Unit - 6 Management and Entrepreneursip

M & E Unit - 6
UNIT - 6
SMALL SCALE INDUSTRY
6.1 Definition
6.2 Characteristics
6.3 Need and rationale
6.4 Objectives
6.5 Scope
6.6 Role of SSI in Economic Development
6.7 Advantages of SSI
6.8 Steps to start an SSI
6.9 Government policy towards SSI
6.10 Different Policies of S.S.I
6.11 Government Support for S.S.I. during 5 year plans
6.12 Single window concept
6.13 Impact of Liberalization, Privatization, Globalization on S.S.I
6.14 Effect of WTO/GATT
6.15Supporting Agencies of Government for S.S.I
Meaning; Nature of Support; Objectives; Functions; Types of Help;
6.16 Ancillary Industry and Tiny Industry (Definition only).
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Dr. Hemanth .K. P. Training & Placement Officer
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6.1 Definition
An industry undertaking in which the investment in fixed asset in plant and machinery whether
held on ownership terms or by lease or on hire purchase does not exceed 1crore ( 10 million)
( subject to that condition that the unit is not owned, controlled or subsidiary of any other
industrial undertaking)
In case enterprise engaged in the Manufacturing or Production of Goods pertaining to any

industry as per First Schedule to the Industries (Development & Regulation) Act 1951 as Micro Enterprises: in which the investment in fixed assets in plant and Machinery does
not exceed Rs. 25 Lacs (Rupees Twenty Five Lacs Only)
Small Enterprises : in which the investment in fixed assets in plant and Machinery is
more than Rs. 25 Lacs (Rupees Twenty Five Lacs Only) but does not exceed Rs. 5 Crore.
Medium Enterprises : in which the investment in fixed assets in plant and Machinery is
more than Rs. 5 Crore. but does not exceed Rs. 10 Crore.
In case of Enterprises engaged in Providing or Rendering Services as Micro Enterprises: in which the investment in fixed assets in plant and Machinery does
not exceed Rs. 10 Lacs (Rupees Ten Lacs Only)
Small Enterprises : in which the investment in fixed assets in plant and Machinery is
more than Rs. 10 Lacs (Rupees Ten Lacs Only) but does not exceed Rs. 2 Crore.
Medium Enterprises : in which the investment in fixed assets in plant and Machinery is
more than Rs. 2 Crore. but does not exceed Rs. 5 Crore.
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Type of Unit
Small Scale Industry
Investment Ceiling Limit in IRS
1 crore (10 million)
Conditions
Original value of plant and

machinery
Ancillary
At least 50% of its output to go

together other industrial
undertakings
Export Oriented Unit
Obligation to export 50% of

production
Tiny Enterprise
25 lakhs (2.5 million)
No location condition
Service and Business (industry
10 lakhs (1 million)
No location condition
Women Enterprises
51% equity holding by women
High Tech and Export oriented
Total only for 64 items
related) Enterprise
units
6.2 Characteristics
Capital investment is less
Number of people employed per unit is less
Generally they are family owned and organized as sole proprietorship organizations. Some of
them are formed on partnership basis with 2 to 3 partners.
Employees of the small scale industries are generally unorganized.
Success of the unit depends on entrepreneurial abilities of the owners.

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Competition is very high among small units.
Incident of infant mortality is very high and only a few small scale units grow into large scale
organizations.
Many units indulge in exploitation of natural and human resources.
Financial discipline is very weak among the units.
Profit margins are very low.
Generally engage in production of light consumer goods
Entrepreneurs savings contribute to the major portion of the investment.
6.3 Need and rationale
Opportunity for Employment.
Assuring adequate supply of goods and services.
Encourage decentralized industrial expansion.
Mobilize capital investment and entrepreneurship skills.
Innovative.
Self satisfaction.
Strength of nation.
Spread over wide areas.
Ensure equitable distribution of income.
Balanced regional development.
Higher standard of living.
Mobilization of local resources.
Less dependence on foreign capital.
Promotion of self employment.
6.4 Objectives
Creation of greater employment opportunity.
Reduction of general imbalance by encouraging set up of units in underdeveloped regions.
Supply products and services at reasonable prices.

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Optimum utilization of skills at local level.
To provide substitute for improved needs and thus save foreign exchange.
To reduce disparities in income and wealth.
Attainment of self reliance.
To improve standard of living.
To create decentralized pattern of ownership.
To encourage growth of local entrepreneurship.
6.5 Scope
The scope of SSI is quit vast, covering wide range of activities requiring less sophisticated
technology.
The following are some of the areas of SSIs

Manufacturing activities.
Service activities.
Construction activities.
Financial activities.
Retailing activities.
Wholesale business.
Transport activities.
Public utilities.
Communication etc..
Government of India has reserved for exclusive development in the small sector are
Food and allied industries
Textile products
Art silk / manmade Fiber Hosiery
Wood products
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Leather products including footwear

Rubber products
Plastic products
Chemical products laboratory
Basic dyes
Sports goods
Stationary items
Electrical appliances
Electronic equipments and components
Mathematical and survey instruments
6.6 Role of SSI in Economic Development
Economic development is defined as an increase in per-capita income of person resulting in

improvement in the levels of living.
SSI contributes to the increase in per-capita income.
SSI generates immediate employment opportunities with relatively low capital investment.
SSI promote evenly spread of national income.
SSI makes effective mobilization of untapped capital and human skills.
This result in the growth of villages, small towns and economically lagging regions.
This creates balanced regional development.
Increase in number, production, employment and exports of small scale industries indicate the
role of SSI in Economic development.
6.7 Advantages of SSI
They do not require high investment.

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They do not require high level technology as they are labor intensive.
They can be set in shorter time.
They can save foreign exchange needs of the country by producing products which can substitute
to imports.
They can understand local customer needs well and meet these needs.
Source of employment for local people, either full time or part time.
SSIs act like training area for local entrepreneurs.
SSIs can bring uniform distribution of income in the society
They offer a method of equitable distribution of national income.
They help in developing rural areas.
6.8 Steps to start an SSI

1. Selection of industry
2. Arrange for know-how/technology
3. Study the resource requirement
4. Selection of land and premises
5. Study of investment requirement
6. Study of requirement of plant and equipment
7. Study of requirement of raw materials and source of supply
8. Study of economic viability like marketing and pricing strategy, financing, staffing, SWOT
analysis, return on investment etc.
9. Preparation of project report
10. Application to financial institutions for loan for fixed assets and working capital.
11. Application to directorate of Industries for No objection certificate, registration as SSI, power
and Permission
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12. Get NOC and permission from local body (municipality/village panchayat / corporation)
13. Apply for power connection
14. Recruit staff and workers
15. Order for plant and machinery
16. Order for raw materials
17. Install the machinery
18. Trial runs
19. Production and sales
20. Profit and pay creditors.
6.9 Government policy towards SSI
Govt. has announced several objectives and intentions towards SSI through Industrial Policy
Resolutions (IPRs)
IPR 1948
IPR 1956
IPR 1977
IPR 1980
IPR 1990
IPR 2000
IPR2001-02
IPR 2003-04
IPR 2005-06
6.10 Different Policies of S.S.I
IPR 1948
Overall industrial development of the country was accepted for the first time.
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It was well recognized that SSIs are particularly suited for using local resources and
create employment for rural.
The main trust of IPR 1948 was to provide protection to SSI
IPR 1956
Aimed at Protection and Development for the SSIs.
About 128 items were reserved for manufacture only through SSIs.
Based on the IPR in 1959 the Small Scale Industries Board (SSIB) constituted a working
group to formulate a plan for development of SSIs.
IPR 1977
IPR 1977 classified small sector into three categories
Cottage and house hold industries:- provide self-employment on a large scale
Tiny sector :- investment in industrial units in plant and machinery upto Rs. 1 lakh
Small scale industries:- investment in industrial units in plant and machinery upto Rs. 10
lakh
The measures suggested for promoting SSIs are reservation of 504 items for exclusive
production in small scale industries
Proposal to set up an agency called District Industry Centre (DIC) in each district to
serve as a focal point for the development of SSIs.
IPR 1980
The main objective of IPR 1980 was to facilitating an increase in industrial production
through optimum utilization of installed capacity and expansion of industries
It helped the small sector by increasing the ceiling from Rs. 1 lakh to Rs. 2 lakhs for tiny
industries, from Rs. 10 lakhs to 20 lakhs in case of small scale units and from Rs. 15
lakhs to Rs. 25 lakhs for ancillaries.
District Industry Centres (DICs) are replaced with the concept of Nucleus Plants in
each industries in backward areas.
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It also emphasized the promotion of village and rural industries to generate economy in
the villages.
IPR 1990:
Importance for SSIs to generate wage and self-employment based opportunities in the
country.
Investment ceiling in plant and machinery for tiny units in increased to Rs. 5 lakhs from
Rs. 2 lakhs, provided the unit is located in an area having population of less than 50,000
as per 1981 Census.
Investment ceiling for SSI units raised to 60 lakhs from Rs 35 lakhs.
Investment for ancillary units raised to Rs 75 from Rs 45 lakhs.
A new scheme of central investment subsidy implemented exclusively for SSI units
established in backward that generate employment with lower capital investment.
Small Industries Development Bank of India (SIDBI) was established in 1990 with an
idea to ensure timely and adequate flow of credit facilities to SSIs.
The number of items reserved for exclusive manufacture under SSI raised to 836.
Emphasis to establish special cell in SIDO for developing and training women
entrepreneurs.
New Small Enterprise Policy 1991

During August 1991, the Government of India issued a new policy for small scale
enterprises titled Policy measures for promoting and strengthening and supplementing
small, tiny and village enterprises.
Increase in the investment to Rs. 5 lakhs from Rs. 2 lakhs in tiny enterprises, irrespective
of the location of the enterprise.
To give priority to small and tiny sector in the allocation of indigenous raw material.
Introduction of services to help the problems of delayed payment to small sector.
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Industry related services and business enterprises are included as SSIs irrespective of their
location.
To widen the scope of the National Equity Fund (NEF) to enlarge the single window
scheme and also to associate commercial banks with provision for corporate loans.
Introduction of limited partnership act.
Set up of Export Development Centre (EDC) in the SIDO.
To introduce the scheme of Integrated Infrastructural Development (IID) with technology
backup services to SSIs.
Market promotion of small-scale industries products through cooperates / public sector
institutions other specialized professional / marketing agencies and the consortium
approach.
IPR 2000
The exemption for excise duty limit raised from 50 lakhs to Rs. 1 crore to improve the
competitiveness.
Credit linked capital subsidy of 12% against loans for technology upgradation was
provided in specified industries.
The third census of small scale industries by the ministry of SSI was conducted, which
also covered sickness and its causes in SSIs.
The limit of investment was increased in industry related service and business enterprises
from Rs. 5 lakhs to Rs. 10 lakhs.
The scheme of granting Rs. 75000 to each small scale enterprise for obtaining ISO 9000
certification was continued till the end of 10th plan.
SSI associations were motivated to develop and operated testing laboratories. One time
capital grant of 50% was given on reimbursement basis to each association.
The limit of composite loan was increased from Rs. 10 lakhs to Rs. 25 lakhs.
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A group was constituted for streamlining of inspection and repeal of redundant laws and
regulations.
The coverage of ongoing Integrated infrastructure Development (IID) was enhanced to
cover all areas in the country with 50% reservation for rural areas and 50% earmarking of
plots for tiny sector.
The family income eligibility limit of Rs. 24000 was enhanced to Rs. 40000 per annum
under the Prime Minister Rozgar Yozna (PMRY).
IPR 2001-02
The investment limit was enhances from Rs. 1 crore to Rs. 5 crore for units in hosiery and
handloom sectors.
14 items were de-reserved during June 2001 related to leather goods, shoes and toys.
Market Development Assistance Scheme was launched exclusively for SSI sector.
IPR 2004-05
The National Commission on Enterprises in the unorganized / informal Sector was set up
in September 2004.
It suggested measures considered necessary for improvement in the productivity of these
enterprises, generation of large scale employment opportunities, linkage of the sector to
institutional frame work in areas like credit, raw material supply, Infrastructure,
technology up gradation, marketing facilities and skill development by training.
85 items were de-reserved in October 2004
The investment limit in plant and machinery was raised from Rs.1 Crore to Rs. 5 Crore in
respect of 7 items of sports goods to help to upgrade the technology and enhance
competitiveness.
Promotional Package for small enterprises was initiated.
The Small and Medium Enterprise (SME) fund of Rs. 10000 crore was started by SIDBI
since April 2004 with 80% of the lending for SSI units. The interest rate was 2% below
the prevailing Prime Lending Rate (PLR) of the SIDBI
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The Reserve Bank of India raised the composite loan limit from Rs. 50 lakhs to Rs. 1
crore.
IPR 2005-06
The Ministry of Small Scale Industries has identified 180 items for dereservation.
Small and Medium Enterprises were recognized in the services sector and were treated on
par with SSIs in the manufacturing sector.
Tax concessions have been provided to SSIs to promote investment in this sector and also
to grant relief to small entrepreneurs.
Technological facilities have been increased.
In order to facilitate adequate flow of credit, efforts have been made.
Measures have also been taken to improve infrastructure facilities and promote marketing
of products.
6.11 Government Support for S.S.I. during 5 year plans

The Government of India gives a lot of importance to the small scale industries and progressively has
been providing fund support for the development of the sector, to make it more competitive, upto date in
technology, generate income, provide large scale employment, improve exports, etc. At the same time it
has also started boards, corporations, banks etc to identify the needs, problems, bottlenecks and address
them suitably. The features of the successive 5-yuear plans are as under:
First Five Year Plan 1951-56
In the first five year plan, Rs. 48 crore was spent in SSIs
About 48% of total plant expenditure of industry covering the entire field of small scale and
cottage industries.
Six boards were formulated by the end of first five year plans. They are: All India Human Board,
All India Handicrafts Board, All India and Village Industries Board, Small Scale Industries
Board, Coir Board and Central Silk Board.
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Second Five Year Plan (1956-61)
The second five-year plan focused on dispersal of industries with an out lay of Rs. 187 crore.
As may as 60 industrial estates were established for providing basic facilities like power, water,
transport etc., under one roof.
Third Five Year Plan (1961-66)
Third five year plan outlaid Rs. 264 crore for the development of SSI and cottage industries.
It has put lot of stress on the extension of the coverage of SSIs. Establishment of SSI underwent
a slight recession during this plan.
Fourth Five Year Plan (1969-73)

The planned out layout for fourth five-year plan is Rs. 293 crore.
During fourth five plans about 346 industrial estates were completed providing employment to
about 80,000 people.
Fifth Five Year Plan (1974-78)
The main thrust of fifth year-plan was to develop SSIs to help reducing poverty and in equating
prevailing in society.
Government had initiated wide development programmes leading to the development of SSIs.
The planned out lay of fifth five-year plan was Rs. 611 crore.
Sixth Five Year Plan (1980-85)
The planned out lay of sixth five-year plan was Rs. 1945 core.
The sixth plan included many programs like: Reservation of 409 items for purchase from SSIs
and 836 items are reserved for exclusive production in small scale industries,
Established Council for Advancement of Rural Technology (CART) in 1982, with an idea to
provide technical inputs to the rural industries and providing consultancy services in technical,
managerial
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and
marketing
through
SIDO.
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Seventh Five Year Plan (1985-90)
The planned outlay of seventh five-year plan was Rs. 2752 crore.
The main thrust of seventh plan was up gradation of technology to increase competitiveness of
SSIs.
Owing to various development programmes, the small sector witnessed significant development
in all directions. The number of small-scale industries had gone up, the employment also
increased considerably from 96 lakhs to above 120 lakhs persons.
Eighth Five Year Plan (1992-97)
Eighth plan has a plan outlay of Rs. 6334 crore.
It started with a main focus of employment generation.
In order to upgrade the technology, the eithth plan proposed to establish appropriate tool rooms
and training institutes.
Similar to growth centers, the eighth plan proposed to set up integrated infrastructure
development centers.
The eighth plan ensured timely and adequate availability of credit by the establishment of SIDBI,
instructed new initiatives like sanction of composite loans under single window concept and
concessional loans to state corporations for infrastructure development.
Ninth Five Year Plan (1997 - 2002)

Objectives
to prioritize agricultural sector and emphasize on the rural development.
to generate adequate employment opportunities and promote poverty reduction.
to stabilize the prices in order to accelerate the growth rate of the economy.
to ensure food and nutritional security.
to provide for the basic infrastructural facilities like education for all, safe drinking water,
primary health care, transport, energy.
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to check the growing population increase.
to encourage social issues like women empowerment, conservation of certain benefits for the
Special Groups of the society.
to create a liberal market for increase in private investments.
Tenth Five Year Plan (2002-2007)

Reduction of poverty ratio by 5 percentage points by 2007
Providing gainful and high-quality employment at least to the addition to the labour force
All children in India in school by 2003; all children to complete 5 years of schooling by 2007
Reduction in gender gaps in literacy and wage rates by at least 50% by 2007
Reduction in the decadal rate of population growth between 2001 and 2011 to 16.2%
Increase in Literacy Rates to 75 per cent within the Tenth Plan period (2002 to 2007)
Reduction of Infant mortality rate (IMR) to 45 per 1000 live births by 2007 and to 28 by 2012
Reduction of Maternal Mortality Ratio (MMR) to 2 per 1000 live births by 2007 and to 1 by
2012
Increase in forest and tree cover to 25 per cent by 2007 and 33 per cent by 2012
All villages to have sustained access to potable drinking water within the Plan period
Cleaning of all major polluted rivers by 2007 and other notified stretches by 2012
Economic Growth further accelerated during this period and crosses over 8% by 2006
Eleventh Five Year Plan (2007-2012)

The eleventh plan has the following objectives:
Income & Poverty
Accelerate GDP growth from 8% to 10% and then maintain at 10% in the 12th Plan in
order to double per capita income by 2016-17
Increase agricultural GDP growth rate to 4% per year to ensure a broader spread of
benefits
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Create 70 million new work opportunities.
Reduce educated unemployment to below 5%.
Raise real wage rate of unskilled workers by 20 percent.
Reduce the headcount ratio of consumption poverty by 10 percentage points.
Education
Reduce dropout rates of children from elementary school from 52.2% in 2003-04 to 20%
by 2011-12
Develop minimum standards of educational attainment in elementary school, and by

regular testing monitor effectiveness of education to ensure quality
Increase literacy rate for persons of age 7 years or more to 85%
Lower gender gap in literacy to 10 percentage points
Increase the percentage of each cohort going to higher education from the present 10% to
15% by the end of the plan
Health
Reduce infant mortality rate to 28 and maternal mortality ratio to 1 per 1000 live births
Reduce Total Fertility Rate to 2.1
Provide clean drinking water for all by 2009 and ensure that there are no slip-backs
Reduce malnutrition among children of age group 0-3 to half its present level
Reduce anaemia among women and girls by 50% by the end of the plan
Women and Children
Raise the sex ratio for age group 0-6 to 935 by 2011-12 and to 950 by 2016-17
Ensure that at least 33 percent of the direct and indirect beneficiaries of all government
schemes are women and girl children
Ensure that all children enjoy a safe childhood, without any compulsion to work
Infrastructure
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Ensure electricity connection to all villages and BPL households by 2009 and
round-the-clock power.
Ensure all-weather road connection to all habitation with population 1000 and above (500
in hilly and tribal areas) by 2009, and ensure coverage of all significant habitation by
2015
Connect every village by telephone by November 2007 and provide broadband

connectivity to all villages by 2012
Provide homestead sites to all by 2012 and step up the pace of house construction for
rural poor to cover all the poor by 2016-17
Environment
Increase forest and tree cover by 5 percentage points.
Attain WHO standards of air quality in all major cities by 2011-12.
Treat all urban waste water by 2011-12 to clean river waters.
Increase energy efficiency by 20 percentage points by 2016-17.
Twelth Five Year Plan (2007-2012)
Assignment
6.12 Single window concept
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The Single Window System is a trade facilitation idea. As such, the implementation of a single window
system enables international (cross-border) traders to submit regulatory documents at a single location
and/or single entity. Such documents are typically customs declarations, applications for import/export
permits, and other supporting documents such as certificates of origin and trading invoices.
The main value proposition for having a Single Window for a country or economy is to increase the
efficiency through time and cost savings for traders in their dealings with various government authorities
for obtaining the relevant clearance and permit(s) for moving cargoes across national or economic
borders. In a traditional pre-Single Window environment, traders may had to contend with visits and
dealings with multiple government agencies in multiple locations in order to obtain the necessary papers,
permits
and
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clearance
in
order
to
complete
their
import
or
export
processes.
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There is no single definitive viewpoint of what a single window system should be. A common definition
of the term "Single Window" is:
"A facility that allows parties involved in trade and transport to lodge standardized information and
documents with a single entry point to fulfill all import, export, and transit-related regulatory
requirements. If information is electronic then individual data elements should only be submitted once."
The concept is recognized and promoted by several world organizations that are concerned with trade
facilitation. Among these are the United Nations Economic Commission for Europe (UNECE) and its
Centre for Trade Facilitation and Electronic Business (UN/CEFACT), World Customs Organization
(WCO), SITPRO Limited of the United Kingdom and the Association of Southeast Asian Nations
(
A single window service aims to deliver specific benefits to the main communities and stakeholders in
cross-border trade.
6.13 Impact of Liberalization, Privatization, Globalization on S.S.I
LPG started in India in July 1991 that had changed the face of industry.
It has attract new areas of development, foreign direct investments etc
This made Indian economy to grow to new height
Liberalization
Made import of scarce and non-available of raw materials easy.
Ex: electronic and computer industries
Privatization
Earlier certain products/services were produced only by govt. organizations
With privatization, it threw open to many challenging entrepreneurs to produce similar
goods and services at much competitive price and of better quality.
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Ex: Telephone industry, Life insurance sector
Globalization
It made possible the export of goods produced in SSI.
Indian entrepreneurs in Pharma sector, IT sector, Steel sector, etc have gone to many
countries to start new ventures.
The spectacular growth is observed in Service sector. (BPO, Transport, repair services,
entertainment and hospitality sectors)
6.14 Effect of WTO/GATT

GAAT
General Agreement on Tariffs and Trade
Signed by 123 nations agreeing in principle to promote trade among members in 1947.
From 1947 to 1994, General Agreement on Trade and Tariff (GATT) was the forum for
negotiating lower customs duty rates and other trade barriers.
It was an important mile stone in global trade.
GATT gave a new direction for trade settlement by discussions, mediation, taking opinions of
experts and negotiations.
It advocated free trade and open trade policies for commerce in industry and stages across globe.
GATT had challenges like

E-commerce
Agriculture
Political and regional forces on trade and industry
Development of backward regions
Trade disputes in international business
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Services
Trade information
High tariffs by some countries
Subsidies
Trade restrictive practices
WTO
The World Trade Organization (WTO) was established on 1st January 1995.
When the GATT came into WTOs umbrella, it has annexes dealing with specific sectors such as
agriculture and textiles, and with specific issues such as State Trading, Product Standards,
Subsidies and Actions taken against dumping.
The WTO has 148 members, accounting for over 97% of world trade. Around 30 others are
negotiating membership.
Positive impact of WTO on SSIs
Enabling India to export goods to the member countries of the WTO with fewer restrictions.
Reduction of tariffs on the export products to India i.e., Tariff based protection has become the
rule.
Export in India has been increased from Rs.13883 crores in 1992 to Rs.53975 crores in the year
2000 in SSI sector.
Prospects in agricultural exports as a result of likely increase in the world prices of agricultural
products due to reduction in domestic subsidies and barriers to trade.
Greater Market orientation
Radical trade in SSI sector opened new investment opportunities thereby the acceleration of
economic growth.
Availability of modern technologies from the other countries at reduced cost.
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Objectives of WTO
The main objectives of the World Trade Organization could be considered to be
Optimal utilization of the worlds resources for improving the incomes, standard of living,
promoting employment and expanding production and trade activities among the member
countries.
Encourage sustainable development giving due importance to environmental issues as well as

child labour problems.
Efforts to ensure that under-developed as well as developing countries get an opportunity to have
their share of growth in the world trade.
Functions of WTO
WTO covers all the commodities that are traded internationally by the member countries and has
formulated rules and procedures for each category of goods as guidelines for the member
countries.
As a rule WTO does not interfere in the internal economics matters or politics of member
nations. It however does play a part with regard to trade policies.
WTO has expert committees and sub-committees for different categories. They render service to
its members as consultants on various subjects.
WTO arranges visits of its expert committees to various countries for training & development
activities.
WTO plays an arbitrator role in settlement of disputes between member countries.
It reviews and advises nations on their trade policies to ensure that they are in line with world
trade practices which are beneficial to all parties concerned.
Implementation and monitoring of bilateral and multilateral trade agreements is the essence of
WTO.
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It is obligatory on the part of the member countries to keep the WTO informed of its world trade
activities since WTO keeps track of all trade activities.
Evaluation of international trade and seeking of explanation whenever abnormal variations are
observed in terms of dominance or where ever there is underdevelopment despite adequate
support.
Advantages of WTO
Safeguard from unilateral actions of the developed nations.
Increased access to export markets.
Increased R&D activity in the countries.
It facilitates advanced technology to existing and new industries.
It increases the scope for subcontracting work as well as job work for the SSIs.
Increased global competition results in higher efficiency as well as improved quality.
It has boosted business in specific field of activities viz. Textile and clothing, Agricultural and
Food Products, Chemicals, Software Industry, Services
It ensures that export subsidies are available to participating nations till such time as their per
capita income crosses US $ 1000 /-
Disadvantages of WTO
The global trading system has been unfair to the third world countries Asia and Latin America.
Developed countries take the smaller ones for a ride and WTO has not been able to curtail this.
Despite a lot of bargaining the developing countries gained little or nil.
Developed countries raise political and social barriers (viz. Obama out-sourcing restrictions
WTO can do nothing about it.)
Pharmaceutical intellectual property rights issue is a big problem. Developed countries and its
multinational companies charge high price for essential drugs claiming exclusive market rights.
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SSIs will be hit due to competition.
6.15 Supporting Agencies of Government for S.S.I

Meaning; Nature of Support; Objectives; Functions; Types of Help;
6.15.1 Meaning of Supporting Agencies
Supporting Agencies are those that cater to the requirement of the SSIs units right from their
start-up to their smooth functioning.
Rendering assistance to the units with

Applying and sanction of loan
Land allotment
Procurement of power and water
Registration of the units as a SSI
Technical support with regard to requirement of machinery and equipment
Procurement and guidance for setting up of the plant
Identifying key materials and their sources,
Registering with departments for subsidized materials
Capital finance support for plant and machinery.
Working finances support at subsidized interest rates
Marketing support in identifying customers, promoting exports, discounting of bills,
recovery of outstanding bills, etc.
6.15.2 Nature of support of Supporting Agencies

The nature of the Supporting Agencies depends on the type of the agency. The agencies are broadly
classified under the following categories:
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1. Central Level Institutions

2. State Level Institutions
3. Fund Based Institutions
4. Training Institutes
5. Others
1. Central Level Institutions

I. Small Scale Industries Board (SSIB)
Constituted in 1954 to facilitate the coordination of inter-institutional linkages for the

development of the SSI Sector.
It advices the Govt. on all issues pertaining to the SSI.
The term of the board is for two years and is headed by the Union Industry Minister.
The state industries ministers, secretaries of various departments of the Govt., members
financial institutions, Industry Associations, PSUs and eminent experts in the field form
its key members.
II. National Small Industries Corporation (NSIC)
Established in 1955 by the Govt. of India
with a view to promoting, aiding and fostering the growth of SSIs in the country with a
focus on commercial aspects of these functions.
NSIC continues to implement its various programs and projects throughout the country
to assist the SSI units.
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NSIC assists the sectors through several schemes and activities.
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III.Khadi and Village Industries Commission (KVIC)
Statutory Body created by an Act of Parliament in 1956-57
KVIC is supposed to do planning. promotion, organisation and implementation of the

programme for the development of Khadi and other village industries in the rural asareas
in coordination with other agencies engaged in rural development, wherever necessary.
IV. Small Industries Development Organization (SIDO)
The Office of the Development Commissioner (Small Scale Industries) is also known as
the Small Industries Development Organization.
It was established in 1954
It is an apex body assisting the ministry in formulating, implementing and monitoring

policies and programmes for the promotion and development of SSIs.
It has over 60 offices and 21 autonomous bodies under its management including Tool
Rooms, Training Institutions and Project-cum-Process development Centres..etc
2. State Level Institutions

I. State Directorate of Industries (SDI)
At a state level the Commissioner / Directorate of Industries implements policies for

promotion and development of small-scale, cottage, medium and large scale industries.
The Central polices for SSI sector serve as guidelines, but each state evolves its own
policy and incentive packages.
The Commissioner / Directorate of Industries of states oversee the activities of the

Officers of the District Industries Centres (DICs).
II. District Industries Centers (DIC)
The DICs were established in May, 1978 as a Centrally sponsored scheme
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with a view to extend promotion of small-scale, and cottage industry beyond big cities
and state capitals to the district head quarters as well as to develop small, cottage and tiny
industries in the country.
Another aim was to increase employment opportunities in rural and backward areas of
the country.
These centres provide support facilities / concessions / services in widely dispersed rural
areas and small towns.
There are about 430 District Industrial Centres covering all districts of the country except
the metropolitan cities.
The Central sponsorship was withdrawn in 1993-94 and they now work under the State
Budgetary provisions.
III.State Industrial Development Corporations (SIDC) / State Industrial Investment

Corporations (SIIC)
SIDCs and SIICs have been set up under the Companies Act, 1956 as wholly owned
undertakings of the State Governments.
They act as catalysts for industrial development.
They play an import role in developing land and providing plots with infrastructural
facilities like, road, power, drainage, water or providing readymade industrial sheds.
Set up primarily for the medium and large industries
They also provide assistance to SSIs in form of term loan, subscriptions to equity and
promotional services. Currently there are about 28 SIDCs in the country of which 11 also
function as SFC and are therefore termed Twin-Function IDCs
IV. State Small Industries Development Corporation (SSIDC)
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Established under the Companies Act, 1956 as state govt. undertakings to cater to the
needs of the small, tiny and village industries in their respective state / Union territories.
Being flexible the SSIDCs undertake a variety of activities for the benefit of the SSI
sector viz procurement and distribution of raw materials, supply of m/c on hire purchase
schemes, marketing assistance, construction of industrial estates, providing infrastructural
facilities, sheds, etc.
In Karnataka the activity is undertaken by the KSIADB which stands for the Karnataka
State Industrial Area Development Board
3. Training Institutes
I. National Institute for Small Industry Extension and Training (NISIET)
Set up in 1950s in Hyderabad has been imparting training to entrepreneurs, managers and
various development functionaries of state govts., financial institutions and other
agencies.
NISIET conducts about 45 national and 15 international level training programmes every
year.
It also acts as an import resource and information centre for small units and undertakes
research and consultancy for small industry development.
In 1984 the UNIDO recognized NISIET as an institute of meritorious performance under

its Centres of Excellence Scheme to extend aid.
II. National Institute of Entrepreneurship and Small Business Development (NIESBUD)
NIESBUD is an autonomous body under the administrative control of the Office of the
DC(SSI).
It was established in 1983 by the Ministry of Industry (Now Ministry of Small Scale
Industries) as an apex body for coordinating and overseeing the activities of various
institutions / agencies engaged in Entrepreneurship Development particularly in the area
of small industry and business.
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III.Indian Institute of Entrepreneurship (IIE)
Established in 1993 by the Ministry of Industry GoI at Guwahati with an aim to undertake
training, research and consultancy activities in the small industry sector focussing on
entrepreneurship development.
It started operations in 1994 with the North East Council, Govts. of Assam, Arunachal
Pradesh and Nagaland and SIDBI being its stakeholders.
The policy direction and guidance is provided by the its Board headed by the Secretary to
the GoI as the Chaiman.
IV. Entrepreneurship Development Institute of India (EDII)
Set up in Ahmedabad in 1983 as a non-profit autonomous institution by financial

institutions such as IDBI, IFCI, ICICI, SBI and assistance from the Govt. of Gujarat.
It has been spearheading an entrepreneurship movement throughout the nation with the
belief that entrepreneurs are not necessarily born, they can be developed through well
conceived and well directed activities.
4. Fund Based Institutions

I. State Finance Corporations (SFC)
SFCs have been established under the SFC Act, 1951 and play an important part in the
development of small and medium industries.
The main objectives are to finance and promote SME within the respective states for
achieving balanced regional growth
Catalyses investment, generate employment and widen the ownership base of the
industry.
At present there are 18 SFCs of which one the Tamilnadu Industrial and Investment
Corporation (TNIIC) has been formed under the Companies Act.
Financial assistance is provided in the form of term loan, direct subscription to equity /
debentures, guarantees, discounting of bills of Exchange, seed capital, etc.
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Providing working capital loans and meeting various short-term needs of their clients.
II. State Industries Development Bank of India (SIDBI
SIDBI was established in 1991 as an apex refinance bank.
It operates through 5 regional offices and 33 branch offices.
The assistance to SSIs is either direct or indirect when they operate through the SFCs
which are financed by them.
III.IDBI Industrial Development Bank of India.
IV. ICICI Industrial Credit and Investment Corporation of India
Set up in January 1955 under the Companies Act with a primary objective of developing
small and medium industries in the private sector.
Its issue capital has been subscribed by other banks, insurance companies, individuals and
corporations of the US and the British eastern Exchange Bank, other companies and
general public in India.
It assists by way of foreign currency loans, underwriting direct subscriptions to shares,

debentures, guarantees, deferred credit, leasing credit, installment sale, asset credit and
venture capital, it guarantees loans from other private investment sources. It also has a
Merchant Banking Division.
5. Others
Industry Associations
Some of the Industry related associations which impart institutional support are
CII
Confederation of Indian Industry
FICCI
Federation of Indian Chamber of Commerce
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PHDCCI
PHD Chamber of Commerce and Industry
ASSOCHAM Associated Chamber of Industries and Commerce

FIEO
Federation of Indian Exporters Organization
WASME
World Association for Small and Medium Enterprises
FASII
federation of Association of Small Industries of India
LUB
Laghu Udyog Bharati
ISCI
Indian Council of Small Industries
CSIR
Council of Scientific and Industrial Research
- NGOs Non Govt. Organizations

- Research and Development Laboratories.
6.15.3 Objectives of Supporting Agencies
Making available to the SSI units the necessary assistance to set up the units, run them smoothly
and help them in all maters with regard to rules, regulations, functioning, market, marketing,
sales, exports, research, development, etc.
An entrepreneur would be focused on running the actual production within the industry and
oversee things therein. He would not be aware of the external conditions as much as he believes
he knows. Filling him up with all other inputs is the objective of the supporting agencies.
6.15.4 Functions of Supporting Agencies

All Supporting Agencies are independent bodies either formed by the state government or by an Act of
govt. or under the Companies Act, 1956. They operate independently and have their own objectives and
goals. The common functional objectives of the Supporting Agencies however are
Help develop Small Scale Industries which include the tiny, village and cottage industries also.
Improve the employment opportunities.
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Widen the entrepreneurship base.
Develop the region, town, and village industrially.
Help develop the economy of the country.
6.15.5 Types of Help by Supporting Agencies
Identifying the industry to be set up
Project report formation
Providing ready to occupy industrial shed / plot of land
Providing finance for setting up the unit
Arranging for machinery
Technical support to run the unit
Identifying market for the products
Promoting exports
Discounting bills of exchange, sales bills
Arranging Term loan facility, working capital facility, bill discounting facility
Furnishing guarantees where required
6.16 Ancillary Industry and Tiny Industry (Definition only).
6.16.1 Ancillary Industry
Ancillary Industries are small industries having investment in fixed assets plant & machinery
not exceeding 1 crore and
is engaged or is proposed to be engaged in the manufacturing or production of parts,
componenets, sub-assemblies, tooling or intermediaries,
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Rendering of services, supplying or proposed to supply or render 50% production of total

service to other units of production of other articles
Provided no such understanding shall be subsidiary of or owned or controlled by any
other industry.
Advantages of ancillary units
Gestation period reduced. Parent unit can concentrate on more important production issues.
Generates another entrepreneur, creates more employment.
Hitherto untapped monetary resource is now utilized.
Cost effective since smaller unit can produce same item with lesser / cheaper inputs
Facility set up can be used by the ancillary for other activity also and there by develop business.
Special part of production set up by ancillary make him an expert in the activity over time
Marketing problem is solved for the ancillary
6.16.2 Tiny Industry
The investment limit in plant and machinery items in the case of tiny unit is Rs 25 lakhs
irrespective of its location.
The growth in tiny industry facilitates self employment, results in a wide dispersal of industrial
and economic activity and ensures maximum utilization of local resources.
Advantages of Tiny Units
Local resources utilized.
Creates widespread employment. Rural people also employed. Operate from home.
Less risk involved. Risk minimized.
Gestation period reduced. More production achieved.
Exports earn foreign exchange.
Helps regional development.
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Helps entrepreneurial development.
KNSIT Bangalore
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Dr. Hemanth .K. P. Training & Placement Officer

In case enterprise engaged in the Manufacturing or Production of Goods pertaining to any

Dr. Hemanth .K. P. Training & Placement Officer

Small Scale Industry

Investment Ceiling Limit in IRS

1 crore (10 million)

Original value of plant and

1 crore (10 million)

At least 50% of its output to go

Export Oriented Unit

1 crore (10 million)

Obligation to export 50% of

25 lakhs (2.5 million)

Service and Business (industry

1 crore (10 million)

51% equity holding by women

High Tech and Export oriented

5 crore (50 million)

Total only for 64 items

Capital investment is less

Number of people employed per unit is less

Employees of the small scale industries are generally unorganized.

Success of the unit depends on entrepreneurial abilities of the owners.

Dr. Hemanth .K. P. Training & Placement Officer

Competition is very high among small units.

Many units indulge in exploitation of natural and human resources.

Financial discipline is very weak among the units.

Profit margins are very low.

Generally engage in production of light consumer goods

Entrepreneurs savings contribute to the major portion of the investment.

6.3 Need and rationale

Opportunity for Employment.

Assuring adequate supply of goods and services.

Encourage decentralized industrial expansion.

Mobilize capital investment and entrepreneurship skills.

Spread over wide areas.

Ensure equitable distribution of income.

Balanced regional development.

Higher standard of living.

Mobilization of local resources.

Less dependence on foreign capital.

Promotion of self employment.

Creation of greater employment opportunity.

Reduction of general imbalance by encouraging set up of units in underdeveloped regions.

Supply products and services at reasonable prices.

Dr. Hemanth .K. P. Training & Placement Officer

Optimum utilization of skills at local level.

To reduce disparities in income and wealth.

Attainment of self reliance.

To improve standard of living.

To create decentralized pattern of ownership.

To encourage growth of local entrepreneurship.

The following are some of the areas of SSIs

Dr. Hemanth .K. P. Training & Placement Officer

Leather products including footwear

6.6 Role of SSI in Economic Development

Economic development is defined as an increase in per-capita income of person resulting in

SSI contributes to the increase in per-capita income.

SSI promote evenly spread of national income.

SSI makes effective mobilization of untapped capital and human skills.

This creates balanced regional development.

6.7 Advantages of SSI