Small-scale industries are defined as businesses that operate on a small scale.
Naturally, the first step would be to define what defines a small-scale industry. It’s crucial to understand how the government defines a small-scale business:
The Government of India used to classify small scale manufacturing and small scale service sectors separately before the new categorization rules were issued in July 2020. This has changed as a result of the government’s official notification in July 2020.
Small scale enterprises involved in manufacturing or services that have a capital investment in manufacturing plants or machinery of less than 10 crores and annual turnover of less than 50 crores would be classed as small scale industries under the new announcement.
One of the pillars of employment is small-scale industry.
Tiny enterprises can be labour-intensive in some situations and employ a small workforce in others. Nonetheless, India’s small-scale enterprises employ a large number of people all over the country. According to a recent survey, the small-scale industry employs about 2.5 million people.
We usually observe that a large percentage of small-scale businesses are located in the unorganised sector. Although there are provisions for small-scale industry registration, it is totally voluntary. If the company is in the manufacturing industry and employs a particular number of people, the proprietor is required to register the company under the Factories Act.
Category Of Small Scale Industries
Small Scale Industries (SSI) are divided into three categories based on the sort of work they perform.
Industries of production/assembly/processing
These businesses produce completed commodities that are either consumed or used in further processing. Power looms, food processing units, and engineering units are examples of small-scale industries.
Ancillary industries are businesses that produce components for other businesses. The final product is then assembled or incorporated by these manufacturers. A tiny company that makes various sizes of nuts and bolts is an excellent example. You might also think about industries that make electronic components or engines.
Industries that provide services
Manufacturing is not a component of service-based industries. They mostly deal with the after-sales repair, maintenance, and upkeep of products.
A few more, less commonly used categories are also worth mentioning.
Units for export
If a small-scale industry exports more than 50% of its output, it is classified as an export unit.
Units in cottages
These small units do not require a designated facility and are carried out in the owners’ or donors’ homes or living spaces.
Village industries encompass a wide range of rural sectors that are not part of the organised economy. In most cases, these businesses rely primarily on human labour to produce their goods.
Essential Characteristics of Small Scale Industries
Small-scale industries require a lot of labour. They provide a cost-effective economic solution by producing jobs in both urban and rural locations at a minimal cost of capital investment.
Small-scale businesses are more adaptable in their operations. They adapt swiftly to a variety of elements that play a significant role in day-to-day management. They are best suited to a continuously changing environment because of their adaptability.
- One-man performance:
A one-man show is typical of a small-scale unit. Individuals are primarily responsible for setting it up. Even small businesses are managed by a partnership firm or company, with one of the partners or directors performing the majority of the work. As a result, they give a platform for the entrepreneurial spirit to be expressed. Because they are their own bosses, they can make decisions quickly and creatively.
- Use of locally sourced raw materials:
Small-scale companies promote intermediate and capital goods while using local raw materials. Through decentralisation and dispersion of industries in local areas, they help to faster, more balanced economic growth in a transitional economy.
- Operation restricted to a specific area:
Small-scale industries typically limit their operations to local areas in order to meet people’s local and regional needs. Due to a lack of resources, they are unable to expand their economic activity.
- The gestation period is shorter:
The gestation period is the time after which the investment or return begins. It is the time between setting up the units and starting production. Smaller businesses usually have a shorter gestation period than larger businesses. This enables the entrepreneur to profit in a short amount of time. Capital will not be held in reserve for an extended period of time.
- Educational attainment:
Employees in small businesses usually have a low or moderate degree of education. To run and manage the SSI, little specialised knowledge and experience is required.
We conclude following points from above topic-:
1.Small-scale industries have the following goals: to increase employment possibilities.
2.To assist in the economic development of rural and underdeveloped areas.
3.To lessen regional disparities.