Importance Of Small Scale Industries In Indian Economy 52555l

Importance of Small Scale Industries in Indian Economy The Small Scale Sector is the natural habitat of entrepreneurs. Most entrepreneurs start small and then nurture their units into large industries. The SSI Sector provides an opportunity for them to hone their skills and talents, to experiment, to innovate and transform their ideas into goods and services needed by the society. Over the last six decades the Small Scale Industry sector has emerged as a highly vibrant and dynamic sector. It has acquired a prominent place in the socioeconomic development of the country. Mostly this sector exhibited positive growth trends even during periods when other sectors of the economy experienced either negative or nominal growth. Today this sector s for 95 percent of the industrial units, provides nearly 80 percent of manufacturing employment and contributes around 35 percent of exports. It produces 7500 items and provides employment to more than 195 lakh persons. It is a well-recognised fact that a vibrant small-scale sector holds the keyto economic prosperity in an economy like India. Profile of SSI Sector in India • • • • • • • •

95% of Industrial Units in the Country 39.92% of Value Added in the Manufacturing Sector 34.29% of National Exports 6.86% of Gross Domestic Product Employment To 193 Lakh Persons Production of Over 7500 Items in the Industrial Sector 298 Items Reserved for Exclusive Manufacture 358 Items for Exclusive Purchase from This Sector

Small business has played a very crucial role in transforming the Indian economy from a backward agrarian economy to its present stature. Its benefits range from creating job opportunities for millions of people, including many with low levels of formal education. It has nurtured the inherent entrepreneurial spirit in far flung corners of the nation resulting in the growth and development of all regions. It has been instrumental in raising the standard of living of the multitudes. The small scale sector has contributed specifically in the following areas: 1. Employment Generation: The SSI sector in India is the second largest manpower employer in the country next only to the agriculture sector. India is characterized by abundant labour supply and is plagued by unemployment and underemployment. Under these circumstances the small-scale sector is a boon .For every Rs.0.1million of investment, the small-scale sector provides jobs to 26 people as compared to 4 jobs created in the large-scale sector. 2. Low Initial Capital Investment: Another feature of the Indian economy and most of the developing economies is the scarcity of capital. The modern largescale sector requires colossal investments whereas the small sector is just the opposite. Not only is the employment capital ratio high for the SSI but the output capital ratio is also high. 3. Balanced Regional Development: Dispersion of small business in all parts of the country helps in removing regional imbalances by promoting decentralized development of industries. It helps in industrialization of rural and backward areas. It also helps to reduce problems of congestion, pollution, housing, sanitation etc.

4. Equitable Distribution of Income: This is a natural corollary of the above. When entrepreneurial talent is tapped in different regions and areas the income is also distributed instead of being concentrated in the hands of a few individuals or business families. 5. Promotes Inter-Sectoral Linkages: SSI units are supplementary and complementary to large and medium scale units as ancillary units. Many small units produce sub-parts, assemblies, components and accessories for the largescale sector especially in the electronic and automotive sectors. 6. Exports: The most significant contribution of the SSI has been in the field of exports. There has been a significant increase in the exports from this sector of both traditional and nontraditional goods including jewellery, garments, leather, hand tools, engineering goods, soft ware etc. 7. Development of Entrepreneurship: Small business taps the latent potential available locally. This way they facilitate the spirit of enterprise, which results in overall growth, and development of all the regions /sectors of the nation.