown below:Expenditure on village and Small Industries in the First Plan1951-55Rs. cores) 1955-56 (Budget)1951-56

(1)(2)(3)(4)

Handlooms6.54.611.1

Khad4.9358.4

Village industries1,13.04.1

Small-scale industries2.03-253.

Handicrafts0.40.61.0

Silk and sericulture0.80.51.3

Coir0.10.1

Total15.715.531.2

The draft plans for the second five year period prepared by the various Boards and by State Governments were considered by the Village and Small Scale Industries Committee which had been set the task of preparing proposals, by industries and wherever possible, by States, for the utilisation of resources which were expected to be available during the second plan for the development of village and small-scale industries. The Committee recommended programs and allocations involving a total outlay of about Rs. 260 cores which also included provision for working capital which is estimated to amount to about Rs. 65 cores. An allocation of Rs. 88 cores was proposed for the handloom industry including cotton, silk and wool, Rs. 2.2 cores for wool spinning and weaving (khaki), Rs. 23 cores for decentralized cotton spinning and khaki, Rs. 47.4 cores for the various village industries, Rs. 11 cores for handicrafts, Rs. 65 cores for small scale industries, Rs, 6 cores for sericulture, Rs. 2 cores for coir spinning and weaving and Rs. 15 cores for general schemes. As explained below, the plan provides an outlay ofRs. 200 cores, in addition to working capital require ments. The distribution of outlay between different industries as proposed tentatively for the second five year plan is given below:Distribution of Outlay for Village and Small Industries(Rs. cores)Industry Outlay1.Handloom

Cotton weaving56.0

Silk weavingI.5

Wool weaving2.0

59.5

2.Khadi Wool spinning and weaving1.9

Decentralised cotton spinning, and khaki14.8

16.7

3.Village Industries

Hand pounding of rice5.0

Vegetable oil (ghani)6.7

Leather footwear .& tanning (village)5.0

Gur and Khandsari7.0

Cottage match1.1

Other village industries14.0

38.8

4Handicrafts9.0

5.Small Scale industries55.0

6.Other industries

Sericulture5.0

Coir spinning and weaving1.0

7.General schemes (Administration, research, etc.)15.0

Total200.0

The outlay of Rs. 200 cores does not include any specific provision for the Ambar Charkha programme which will be considered further after tests now in progress have been completed. The provision for working capital required for the development of the various villages and small industries will be made by G6vem-ment in the initial years of the plan period, that is until adequate arrangments for the supply of working capital through normal banking and institutional channels become available. The provision for working capital will be in addition to the plan provision of Rs. 200 cores. The Boards concerned with the development of various village and small industries as well as State Governments will estimate their requirements of working capital for the first two or three years of the plan period and indicate them separately when working out detailed programs for these industries. The All-India Khadi and Village Industries Board have estimated their requirements of working. capital for the entire plan period at about Rs. 2 5 cores of which about Rs. 7 cores is for khaki and the balance for village industries. It is envisaged that as early as possible the bulk of the working capital needed should come from co-operative and other banking agencies. The outlay of Rs. 200 cores provided in the plan will cover the cost of schemes to be implemented directly by the Centre, Central assistance for the State schemes. States' contribution for the centrally assisted schemes and any expenditure which States may incur from their own resources on schemes which are not centrally assisted. Besides this provision, in the programme for the rehabilitation of displaced persons, Rs. 11 cores have been provided for cottage and medium industries and industrial loans and Rs. 7 cores for vocational and technical training. Programmes for the welfare of backward classes also have some provision for vocational and technical training and for selected village and small industries. In the programme budget of community development blocks also there is provision to the extent of Rs. 4 cores for rural arts and crafts. Part of the programme for village and small industries will be implemented directly by the Central Ministries or by all-India Boards functioning under their aegis. The remaining programs will be implemented by States on the advice of the Ministries and the Boards. The following allocations represent the tentative cost of the schemes to be implemented centrally and by the States:

Expenditure on Village and Small Industries in the Second Plan(Rs. cores)IndustryCentreStates

(1)(2)(3)

Handloom1.558.0

Khadi & Village Industries4.051.5

Handicrafts3.06.0

Small scale industries10.045.0

Sericulture024.8

Coir spinning and weaving .0.30.7

General schemes6.09.0

Total25.0175.0

The great majority of the schmeswillbe implemented by the State Governments or in the case ofkhadi and village industries by State Boards and registered institutions functioning in the States. The schemes to be centrally implemented will be generally those which are of an all-India character and can best be undertaken by the Centre. These schemes relate to such aspects as the provision for central organizations, publicity, training and research, exhibitions and fairs, hire-purchase of machinery and the work of special institutions like the National Small Industries Corporation. These schemes are explained later in this chapter. In the revised plans of States the total allocation made for village and small industries is about Rs. ,120 cores. In due course these allocations will be revised so as to accord more closely with the pattern of distribution visualised in the Village and Small Scale Industries Committee's Report The Central Ministries and the all-India Boards have also worked out tentative distribution between States of the allocations proposed for industries with which they are concerned. These will be taken into consideration in revising allocations in the States. The 'general schemes' for which a provision of Rs. 15 cores has been made relate to more than one industry or to groups of industries, such as production-cum-training centres, research institutions and emporia and sales depots. A sum of Rs. 6 cores out of the provision of Rs. 15 cores has been earmarked for the general schemes of the All-India Khadi and Village Industries Board, including those pertaining to intensive area development, training programs and technical research. A sum of Rs. 3 cores has been allotted for strengthening staffs of State Industries Departments. From the balance ofRs. 6 cores schemes for research, training, emporia, etc., which are to be implemented mostly by State Governments will be financed. In implementing village and small industries programs the common procedure is for proposals of States to be scrutinised by the all-India Boards concerned before they are approved by the Central Government. Schemes relating to khaki and village industries however, are in a separate category, since much of the initiative in proposing schemes comes from the All-India and State Khadi and Village Industries Boards and the schemes are carried out mainly by their registered or recognized institutions and by societies. The patterns of financial assistance which have been evolved over the past three or four years need to be reviewed in relation to programs for the second five year plan.Small Scale Industries Industries falling in this group are of varied types, but their common features at present are their urban or semi-urban location and use of machines, power and modem techniques. They are run by small entrepreneurs or self-supporting workers, and sometimes by cooperatives. Some units in this field, e.g., those manufaturing bicycle parts or sewing machine parts, may be ancillary to large industries but as a rule they are not linked to them by well-established sub-contracting system but as suppliers of products against occasional orders. The working definition adopted by the Small Scale Industries, Board brings within the scope of the term 'small scale industries' all units or establishments having a capital investment of less than Rs. 5 lakhs and employing less than 50 persons when using power. For development in this field the principal needs are the imparting of training and technical advice regarding the adoption of improved tools, machines and new techniques, supply of raw materials and power at reasonable rates, supply of adequate finance on fair terms, facilities for importing or purchasing machines and assistance in the marketing of products. Problems of marketing are simplified to the extent that small-scale industries are developed as ancillaries of large industries. Such coordination between the two sectors of industry requires, however, that (a) purchase of articles or parts from small industries is specifically provided lor while planning the production programmes of the large units, and (b) the small industries are brought up to a level where they can maintain an assured supply of products of the requisite standard and specifications. The practice has recently been introduced of laying down appropriate conditions and reservations at the time of licensing the establishment or substantial expansion of a large industry, so as to provide scope for the products of the related smaH industries.Small Industries Service Institutes.The programme to be undertaken directly by the Central Government involving an expenditure of about Rs. 10 cores includes further extension of technical servicing through the Small Industries Service Institutes and the establishment of an industrial extension service, a scheme for hire-purchase of machinery, establishment of a marketing service and the undertaking of pilot projects in selected centres and industries. It is proposed to increase the number of Small Industries Service Institutes from four to 20, so that each State has at least one Institute. The Institutes will not merely provide technical advice in response to enquiries from small units regarding improved types of machines, equipment and processes, use of raw materials and methods of reducing cost, but their technical staff will contact small units and advise on their problems, thus providing a useful extension service. The Institutes will also arrange to give demonstrations in the use of improved technical services and machines through their own workshops as well as through model workshops set up in centres outside the Institutes and through mobile workshops mounted on trucks. Further they will operate on behalf of the National Small Industries Corporation in regard to the supply of machinery and equipment to small industrialists on a hire-purchase system. They will also provide a marketing service by giving advice and information to small industries on existing and potential markets and on adaptation of their production to suit such markets. Schemes for the hire-purchase of machinery and equipment and for a marketing service are a natural corollary of the industrial extension service. The terms for the hire-purchase of machinery at present are 20 per cent initial payment for general purposes machines and up to 40 per cent. for special machines and the rate of interest is 4Vt per cent but, if necessary these terms will be liberalised.The marketing service is to be operated along three lines. Firstly, wholesale depots will be opened for certain articles in related centres, for example, footwear in Agra and locks in Aligarh, and the National Small Industries Corporation will purchase these goods according to certain quality standards and sell them to retailers in adjacent areas or other centres. Mobile sales-vans will be operated for arranging the sale of these goods in distant areas and for selecting suitable retail shops at which the goods will be sold at market prices. Secondly, the National Small Industries Corporation will negotiate with the Director-General of Supplies and Disposals for placing stores purchase orders with small industries. Thirdly, the Small Industries Service Institutes through a special whole-time technical officer will explore the scope for obtaining orders from large industries for various components and parts which small units can manufacture.As the marketing service and the hire-purchase system of machinery are extend on a large scale it will become necessary to set up subsidiary corporations of the National Small Industries Corporation. It is proposed to set up four such subsidiaries at Bombay, Calcutta, Madras, and Delhi. These corporations may in addition stock and supply iron and steel and other raw materials required for the use of small industries which Government wish to promote as ancillaries to large units and for other similar developmental purposes. As a part of the technical service programme of the Central Government, the services of foreign experts for selected industries such as footwear, surgical instruments, lock-making, surveying and drawing instruments and electroplating and galvanising, have been obtained. Industrial estates.A provision of Rs. 10 cores has been made for setting up industrial estates in the second five year plan with a view to providing conditions favourable to working efficiency, maintenance of uniform standards in production and economic utilisation of materials and equipment. The principal objective is to enable a number of small-scale units to have the advantage of common services and other facilities, such as, a good site, electricity, water, gas, steam, compressed air, railway sidings, watch and ward, etc. Being located near one another, some units may be better able to use the goods and services of others, so that they become interdependent and complementary. Two types of industrial estates, large ones costing from .Rs. 40 to 50 lakhs and small ones costing from Rs. 20 to 25 lakhs are expected to be established. It is proposed that the responsibility for contruction and management should vest in the State Governments but that the Central Government should advance to Stale Governments the entire cost of the estates in the form of loans. State Governments will run the estates through corporations or such other agencies as they may decide to set up. Sites in the estates will be sold outright to industrial units or given to them on hire purchase terms. In some cases buildings will be erected on sites and let out on a rental or a rent-cum-purchase basis or, if necessary, sold out-right. Ten large industrial estates have already been approved for Rajkot, Delhi, Madras, West Bengal, Mysore, Travancore-Cochin and in the U.P. For the small industrial estates eight areas have been tentatively selected.The Village and Small Scale Industries Committee expressed the view that industrial estates should be located in such a way that they do not encourage further concentration of population in large urban centres. In deciding the location of the estates, especially the smaller estates, this consideration should be kept in view so that preferably they are developed in or near towns of comparatively small size. Schemes in Slate p!ans-T}ie technical service schemes of the Centre and tlie schemes of industrial estates will influence the general direction and the pace of development of small-scale industries but the pattern of development of these industries will really be set by the manner in which various schemes are framed and carried out in the States. State schemes are broadly of four types, namely,a. technical service and research schemes, e.g., training-cum-production or training-cum-demonstration centres and polytechnics;b. production schemes of a pilot character initiated departmentally with a view to-being turned over to industrial co-operatives or private enterprises;c. production schemes of a commercial character and loans to private concerns under State Aid to Industries Acts; andd. Schemes for supply of power. The training and technical service programmes in the States will supplement the Central programme to be implemented through the Small Industries Service Institutes. The need forcoordina tion in this matter as well as in other development activities as between the Small Industries Service Institutes and Industries Departments in the States has been recognised and steps have been taken to define the relative sphere of activity of the two and the manner in which they will coordinate their respective functions. While the Institutes are intended to serve primarily as a technical service agency. State Industries Departments will continue to handle all matters regarding enquiries for starting industries, financial and other forms of assistance needed by industries, organization of industrial cooperatives, etc. There will be mutual consultation in such matters as pilot schemes of Central Government, such as, model workshops, arranging for the services of technical experts and preparation of lists of industries suitable for different regions. Model schemes for some industries have already been prepared by the office of the Development Commissioner for small scale industries.In proposing schemes for developing various small-scale industries conditions of demand, availability of raw materials and other relevant factors have to be studied carefully. It could be useful to select for different regions the industries for which favourable conditions exist and which should, therefore, be specially promoted and assisted. In preparing departmental schemes and in scrutinising the applications from private persons for loans and other assistance, reference to lists of selected industries could be of much assistance. Exploratory surveys as well as intensive studies are needed for their preparation and for the necessary modifications in the light of changing conditions. A programme of investigations has already been initiated by the Small-scale Industries Board and a team has completed reports on four industries in the northern region, namely sports goods, sewing machines and parts, bicycles and parts and leather footwear and one industry on an all-India basis, namely, automobile batteries for the northern region. Similar teams for the eastern, southern and western regions have also started working. Pending the completion of these studies, tentative lists of industries could be drawn up by State Industries Departments on the basis of their own experience and judgement, so that a measure of direction and guidance can be given to developments in this field.Sericulture Sericulture has a high employment potential and provides supplementary occupation to large numbers of rural families. As silk fabrics have to compete in the market with other textiles the stability and expansion of the industry can be ensured only by continuous effort to improve quality and reduce cost. Schemes for the improvement and development of both mulberry and non-mulberry silk have been in operation during the first plan period, but in all directions a larger effort is envisaged in the second five year plan. The bulk of the programme will be implemented in the State, Central schemes being confined to general coordination and all-India research centres. In regard to mulberry silk an important item in the development programme is the reduction in costs of mulberry leaf through substitution of existing mulberry with higher yielding grafts both in rainfed and in irrigated areas, evolving new varieties of mulberry of higher yield and improvemen't in cultivation methods, manuring, etc. These and other measures for bringing about improvement in mulberry and cocoons will be supplemented by steps for the modernisation of silk reeling, by encouraging the substitution of improved basins for country charkhas and Dy converting of improved basins for filatures into multi-end basins and introducing central cooking system and drawing chambers. Utilisation of bye-products in the spun silk industry is necessary for the service of the reeling industry and steps will be taken to rehabilitate and extend the spun silk industry. As an experimental measure cooperative societies for raising young worms of the first and second stages collective are to be established. Cooperative marketing and testing of cocoons, grading of cocoons and introduction of a system of payment of cocoon prices on actual yield will also be undertaken. Work in the conditioning houses at Calcutta and Bangalore and at the Berhampur station will be further developed. Two training institutes are to be established for training personnel for sericulture departments in the States.As regards non-mulberry silk the development programme provides for plantations as well as improvement of basic seed cocoon production for eri, muga and tassar. Organisation of seed supply, improvement of spinning and reeling, marketing and training and research will be undertaken more or less on the same lines as for the mulberry silk industry.Coir Industry The coir industry has two main branches, namely, manufature of coir yarn from husk and the manufacture of coir goods such as mats, mattings, carpets and rugs from coir yam. The development programme for the second plan period will be directed mainly to the solution of the main problem of the industry, namely, to strengthen the position of the producers through the organization of co-operative societies. Thondu (husk) co-operative societies will be organised for the collection of husks and their distribution to primary co-operative societies. Primary co-operative societies will be organised for retting, distribution of retted husk to members for the production of coir yam and for the collection of yam. Coir marketing societies will be organised for the sale of the yam received from primary societies. An encouraging beginning with co-operative organization was made during first plan period but the programme envisaged for the second plan period is on a much larger scale. Unions are also to be set up for exercising supervision and control over primary societies. Co-operatives are to be assisted by grants towards establishment expenses and by loans to meet-their working capital requirements.The development programme for the manufacture of coir goods is concerned chiefly with the reorganisation of some of the small factories and individual manufacturers into mat and matting cooperative societies and the establishment of a central coir products marketing society. Experimental work on the mecnanisation ot the processes of coir weaving will be continued and further developed, and a central coir research institute and a pilot plant are proposed to be established. By opening show rooms and warehouses abroad and by sending trade delegations to foreign countries, the foreign market for coir and coir products is to be developed furtherWhat are the problems faced by Small Scale Industries in India?Small-scale industries in India could not progress satisfactorily due to various problems that they are confronted with while running enterprises. In spite of having huge potentialities, the major problems, small industries face are given below. Problem of skilled manpower:The success of a small enterprise revolves around the entrepreneur and its employees, provided the employees are skilled and efficient. Because inefficient human factor and unskilled manpower create innumerable problems for the survival of small industries. Non-availability of adequate skilled manpower in the rural sector poses problem to small-scale industries. Inadequate credit assistance:Adequate and timely supply of credit facilities is an important problem faced by small-scale industries. This is partly due to scarcity of capital and partly due to weak creditworthiness of the small units in the country.Irregular supply of raw material:Small units face severe problems in procuring the raw materials whether they use locally available raw materials or imported raw materials. The problems arise due to faulty and irregular supply of raw materials. Non-availability of sufficient quantity of raw materials, sometimes poor quality of raw materials, increased cost of raw materials, foreign exchange crisis and above all lack of knowledge of entrepreneurs regarding government policy are other few hindrances for small-scale sector. Absence of organized marketing:Another important problem faced by small-scale units is the absence of organized marketing system. In the absence of organized marketing, their products compare unfavorably with the quality of the product of large- scale units. They also fail to get adequate information about consumer's choice, taste and preferences of the type of product. The above problems do not allow them to stay in the market. Lack of machinery and equipment:Small-scale units are striving hard to employ modern machineries and equipment in their process of production in order to compete with large industries. Most of the small units employ outdated and traditional technology and equipment. Lack of appropriate technology and equipment create a major stumbling block for the growth of small-scale industries. Absence of adequate infrastructure:Indian economy is characterized by inadequate infrastructure which is a major problems for small units to grow. Most of the small units and industrial estates found in towns and cities are having one or more problems like lack of of power supply, water and drainage problem, poor roads, raw materials and marketing problem.Thus absence of adequate infrastructure adversely affect the quality, quantity and production schedule of the enterprises which ultimately results in under-utilization of capacity. Competition from large-scale units and imported articles:Small-scale units find it very difficult to compete with the product of large-scale units and imported articles which are comparatively very cheap and of better quality than small units product.Other problems:Besides the above problems, small-scale units have been of constrained by a number of other problems also. They include poor project planning, managerial inadequacies, old and orthodox designs, high degree of obsolescence and huge number of bogus concerns. Due to all these problems the development of small-scale industries could not reach a prestigious stage.

What is the Role and Importance of Small Scale Industry in India?

1. A small scale or cottage industry may be defined as an enterprise or seriesof operations carried on by a workman skilled in the craft on hisresponsibility, the finished product of which, he markets himself -Prof. K.T. Sash 2. Indian economy is an under developed economy. Its vast resources are either unutilized or under-utilized. A major section of man power is lying idle. The per capita income is low. Capital is shy and scarce and investment is lean. Production is traditional and the technique is outdated. The output is insufficient and the basic needs of the people remain unfulfilled . Industrialization is the only answer to this present state of disrupted economy. The problem is of the approach which should be direct, utilitarian and pragmatic. Such industries do not require huge capital and hence suitable for a country like India . The small scale industries have a talent of dispersal. They can be accessible to the remote rural areas of the country and do not lead to regional imbalances and concentration of industries at one place, which is responsible for many economic resources such as entrepreneurship and capital. 3SSI means small scale industries, which is an industrial undertaking with the investment not exceeding Rs.100 lakhs in plant and machinery. In cases of auxiliary industries the investment ceiling on plant and machinery is also Rs.100 lakhs. 4 Small Scale Industries help the economy in promoting balanced development of industries across all the regions of the economy. Small Scale Industries are adept in distributing national income in more efficient and equitable manner among the various participants in the process of good production than their medium or larger counterparts. Small Scale Industries enjoy a lot of help and encouragement from the government through protecting these industries from the direct competition of the large scale ones, provision of subsidies in the form of capital, lenient tax structure for this industry 5. Before Independence, the present small scale industry was meant to denote the village and the urban cottage industry .This group included a variety of industries ranging from manufacturing of Iron safes, locks, carpets, marble jigs, baskets, hand-loom cloth and the like. In fact, at that time the term cottage and Small scale industries was used in juxtaposition to large scale industries, which were established under the British patronage. They received encouragement and support during the freedom movement. The small scale industries found a prominent place in the economic programme envisaged by the Indian National Congress. 6. After 1947 Jawaharlal Nehru maintained separate entities of small scale industries. He was of the view that a small industry was the middle sector and it would overlap both the cottage and the large industries.1977 industrial Policy The basic policy support of SSI sector had its roots in the Industrial Policy Resolution 1977, laid emphasis on reservation of items. The reservation economically viable and technologically feasible products to be exclusively manufactured by small scale industry began with a list of 47 items which was gradually extended to too many products. 7. 1991 Industrial Policy Equity participation of up to 24% by other industrial undertakings including foreign companies. Hike in investment limit for tiny sector from Rs. 2 lakh to Rs. 5 lakh. Support from National Equity Fund for projects up to Rs. 10 lakh. Single window loans to cover projects up to Rs. 20 lakhs. Banks to be involved. Relaxation of certain provisions of labor laws. Subcontracting Exchanges to be set up by industry associations Factoring services through SIDBI to overcome the problem of delayed payments. Women enterprises redefined Package for handloom and handicraft sector Export development centre in SIDO Marketing of mass consumption items by NSIC under a common brand name.1995 WTO Policy The formation of WTO in 1995 resulted in a major challenge to the well being of the SSI. The protection given to the SSI in the form of reservation and quantitative restrictions has been withdrawn. More than 160 items reserved under the SSI category have been de reserved. 8. Micro, Small and Medium Enterprises Development Act, 2006(MSMED Act)* The Act provides the framework for recognition of enterprises (Manufacturing and services) and integrating the micro, small and medium enterprises. Categorization of SMEs: SMEs have been categorized into manufacturing and service industry within which the classification based on investment in plant and machinery or in equipment has been made: Manufacturing Enterprise: 9 Micro: investment up to Rs. 25 lakhs Small Enterprises: investment above Rs. 25 lakhs and up to Rs. 5 crore Medium Enterprise: investment above Rs. 5 crore and up to Rs. 10 crore Service Enterprises: Micro: investment up to Rs. 10 lakhs Small Enterprises: investment above Rs. 10 lakhs and up to Rs. 2 crore Medium Enterprise: investment above Rs. 2 crore and up to Rs. 5 crore Other Features: Establishment of funds for promotion, development and enhancement of competitiveness of these enterprises. Progressive Credit Policies and practices. Preference in Government procurement of products and services of micro and small enterprises. More effective mechanism for mitigating problem of delayed payment to micro and small enterprises. Simplification of process for closure of business by all three categories of business 10. It contributes almost 40% of the gross industrial value added in the Indian economy. It has been estimated that a million Rs. of investment in fixed assets in the small scale sector produces 4.62 million. The number of small scale units has increased from an estimated 8.74 lakhs units in the year 1980-81 to an estimated 31.21 lakhs in the year 1999. 11. Production From Small Scale Industries Production (Rs. 000 cores) at 1993-94 prices300000250000200000150000 Production (Rs. 000 cores) at 1993-94 prices100000 50000 0 12. SSI Sector in India creates largest employment opportunities for the Indian populace, next only to Agriculture. It has been estimated that 100,000 rupees of investment in fixed assets in the small-scale sector generates employment for four persons. 13. Food products industry has ranked first in generating employment, providing employment to 0.48 million persons (13.1%). The next two industry groups were Non-metallic mineral products with employment of 0.45 million persons (12.2%) and Metal products with 0.37 million persons (10.2%). In Chemicals & chemical products, Machinery parts, Wood products, Basic Metal Industries, Paper products & printing, Hosiery & garments, Repair services and Rubber & plastic products, the contribution ranged from 9% to 5%, the total contribution by these eight industry groups being 49%. In all other industries the contribution was less than 5%. 14. Per unit employment was the highest (20) in units engaged in beverages, tobacco & tobacco products mainly particularly in Maharashtra, Andhra Pradesh, Rajasthan, Assam and Tamil Nadu. Next came Cotton textile products (17), Non- metallic mineral products (14.1), Basic metal industries (13.6) and Electrical machinery and parts (11.2.) The lowest figure of 2.4 was in Repair services line. 15. Rural Non-metallic products contributed 22.7% to employment generated in rural areas. Food Products accounted for 21.1%, Wood Products and Chemicals and chemical products shared between them 17.5%.Urban As for urban areas, Food Products and Metal Products almost equally shared 22.8% of employment. Machinery parts except electrical, Non-metallic mineral products, and Chemicals & chemical products between them accounted for 26.2% of employment. In metropolitan areas the leading industries were Metal products, Machinery and parts except electrical and Paper products & printing (total share being 33.6%). 16. Tamil Nadu (14.5%) made the maximum contribution to employment. This was followed by Maharashtra (9.7%), Uttar Pradesh (9.5%) and West Bengal (8.5%) the total share being 27.7%. Gujarat (7.6%), Andhra Pradesh (7.5%), Karnataka (6.7%) and Punjab (5.6%) together accounted for another 27.4%. 17. No of Employment in Small Scale Industries in India. 18. SSI Sector plays a major role in Indias present export performance. This takes place through merchant exporters, trading houses and export houses. They may also be in the form of export orders from large units or the production of parts and components for use for finished exportable goods. The product groups where the SSI sector dominates in exports are sports goods, readymade garments, woollen garments and knitwear, plastic products, processed food and leather products. SSI Sector contributes about 45%-50% of the Indian Exports. Direct exports from the SSI Sector account for nearly 35% of total exports. It contributes around 15% to exports indirectly. Nontraditional products account for more than 95% of the SSI exports. 19. Export from small sector 20. The opportunities in the small-scale sector are enormous due to the followingfactors:Less Capital Intensive Extensive Promotion & Support by Government Reservation for Exclusive Manufacture by small scale sector Project Profiles Funding - Finance & Subsidies Machinery Procurement Raw Material Procurement Manpower Training Technical & Managerial skills Tooling & Testing support Reservation for Exclusive Purchase by Government Export Promotion Growth in demand in the domestic market size due to overall economic growth Increasing Export Potential for Indian products Growth in Requirements for ancillary units due to the increase in number of greenfield units coming up in the large scale sector. Small industry sector has performed exceedingly well and enabled our country to achieve a wide measure of industrial growth and diversification. 21. Development measures should be spread Rising productivity needs to be made sustainable Assistance programs need to be tackled Skill based needs need to be improved

In a developing country like India, the role and importance of small-scale industries is very significant towards poverty eradication, employment generation, rural development and creating regional balance in promotion and growth of various development activities.It is estimated that this sector has been contributing about 40% of the gross value of output produced in the manufacturing sector and the generation of employment by the small-scale sector is more than five times to that of the large-scale sector.This clearly shows the importance of small-scale industries in the economic development of the country. The small-scale industries have been playing an important role in the growth process of Indian economy since independence in spite of stiff competition from the large sector and not very encouraging support from the government.The following are some of the important role played by small- scale industries in India. Employment generation:The basic problem that is confronting the Indian economy is increasing pressure of population on the land and the need to create massive employment opportunities. This problem is solved to larger extent by small-scale industries because small- scale industries are labor intensive in character. They generate huge number of employment opportunities. Employment generation by this sector has shown a phenomenal growth. It is a powerful tool of job creation.

Mobilisation of resources and entrepreneurial skill:Small-scale industries can mobilize a good amount of savings and entrepreneurial skill from rural and semi-urban areas remain untouched from the clutches of large industries and put them into productive use by investing in small-scale units. Small entrepreneurs also improve social welfare of a country by harnessing dormant, previously overlooked talent.Thus, a huge amount of latent resources are being mobilised by the small-scale sector for the development of the economy. Equitable distribution of income:Small entrepreneurs stimulate a redistribution of wealth, income and political power within societies in ways that are economically positive and without being politically disruptive.Thus small-scale industries ensures equitable distribution of income and wealth in the Indian society which is largely characterised by more concentration of income and wealth in the organised section keeping unorganised sector undeveloped. This is mainly due to the fact that small industries are widespread as compared to large industries and are having large employment potential. Regional dispersal of industries:There has been massive concentration of industries m a few large cities of different states of Indian union. People migrate from rural and semi urban areas to these highly developed centres in search of employment and sometimes to earn a better living which ultimately leads to many evil consequences of over-crowding, pollution, creation of slums, etc. This problem of Indian economy is better solved by small- scale industries which utilise local resources and brings about dispersion of industries in the various parts of the country thus promotes balanced regional development. Provides opportunities for development of technology:Small-scale industries have tremendous capacity to generate or absorb innovations. They provide ample opportunities for the development of technology and technology in return, creates an environment conducive to the development of small units. The entrepreneurs of small units play a strategic role in commercialising new inventions and products. It also facilitates the transfer of technology from one to the other. As a result, the economy reaps the benefit of improved technology. Indigenisation:Small-scale industries make better use of indigenous organisational and management capabilities by drawing on a pool of entrepreneurial talent that is limited in the early stages of economic development. They provide productive outlets for the enterprising independent people. They also provide a seed bed for entrepreneurial talent and a testing round for new ventures. Promotes exports:Small-scale industries have registered a phenomenal growth in export over the years. The value of exports of products of small-scale industries has increased to Rs. 393 cores in 1973-74 to Rs. 71, 244 cores in 2002-03. This contributes about 35% India's total export. Thus they help in increasing the country's foreign exchange reserves thereby reduces the pressure on country's balance of payment. Supports the growth of large industries:The small-scale industries play an important role in assisting bigger industries and projects so that the planned activity of development work is timely attended. They support the growth of large industries by providing, components, accessories and semi finished goods required by them. In fact, small industries can breathe vitality into the life of large industries. Better industrial relations:Better industrial relations between the employer and employees help in increasing the efficiency of employees and reducing the frequency of industrial disputes. The loss of production and man-days are comparatively less in small- scale industries. There is hardly any strikes and lock out in these industries due to good employee-employer relationship.Of course, increase in number of units, production, employment and exports of small- scale industries over the years are considered essential for the economic growth and development of the country. It is encouraging to mention that the small-scale enterprises accounts for 35% of the gross value of the output in the manufacturing sector, about 80% of the total industrial employment and about 40% of total export of the countryProductionThe small-scale industries sector plays a vital role in the growth of the country. It contributes almost 40% of the gross industrial value added in the Indian economy.It has been estimated that a million Rs. of investment in fixed assets in the small scale sector produces 4.62 million worth of goods or services with an approximate value addition of ten percentage points.The small-scale sector has grown rapidly over the years. The growth rates during the various plan periods have been very impressive. The number of small-scale units has increased from an estimated 0.87 million units in the year 1980-81 to over 3 million in the year 2000.When the performance of this sector is viewed against the growth in the manufacturing and the industry sector as a whole, it instills confidence in the resilience of the small-scale sector.YearTargetAchievement

1991-923.03.1

1992-935.05.6

1993-947.07.1

1994-959.110.1

1995-969.111.4

1996-979.111.3

1997-98*8.43

1998-99*7.7

1999-00*8.16

2000-01 (P)*8.90

P-Projected (April-December)

EmploymentSSI Sector in India creates largest employment opportunities for the Indian populace, next only to Agriculture. It has been estimated that 100,000 rupees of investment in fixed assets in the small-scale sector generates employment for four persons.

Generation of Employment - Industry Group-wiseFood products industry has ranked first in generating employment, providing employment to 0.48 million persons (13.1%). The next two industry groups were Non-metallic mineral products with employment of 0.45 million persons (12.2%) and Metal products with 0.37 million persons (10.2%).In Chemicals & chemical products, Machinery parts except Electrical parts, Wood products, Basic Metal Industries, Paper products & printing, Hosiery & garments, Repair services and Rubber & plastic products, the contribution ranged from 9% to 5%, the total contribution by these eight industry groups being 49%.In all other industries the contribution was less than 5%.Per unit employmentPer unit employment was the highest (20) in units engaged in beverages, tobacco & tobacco products mainly due to the high employment potential of this industry particularly in Maharashtra, Andhra Pradesh, Rajasthan, Assam and Tamil Nadu.Next came Cotton textile products (17), Non-metallic mineral products (14.1), Basic metal industries (13.6) and Electrical machinery and parts (11.2.) The lowest figure of 2.4 was in Repair services line.Per unit employment was the highest (10) in metropolitan areas and lowest (5) in rural areas.However, in Chemicals & chemical products, Non-metallic mineral products and Basic metal industries per unit employment was higher in rural areas as compared to metropolitan areas/urban areas.In urban areas highest employment per unit was in Beverages, tobacco products (31 persons) followed by Cotton textile products (18), Basic metal industries (13) and Non-metallic mineral products (12).Location-wise Employment Distribution - RuralNon-metallic products contributed 22.7% to employment generated in rural areas. Food Products accounted for 21.1%, Wood Products and Chemicals and chemical products shared between them 17.5%.UrbanAs for urban areas, Food Products and Metal Products almost equally shared 22.8% of employment. Machinery parts except electrical, Non-metallic mineral products, and Chemicals & chemical products between them accounted for 26.2% of employment.In metropolitan areas the leading industries were Metal products, Machinery and parts except electrical and Paper products & printing (total share being 33.6%).State-wise Employment DistributionTamil Nadu (14.5%) made the maximum contribution to employment.This was followed by Maharashtra (9.7%), Uttar Pradesh (9.5%) and West Bengal (8.5%) the total share being 27.7%.Gujarat (7.6%), Andhra Pradesh (7.5%), Karnataka (6.7%) and Punjab (5.6%) together accounted for another 27.4%.Per unit employment was high - 17, 16 and 14 respectively - in Nagaland, Sikkim and Dadra & Nagar Haveli.It was 12 in Maharashtra, Tripura and Delhi.Madhya Pradesh had the lowest figure of 2. In all other cases it was around the average of 6.YearTarget (lakh nos.)Achievement (lakh nos.)Growth rate

1992-93128.0134.063.28

1993-94133.0139.383.28

1994-95138.6146.565.15

1995-96144.4152.614.13

1996-97150.5160.004.88

1997-98165167.204.50

1998-99170.1171.582.61

1999-00175.4177.33.33

P-Provisional

ExportSSI Sector plays a major role in India's present export performance. 45%-50% of the Indian Exports is contributed by SSI Sector. Direct exports from the SSI Sector account for nearly 35% of total exports. Besides direct exports, it is estimated that small-scale industrial units contribute around 15% to exports indirectly. This takes place through merchant exporters, trading houses and export houses. They may also be in the form of export orders from large units or the production of parts and components for use for finished exportable goods.It would surprise many to know that non-traditional products account for more than 95% of the SSI exports.The exports from SSI sector have been clocking excellent growth rates in this decade. It has been mostly fuelled by the performance of garments, leather and gems and jewellery units from this sector.The product groups where the SSI sector dominates in exports are sports goods, readymade garments, woollen garments and knitwear, plastic products, processed food and leather products.The SSI sector is reorienting its export strategy towards the new trade regime being ushered in by the WTO.YearExports(Rs. Crores)(at current prices)

1994-9529,068(14.86)

1995-9636,470(25.50)

1996-9739,249(7.61)

1997-9843946(11.97)

1998-9948979(10.2)

1999-00 (P)53975(10.2)

P-Provisional

MajorExportMarketsAn evaluation study has been done by M/s A.C. Nielsen on behalf of Ministry of SSI. As per the findings and recommendations of the said study the major export markets identified having potential to enhance SSIs exports are US, EU and Japan. The potential items of SSIs have been categorized into three broad categories.ExportDestinationsthe Export Destinations of SSI products have been identified for 16 product groups.

OpportunityThe opportunities in the small-scale sector are enormous due to the following factors: Less Capital Intensive Extensive Promotion & Support by Government Reservation for Exclusive Manufacture by small scale sector Project Profiles Funding - Finance & Subsidies Machinery Procurement Raw Material Procurement Manpower Training Technical & Managerial skills Tooling & Testing support Reservation for Exclusive Purchase by Government Export Promotion Growth in demand in the domestic market size due to overall economic growth Increasing Export Potential for Indian products Growth in Requirements for ancillary units due to the increase in number of Greenfield units coming up in the large scale sector. Small industry sector has performed exceedingly well and enabled our country to achieve a wide measure of industrial growth and diversification.By its less capital intensive and high labor absorption nature, SSI sector has made significant contributions to employment generation and also to rural industrialization. This sector is ideally suited to build on the strengths of our traditional skills and knowledge, by infusion of technologies, capital and innovative marketing practices. This is the opportune time to set up projects in the small-scale sector. It may be said that the outlook is positive, indeed promising, given some safeguards. This expectation is based on an essential feature of the Indian industry and the demand structures. The diversity in production systems and demand structures will ensure long term co-existence of many layers of demand for consumer products / technologies / processes. There will be flourishing and well grounded markets for the same product/process, differentiated by quality, value added and sophistication. This characteristic of the Indian economy will allow complementary existence for various diverse types of units. The promotional and protective poli