SMALL SCALE INDUSTRIES

MSMEs contribute 29 per cent to India's gross domestic product and comprise almost
half of its exports. These units employ over 11 crore workers.
 Small scale industries are those industries in
which the manufacturing, production and
rendering of services are done on a small or
micro scale. These industries make a one-
time investment in machinery, plants, and
DEFINITION & industries, but it does not exceed Rs 1 Crore.

MEANING
(Updated on Jun 05, 2020 - 06:41:05 PM)
• From July, over six crore micro, small and medium
enterprises across the country will be classified on the
basis of the new criteria approved by the government

Read more at:

https://economictimes.indiatimes.com/small-biz/sme-
sector/msmes-to-be-classified-based-on-new-criteria-from-
july/articleshow/76175735.cms?utm_source=contentofinterest&
utm_medium=text&utm_campaign=cppst
• As per the revised criteria, a unit with Rs 50 crore of
investment and Rs 250 crore of turnover will fall under the
'medium' enterprise category
Besides, a manufacturing and services unit with Rs 1 crore of
investment and Rs 5 crore of turnover will be classified as
'micro’
• whereas a unit involving Rs 10 crore of investment and Rs 50
crore of turnover will be categorised as a 'small' enterprise
•
EXISTING
Importance of MSME in India
Importance of MSME

• The Micro, Small and Medium Enterprises (MSME) sector is a very important piece
of India’s legacy economic model and a part of the critical supply chain for products
and services
• This sector is considered as the job creator and plays a crucial role in providing
large-scale employment and industrialization of rural and backward areas
 • Enterprises that are inclusive in this
sector require low capital to start up
new business
• Moreover, it creates a vast
1. It creates opportunity for the unemployed people
to avail. India produces about 1.2
large-scale million graduates per year out of which
the total number of engineers are
employment around 0.8 million
• There is no economy so far that could
provide that large number of freshers in
one year only. MSME is the boon for the
fresh talent in India
 • It is the most significant driver in India

2. Economic contributing to the tune of 8% to GDP.

Considering the contribution of MSME to
manufacturing, exports, and employment,
stability in other sectors are also benefitting from it
• Nowadays, MNCs are buying semi-
terms of finished, and auxiliary products from small
enterprises, for example, buying of

Growth and
clutches and brakes by automobile
companies

leverage
• It is helpful in creating a linkage between
MSME and big companies even after the
implementation of the GST 40% MSME
Exports sector also applied GST Registration that
plays an important role to increase the
government revenue by 11%
 • The inclusive growth is at the top of the

3. agenda of Ministry for Medium, and

small and Medium-sized enterprises for
several years
Encourages • On the other hand, poverty and
deprivation are a deterrent to the
Inclusive development of India
• Besides, it includes marginalized
Growth sections of a society which is a key
challenge lying before the Ministry of
MSME
 • While in the large-scale organizations,
4. Cheap one of the main challenge is to retain
the human resource through an

Labor and effective human resource management

professional manager

minimum
• But, when it comes to MSME, the
requirement of labor is less and it does
not need a highly skilled laborer
overhead • Therefore, the indirect expenses
incurred by the owner is also low
 • MSME can start with limited resources
within the control of the owner. From
this decision making gets easy and
5. Simple efficient
• On the contrary, a large corporation
Management requires a specialist for every
departmental functioning as it has a

Structure for complex organizational structure

• Whereas a small enterprise does not

Enterprises need to hire an external specialist for its

management
• The owner can manage himself
• Hence, it could run single-handedly
6. The main • The signature initiative by the Prime
Minister of India “Make in India” has

role in the been made easy with MSME

• It is taken as a backbone in making this

mission of dream a possibility. In addition, the

government has directed the financial
institution to lend more credit to
“Make in India” enterprises in the MSME sector
 • Essentially the small scale industries are generally
comprised of those industries which manufacture,
produce and render services with the help of small
machines and less manpower

Introduction
• These enterprises must fall under the guidelines,
set by the Government of India
• The SSI’s are the lifeline of the economy,

of SSI especially in developing countries like India

• These industries are generally labour-intensive,
and hence they play an important role in the
creation of employment
• SSI’s are a crucial sector of the economy both
from a financial and social point of view, as they
help with the per capita income and resource
utilisation in the economy
 Bakeries

School stationeries

Water bottles
Examples and Ideas Leather belt
of Small Scale
Industries
Small toys

Paper Bags

Photography

Beauty parlours
Characteristics of SSI

• Ownership: SSI ’s generally are under single ownership. So it can

either be a sole proprietorship or sometimes a partnership
• Management: Generally both the management and the control is
with the owner/owners. Hence the owner is actively involved in the
day-to-day activities of the business
• Labor Intensive: SSI’s dependence on technology is pretty limited.
Hence they tend to use labour and manpower for their production
activities
• Flexibility: SSI’s are more adaptable to their changing business
environment. So in case of amendments or unexpected
developments, they are flexible enough to adapt and carry on,
unlike large industries.
• Limited Reach: Small scale industries have a restricted zone of
operations. Hence, they can meet their local and regional demand.
• Resources utilisation: They use local and readily available
resources which helps the economy fully utilise natural resources
with minimum wastage.
Role in the Indian economy

• Employment: SSI’s are a major source of employment for

developing countries like India. Because of the limited technology
and resource availability, they tend to use labour and manpower for
their production activities
• Total Production: These enterprises account for almost 40% of the
total production of goods and services in India. They are one of the
main reasons for the growth and strengthening of the economy
• Make in India: SSI’s are the best examples for the Make in India
initiative. They focus on the mission to manufacture in India and sell
the products worldwide. This also helps create more demands from
all over the world
• Export contribution: India’s export industry majorly relies on these
small industries for their growth and development
• Nearly half of the goods that are exported from India are
manufactured or produced by these industries
• Public Welfare: These industries have an opportunity to earn
wealth and create employment
• SSI’s are also important for the social growth and development of
our country.
Objectives of SSI

▪ The objectives of the small scale industries are:

▪ To create more employment opportunities.
▪ To help develop the rural and less developed regions of the
economy.
▪ To reduce regional imbalances.
▪ To ensure optimum utilisation of unexploited resources of the
country.
▪ To improve the standard of living of people.
▪ To ensure equal distribution of income and wealth.
• To solve the unemployment problem
• To attain self-reliance
• To adopt the latest technology aimed at producing better quality
products at lower costs
Registration of SSI

• SSI registration is a registration provided by the Ministry of MSME

• A business should obtain SSI registration in order to be eligible for a
number of schemes, subsidies and other incentives provided by the
Government to such SSI’s
• SSI registration can be obtained online too.
Overview of SSI registration
• SSI registration is provided by the Ministry of Micro, Small and
Medium Enterprises through the Directorate of Industries of the
State Government
• The main logic behind the SSI registration is to set up new SSI
businesses in India
• SSI registration helps the business to be eligible for a number of
subsidies given by the Government
• We can also get SSI registration online
Benefits of obtaining SSI registration
• There are various tax rebates offered to SSI’s
• A credit for Minimum Alternate Tax (MAT) is allowed to be carried
forward for up to 15 years instead of 10 years
• There are many government tenders which are only open to the SSI.
• They get easy access to credit.
• Once registered the cost of acquiring a patent, or the cost of setting
up the industry reduces as many rebates and concessions are
available.
• Business registered as SSI are given higher preference for
government license and certification.
Business registered as SSI are given higher
preference for government license and
certification
• To do the registration the SSI owner has to fill a single SSI online
registration form. It can be done in the offline mode as well.
• If a person wants to get registration for more than one industry then
also he/she can opt for an individual SSI registration done.
• To get registered he/she has to fill a single form which is available at
the website.
• The documents required for the SSI registration are Aadhar number,
industry name, address, bank account details and some common
information.
• Here, the person can provide self-certified certificates.
• No registration fees is required for the registration.
• Once the SSI registration form is filled and uploaded, very soon you
will obtain the SSI registration number.
9 Factors Governing the Selection
of a Suitable Form of Ownership
Business Organization
1. NATURE OF This is an
important factor
In small trading
businesses,

BUSINESS having a direct

bearing on the
choice of a form of
professions, and
personal service
trades, sole-

ACTIVITY ownership
proprietorship is
predominant
2. Scale of operations

The second factor that affects the form of

ownership organisation is the scale of
operations.
If the scale of operations of business activities is
small, sole proprietorship is suitable;

If this scale of operations is modest — neither

too small nor too large — partnership is
preferable;
Whereas, in case of large scale of operations, the
company form is advantageous
3. Capital requirements

• Capital is one of the most crucial

factors affecting the choice of a
particular form of ownership
organisation
• Requirement of capital is closely
related to the type of business and
scale of operations
• Enterprises requiring heavy
investment (like iron and steel plants,
medicinal plants, etc.) should be
organised as joint stock companies
 • The degree of control and
management that an
entrepreneur desires to have over
business affects the choice of
ownership organisation
• In sole proprietorship,
ownership, management, and
control are completely fused, and
therefore, the entrepreneur has
complete control over business
• In partnership, management and
control of business is jointly
shared by partners

4. Degree of control and management

5. Degree of risk and
liability

• The size of risk and the willingness of

owners to bear it is an important
consideration in the selection of a
legal form of ownership organisation
• The amount of risk involved in a
business depends, among other, on
the nature and size of business
• Smaller the size of business, smaller
the amount of risk
6. Stability of business

• Stability of business is yet another factor

that governs the choice of an ownership
organisation
• A stable business is preferred by the owners
insofar as it helps him in attracting suppliers
of capital who look for safety of investment
and regular return, and also helps in getting
competent workers and managers who look
for security of service and opportunities of
advancement
• From this point of view, sole proprietorships
are not stable, although no time limit is
placed on them by law
7. Flexibility of
administration

• As far as possible, the form of

organisation chosen should allow
flexibility of administration
• The flexibility of administration is
closely related to the internal
organisation of a business, i.e., the
manner in which organisational
activities are structured into
departments, sections, and units with
a clear definition of authority and
responsibility
8. DIVISION OF
PROFIT

• Profit is the guiding force of private

business and it has a tremendous
influence on the selection of a
particular form of ownership
organisation
• An entrepreneur desiring to pocket all
the profits of business will naturally
prefer sole proprietorship.
9. GOVERNMENT REGULATIONS

• This is also an important factor that should be

taken into account while choosing a particular
form of organisation.
• Different forms of organisation involve different
procedure for establishment, and are governed
by different laws which affect the immediate
and long-term functioning of a business
enterprise.
• From this point of view, sole proprietorships are
the easiest and cheapest to get started. There is
no government regulation.
• What is necessary is the technical competence
and the business acumen of the owner
 PROBLEMS OF MSME’S
Small and Medium Enterprises (SMEs) play a vital role for the growth of Indian economy by
contributing 45% of industrial output, 40% of exports, employing 60 million people, create 1.3
million jobs every year and produce more than 8000 quality products for the Indian and
international markets. SME’s Contribution towards GDP in 2011 was 17% which is expected
to increase to 22% by 2012. There are approximately 30 million MSME Units in India and 12
million persons are expected to join the workforce in the next 3 years.
1. Absence of adequate and timely banking finance
2. Limited capital and knowledge
3. Non-availability of suitable technology
4. Low production capacity
5. Ineffective marketing strategy
6. Constraints on modernisation & expansions
7. Non availability of skilled labour at affordable cost
8. Follow up with various government agencies to resolve problems due to lack of
man power and knowledge etc.