As per Indian industrial Law 1999

“A small scale industry (SSI) is an industrial undertaking in

which the investment in fixed assets in plant & machinery,

whether held on ownership term or on lease or hire

purchase, does not exceed Rs. 10 million ( one crore)”

Note: However, this investment limit is varied by the Government from time to time.

Traditional Industries Such as

1) Khadi

2) Handloom

3) Handicrafts

Modern Industries Such as

1) EOU: Export oriented Unit (Exports at least 30% of its production)

2) AIU : Ancillary Industrial Unit (Manufactures parts , accessories, Components

supplies 50% production to large scale industries)

3) TIU : Tiny Industrial Unit ( Investment is limited to Rs. 25 Lakhs)

1) Capital investment is low.

2) Single ownership at most SSI.

3) Usually found in rural and semi urban areas.

4) Involved in production of lighter consumer goods.

5) Generally use local resources for manufacturing.

6) They depend on old technologies.

7) Employs less skilled labors.

8) Tendency of folding up very soon.

Few fields where in, small scale business can be set up

1) Manufacturing 2) Construction 3) Repair/Service

4) Finance 5) Retail 6) Wholesale 7) Public utilities

For the protection of small scale industries, Government

has made a list of 114 items which are reserved. No large

scale industry may produce any of these reserved items.

Such as

1) Leather products 2) Rubber products 3) Stationary

4) Sports goods 5) Printing Presses 6) Pickles 7) Ice creams

Employment generation

Mobilization of resources and

entrepreneurial skill

Equitable distribution of

wealth

Balanced regional development

Supports the growth of large

industries Promotes exports

Improves standard of living

Inspires new entrepreneurs

Promotion of Exports

Provides Employment

or or

Self employment opportunities.

Do not require high technology.

Industries can be located any where.

They use local resources increasing local economy.

Wealth is not concentrated in few hands.

They assist large and medium industries by acting as

ancillaries.

Time of establishment is less.

They help earn and save foreign exchange.

They help in globalizing local skills.

They encourages new entrepreneurs.

Step1: Product Identification

There are two ways of identifying

1) Market Pull: Existing product with market demand will be identified.

2) Technology Push: A new product through R&D can be pushed into market.

Step2 : Arrangement of Finance (Through Partnership, Bank loans, Personal Savings)

Step3: Selecting the location and form of ownership 1) Location on the basis of transportation ,Raw material & man power availability etc.

2) Ownership can be sole, partnership, private limited.

Step 4: Preparation and Registration of project report

As per planning commission of India project report should include following information

1) General information about project

2) Preliminary analysis of alternatives

3) Project description etc

There are two types of Registrations

1) Provisional : Temporary registration to bring unit to existence provided by Directorate of industries.

2) Permanent : This is given once the unit is established.

Step 5 : Procuring Licenses and clearances

There are few Govt organizations to issue license and clearance to permit the business activities

such as Municipal authorities, Pollution control board, Chief inspector of factories etc

Step 6 : Establishing infrastructure and staff recruitment

Step 7 : Procuring Raw Materials, Power and water supply

Step 8 : Starting production and marketing

BAD 1) Competition has increased with the arrival of cheap quality products such as Chinese products.

2) Now there is no restriction to FDI ( Foreign direct investment) which has led to the entry of MNC companies.

Which is a threat to Indian industries.

3) Mobilization of well trained employees to other countries.

GOOD 1) Due to liberalized environment SSIs did not have to face problems today like shortage of finance, Marketing

issues, poor technologies etc

2) Globalization has made world truly flat. Now Indian companies can export goods or set up their own firm in

other countries.

3) Now due to all factor SSIs have changed their strategy more quantity and less quality. Now they are

concentrating over less quantity but more quality products to be acceptable globally.

1) Many import quotas have been removed.

2) Import tariffs ( A tax imposed on imported goods) were reduced.

3) Removal of quantitative restrictions on imports in 2001 and export subsidies

in 2003.

4) Out of 812 reserved and protected items for SSI 586 items were removed.

5) Intellectual property rights are regulated protecting the individual patents.

Since 1947 to develop the economy of India, Government has started 5 years plans

listed below.

Duration

Plan Outlay

(Budget)

Outcome

1951-56

48 Crore

Six boards are established during this plan. 1) All India handloom board

2) All India handicrafts board 3) All India Khadi and Village Industries 4) Small Scale Industries

5) Coir Board 6) Central Silk Board .

1956-61

187 Crore

60 industrial estates were established to provide basic facilities

to SSI

1961-66

248 Crore

Coverage of SSIs is extended

1969-74

242 Crore

Facilities provided are upgraded

1974-79

592 Crore

Growing unemployment is reduced

Duration

Plan Outlay

(Budget)

Outcome

1980-85

1945 Crore

836 products and 409 raw materials were reserved for SSIs.

Consultancy services were initiated.

1985-90

3249 Crore

Technology of SSI is upgraded

1992 - 97

6334 Crore

Training Institutes and infrastructure development centres

established for tiny units.

a) Continuous decline in gross output compared to the previous two

financial years;

b) Delay by more than 12 months in repayment of loan taken from

institutional sources; and

c) Erosion in the net worth to the extent of 50 percent of the net worth during

the previous accounting year.

Irregular

supply of raw

material

Finance

Absence of

organized

marketing

Outdated

Technology

Delay in

payments

Absence of

adequate

infrastructure

Inefficient

Entrepreneurs Zero R&D

NSIC

DIC