Small scale sectors are those industries that involve manufacturing, production or any kind of customer service that is done or provided on a very small scale or micro scale. Small scale sector plays a very vital role in boosting the social and economic development of the country. Small scale sectors generally consist of small enterprises which can manufacture or can provide different services to their customers by using small machines or equipment with very few workers or employees.

The guidelines set by the government of India for small scale sector enterprises include the following:

  1. For manufacturing or production of goods, investment in the plant or machinery must be between 25 lakhs to 5 crores.
  2. For service providers, the investment in machinery should be between 10 lakhs to 2 crores.

Small and Medium Scale Enterprise:

Small and medium-scale enterprises are those enterprises in which personnel numbers fall to certain limits.

Small & medium scale enterprises are abbreviated as ‘SME’ which is used by International Organizations such as the World Bank. There is no specific definition of SME set by the United States of America. The European Union (EU) defines a small scale enterprise as a company with less than 50 employees and a medium-scale enterprise with less than 250 employees.

Micro Scale Enterprises:

Microscale enterprises are those businesses that employ fewer than 10 persons and are launched by any bank or other entity with a limited amount of capital.

Micro, Small and Medium Scale Enterprises:

Micro, small and medium scale enterprises are abbreviated as MSME and are introduced by the Government of India in agreement with the micro, small and medium enterprises development (MSMED) act of 2006.

MSME provides support for the development of innovation, design, intervention and packaging of elements of a business. This enterprise is also known for its reasonable assistance to provide improved access to the domestic as well as export markets.

Examples of Small Scale Sector:

Some of the examples of Small scale industries include Bakeries, candle making, leather belts, small toys, water bottles, xerox, printings, t-shirt printings, photography, beauty parlours, school stationeries and many more.

Characteristics of Small Scale Sector:

The basic characteristics of small scale sector are as follows:

  • Ownership

These units are generally under single owners. So, it is the sole industry of proprietorship or maybe a partnership.

  • Management

The management and the control of the industry are generally with the owner. So, the owner is actively involved in the running of the business.

  • Limited Reach

These are small scale industries that are restricted to specific areas of operations. So, they only meet the requirements of local and regional demand.

  • Labor Intensive

These small scale industries generally involve the use of labour and manpower for production activities.

  • Flexibility

These industries are more flexible to the changing business and environment. Large scale industries do not have this kind of advantage.

  • Resources

These industries generally use local and readily available resources. These criteria also help the economy with better utilization of natural resources and less wastage of natural resources.

Classifications of Small Scale Sector:

Small scale sectors are classified into three parts which include:

  • Manufacturing industries

Manufacturing industries are mainly into the manufacturing of finished goods for consumption or can be used in the processing of other goods. Some examples of manufacturing small scale industries include looming, food processing and engineering of tools.

  • Ancillary Industries

These types of industries are feeder based industries that manufacture components or goods for other manufacturers. Then, these manufacturers assemble to make the final product.

Examples of ancillary industries are nuts and bolts of various shapes and sizes which can be used to manufacture electronic components or engines.

  • Service Industries

Service industries do not involve in any kind of manufacturing. They are generally involved in repairing, maintenance and after-sales services. Examples of such industries include repair shops, car washing shops, etc.

  • Export units

The small scale industry can be considered an export unit if the industries are exporting more than 50% of their production.

  • Cottage units

Cottage units do not have well-established facilities and are mainly carried out within houses or any space of the owners or contributors.

  • Village industries

There are many industries in villages or rural areas that are not considered a part of the organized sector. So, they fall under village industries. In general, these types of industries solely depend upon human labour for production.

Advantages of Small Scale Sector: 

The are various advantages of small scale sectors or industries which are as follows:

  1. Small scale sectors are the major sources of employment for the people that are living in villages or rural areas. Hence, plays an important role in generating employment in an economy.
  2. Small scale industries contributed to almost 40% of the total goods and services in India hence, these industries are a very important contributor to the economy.
  3. Small scale industries also help in promoting the ‘Make in India’ initiative which helps in increasing the demand for products that are manufactured locally.
  4. Export materials provided to various Indian companies are exported from small scale industries. According to the statistics,  It is estimated that about 50% of all the materials exported are from these types of industries.
  5. These types of industries require less capital and investments for startups.
  6. Small scale industries also help in promoting entrepreneurship skills among the rural peoples.
  7. These types of industries reduce the dependence of various villagers on the agriculture sector.