INTRODUCTION

BACKGROUND

Since the time of the independence in 1947, a significant feature of the Indian economy has been

the rapid growth of the small industry sector. The small industry sector is considered to have a

major role in the Indian economy due to its 40 percent share in the national industrial output

along with an 80 percent share in industrial employment and nearly 35 percent share in exports.

The small scale industries sector has been assigned an important role in the industrialization of

the country by the previous and current governments of India.

There are no clear official definitions of small. Small scale industries are usually distinguished

from the large-scale and medium-scale industries on the basis of size, capital resources and labor

force in the units. At one time the government of India had grouped small-scale industrial

undertakings into two categories - those using power but employing less than 50 persons and

those not using power and employing less than 100 persons. However, capital investment on

plant and machinery by units is considered as a main criteria for distinguishing between the large

and small industries. An industrial unit can be classified as a small-scale unit only if it meets the

capital investment limits set by the government of India (GoI). These limits have been steadily

increased over the years. In 2005, the investment limit for small-scale industry (SSI) was raised

from $6 million to $30 million. Production units that are ancillary to large-scale units are also

considered as small if they sell not less than 50 percent of their manufactured products to one or

more industrial units.

However, there is a clear distinction between the traditional and modern small industries. The

traditional small industries include khadi and handloom, village industries, handicrafts,
sericulture, coir, etc. Modern small industries manufacture a wide variety of goods from simple

items to sophisticated items such as television sets, electronics control system, various

engineering products, particularly as ancillaries to large industries. The traditional small

industries are highly labor-intensive, while the modern small industries use highly sophisticated

machinery and equipment. The term small-scale industries is mostly used to represent modern

small industries. The SSIs manufacture many items which include rubber products, plastic

products, chemical products, glass and ceramics, mechanical engineering items, hardware,

electrical items, transport equipment, electronic components and equipments, automobile parts,

bicycle parts, instruments, sports goods, stationery items and clocks and watches. The small

scale industry sector output contributes almost 40% of the gross Industrial value-added 45% of

the total exports from India (direct as well as indirect exports) and is the second largest employer

of human resources after agriculture. The development of Small Scale Sector has therefore been

assigned an important role in India's national plans.

In order to protect, support and promote small enterprises as also to help them become self-

supporting, a number of protective and promotional measures have been undertaken by the

Government.