STRUCTURE

Introduction – A short introduction to small scale industries (15 words)                     

Body – Explain the importance of small scale industries in Indian Rural Economy (220 words)

Conclusion – Mention a short conclusion  (15 words)

ANSWER

• Previously, the definition of small scale industries depended upon the business’s capital and labour. This definition is still used to demarcate between small, medium and large-scale industries.

• The Central Government has the authority to determine capital investment requirements for small-scale industries. These requirements are listed under the Industries (Development and Regulation) Act, 1951.

• A small enterprise in which investment in plant & machinery ranges between Rs. 25 lakhs to Rs. 5 crores is a small-scale industry.

• Similarly, for industries that provide services, the investment requirement is between Rs. 10 lakhs and Rs. 2 crores.

The following are some specific roles that SSIs play in the Indian economy:

1. SSI Increases Production

• India is one of the world’s fastest growing economies in the world. Consequently, its production output is massive. It is pertinent to note that SSIs contribute almost 40% of India’s gross industrial value.

• These industries produce goods and services worth over Rs. 40 lakhs for every investment of Rs. 10 lakhs. Furthermore, the value addition in this output increases by over 10%.

• Here is another interesting statistic about Small scale industries. The number of Small Scale Industries in India increased from around 8 lakhs in 1980 to over 30 lakhs in 2000.

• This figure has grown even more in recent years owing to the government’s ‘Ease of Doing Business’ policies.

• As a result of this, the total industrial production output rose tremendously in the last few years. SSIs are, therefore, strongly responsible for the growth of India’s economy.

2. SSI Increases Export

• Apart from producing more goods and services, SSIs have been able to export them in large numbers as well.

• Almost half of India’s total exports these days come from small-scale businesses.

• 35% of the total exports account for direct exports by SSIs, while indirect exports amount to 15%.

• Even trading houses and merchants help SSIs export their goods and services to foreign countries.

3. SSI Improves Employment Rate

• It is important to note firstly that Small Scale Industries employs more people than all industries after agriculture.

• Almost four persons can get full employment if Rs. 10 lakhs are invested in fixed assets of small-scale sectors.

• Furthermore, SSIs employ people in urban as well as rural areas.

• Consequently, this distributes employment patterns in all parts of the country and prevents unemployment crisis.

4. SSI Open New Opportunities

• Small-scale industries offer several advantages and opportunities for investments.

• For example, they receive many tax benefits and rebates from the government. The opportunity to earn profits from SSIs are big due to many reasons.

• Firstly, SSIs are less capital intensive. They even receive financial support and funding easily.

• Secondly, procuring manpower and raw materials is also relatively easier for them. Even the government’s export policies favour them heavily.

5. SSI Advances Welfare

• Apart from providing profitable opportunities, Small Scale Industries play a large role in advancing welfare measures in the Indian economy as well.

• A large number of poor and marginalized sections of the population depend on them for their sustenance.

• These industries not only reduce poverty and income inequality but they also raise standards of living of poor people, especially those of rural India. Furthermore, they enable people to make a living with dignity.