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2. SMALL BUSINESS
Small Scale Industry in the Indian Economy
Development
Small businesses / small-scale industrial units
are playing an important role in the economic
development of any nation. Although it is not
generally recognized, this segment of our economy
includes some of the dynamic, profitable and
interesting firms. In India, there are 32.25 lakhs small- scale industrial units / businesses in the SSI sector,
employing 177.30 lakh persons (1999-2000). The
output of this sector is around Rs.5, 78,470 crores. The
export amounted to Rs.53, 975 crores. SSIs contribute
up to 40 per cent of gross turnover in manufacturing
sector, 45% of the manufacturing exports and 35% of
the total exports. SSI sector, contributes 7% of the
GDP. During this era of economic liberalization, the
growth of the SSI sector is rather quite perceptible.
Definition of Small Scale Industry
There is no generally accepted definition of a
‘small business’. The definitions vary all the way
from country to country and Government-to- Government in a country. The following are some of
the definitions.
In the USA, in the Small Business Act 1953,
congress defined a small business as one that is
independently owned and operated and which is not
dominant in its field of operation.
In India, the Department of Small Scale and
Agro and Rural Industries considered small
businesses as a sector and given the following
definitions.
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1. Small Scale Industrial Undertaking
An industrial undertaking in which the
investment in fixed assets in Plant and Machinery,
whether held in ownership terms or on lease or by
hire purchase, does not exceed Rs.100 lakhs is called a
Small Scale Industrial Undertaking.
2. Ancillary Industrial Undertaking
An industrial undertaking which is engaged
or proposed to be engaged in the manufacture or
production of parts, components, sub-assemblies,
tooling or intermediates or the rendering of services
and the undertaking supplies or renders or proposes
to supply or render not less than 50% of its
production or services as the case may be to one or
more other industrial undertakings and whose
investment in fixed assets in Plant and Machinery,
whether held on ownership terms or on lease or on by
hire purchase does not exceed Rs.100 lakhs is called
an Ancillary Industrial Undertaking.
3. Tiny Enterprises
All small-scale units with investment limit in
Plant and Machinery up to Rs.25 lakhs irrespective of
the location of the unit are called tiny enterprises.
4. Export Oriented Units
Units having fixed assets in Plant and
Machinery not exceeding Rs.100 lakhs and which
undertake to export at least 30% of its current
production by the end of 3rd year from the date of its
commencing of production are called Export Oriented
Units (EOU).
5. Small Scale (Industrial related) Service and
Business Enterprises (SSSBE)
Industry related Service and Business
Enterprises with investment up to Rs.5 lakhs in fixed
assets excluding Land and Building are called Small
scale (Industry related) Service and Business
Enterprises (SSSBE).
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6. Women Enterprises
Women enterprises are those small-scale
units, where one or more women entrepreneurs have
not less than 51% of financial holding. Such units are
given more concessions and encouragement.
7. Village and Small Scale Industries (24.12.1999)
Power looms ---------------------- Modern
segment
Khadi and Village industries
Handlooms
Sericulture Traditional
segment
Handicrafts
Coir units
Objectives of A Small Business
Objectives are the ends towards which all the
activities of the organization are directed.
1. Service
2. Profit
3. Community participation
4. Growth
5. Subsidiaries
Characteristics
The above definitions exhibit the following
characteristics associated with small business and
small-scale units.
1. Characterized by smallness
2. Involves lesser capital
3. Mostly one man venture
4. They are highly diversified – wide range
of products
5. Wide dispersal geographically
Importance
There are a number of reasons why smaller
firms are of importance to our economy.