Important Role of Small Scale Industries in Indian Economy

Role of SSI in Indian Economy

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 comes from the SSIs. Many of the big businesses today were all started small and then nurtured into big businesses. The roles of SSIs in economic development of the country are briefly explained below.

Role of Small Scale Industries in Indian Economy

Role of Small Scale Industries in Indian Economy

1. Small Scale Industries Provides Employment

1. SSI uses labour intensive techniques. Hence, it provides employment opportunities to a large number of people. Thus, it reduces the unemployment problem to a great extent.

2. SSI provides employment to artisans, technically qualified persons and professionals. It also provides employment opportunities to people engaged in traditional arts in India.

3. SSI accounts for employment of people in rural sector and unorganized sector.

4. It provides employment to skilled and unskilled people in India.

5. The employment capital ratio is high for the SSI.

2. SSI Facilitates Women Growth

1. It provides employment opportunities to women in India.

2. It promotes entrepreneurial skills among women as special incentives are given to women entrepreneurs.

3. SSI Brings Balanced Regional Development

1. SSI promotes decentralized development of industries as most of the small scale industries are set up in backward and rural areas.

2. It removes regional disparities by industrializing rural and backward areas and brings balanced regional development.

3. It promotes urban and rural growth in India.

4. It helps to reduce the problems of congestion, slums, sanitation and pollution in cities by providing employment and income to people living in rural areas. It plays an important role by initiating the government to build the infrastructural facilities in rural areas.

5. It helps in improving the standard of living of people residing in suburban and rural areas in India.

6. 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.

4. SSI Helps in Mobilization of Local Resources

1. It helps to mobilize and utilize local resources like small savings, entrepreneurial talent, etc., of the entrepreneurs, which might otherwise remain idle and unutilized. Thus it helps in effective utilization of resources.

2. It paves way for promoting traditional family skills and handicrafts. There is a great demand for handicraft goods in foreign countries.

3. It helps to improve the growth of local entrepreneurs and self-employed professionals in small towns and villages in India.

5. SSI Paves for Optimisation of Capital

1. SSI requires less capital per unit of output. It provides quick return on investment due to shorter gestation period. The pay back period is quite short in small scale industries.

2. SSI functions as a stabilizing force by providing high output capital ratio as well as high employment capital ratio.

3. It encourages the people living in rural areas and small towns to mobilize savings and channelize them into industrial activities.

6. SSI Promotes Exports

1. SSI does not require sophisticated machinery. Hence, it is not necessary to import the machines from abroad. On the other hand, there is a great demand for goods produced by small scale sector. Thus it reduces the pressure on the country’s balance of payments.

2. SSI earns valuable foreign exchange through exports from India.

7. SSI Complements Large Scale Industries

1. SSI plays a complementary role to large scale sector and supports the large scale industries.

2. SSI provides parts, components, accessories to large scale industries and meets the requirements of large scale industries through setting up units near the large scale units.

3. It serves as ancillaries to large Scale units.

8. SSI Meets Consumer Demands

1. SSI produces wide range of products required by consumers in India.

2. SSI meets the demand of the consumers without creating a shortage for goods. Hence, it serves as an anti-inflationary force by providing goods of daily use.

9. SSI Ensures Social Advantage

1. SSI helps in the development of the society by reducing concentration of income and wealth in few hands.

2. SSI provides employment to people and pave for independent living.

3. SSI helps the people living in rural and backward sector to participate in the process of development.

4. It encourages democracy and self-governance.

10. Develops Entrepreneurship

1. It helps to develop a class of entrepreneurs in the society. It helps the job seekers to turn out as job givers.

2. It promotes self-employment and spirit of self-reliance in the society.

3. Development of small scale industries helps to increase the per capita income of India in various ways.

4. It facilitates development of backward areas and weaker sections of the society.

5. Small Scale Industries are adept in distributing national income in more efficient and equitable manner among the various participants of the society.