Small Scale Industries

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IIM Lucknow, Noida Campus

Table of Contents


2.Role and Importance4

3.Trend in production6

4.Trend in investment7

5.Trend in employment and wages in the large and small scale12

A.Employment Trend12

B.Employment - Industry Group-wise13

C.State-wise Employment Distribution14

D.Trend in Average Wages16

6.Employment intensity of output in the large and small scale17

A.Employment intensity of output in small scale industries17

B.Small scale industry is job creator20

C.The key to maintaining high employment growth22

7.New entrances in the market as a small scale22

8.Viability of small-scale sector in India’s globalized economy26

A.Capital intensity27

B.Generation of employment- industry GroupWise27

C.Per unit employment27




G.State-wise Employment Distribution28

H.Quick yielding28

I.Controlled price level29

J.Skill formation29

K.Low import intensity29

L.Balanced regional development29

M.Proper utilization of local resources29

N.Creation of self employment29

O.Support to large scale industries29

P.Even distribution of income and wealth30

Q.Export potential30




The industries in India which are organized on a small scale and produce goods with the help of small machines, hired labour and power, are the small scale industries present in India.

In a developing country like India, the role and importance of small-scale industries is very significant towards poverty eradication, employment generation, rural development and creating regional balance in promotion and growth of various development activities.

Role and Importance

Based on the past records it is estimated that the growth of small scale industries have been contributing about 40% of the gross value of output produced in the manufacturing sector and the generation of employment by the small-scale sector is more than five times to that of the large-scale sector.

This clearly shows the importance of small-scale industries in the economic development of the country. The small-scale industries have been playing an important role in the growth process of Indian economy since independence in spite of stiff competition from the large sector and not very encouraging support from the government.

The following are some of the important role played by small- scale industries in India.

1. Employment generation:

The basic problem that is confronting the Indian economy is increasing pressure of population on the land and the need to create massive employment opportunities. This problem is solved to larger extent by small-scale industries because small- scale industries are labour intensive in character. They generate huge number of employment opportunities. Employment generation by this sector has shown a phenomenal growth. It is a powerful tool of job creation.

2. Mobilisation of resources and entrepreneurial skill:

Small-scale industries can mobilize a good amount of savings and entrepreneurial skill from rural and semi-urban areas remain untouched from the clutches of large industries and put them into productive use by investing in small-scale units. Small entrepreneurs also improve social welfare of a country by harnessing dormant, previously overlooked talent.

Thus, a huge amount of latent resources are being mobilised by the small-scale sector for the development of the economy.

3. Equitable distribution of income:

Small entrepreneurs stimulate a redistribution of wealth, income and political power within societies in ways that are economically positive and without being politically disruptive.

Thus small-scale industries ensures equitable distribution of income and wealth in the Indian society which is...
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