Small Scale Industries- Characteristics, Objectives, Problems etc.

Small Scale Industries- Characteristics, Objectives, Problems etc.

Nature or Characteristics of Small Scale Industries

Small Scale industries have some special features which distinguish them from large scale industries. These are as follows:

1. Wide Scope:

   Small Scale industries have many types such as (i) Manufacturing units, (ii) Feeder industries (iii) Servicing industries, (iv) Ancillary, (v) Mining or quarrying.

2. Limited Scale and Size:

   A Small scale unit has a limited scale of operations. It has limited market and short gestation period.

3. Limited Resources :

   Small scale units use local and limited resources. Hence, mostly they are decentralized or dispersed.

4. Closely Held:

   A Small scale unit is owned by one person or a small group of persons. Proprietorship and partnership are the dominant forms of ownership in small scale sector.

5. Supplementary:

   Small scale units are supplementary to large scale units. It can fill the gaps between large scale production and standard output.

6. Various Functions:

   Small scale units perform various functions such as servicing, jobbing, merchandising or selling components, parts or accessories.

7. Local Operations :

   The activities of a small scale unit are generally localized. It caters to local and regional demands. However, its products may be exported.

8. Easily Managed:

   A Small scale unit has simple organizational structure, few or no layers of management. It has no specialization of work.

9. Labour Intensive :

   Capital investment in small scale unit is limited. It has simple technology. It has more use of human labour.

10. Person Character:

    Small scale firms are managed in a personalized manner by the owner himself. The owner has first hand knowledge and actively participates in all types of decisions.

Objectives of Small Scale Industries

The main objectives of SSIs are as follows:

1. To generate large scale employment opportunities with low investment.
2. To solve the problem of unemployment in the country.
3. To encourage effective mobilization of country’s untapped capital and human resources.
4. To improve the standard of living of people in the country.
5. To encourage dispersal of industries to all over the country covering small towns and rural areas.
6. To bring backward areas too in the mainstream of national development.
7. To promote balanced regional development in the whole country.
8. To ensure more equitable distribution of national income.
9. To meet a major part of the increased demand for consumer goods and simple producer’s goods.
10. To bring about an integration of the development of these industries with rural economy and large scale industries.

Role of Small Scale Industry in Economic Development

The small scale industrial sector plays a vital role in the economic development of any country. It has been seen that the development or growth of small enterprises contribute to the increase in per capita income through various ways. By its less capital intensive and high labour absorption nature, SSI (Small -Scale Industry) sector has made significant contribution to employment generation and rural industrialization. This sector is ideally suited to build on the strength of our traditional skill and knowledge by infusing technology, capital and innovative marketing practices. Government has announced many supportive policies to SSI after seeing the great potential of this sector. Small scale industries have performed exceedingly well and enabled our country to achieve a wide measure of industrial growth, development and diversification. This can be better examined through following parameters:

Export: SSI plays a major role in India’s present export trade. Almost 45%-50% of Indian export is contribute by small sector. Direct export from SSI sector account for nearly 35% of the total export. Besides direct export 15% of indirect export is contributed by this sector, Indirect trade may be in the form of orders from large productive units or the production of parts and components for use of finished exportable goods.

Generation of Employment: Providing new opportunities of employment is one of the most eminent role that small scale sector plays in the economic development of the country.

Food production industry has ranked first in providing employment to 0.48 million persons (13.1%). The next two groups were non-metallic mineral products with giving employment to 0.45 million persons (12.2%) and metal products with 0.37 million persons (10.2%).

Production: The small sector industry has grown rapidly over the years. The growth rates during various plan period have been very impressive. The no. of productive small scale units has increased from an estimated 0.87 million units in year 1980-81 to over 13 million in the year 2018.

Problems of Small and Medium Enterprises

Though government is providing assistance and support to small and medium sized industries yet this sector is battling with many problems and hurdles in the way of development. Some of the problems are as given below:

1. Problems of Finance :

   As we know that finance is one of the basic requirement of any business or industry. In every developing country, the small sector industry has to face this problem, due to the scarcity of capital in the country as a whole. At the same time, the small set up makes it difficult to get financial assistance from other sources because of weak credit worthiness. In such situations these units are bound to take money at high rate of interest.

2. Problems of Raw Materials:

   Availability of raw material at an affordable cost is also a major problem of small scale industry. The problem of raw material has assumed the shape of.

• An absolute scarcity
• poor quality of raw materials
• high cost
• monopoly of supplier of raw materials.

The small units using imported raw materials face this problem with more severity mainly due to difficulty in obtaining this raw material either on account of the foreign exchange crisis or some of other reasons.

3. Problems of Marketing:

   Marketing is the great aspect of modern business. Small scale sector often does not possess an organised marketing unit attached with it. Therefore, the products of small-industries usually become out of demand of customer.

4. Deficiency of Managerial and Technical Skills:

   One of the major problems of small scale units is the deficiency of managerial and technical skills. With small paying capacities these units cannot hire highly skilled individuals.

Important links

• Venture Capital- Meaning, Stages, Sources & Guidelines
• Specialised Venture Capital Fund/Companies in India
• Small Scale Industries (SSI)- Meaning & Importance
• Small Scale Industries- “Problems & Remedial Measures”
• Financial management- Meaning, Characteristics and Objectives
• Project Management- Meaning, Characteristics, Functions
• Opportunity Analysis- Meaning & Types
• Factors Determining Capital Gearing

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