These are the industrial undertakings having fixed investment in plant and machinery, whether held on ownership basis or lease basis or hire purchase

1. SMALL SCALE INDUSTRY

2. Definition:
(i) Small-Scale Industries:
 These are the industrial undertakings having fixed
investment in plant and machinery, whether held
on ownership basis or lease basis or hire purchase
basis not exceeding Rs. 1 crore.
 (ii) SSI is defined as an unit engaged in
manufacturing, serving, repairing, processing and
preservation of goods and having investment in
plant and machinery at an original cost of not
exceeding Rs. 1 crore.

3. Characteristicsof Small-Scale Industries
(i) Ownership:
 Ownership of small scale unit is with one
individual in sole-proprietorship or it can be with
a few individuals in partnership.
(ii) Management and control:
 A small-scale unit is normally a one man show and
even in case of partnership the activities are mainly
carried out by the active partner and the rest are
generally sleeping partners. These units are
managed in a personalised fashion. The owner is
activity involved in all the decisions concerning
business.

4. (iii) Area of operation:
 The area of operation of small units is generally
localised catering to the local or regional demand.
The overall resources at the disposal of small scale
units are limited and as a result of this, it is forced
to confine its activities to the local level.
(iv) Technology:
 Small industries are fairly labour intensive with
comparatively smaller capital investment than the
larger units. Therefore, these units are more suited
for economics where capital is scarce and there is
abundant supply of labour.

5. (v) Gestation period:
 Gestation period is that period after which
teething problems are over and return on
investment starts. Gestation period of small scale
unit is less as compared to large scale unit.
(vi) Flexibility:
 Small scale units as compared to large scale units
are more change susceptible and highly reactive
and responsive to socio-economic conditions.
 They are more flexible to adopt changes like new
method of production, introduction of new
products etc.

6.  (vii) Resources:
 Small scale units use local or indigenous resources
and as such can be located anywhere subject to the
availability of these resources like labour and raw
materials.
 (viii) Dispersal of units:
 Small scale units use local resources and can be
dispersed over a wide territory. The development
of small scale units in rural and backward areas
promotes more balanced regional development
and can prevent the influx of job seekers from
rural areas to cities.

7. Objectivesof Small Scale Industries:
 The objectives of small scale industries are:
 1. To create more employment opportunities with
less investment.
 2. To remove economic backwardness of rural and
less developed regions of the economy.
 3. To reduce regional imbalances.
 4. To mobilise and ensure optimum utilisation of
unexploited resources of the country.

8.  5. To improve standard of living of people.
 6. To ensure equitable distribution of income and
wealth.
 7. To solve unemployment problem.
 8. To attain self-reliance.
 9. To adopt latest technology aimed at producing
better quality products at lower costs.

9. Whatarethetypesof Small Scale
Industriesfound in India
 All types of small-scale industries found in India
whether in manufacturing sector or service sector
are divided into five types:
1. Manufacturing Industries:
 Those units which are producing complete articles
for direct consumption and also for processing
industries are called as manufacturing industries.
For example : Powerlooms, engineering industries,
coin industries, khadi industries, food processing
industries etc.

10. 2. Ancillary Industries:
 The industries which are producing parts and
components and rendering services to large
industries are called as ancillary industries.
3. Service Industries:
 Service industries are those which are covering
light repair shops necessary to maintain
mechanical equipments. These industries are
essentially machine- based.

11. 4. Feeder Industries:
 Feeder industries are those which are specialising
in certain types of products and services, e.g.
casting, electro-plating, welding, etc.
5. Mining or Quarries.

12. Importanceof SSIs in India
 SSI is one of the significant segments of the Indian
economy, contributing about 7 per cent to the
Indian GDP and providing employment to over 28
million people.
 manufactures more than 8,000 diverse products,
ranging from low-tech items to technologically-
advanced products.
 The SSI sector targets both domestic as well global
markets. SSIs sector is recognized as the engine of
growth, accounting for about 70% of employment
and contributes a significant amount for the
growth of GDP.

13.  Globally, 99.7 percent of all enterprises in the
world are SMEs and the balance 0.3 per cent is
large-scale enterprises. By contrast, the SSI sector
in India accounts for 95 per cent of all industrial
units.

14. Advantagesand problemsof small scale
industries in India.
 Labor intensive in nature.
 Prevent congestion
 Suitable for people with limited resources
 Prevents concentration of economic power
 Leads to better distribution of income
 Helps to put idle resources to productive users
 Suitable for lean production
 Lead to allocate efficiently

15.  Problem of finance
 Problem of raw material
 Problem of power
 Problem of marketing
 Export duties
 Problem of technical know how
 Problem of industrial relation
 Growing mortality among the units

16. Stepsto Set Up Small Scale Industry
 Small scale industries have a large contribution in
the growth of an economy.
 Another advantage of small scale enterprises is
that they are easy to set up and can fulfill one’s
dream to become an entrepreneur.
 First of all, you need to prepare the description for
the small scale industry you want to set up. You
have to decide whether you wish to have a
corporation, proprietorship or partnership.

17.  Next, you need to describe the product you wish to
manufacture or the service you wish to offer.
 While choosing the product or service you want to
offer, you must conduct a good market research
and learn about the prevailing competition in the
market.
 The next step is to choose a location to set up your
small scale industry. Make sure you consider
things like availability of raw materials, labor,
transportation services and other such things
while choosing the location.

18.  The next big step is to arrange for finance. If you
don’t have enough finance, the best way is to
borrow a loan. You may learn about financial aid
offered by the government of your state or country.
 Production management is the next step, once you
are able to start your small scale industry. This
includes allocating space for different operations
and choosing your production methods
 Make sure that you follow the practices for quality
testing and keep on improving. You have to
purchase required machinery and hire employees
and workers for different departments.

19.  Marketing and business advertising form the next
big step of setting up a small scale industry.
 You have to decide prices for your products or
services, keeping in mind the profit margin.

20. What is Governmentsupportto SSI
during fiveyearplans?
 Immediately after independence, government of
India has given great importance to the
development of small-scale sector in the successive
five year plans. The expenditures for SSI during the
eight Five Year Plans
 First Plan: In the first Five Year Plan Rs. 48 crores
was spent on small-scale sector alone. During this
plan six boards were constituted namely All India
Handloom Board, All India Handicraft Board, All
India Khadi and Village Industry Board, Small-
Scale Industries Board, Coir Board and Central Silk
Board. The Boards were established to cover the
entire field of small-scale and cottage industries.

21.  Second Plan: As per the recommendations of
Karve Committee, the second Five Year Plan
focused on dispersal of industries.
 During this plan 60 industrial estates were
established for providing basic facilities like water,
power, transport etc. at one place.
 The total expenditure during this plan towards SSI
was Rs. 187 crores. In addition some items were
reserved for exclusive production in small-scale
industries.

22.  Third Plan: The third Plan focused on extension
of coverage of small scale industries. During this
plan Rs. 248 crores were spent.
 Fourth Plan: The programmes adopted during the
third plan were extended during fourth plan also.
 As a result, small-sector witnessed significant
diversification and expansion during the fourth
plan period, during which 346 industrial estates
had been completed and small-scale sector
provided employment to almost 82,700 persons.

23.  Fifth Plan: The main thrust of the fifth plan was
to develop small-scale industries to remove
poverty and inequality stacking the land. During
this plan the expenditure incurved is Rs. 592
crores.

24.  Sixth Plan: Because of the massive development
programmes initiated for the development of promising
small-scale sector, the actual expenditure of Rs. 1945
crores surpassed the plan 836 items were reserved for
manufacturing in small-scale industries and reserved
409 items for exclusive purchase from small scale
industries. In addition, SIDO (Small-Industries
Development Organization) was established to provide
consul-tancy services in technical, managerial and
marketing. In 1982 CART (Council for Advancement of
Rural Technology) was established for providing
necessary technical input to 23 rural industries. By the
end of sixth plan, the production from small and cottage
industries increased to Rs. 65,730 crores, exports
touched Rs. 557 crores and employment in SSI sector
reached 315 lakh persons accounting 80% of the total

25.  Seventh Plan: The main thrust of this plan was
upgradation of technology to increase
competitiveness of small sector. The new watch
word was “competition” and “not reservation”.
 The actual expenditure of Rs. 3,249 crores
surpassed the plan outlay of Rs. 2,752 crores. The
value of production increased from Rs. 57,100
crores to Rs. 91,681 crores.

26.  Eighth Plan: The main thrust of the eighth plan
was the employment generation as the motive
force for economic growth. To achieve this, small
and village industries have been assigned an
extremely important role. The proposals of this
plan are
 (i) The plan reiterated that timely and
adequate availability of credit is more important
than concessional credit. For this purpose SIDBI
was established, certain new initiatives like
sanction of composite loans under ‘single window
system’, concessional loans to state corporations
for infrastructural developments were introduced.

27.  (ii) Eighth plan proposed to establish tool
room and training institutes in order to upgrade
technology.
 (iii) Growth centre approach has been accepted
and 70 growth centers were established. In
addition establishment of functional industrial
estates with agricultural and horticulture products
was also proposed.
 (iv) Proposed to establish integrated
infrastructure development centers for tiny units.
For this the centre, the state governments and
industry associations were also involved.

28. Expendituretowards SSI in FiveYear Plans
Plan/period
Total expenditure towards SSI
(in crores)
First (1951-56) 48.00
Second (1956-61) 187.00
Third (1961-66) 248.00
Fourth (1969-73) 242.00
Fifth (1974-78) 592.00
Sixth (1980-85) 1,945.00
Seventh(1985-90) 3,249.00
Eighth (1992-97) 6,334.00

29. Globalization, Liberalisationand
Privatisation in India
Globalization:
 The term globalization can be used in different
contexts. The general usages of the term
Globalization can be as follows:
 i. Interactions and interdependence among
countries.
 ii. Integration of world economy.
 iii. Deterritorisation.

30.  By synthesising all the above views Globalization
can be broadly defined as follows:
 It refers to a process whereby there are social,
cultural, technological exchanges across the
border.
 The term “global village” is also frequently used to
highlight the significance of globalization. This
term signifies that revolution in electronic
communication would unite the world.

31. Effectof Globalizationon India:
 Globalization has its impact on India which is a
developing country. The impact of globalization
can be analysed as follows:
1. Access to Technology:
 Globalization has drastically, improved the access
to technology. Internet facility has enabled India
to gain access to knowledge and services from
around the world. Use of Mobile telephone has
revolution used communication with other
countries.

32.  2. Growth of international trade:
 Tariff barriers have been removed which has
resulted in the growth of trade among nations.
Global trade has been facilitated by GATT, WTO
etc.
3. Increase in production:
 Globalization has resulted in increase in the
production of a variety of goods. MNCs have
established manufacturing plants all over the
world.

33. 4. Employment opportunities:
 Establishment of MNCs have resulted in the
increase of employment opportunities.
5. Free flow of foreign capital:
 Globalization has encouraged free flow of capital
which has improved the economy of developing
countries to some extent. It has increased the
capital formation.

34. Negativeeffectof globalization:
 Globalization is not free from negative effects.
They can be summed up as follows:
1. Inequalities within countries:
 Globalisation has increased inequalities among
the countries. Some of the policies of
Globalization (liberalisation, WTO policies etc.)
are more beneficial to developed countries. The
countries which have adopted the free trade
agenda have become highly successful. E.g.: China
is a classic example of success of globalization. But
a country like India is not able to overcome the
problem.

35. 2. Financial Instability:
 As a consequence of globalization there is free flow
of foreign capital poured into developing
countries. But the economy is subject to constant
fluctuations. On account of variations in the flow
of foreign capital.
3. Impact on workers:
 Globalization has opened up employment
opportunities. But there is no job security for
employees. The nature of work has created new
pressures on workers. Workers are not permitted

36. 4. Impact on farmers:
 Indian farmers are facing a lot of threat from
global markets. They are facing a serious
competition from powerful agricultural industries
quite often cheaply produced agro products in
developed countries are being dumped into India.
5. Impact on Environment:
 Globalization has led to 50% rise in the volume of
world trade. Mass movement of goods across the
world has resulted in gas emission. Some of the
projects financed by World Bank are potentially
devastating to ecological balance. E.g.: Extensive
import or export of meat.

37. 6. Domination by MNCs:
 MNCs are the driving force behind globalization.
They are in a position to dictate powers.
Multinational companies are emerging as growing
corporate power. They are exploiting the cheap
labour and natural resources of the host countries.

38. Liberalisation:
 It is an immediate effect of globalization.
Liberalisation is commonly known as free trade. It
implies removal of restrictions and barriers to free
trade. India has taken many efforts for
liberalisation which are as follows:
 New economic policy 1991.
 Objectives of the new economic policy.
 i. To achieve higher economic growth rate.
 ii. To reduce inflation
 iii. To rebuild foreign exchange reserves.

39. FEMA:
 Foreign exchange Regulation Act 1973 was repealed
and Foreign exchange Management Act was
passed. The enactment has incorporated clauses
which have facilitated easy entry of MNCs.
 i. Joint ventures with foreign companies. E.g.: TVS
Suzuki.
 ii. Reduction of import tariffs.
 iii. Removal of export subsidies.
 iv. Full convertibility of Rupee on current account.

40.  v. Encouraging foreign direct investments.
 The effect of liberalisation is that the companies of
developing countries are facing a tough
competition from powerful corporations of
developed countries.
 The local communities are exploited by
multinational companies on account of removal of
regulations governing the activities of MNCs.

41. Privatisation:
 In the event of globalization privatisation has
become an order of the day.
 Privatisation can be defined as the transfer of
ownership and control of public sector units to
private individuals or companies.
 It has become inevitable as a result of structural
adjustment programmes imposed by IMF.

42.  Objectives of Privatisation:
 To strengthen the private sectors.
 Government to concentrate on areas like education
and infrastructure.
 In the event of globalization the government felt
that increasing inefficiency on the part of public
sectors would not help in achieving global
standards. Hence a decision was taken to privatise
the Public Sectors.

43.  Causes of Inefficiency of Public Sectors:
 i. Bureaucratic administration
 ii. Out dated Technology
 iii. Corruption
 iv. Lack of accountability.
 v. Domination of trade unions
 vi. Political interference.
 vii. Lack of proper marketing activities.

44. Privatisation has itsown advantagesand
disadvantages
Advantages:
 i. Efficiency
 ii. Absence of political interference
 iii. Quality service.
 iv. Systematic marketing
 v. Use of modern Technology
 vi. Accountability
 vii. Creation of competitive environment.
 viii. Innovations
 ix. Research and development
 x. Optimum utilisation of resources
 xi. Infra structure.

45. However, privatisationsuffers from the
following defects
 i. Exploitation of labour.
 ii. Abuse of powers by executives.
 iii. Unequal distribution of wealth and income.
 iv. Lack of job security for employees.
 Privatisation has become inevitable in the present
scenario. But some control should be exercised by
the government over private sectors.

46. ORIGIN AND OBJECTIVES OF WTO
 The World Trade Organization (WTO) was
established on 1st January 1995. The ‘Marrakesh
Declaration' of 15th April 1994, affirmed that the
results of the Uruguay Round would ‘Strengthen
the world economy and lead to more trade,
investment and employment and income growth
throughout the world.

47.  The WTO is the embodiment of the Uruguay
Round Results and successor to the GATT. From
1947 to 1994, General Agreement on Trade and
Tariff (GATT) was the forum for negotiating lower
customs duty rates and other trade barriers. When
the GATT came into WTO's 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.
WTO aims to develop the country's economy by
encouraging its export among the member
countries.

48. Keysubjects in WTO
 WTO not only frames rules regarding the
marketing of produces in agriculture, textiles and
clothing sectors, but also it fixes international
standardized labour wages and working
conditions, globalizes the trade and weeds out the
corruption at Government level in Government
procurement policies.
 Further, it facilitates for availing new technologies
from various countries at a lower cost.

49. Positive impactof WTO on SSIs
After the origin of WTO, the SSIs in India enjoy the
following privileges:
 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.

50.  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.

51.  In India, there has been a significant and absolute
gain in trade under WTO. Exports increased
marginally from $ 30.63 billion during the year
1995 to $ 44.2 billion in the year 2000 though share
in the global trade increased marginally from 0.6
to 0.65 percent. India has been a net gainer,
though in a limited way. Growth in India's exports
has been marginally above the growth in world
exports. This shows that WTO has made
significant contribution to the expansion of world
trade