Small Scale Industries:

Small scale industries play an important role for the development of Indian economy in many ways. About 60 to 70 percent of the total innovations in India come from the SSIs. Many of the big businesses today were all started small and then nurtured into big businesses. The role of SSIs in economic development of the country is briefly explained in forthcoming paragraphs.

Role of SSIs in Economic Development

1. Provide Employment

• SSIs use labour intensive techniques. Hence, they provide employment
  opportunities to a large number of people. Thus, they reduce the unemployment problem to a great extent.
• SSIs provide employment to artisans, technically qualified persons and professionals, people engaged in traditional arts, people in villages and unorganized sectors.
• The employment-capital ratio is high for the SSIs.

2. Bring Balanced Regional Development

• SSIs promote decentralized development of industries as most of the SSIs are set up in backward and rural areas.
• They remove regional disparities by industrializing rural and backward areas and bring balanced regional development.
• They help to reduce the problems of congestion, slums, sanitation and pollution in cities. They are mostly found in outside city limits They help in improving the standard of living of people residing in suburban and rural areas in India.
• The entrepreneurial talent is tapped in different regions and the income
  is also distributed instead of being concentrated in the hands of a few individuals or business families.

3. Help in Mobilization of Local Resources

• SSIs help to mobilize and utilize local resources like small savings, entrepreneurial talent etc., of the entrepreneurs, which might otherwise remain idle and unutilized.
• They pave way for promoting traditional family skills and handicrafts. There is a great demand for handicraft goods in developed countries.
• They help to improve the growth of local entrepreneurs and self-employed professionals in small towns and villages in India.

4. Pave for Optimisation of Capital

• SSIs require less capital per unit of output. They provide quick return
  on investment due to shorter gestation period. The payback period is quite short in SSIs.
• SSIs function as a stabilizing force by providing high output-capital ratio as well as high employment capital ratio.
• They encourage the people living in rural areas and small towns to mobilize savings and channelize them into industrial activities.

1. Promote Exports

• SSIs do not require sophisticated machinery. Hence, import the machines from abroad is not necessary. On the other hand, there is a great demand for goods produced by SSIs. Thus, they reduce the pressure
  on the country’s balance of payments.
• However, with recent past large-scale industries are able to borrow large funds with low interest rate and spend large sums on advertisements. Hence SSIs are gradually vanishing.
• SSIs earn valuable foreign exchange through exports from India.

6. Complement Large Scale Industries

• SSIs play a complementary role to large scale sector and support the large-scale industries. SSIs provide parts, components, accessories to large scale industries and meet the requirements of large-scale industries through setting up units near the large-scale units.
• SSIs serve as ancillaries to large scale units.

7. Meet Consumer Demands

• SSIs produce wide range of products required by consumers in India.
  Hence, they serve as an ant inflationary force by providing goods of daily use.

8. Develop Entrepreneurship

• SSIs help to develop a class of entrepreneurs in the society. They help the job seekers to become job givers. They promote self-employment and spirit of self-reliance in the society
• SSIs help to increase the per capita income of India in various ways. They facilitate development of backward areas and weaker sections of the society.
• SSIs are adept in distributing national income in more efficient and equitable manner among the various participants of the society