Small and cottage industries occupy an important place in the Indian economy. These Industries have a special place in the sphere of employment and economic development. Micro small and medium enterprises are important for achieving the national objective of growth with equity.
That is there should not be an anomalous is enrichment island. For the last many years these Industries have been producing a wide range of commodities for ordinary customer go to sophisticated goods based on the most modern technology like electronic goods,etc. Objective of all plan has been to develop small and cottage industry in the country.
Small scale industries are the ones which according to the new definition given in 2006 manufacturing Enterprises having investment above rupees 25 lacs hand up to rupees 5 crore in plant and machinery. And service Enterprises having investment above rupees 10 lac and up to 2 crore in equipments can also qualified for a small Enterprise.
Often times the term small scale industry is associated with cottage industry however we should know that there is a start difference between a small scale industry and cottage industry. Cottage industries are those industries which are done fully or partially with the help of family members.
Cottage industries and mainly traditional industries which produce traditional goods with the help of traditional techniques. Cottage industries are usually situated in villages however small scale industries are mostly done in urban areas.
Most of the workers engaged in a small scale industry are hired labourer however this is not the case with cottage industry where maximum work force is not hired and is from within the family.
Table of Contents
Importance of small scale industries
- Employment – in 2009, 659 lakh persons were employed in small scale industries. These industries and mainly based on labour intensive technology and generate more employment. Hence, keeping in view the capital deficiency in India and unemployment problems, small scale industries have special significance.
- Equal distribution of wealth – small and cottage industries and instrumental in the equal distribution of income and wealth because in these Industries capital is not concentrated in a few hands and is rather distributed and decentralized.
- Safety – Cottage and small scale industries are dispersed throughout the country and danger of their complete destruction is minimum even in the event of apocalypse and calamities like war. These also avoid the evils of organisation like shortage in cities pollution etc.
Increase in production – of the total production of industrial sector, 55% is from large scale industries and a whopping 45% comes from small and cottage industries.
- Need less capital – small and cottage industries are labour intensive. India is a country where capital is less than labour force is large and so with the capital of about rupees 3 to 4 lacs small scale cottage industries can be started.
- Complementary to large scale industries – small scale industries served as complementary to large scale industries. The producers goods as a used by large scale industries as a mediator raw material goods.
- Role in export – small scale industries have great significance in the export trade of a country. In the year 2009 itself, 45% of total exports are contributed by small scale industries.
Use of local resources – small industries make use of those resources which would have remained and used for want of such industries.
Problems faced by small scale industries
- Problems of raw material – these Industries do not get raw materials inadequate quantity and whenever raw material is available, it’s usually poor in quality and high price.
- Lack of power – these Industries do not get regular power supply and there are frequent power cuts in small scale industries do not have enough capital for a affording in alternate source of energy which is available all the time.
- Problem of finance – these Industries do not get adequate loan facilities as they cannot of a good security because of poverty.
- Old methods of production – these Industries make use of old methods of production mostly which results in quantity fall of output and the goods produced of inferior quality.
- Problem of marketing – these Industries have to face lot of difficulties in selling their goods at a fair price and in sufficient quantity because of many factors like high cost of production, outward appearance, taste of people, no sales promotion organisation and lack of funds.
- Lack of standardization – ISO standardization of finished goods is mandatory for small scale industries as a result of which they do not get a remunerative price of their goods.
Sick units – in India about 85187 small scale units were sick in the year 2010. A sick unit is one which runs under losses.
Steps to encourage and improve small scale industries
- Industrial cooperative societies – small industries in India should organise themselves in industrial cooperative societies which help them to get raw materials in new tools easily because of increase networking and connection.
- Supply of raw materials – special efforts should be made to supply raw materials to small scale industries constantly with special concessions on imported goods by the government.
- Marketing facilities – it is necessary that goods produced by small scale industries are sold in large quantity at remunerative price.
- Credit facility – banks and Financial Institutions should give to liberal loans to these institutions for building a better capital for growth.
- Training -Training Centre should be open to impart knowledge of new techniques.
- Government help – these Industries needful support of the Government and the problems of these Industries can only be solved by the government.
- Publicity and exhibition – to make the goods produced by small industry is more popular extensive publicity through exhibition and trade fairs should be made both within the country and abroad.
- Modernization – since Independence small industries have been reducing several high grade goods like Motor Parts, electric equipments etc. with a view of lowering the cost of production and raising the quality of the products and so modernization of these Industries is urgently called for.