[Commerce Class Notes] on Small Scale Industries Pdf for Exam

Industrialization does not necessarily imply the existence of huge factories spread over hundreds of acres, churning out power and using lots of fuel. This specifically points to large-scale industries. Industrialization also has to do with factories and industries and organizations that operate on a much smaller scale, but generate profits all the same. 

In India, particularly, there has always been a push for small-scale industrialization, since the disparities in income and resources will not make it possible for all sections of the population to be engaged in large-scale industrial work. Moreover, India is home to a large number of artisanal crafts, and these cannot prosper under the principles of large-scale work. Even before independence, there was a push for cottage industries to develop and become self-sufficient. 

What are Small Scale Industries?

To define a small-scale industry effectively, it is imperative to first learn about the meaning of industry. The term industry refers to a group of companies that are related to each other, based on the primary business activities they undertake. Small scale industries, thus, refer to those partnerships, corporations, or sole proprietorships that function on a lower scale, employing a smaller workforce and generating less revenue than that by normal-sized industries or businesses.

Small scale enterprises can also refer to those businesses that apply for government support or avail preferential tax policies, depending on their area of operation. Following is an elaboration on the types, characteristics, and features of small-scale industries, along with a few examples.

What are the Characteristics of Small Scale Industries?

In accordance with the small scale business meaning, such industries are characterized by the following features – 

1. Ownership 

Generally, such businesses are sole proprietorships or, in some cases, partnerships. It means that the ownership of the business rests on a single individual, in most cases.

2. Labor Requirements 

Since capital investment in such industries is comparatively lower than that of the large-scale ones these mostly rely on manpower, to carry out production activities.

3. Management 

One of the most significant characteristics of SSI is that both the control and management of such businesses lie with owners. The owner, thus, participates actively in the day-to-day business conduction.

4. Flexible 

Since they operate on a smaller scale, these industries are more privy to sudden and unforeseen developments on the business front. They are more adaptable to changes in the business environment.

5. Optimal Usage of Resources 

Since they do not have excess resources at their disposal, small-scale industries make optimal usage of the available resources without wastage.

6. Operation Restrictions 

Most small-scale businesses are limited in their area of operation. As a result, they only operate either locally or regionally. These are a few of the characteristics of a small business that helps to effectively gauge its operation, administration, and scope.  

The classification of these industries can be based on several criteria. For instance, as per the goods and services produced, there are three types of small-scale industries.

Classification of Small Scale Industries

Classification of Small Scale Industries on Basis of Amount of Capital Invested

Small scale enterprises can also be classified based on the amount of capital invested in their operation. In this scenario, these industries can be classified into the following – 

In the Manufacturing Sector

In the Service Sector

Objectives and Features of Small Scale Industries

Small scale enterprises are formed to fulfill the following objectives – 

• They create employment opportunities in developing countries like India. Since capital investment and technology usage is limited in this sector, it mostly relies on manpower, thus generating employment.

• These industries help to boost the underdeveloped sectors of the economy – for example, rural and cottage industries. These industries also aid in addressing the problem of financial imbalance between the rural and urban sectors of the economy.

• These industries often adopt the implementation of technology that can help to produce quality products at lower costs. India’s export industry is largely dependent on these small-scale enterprises.

• Almost half of the goods exported from India are either produced or manufactured in these industries. Thus, small-scale industries with less investment are a vital part that helps to strengthen the economy as a whole.

However, to be established, these industries also have to register themselves under the Ministry of Micro, Small, and Medium Enterprises, through the Directorate of Industries under the State Government.

 

What are Some Examples of Small Scale Industries in India?

India is home to many small-scale industries, which are actually doing very well in terms of revenue. Some of them have even received international accolades. They are:

• Toy manufacturing units

• Paper manufacturing units

• Bakeries and other eatable manufacturing and processing units

• Craft guilds

• Jewelry guilds

• Incense stick manufacturing units

• Pickles manufacturing units

• Leather manufacturing and tanning units

• The beauty industry 

• Paper goods manufacturing industries

• Firecracker manufacturing units

• Handmade cosmetics and khadi units

• Tissue manufacturing units

• Candle manufacturing units

• Chocolate manufacturing units

How Does the Government of India Encourage Small Scale Industries?

There are a number of schemes and offers that encourage people to start small-scale work on their own. For example, a number of small-scale industries enjoy tax-free returns up to a certain amount of revenue. They also enjoy benefits such as help and investment from NGOs and many other governmental bodies. The government always focuses on self-reliance and small-scale industries form an excellent mouthpiece to show how it can work.