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Small Scale Industry: DR Neelam Khanna Assistant Professor

Small Scale Industries (SSI) are defined as businesses that produce goods or services on a smaller scale, typically requiring lower capital investment and employing fewer people. They play a significant role in economic growth by generating employment, promoting entrepreneurship, and utilizing local resources. However, SSIs face challenges such as limited access to finance, competition from larger industries, and the need for government support to thrive.

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0% found this document useful (0 votes)
14 views19 pages

Small Scale Industry: DR Neelam Khanna Assistant Professor

Small Scale Industries (SSI) are defined as businesses that produce goods or services on a smaller scale, typically requiring lower capital investment and employing fewer people. They play a significant role in economic growth by generating employment, promoting entrepreneurship, and utilizing local resources. However, SSIs face challenges such as limited access to finance, competition from larger industries, and the need for government support to thrive.

Uploaded by

rishiparkash
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Small Scale Industry

Dr Neelam Khanna
Assistant Professor
MMIM, MULLANA
Concept of Small Scale Industry (SSI)
Small Scale Industries (SSI) refer to businesses or industrial units
that are engaged in the production or manufacture of goods and
services on a relatively smaller scale compared to large industries.
The size of the industry is often measured by factors like
investment in plant and machinery, annual turnover, and workforce
strength. In India, the definition of SSI is often linked to the
investment in machinery or equipment:
• Micro: Investment in plant and machinery does not exceed Rs. 1
crore.
• Small: Investment in plant and machinery is between Rs. 1 crore
to Rs. 10 crore.
• Medium: Investment is between Rs. 10 crore to Rs. 50 crore.
Small scale industries typically have a small workforce and
contribute to the growth of the local economy by promoting
employment, entrepreneurship, and sustainable development.
These industries include a wide range of sectors like
manufacturing, food processing, handicrafts, textiles, etc.
Overview of Small Scale Industry (SSI)
A Small Scale Industry (SSI) is a type of industrial unit that
produces goods or services on a relatively small scale compared to
large industries. These industries play a significant role in a
country’s economy by promoting employment, entrepreneurship,
and local economic development.
Key Characteristics of Small Scale Industries:
1. Investment: SSIs typically require lower capital investment in
machinery, plant, and equipment compared to large industries.
In India, industries that invest less than Rs. 10 crore in plant
and machinery (as per revised guidelines) are considered small-
scale.
2. Size of Operations: They usually operate on a smaller scale
with fewer employees, often from one location or a small
factory.
3. Products and Services: SSIs produce a wide variety of goods
and services, such as textiles, food products, electronics,
chemicals, and more.
4. Limited Resources: They often rely on local resources and
raw materials and may face challenges in securing large-scale
finance, technology, or marketing.
Importance of Small Scale Industries
1. Employment Generation: SSIs are labor-intensive and can
provide employment opportunities to a large number of people,
especially in rural and semi-urban areas.
2. Economic Growth: These industries contribute to the national
economy by producing goods for both domestic and
international markets.
3. Promoting Entrepreneurship: They provide a platform for
individual entrepreneurs to start and run their own businesses.
4. Utilization of Local Resources: SSIs help in utilizing local
resources and materials, contributing to the local economy.
Example of Small Scale Industries:
1. Textile and Garment Manufacturing: Many small-scale units
in India are engaged in manufacturing textiles and garments.
These industries often operate in clusters, producing traditional
textiles, garments, and fabrics like khadi, cotton, and silk.
Example: A small-scale textile unit in a village producing
handmade garments for local and regional markets.
2. Food Processing: Small-scale food processing industries, such
as packaging and processing of spices, dairy products, snacks, and
pickles, are popular in India. These industries usually cater to local
demand.
Example: A small-scale factory producing packaged spices or
snacks like namkeen, chips, or sweets for regional markets.
Example of Small Scale Industries:
3. Handicrafts and Traditional Products: A large number of
artisans across India work in small-scale industries to produce
handmade crafts, pottery, jewelry, and other traditional items.
Example: A small enterprise manufacturing wooden furniture or
handmade carpets, providing employment to local artisans.
4. Electronics Assembly: Small industries may also engage in
the assembly of electronic products or parts, such as mobile
phones, LED lights, or other consumer electronics.
Example: A small-scale unit assembling mobile phone components
and accessories.
5. Plastic Products Manufacturing: Many small-scale units
are engaged in the production of plastic products like bottles,
containers, or plastic household items.
Example: A small plastic manufacturing unit producing
household items such as containers, chairs, and storage
products.
Benefits of Small Scale Industries:
1. Flexibility: SSIs have greater flexibility and adaptability to
changing market demands and technological advancements.
2. Lower Production Costs: With lower operational costs and
fewer overheads, SSIs can often offer products at competitive
prices.
3. Development of Rural Areas: Small-scale industries help in
promoting economic activities in rural and remote areas,
reducing migration to cities.
4. Government Support: Various schemes from the government
provide financial and technical assistance, including tax
exemptions and subsidies, to support SSIs.
Challenges Faced by Small Scale Industries:
1. Limited Capital: Limited access to finance and capital can
hinder growth and expansion.
2. Competition from Large Industries: SSIs often face tough
competition from large industries that benefit from economies
of scale and advanced technology.
3. Lack of Modern Technology: Small industries may struggle
to keep up with technological advancements due to limited
resources.
4. Marketing Issues: Small scale industries may find it difficult
to expand their market reach due to inadequate marketing
strategies and resources.
How to Start a Small Scale Industry (SSI)
1.Market Research and Business Plan:
Conduct thorough market research to identify the demand, competition, target
audience, and business feasibility.
Prepare a detailed business plan that includes your product or service offering,
marketing strategies, financial projections, and operational requirements.
2.Choose the Right Location:
Select a location that is strategically located to ensure easy access to
suppliers, transportation, and your target market.
3. Capital Requirement:
Assess the capital investment required for setting up the business. This
includes costs for machinery, equipment, labor, raw materials, and
infrastructure.
You may need to seek funding from banks, financial institutions, or government
schemes for small scale industries.
How to Start a Small Scale Industry (SSI)
4. Legal Structure:
Choose the legal structure for your business (e.g., sole
proprietorship, partnership, or private limited company). This will
define your liabilities, tax obligations, and ownership structure.
5.Register the Business:
Register your business with the appropriate local authorities. If it's a
sole proprietorship or partnership, you may not need to register with
the Ministry of Corporate Affairs, but you will still need to comply
with various local and state government regulations.
6. Obtain Licenses and Permits:
Depending on the nature of the industry, you may need licenses like
GST registration, trade licenses, pollution control clearances, and
fire safety approvals.
How to Start a Small Scale Industry (SSI)
7. Set Up Manufacturing and Supply Chain:
Procure the necessary machinery, hire labor, and set up your
production or service facilities. Ensure that your supply chain is
robust and efficient.
8. Marketing and Sales:
Develop a marketing strategy to promote your products or
services. This could involve local advertising, social media
marketing, and attending industry trade fairs or exhibitions.
9. Ensure Compliance:
Ensure that your business complies with environmental, health,
and safety regulations. Regular inspections and certifications may
be required.
Procedure for Registration of Small Scale Industry (SSI)
1. Obtain Udyog Aadhar Registration (For MSMEs in India):
This is the most crucial step for registering an SSI in India. The
Udyog Aadhar registration allows small businesses to access
various government schemes and benefits.
Visit the official Udyog Aadhar portal
(https://udyogaadhaar.gov.in/) and fill out the online registration
form with details about the business, its owners, and nature of the
business.
Provide documents like PAN card, address proof, and Aadhaar card
for the registration process.
Procedure for Registration of Small Scale Industry (SSI)
2. Register for GST:
If your turnover exceeds the prescribed limit (Rs. 40 lakh for
goods, Rs. 20 lakh for services), you must obtain GST registration.
This allows you to collect taxes and claim input tax credit.
3 Apply for MSME Registration:
While Udyog Aadhar serves as a simplified registration process for
small businesses, MSME registration is another option for availing
various government subsidies, financial assistance, and benefits
under the Micro, Small, and Medium Enterprises Development
(MSMED) Act.
MSME registration is not mandatory but recommended for small
scale industries to avail of government schemes like financial aid,
tax relief, and special packages.
Procedure for Registration of Small Scale Industry (SSI)
4. Apply for Other Relevant Licenses:
Depending on the type of industry, you may need additional
licenses like Factory License, Food Safety and Standards Authority
of India (FSSAI) License (for food products), Pollution Control
License, etc.
5. Open a Bank Account:
Open a business bank account in the name of your company or
business to manage financial transactions.
6. Register with ESI/EPF (if applicable):
If your industry employs 20 or more employees, you will need to
register for the Employees’ State Insurance (ESI) and Employees’
Provident Fund (EPF) schemes for employee welfare.
Additional Government Support for Small Scale Industries
1. Credit and Finance: The government provides schemes like
the Credit Guarantee Fund Trust for Micro and Small
Enterprises (CGTMSE) to assist small industries with financing.
2. Subsidies and Incentives: Various state and central
government programs provide subsidies, interest rate
reductions, and tax incentives for small businesses.
3. Technology Upgradation: Some schemes provide financial
assistance for technology upgradation and modernization.
Conclusion:
Small Scale Industries (SSIs) are crucial to the development of the
economy. They contribute to the creation of jobs, production of
goods, and the development of local economies. However, for
these industries to thrive, they need government support, better
access to technology, and a good business environment.
Understanding the importance and challenges of SSIs can help
students appreciate the value of small businesses and the
entrepreneurial spirit.
Concept of Ancillary Industrial Undertaking
Ancillary industries are those which provide goods or services
to a larger industry. An ancillary industrial undertaking
supports the operations of a larger company by supplying raw
materials, components, parts, or services. The primary goal is
to act as a supplementary or supporting industry to a major
industrial concern.
• Example: A company manufacturing parts for car makers or
supplying raw materials to a steel factory is an ancillary unit.
Ancillary units typically work in close collaboration with large
industries, and the larger firms often rely on them for
continuous supply of components or services.

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