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Explain the importance of small scale industries

Posted by Aditi Shrivastava 6 years, 3 months ago

1 answers

Yogita Ingle 6 years, 3 months ago

1. Potential for large employment: Small Scale Industries have potential to create employment opportunities on a massive scale. They are labor intensive in character. They use more labor than other factors of production. They can be set up in short time and can provide employment opportunities to more number of people. This is important for a labor abundant country like India.

2. Requirement of less capital: Small Scale Industries require less capital when compared to large scale industries. India is a capital scarce country and therefore Small Scale Industries are more suitable in the Indian context. They can be started and run by small entrepreneurs who have limited capital resources

3. Contribution to industrial output: Products manufactured by Small Scale Industries form a significant portion of the industrial output of the country. They produce a number of consumer goods as well as industrial components in large quantities and satisfy the needs of consumers. The consumer goods produced by Small Scale Industries are cheaper and satisfy the requirements of the poorer sections.

4. Contribution to exports: Small Scale Industries contribute nearly 40 per cent to the industrial exports of the country. Products such as hosiery, knitwear, hand loom, gems and jewellery, handicrafts, coir products, textiles, sports goods, finished leather, leather products, woolen garments, processed food, chemicals and allied products and a large number of engineering goods produced by the SSI sector contribute substantially to India’s exports. Further products produced by Small Scale Industries are used in the manufacture of products manufactured and exported by large scale industries. Therefore they contribute both directly and indirectly to exports and earn valuable foreign exchange.

5. Earning foreign exchange: Small Scale Industries earn valuable foreign exchange for the country by exporting products to different countries of the world. At the same time, their imports are very little and so there is less foreign exchange outgo. Therefore Small Scale Industries are net foreign exchange earners. For e.g. Small Scale Industries in Tiruppur contribute to a substantial portion of India’s textile exports and earn valuable foreign exchange for the country.

6. Equitable distribution : Large scale industries lead to inequalities in income distribution and concentration of economic power. But small scale industries distribute resources and wealth more equitably. It is because income is distributed among more number of workers since it is labor intensive. This results in both economic and social welfare.

7. Use of domestic resources: Small Scale Industries use locally available resources in a productive manner which would have otherwise gone waste. Small amounts of savings which would have remained idle is channelized into setting up of small enterprises. This increases capital formation and investment in the economy.

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