Know All About Small Scale Industries – A Complete Guide

Small Scale Industries (SSI) play a vital role in the social and economic development of any country and make a one-time investment in machinery, plant, and equipment, but it does not exceed Rs.10 crore and annual turnover does not exceed Rs.50 crore. For example – tissues. napkins, water bottles, chocolates, toothpicks, papers, small toys, and pens.

SSI are labor intensive, yet they require little capital. They comprise small enterprises that provide services or manufacture goods with the help of smaller machines and employees and few workers. 

Examples of Small Scale Industries

Small-scale industries tend to grow faster than most other industries mainly because they have easy access to raw materials and the products are usually high in demand.

If you look at Tamil Nadu and Kerala, the small-scale industries that rule the roost there are spinning and weaving, coconut oil making, cashew nut processing, and clay products.

If you travel upwards and reach Hyderabad, you’ll notice that a large population is employed by small-scale industries. This is mainly because of the high number of multinationals in the state. Foreign investment is one of the driving reasons behind ancillary small-scale industries, in turn, increasing employment.

Other popular SSI includes, Agarbatti making, Chalk making, Biodiesel production, Sugar candy manufacturing, Wood making, Rice mill, Potato chips making, Toys making, Microbrewery, Liquid soap making, Honey processing, Slippers making, Detergent powder making, Fruit juice production plant, Spices making, and Chocolate making.

Classification of Small scale industries

Type	Meaning
Manufacturing industries	If you are dealing in producing finished goods – either for processing or consumption, you fit into this category. Most of these businesses are registered as sole proprietorships. Common examples of the category include engineering industries, power looms, food processing, etc.
Service industries	If you own a mobile or other hardware repair/maintenance shop, you come under service industries.
Ancillary industries	Do you provide parts to companies that manufacture finished goods? Then you are part of ancillary industries. You also come under ancillary industries if you manufacture machines for medium-sized industries.
Export units	Any small-scale business is an export unit if the total exports are more than 50% of its total manufacturing. The government provides quite a few grants and bonuses to such units so don’t forget to check them out.
Cottage industries	SSIs that are run through private resources come under cottage industries. Starting them requires smaller investments and the utilization of indigenous technology.
Village industries	As the name suggests, any SSI located in a rural area comes under village industries. These are not owned by the organized sector and produce goods and services without the need for power.

Small-scale enterprises can also be classified based on the capital invested in their operation. In this scenario, these industries can be classified into the following:

In the Manufacturing Sector

As per the MSMED Act 2006: Classification of the Manufacturing process

• An industry qualifies as a small enterprise if you have invested 25 lakhs+ in plant and machinery but not more than five crores.

Type	Capital Invested in Plant and Machinery
Micro Industries	The invested amount does not surpass Rs.25 Lakh.
Small-scale Industries	The investment sum is over Rs.25 Lakh but is below Rs.1 Crore.

In the Service Sector

As per the MSMED Act 2006: Classification of service enterprises

• An industry is a small enterprise if you invest ten lakhs or more for equipment but not more than two crores

Type	Capital Investment in Equipment
Micro Industries	Invested amount is not more than Rs.10 Lakh
Small-scale Industries	The investment amount is over Rs.10 Lakh but is below Rs.2 Crore.

Characteristics of SSI

In accordance with the small-scale business meaning, such industries are characterized by the following features – 

Ownership 

Generally, such businesses are sole proprietorships or, in some cases, partnerships. It means that the ownership of the business rests on a single individual in most cases.

Labour Requirements 

Since capital investment in such industries is comparatively lower than that of the large-scale ones, these mostly rely on manpower, to carry out production activities.

Management 

One of the most significant characteristics of SSI is that both control and management of such businesses lie with owners. The owner, thus, participates actively in the day-to-day business conduction.

Flexible 

Since they operate on a smaller scale, these industries are more privy to sudden and unforeseen developments on the business front. They are more adaptable to changes in the business environment.

Optimal Usage of Resources 

Since they do not have excess resources at their disposal, small-scale industries make optimal usage of the available resources without wastage.

Operation Restrictions 

Most small-scale businesses are limited in their area of operation. As a result, they only operate either locally or regionally.

These are a few of the characteristics of a small business that helps to effectively gauge its operation, administration, and scope. 

Also Read: 10 Retail Business Ideas in India For Everyone

Role in the Indian Economy

Following are the roles of small-scale industries in the Indian Economy

1. Small Scale Industries are the major sources of employment for the people living in rural areas and therefore, play a vital role in generating employment in an economy.
2. Believe it or not, these industries make up almost 40% of the production of total goods and services in the country, making them the pillar of our economic growth.
3. They help promote the Make in India initiative that helps increase demand for locally made products.
4. The majority of the export materials are provided to Indian companies from small-scale industries. It is estimated that around 50% of all the materials exported are produced from such industries.

Employment

You’d be surprised by the significant role SSIs play in employing the country’s youth, especially those that do not find work in the formal sector.

Contribution to Export

Did you know SSIs cater to almost 45-55% of the total exports the country sees? Surprised? So were we. Out of this, around 35% are direct exports, and 15% are indirect exports.

The welfare of the Public

Not just the economy, Other than economic reasons, these industries are also important for the social growth and development of our country. The lower or middle-class public usually starts these industries.

They have an opportunity to earn wealth and employ other people. It helps with income distribution and contributes to social progress.

Objectives and Features of SSI

Small-scale enterprises are formed to fulfill the following objectives – 

• Create opportunities for employment in developing countries like India. It mostly depends on manpower since capital investment and technology usage is limited in this sector, thus generating employment.
• Such industries help the underdeveloped sectors of the economy to boost– for example, rural and cottage industries.
• These industries aid in dealing with the problem of financial imbalance between the urban and rural sectors of the economy.
• To help produce quality products at lower costs, these industries often adopt the implementation of technology.
• The export industry of India is largely dependent on these small-scale enterprises. Almost half of the goods exported from India are either manufactured or produced in these industries.

Administrative Bodies For Small Scale Enterprises

Several administrative bodies get established to help sustain and encourage small and medium-scale industries.

All of these operated under the Ministry of Small and Medium Scale Enterprises. Some of these government administrative bodies are listed here.

• Office of Development Commissioner (MSME)
• Khadi Village Industries Commission (KVIC)
• Coir Board
• National Small Industries Corporation Limited (NSIC)
• National Institute for Micro, Small, and Medium Enterprises (NIMSME)

Eligibility Criteria

Whether manufacturing units or service-rendering enterprises, you can obtain an SSI registration. Though keep in mind that the eligibility criteria are different for both. Here’s a lowdown, so you know exactly what’s needed.

If you want to obtain SSI registration for manufacturing units, you need to ensure your investment in plant and machinery (excluding land & buildings) meets the following criteria:

• Micro Enterprises: Investment of up to Rs.25 lakhs in plant and machinery
• Small Enterprises: Investment of up to Rs.5 crores in plant and machinery
• Medium Enterprises: Investment of up to Rs.10 crores in plant and machinery

If you want to obtain SSI registration for service rendering units, you need to ensure your investment in equipment (excluding land & buildings) meets the following criteria:

• Micro Enterprises: Investment of up to Rs.10 lakhs in equipment
• Small Enterprises: Investment of up to Rs.2 crores in equipment
• Medium Enterprises: Investment of up to Rs.5 crores in equipment

Registration of SSI

You can invest or own in small-scale industries with very little documentation and little investment. The registration is hassle-free, and the government also supports finance to invest in them.

Fill out the online registration form under the Udyog Aadhar scheme to get the registry done. It is free of cost. Once the executives verify the document and process it, you will get a certificate on your registered email id.

Bank/account details, contact details, and additional details of the business, employees, and investment are important to fill out the registration form.

You might be asked to submit a copy of the Aadhar card. Micro and small scale industries registration has been made so easy under several schemes provided by the government of India.

Tips To Keep Away Troubles That Come with Handling Small-Scale Enterprise

• Shortage of funds and raw materials – Money management and the most major issues should be dealt with at all levels
• Quality – Never comprise on quality to keep up with the demand
• Marketing problems  – To run the show every time, proper advertisement is required
• Managerial skills – To handle the labor class and get the work done.
• Technology – Keep up with all technological updates as it helps in increasing the quality and lowers your investment cost.

Benefits of Obtaining SSI Registration

Some of the benefits of obtaining SSI registration are:

• The banks and financial institution provides loan for the business after SSI registration, and it becomes hassle-free.
• To participate in government tenders, it becomes mandatory to have the registration done beforehand.
• Once the booking is made, taxes rebate can be availed.
• As a lot of concessions and discounts are available, it becomes smooth, and the cost of setting up the industry reduces.

Example And Ideas of SSI In India

By now you have understood what SSI is and know all about its objectives, characteristics, and everything else that is related to it. Now let us look at some of the examples and ideas of SSI In India:

• Water Bottles
• Bakeries
• Small Toys
• Photography
• School Stationery
• Paper Bags
• Coconut Oil Making
• Rice Mills
• Agarbatti Making
• Detergent Powder Making
• Beauty parloursCandle Making
• Toothpick Making
• Honey Making and many more.

Also Read: Best Businesses in India: A Guidebook for New Entrepreneurs

How Can Lio Help

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Conclusion

I hope by now you have understood everything about small-scale industries otherwise known as SSI. These industries help nations like ours are growing and even provide employment to people as such companies do not require machine power but depend highly on manpower.

Frequently Asked Questions (FAQs)