Chapter 02: Small Scale Industry (SSI)

Listen to this post

Entrepreneurship leads to industrialization. A Nation's prosperity can only be created by way of encouraging more people to be become entrepreneurs. One of the most popular forms of business shaped by an entrepreneurial process is small scale industry or SSI. International agencies such as IMF and governments world over are encouraging SSI. India since independence in 1947, has taken many steps to speed up economic growth by formulating encouraging policies towards SSI

Definitions of SSI

An SSI unit is defined based on the following criteria

• Land used/building
• Investment made
• Number of workers employed
• Production process employed ( power/no power)

In 1955, any enterprise within an investment less than Rs. 5 lakhs in land and machine, employing upto 100 workers was treated as SSI. In case SSI is used power ( electric) then the limit on employee strength was 50

With effect from 1997, the investment limit is raised to Rs. 3 Crores

Other definitions of SSI

Conventional definition: includes cottage and handicraft industries that employ conventional labour-oriented methods to produce conventional products mainly in the rural areas. Examples: Handloom, handicrafts

Operational Definition: "all undertakings having an investment in fixed assets in plant and machinery, whether held on ownership terms or lease or hire-purchase, not exceeding Rs. 60 lakhs" is considered a SSI for policy purpose

National Income Accounting : "A Unit engaged in manufacturing, servicing, processing, preservation of goods having investment in plant and machinery, at an original cost not exceeding Rs. 60 Lakhs.

Characteristics of SSI

• Small capital investment
• Owned by a single or at most 2 persons engaged in production
• Mostly family owned
• Work specialization is not well known
• Funded by owner's savings or short term loans
• Face tough competition
• Exploitation of HR and tural resources

Need and Rationale for SSI (why do people and nation need SSI)

• Innovation
• Self-expression and satisfaction
• Caters to Individuals taste and style
• Strengthnes the nation socially, economically
• spread over wide areas

Objectives ( Goals of SSI)

• Employment creation
• Improvement of output, income and better standards of living
• Elimination of economic backwardness
• Import substitution
• reduce regional imbalance