Small scale industries are generally industries which are more labour intensive than big organizations.
A small scale industry is defined as “a unit engaged in manufacturing, repairing, processing and presentation of goods having investment in plant and machinery at an original cost not exceeding Rs. 1 crore.”
Small scale industries consists of industrial projects setup on a small scale, which produce goods with the help of small machines, power, hired labour and have a capital investment of less than Rs 1 crore.
Characteristics of Small scale industries
Financial Aspects →
- Capital requirement at the beginning is very low
- Fixed assets form the biggest component of investment
- Owners are profit conscious and try to keep high margins in their pricing
- Due to cash flow problems workers tend to involve in corruption, financial irregularities and siphoning of funds by partners
- Owners usually avoid paying taxes, P.F. And other statutory obligations
Human Resource Aspects →
- Most of Small scale industries have less than 50 employees
- Mostly owned by a single person, therefore, there is dictatorial tendency and employee welfare is neglected
- Merit is not given importance and recruitment is done on the basis of suggestions from friends and relatives
- Exploitation of human resources is very common
- There is no scope for trade unions as workers are very poor, unorganized and worried about job security
General Aspects →
- Very few SSI have good infrastructural facilities
- Lack work load due to dependence on big industries for major work
- They are negligent about pollutants and safety aspects
- Training and development is not taken up
- Lack of growth due to lack of motivation, innovation and financial management
- Infant mortality of Small scale industries is very high
- They lack skilled labour
- Small scale industries have problems in marketing, loans, payments colection
- Require local or indigenous resources
- Ownership is generally with one person
- They are generally setup in Rural and Semi-urban Areas
- Generally use old age technology and traditional production methods
- They have a Short Gestation period
Difference between Small Scale Industries and Large scale Industries
| Small Scale Industries | Large Scale Industries |
| They are registered as SSI with the directors of industries, state or union territory | They are subjected to licenses and registration according to IDRA |
| Government intervention is less in SSI`s | Government intervention is more than SSI`s |
| Capital investment does not exceed 1 crore | Capital investment generally exceeds 5 crore |
| Sole proprietary or partnership | They are generally in form of a company |
| Less capital intensive and more labour intensive | More capital intensive and have high input of technology |
| They are set up in rural and semi urban areas and have poor infrastructural facilities | Metropolitan and urban areas |
| Use old age Management tools and techniques | They have exposure to professional management tools and techniques |
| They cater to the needs of local people | They are market oriented i.e. produce goods for masses |
| Generally an unskilled labour performs almost all the tasks | All tasks are performed by a chain in specialized and skilled people |
| Gestation period is short | Gestation period is long |
Advantages of Small Scale Industries
- SSI require a small investment to start in terms of finance, space, manpower and production
- It has a short gestation period of about 2-6 months
- It generates employment with less investment
- It utilizes of local and indigenous resources
- It compliments big industries and new projects
- It requires less paper work and only few regulatory procedures are to be followed
- Small Scale Industries are eligible for subsidies and concessions from government
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