Subject Name Management and Entrepreneurship Subject Code 10
Subject Name: Management and Entrepreneurship Subject Code: 10 AL 51 Prepared By: Mrs. Kala & Mrs. Robina Gujral Bagga Department: ECE Date : 10/11/2014 1/11/2022
MODULE 6 SMALL SCALE INDUSTRY 1/11/2022
TOPICS COVERED • To understand the meaning and significance of small scale industry. • To understand the role of SSI in economic development. • To understand different government policies towards SSI. • To understand the impact of liberalization, Privatization, globalization on SSI • To understand the meaning of Ancillary industry and Tiny industry. 1/11/2022
SMALL SCALE INDUSTRIES In most of the developing countries like India, Small Scale Industries(SSI) constitute an important and crucial segment of the industrial sector. They play an important role in employment creation, resource utilisation and income generation and helping to promote changes in a gradual and phased manner. They have been given an important place in the framework of Indian planning since beginning both for economic and ideological reasons. The reasons are obvious. 1/11/2022
DEFINITION: SMALL SCALE INDUSTRIES • • • CONVENTIONAL DEFINITION: • A SSI includes cottage and handicraft industries that employ conventional labour-oriented methods to produce conventional products, mainly in rural areas. Examples: -handloom and handicrafts. OPERATIONAL DEFINITION: • A SSI includes all the undertakings having an investment in fixed assets in plant and machinery, whether held or ownership terms or by lease or hirepurchase, not exceeding Rs. 60 Lakhs. Examples: -Ancillary and Tiny units. NATIONAL INCOME ACCOUNTING DEFINITION: • A SSI is defined as a unit engaged in manufacturing, servicing and preservation of goods having investment in plant and machinery, at an original cost not exceeding Rs. 60 Lakhs. 1/11/2022
Table showing the evolution of legal concept of SSI: YEAR 1/11/2022 CEILING LIMIT FOR SSI 1950 Capital assets upto Rs. 5 lakhs 1958 Capital investment upto Rs. 5 lakhs 1960 Gross value of fixed asset up to Rs. 5 Lakhs was called as SSI. 1966 Value of plant and machinery upto Rs. 7. 5 Lakhs 1975 The investment limit was rise to Rs. 10 Lakhs (15 Lakhs for ancillary units). 1980 The investment limit was rise to Rs. 20 Lakhs (25 Lakhs for ancillary units). 1985 The investment limit was rise to Rs. 35 Lakhs (45 Lakhs for ancillary units). 1991 The investment limit was rise to Rs. 60 Lakhs (75 Lakhs for ancillary units). 1997 The investment limit was raised to Rs. 3 Crore.
CHARACTERISTICS OF SSIs • Following are the characteristics of some industries which identify them as smallscale industries: 1. Labour intensive: – Small-scale industries are fairly labour-intensive. They provide an economic solution by creating employment opportunities in urban and rural areas at a relatively low cost of capital investment. 2. Flexibility: – Small-scale industries adopt quickly to various factors that play a large part in daily management. Their flexibility makes them best suited to constantly changing environment. 3. One-manshow: – A small-scale unit is generally a one-man show. It is mostly set up by individuals. Even some small units are run by partnership firm or company, the activities are mainly carried out by one of the partners or directors. Therefore, ' they provide an outlet for expression of the entrepreneurial spirit. As they are their own boss, the decision making process is fast and at times more innovative. 4. Use of indigenous raw materials: – Small-scale industries use indigenous raw materials and promote intermediate and capital goods. They contribute to faster balanced economic growth in a transitional economy through decentralisation and dispersal of industries in the local areas. 1/11/2022
CHARACTERISTICS OF SSIs Cond. . 5. Localised operation: – Small-scale industries generally restrict their operation to local areas in order to meet the local and regional demands of the people. They cannot enlarge their business activities due to limited resources. 6. Lesser gestation period: – Gestation period is the period after which the return or investment starts. It is the time period between setting the units and commencement of production. Small-scale industries usually have a lesser gestation period than large industries. This helps the entrepreneur to earn after a short period of time. Capital will not be blocked for a longer period. 7. Educational level: – The educational level of the employees of small industries is normally low or moderate. Hardly there is any need of specialised knowledge and skill to operate and manage the SSI. 8. Profit motive: – The owners of small industries are too much profit conscious. They always try to keep high margins in their pricing. This is one of the reason for which the unit may lead to closure. 1/11/2022
NEED AND RATIONALE OF SSIs • Employment rationale. • Equality rationale. • Latent resource rationale. • Decentralization rationale. • Allocation efficiency rationale. 1/11/2022
OBJECTIVES OF SSIs • • To generate immediate and large scale employment opportunities with relatively low investment. To eradicate unemployment problem from the country. To encourage dispersal of industries to all over country covering small towns, villages and economically lagging regions. To bring backward areas too, in the main stream of national development. To promote balanced regional development in the whole country. To ensure more equitable distribution of national income. To encourage effective mobilization of country’s untapped resources. To improve the standard of living of people in the country. 1/11/2022
ROLE OF SSI IN ECONOMIC DEVELOPMENT. • Elimination of economic backwardness of rural and underdeveloped regions in the country. • Reduction of regional imbalances. • Reduction of disparities in income, wealth and consumption. • Providing import substitution, thus saving scarce foreign exchange. • Creation of greater employment opportunities. 1/11/2022
ADVANTAGES OF SSI • SSI can be started with lesser investment. • The element of risk is too less. • It depends on local resources and there is lesser problem regarding their availability. • SSI provides opportunities for experimentation. • SSI units have shorter gestation period. 1/11/2022
SCOPE OF SSIs The scope of small-scale industries is quite vast covering a wide range of activities. The activities which are found particularly amenable can be successfully operated in small scale are too many to mention. Among them the important ones are: – Manufacturing activities – Servicing/repairing activities – Retailing activities – Financial activities – Whole-sale business – Construction activities – Transportation activities – Communication activities. 1/11/2022
SCOPE OF SSIs Cond. . In order to strengthen the scope for small-scale industries, the Government of India has announced reservation policy for small sector in the country. In 1967 only 47 items were reserved for exclusive manufacture in small scale sector. In 1983 the reserved list included 836 items. Presently there are 824 items reserved for exclusive production in small sector. Some of the important items are: • Food and allied industries • Textile products • Leather and leather products • Foot wares • Chemical and chemical products • Glass and ceramics • Electrical appliances • Boats and truck body building • Auto parts components • Survey instruments • Sports goods • Stationery items • Clocks and watches 1/11/2022
STEPS TO STRAT A SSI 1/11/2022
FLOWCHART FOR SETTING UP A SSI 1/11/2022
GOVERNMENT POLICY TOWARDS SSI • Industrial policy resolution 1948 • Industrial policy resolution 1956 • Industrial policy resolution 1977 • Industrial policy resolution 1980 • Industrial policy resolution 1990 • New small enterprise policy 1991 • Industrial policy resolution 2000 • Industrial policy resolution 2001 -2002 • Industrial policy resolution 2003 -04 • Industrial policy resolution 04 -05 • Industrial policy resolution 2005 -06 • Industrial policy resolution 2007 1/11/2022
DIFFERENT POLICIES FOR SSI • Reservation policy • Governments purchase preference policy. • Governments price preference policy. • Technical assistance. • Raw material assistance. • Financial assistance. 1/11/2022
Governmental Support to Small Scale Enterprises : • Immediately after independence, Government of India initiated various steps for promotion & development of Small Scale & Cottage Industries. Government of India has attached great importance to the development of Small Enterprises Sector in all the Five Year Plans since the beginning in 1951. 1/11/2022
FIVE YEAR PLANS • In the First Five Year Plan (1951 – 56), Rs 48 Crores constituting 47. 8% of the Total Plan Expenditure was spent in Small Scale Sector alone. By the end of First Five Year Plan, there were Six Statutory Boards created to help the Small Scale Sector. These are : a) All India Handloom Board. b) All India Handicrafts Board. c) All India Khadi & Village Industries Board. d) Small Scale Industries Board. e) Coir Board. f) Central Silk Board. 1/11/2022
Five Year Plans Cond. . • Second Five Year Plan (1956 – 61) focused on dispersal of Industries to all the regions in the Country. Accordingly, 60 Industrial Estates were established in different regions providing various infrastructural facilities like Power, Water, Transport etc. , at one place. The total expenditure was 187 Crores. • The Third Five Year Plan (1961 – 66) stressed on extension of Coverage of Small Scale Industries. The total expenditure on Small Scale Sector was Rs. 248 Crores. • The Fourth Five Year Plan (1969 – 73) Small Scale Sector witnessed significant Diversification & Expansion. By the end of 1973, as many as 346 Industrial Estates had been established & Small Scale Sector provides employment to about 82, 700 Persons. • The Fifth Five Year Plan (1974 – 78) outlay was Rs 611 Crores, whereas the actual expenditure on Small Scale Sector amounted to Rs. 592 Crores. 1/11/2022
Five Year Plans Cond. . During Sixth Five Year Plan (1980 – 1985), massive development programs were initiated by the development of most promising Small – Scale Industrial Sector. Expenditure occurred in this Plan was Rs. 1945 Crores exceeding the Outlay of Rs. 1780 Crores. Some of the important programs implemented during Sixth Five Year Plan are as under: 1) List of items reserved for exclusive production in Small Scale Industrial Sector increased to 836. 2) 409 items were reserved for exclusive purchase from Small Scale Industries. 3) Provision of Consultancy Services in Technical , Managerial etc. thro SIDO (Small Industries Development Organization). 4) For providing necessary Technical Input to Rural Industries, Council for Advancement of Rural Technology (CART) was established in October 1982. By the end of 6 th Five Year Plan the Annual Production of SSI’s was Rs. 65, 370 Crores, Exports touched Rs. 4557 Crores, employment reached to 31. 5 Lakh Persons, accounting for 80 % of the Total Industrial Employment next only to employment in Agricultural Sector. 1/11/2022
Five Year Plans Cond. . • Seventh Five Year Plan (1985 – 90) gave a lot of importance for Technology Up gradation to increase Competitiveness of Small Scale Industrial Sector. The actual expenditure during Seventh Plan was Rs. 3249 Crores & exceeded the plan outlay of Rs. 2753 Crores. Due to this, various development programs, the Small Scale Industrial Sector witnessed significant development in all fronts. Employed increased substantially from 96 Lakh persons to 119. 6 Lakh persons during the Seventh Plan period. • The Eighth Five Year Plan (1992 – 1997) gave a lot of stress on Employment generation as the motive force for economic growth. As a result the number of Small Scale Units increased from 13. 56 lakh to 18. 27 Lakh. The value of Annual Production increased to Rs. 91, 681 Crores. The total expenditure in Eight Plan on Small Scale Sector was Rs. 6334 Crores. 1/11/2022
IMPACT OF LIBERALIZATION, PRIVATIZATION, AND GLOBALIZTON FOR SMALL SCALE INDUSTRY. • De-reservation of products. • Lowering of tariffs. • Reduction of import duties. • Discontinuation of incentives / concessions. • Relaxation in foreign equity rules for attracting higher foreign investment in competing sectors. • Application of environmental standards ISO 14001 • Transparency in government procurement. 1/11/2022
General Agreement on Tariffs and Trade (GATT) • The GATT was a multilateral agreement regulating international trade. • Its purpose was the "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis. " • It was negotiated during the United Nations Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organisation (ITO). • GATT was signed in 1947, took effect in 1948, and lasted until 1994. • The challenges faced by GATT are: • E-Commerce • Agricultural Commodities • Political and regional forces on trade and industry • Development of backward regions. 1/11/2022
WORLD TRADE ORGANIZATION (WTO) • • • The World Trade Organization (WTO) was established on 1 st January 1995. When the GATT came into WTO‘s umbrella, it has annexes dealing with specific sectors such as agriculture and textiles, and with specific issues such as State Trading, Product Standards, Subsidies and Actions taken against dumping. The WTO has 148 members, accounting for over 97% of world trade. Around 30 others are negotiating membership. WTO aims to develop the country‘s economy by encouraging its export among the member countries. Further, it facilitates for availing new technologies from various countries at a lower cost. 1/11/2022
EFFECT OF GATT/WTO • Benefits from reduction of tariffs on exports. • Improved prospects for agricultural exports because the prices of agricultural products in the world market will increase due to reduction to domestic subsidies and barriers to trade. • Advantages from greater security and predictability of the international trading system. • Benefits from international trade centre jointly operated by WTO and the United nations. • Compulsory imposed to be competitive in the world market 1/11/2022
SUPPORTING AGENCIES OF GOVERNMENT FOR SMALL SCALE INDUSTRY Meaning and Nature of Support Agencies • A number of measures have been taken by state and central government to support the SSIs and to protect the same from on slot of large scale sector. • Measures taken by the government agencies from time to time include : q. Reservations q increasing credit flows, qpreference in government purchases qmodernization, qtechnology upgradation q. Marketing. 1/11/2022
VARIOUS GOVERNMENT AGENCIES SUPPORTING SSI, THEIR OBJECTIVES AND FUNCTIONS. • Small industrial development organization(SIDO)- Apex body and nodal agency for SSI promotion. • National small industries corporation(NSIC)- Marketing, Machinery on hire purchase, export assistance. • National institute of small industries extension training (NISIET)- Research, Training etc. • Small industries development bank of India(SIDBI)- Financial assistance. • Small Industries Development corporation- Promotion of SSI through industrial estates. • District level centre- Provision of multiple service and support under a single roof. 1/11/2022
ANCILLARY INDUSTRY AND TINY INDUSTRY • Ancillary Industry – It is defined a unit having investment in fixed assets in plant and machinery not exceeding 75 lakhs and engaged in the manufacture of parts, components, sub-assemblies, tooling or intermediates of the rendering of services. • Tiny Industry- Industrial policy resolution of 1977 recognised tiny sector with a view to effectively promote cottage and small scale industries of rural areas and small towns. All industries with a capital investment of 5 lakhs in plant and machinery and located in rural areas and small towns are included in the tiny sector. 1/11/2022
- Slides: 30