Growth and Problems of Small Scale Industries
Small scale industries are industries which produce goods or provide services on a small scale with the help of machines, hired labour and power.Small businesses face various problems because of their small size. They have limited capital for expansion.
They are unable to take advantage of economies of large scale production and also lack motivation for expansion as they are unable to take benefit of the government schemes and incentives. As a result, the business units may become sick or even close down their operations.
They are unable to take advantage of economies of large scale production and also lack motivation for expansion as they are unable to take benefit of the government schemes and incentives. As a result, the business units may become sick or even close down their operations.
Some of the problems faced by small scale industries in India are:-
1. Shortage of Funds:
Small business entrepreneurs don’t have enough long- term or short-term funds. These are, therefore, short of both fixed assets as well as working capital. Even the banks do not come to their help in a big way. Financial institutions like ICICI, IDBI and IFCI help only large scale industries.
2. Lack of Latest Technology:
Small business lacks funds. Latest technology is not used because it is expensive. Only old methods and techniques are being used. Due to this they earn less margin of profit.
3. Shortage of Raw Materials:
There is shortage of raw material because of less working capital. They can’t buy in bulk during the season and cannot enjoy the economies of large scale.
4. Shortage of Power:
Because of shortage of power, the small business enterprises are not able to use full capacity of the plant at their disposal. They cannot afford to have their own power generators.
5. Labour Problem:
The labour is mostly unskilled. Small business don’t have resources to provide good training. Labour are also not paid well. There is no motivation for professional growth. Small business is incapable to bargain with powerful trade unions.
6. Marketing Problem:
Small business cannot face the competition with large scale units in marketing and selling. They cannot afford to spend much on advertising and proper distribution of goods. They have to depend on middlemen, who pay low prices and even the recovery from the middlemen is very slow.
7. Managerial Skills:
Only individuals or a small group of people own and operate the small business units. They don’t possess professional managerial skills required to run a business successfully.
8. Quality:
Small business finds it difficult to come upto global standards of the quality. They also don’t have funds for research in order to improve upon the quality. The product quality is their weakest point as compared to the standards of the large scale units.
9. Sickness:
It is painful to see most of the small units going sick. There is a lack of planning. Skilled and trained personnel is another hurdle. They have to sell on credit. Their customers do not pay them in time. There are large scale bad debts. Thus, they fall short of working capital to keep the production process going. This leads to sickness.
1. Shortage of Funds:
Small business entrepreneurs don’t have enough long- term or short-term funds. These are, therefore, short of both fixed assets as well as working capital. Even the banks do not come to their help in a big way. Financial institutions like ICICI, IDBI and IFCI help only large scale industries.
2. Lack of Latest Technology:
Small business lacks funds. Latest technology is not used because it is expensive. Only old methods and techniques are being used. Due to this they earn less margin of profit.
3. Shortage of Raw Materials:
There is shortage of raw material because of less working capital. They can’t buy in bulk during the season and cannot enjoy the economies of large scale.
4. Shortage of Power:
Because of shortage of power, the small business enterprises are not able to use full capacity of the plant at their disposal. They cannot afford to have their own power generators.
5. Labour Problem:
The labour is mostly unskilled. Small business don’t have resources to provide good training. Labour are also not paid well. There is no motivation for professional growth. Small business is incapable to bargain with powerful trade unions.
6. Marketing Problem:
Small business cannot face the competition with large scale units in marketing and selling. They cannot afford to spend much on advertising and proper distribution of goods. They have to depend on middlemen, who pay low prices and even the recovery from the middlemen is very slow.
7. Managerial Skills:
Only individuals or a small group of people own and operate the small business units. They don’t possess professional managerial skills required to run a business successfully.
8. Quality:
Small business finds it difficult to come upto global standards of the quality. They also don’t have funds for research in order to improve upon the quality. The product quality is their weakest point as compared to the standards of the large scale units.
9. Sickness:
It is painful to see most of the small units going sick. There is a lack of planning. Skilled and trained personnel is another hurdle. They have to sell on credit. Their customers do not pay them in time. There are large scale bad debts. Thus, they fall short of working capital to keep the production process going. This leads to sickness.
Growth of Small Scale Industries
The small-scale sector has particularly emerged as a vibrant and dynamic segment of the economy.It is a matter of great importance and pride that India has distinct leading position of its own amongst the developing economies particularly in the sphere of small scale sector. India has a vast reservoir of scientific and technical manpower, occupying third position in the world as far as technical manpower is concerned.
Small scale industrial sector received specific focus towards growth and development in the industrial policy measures, announced on August 6, 1991. These policy measures of SSI sector have given considerable focus and attention towards modernization, technology up gradation, quality and human resources development.Small scale industry is playing a very important role in the industrial development of our country. The growth in employment in this sector over years has been remarkable. The total value of production of small scale units comes to nearly 40 percent of the total value of industrial output of the country. Over the years a heartening trend in exports has been observed in the shape of increase in exports of non-traditional items from this sector.
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