India is a developing country and in developing countries the scope of small scale “industries are very wide.
It is contributing to the socio-economic development in the following ways:
(i) Contribution in GDP Small industries in India account for 96% of the industrial units in the country. They, contribute almost 40% of the gross industrial value added in the economy.
(ii) Contribution in Exports 45% of the total exports from India come from small scale industries. Gems and jewellery, handicrafts, sports goods, etc. are some items of exports from small scale sector.
(iii) Employment Generation Small industries are the second largest employers of human resources, after agriculture and generate more number of employment opportunities per unit of capital invested compared to large industries.
(iv) Variety of Production Small industries produce a wide variety of products ranging from mass consumption goods, ready made garments, hosiery goods, stationery items, soaps and detergents, domestic utensils, leather, plastic and rubber goods, processed foods and vegetables, wood and steel furniture, paints, varnishes, safety matches, etc. to the sophisticated items like electric and electronic goods, drugs and pharmaceuticals, agricultural tools and equipment and several other engineering products. Hand looms, handicrafts and other products from traditional village industries add to this diverse production from SSIs.
Regieiial Balance Small induslries confriT’ri-fte-sjgnificantly to the balanced development of the country as they produce simple products using simple technologies and depend on locally I available resources both material and labour and can be set up anywhere in the country.
(vi) Entrepreneurship Development Small industries provide opportunity for entrepreneurship development in the country. The latest skills and talents of people can be transformed into business ideas with little capital investment and almost nil formalities to start a small business.
(vii) Low Cost of Production Small industries have the advantage of low cost of production as they use locally I available resources which are less expensive: Establishment and running costs of I small industries are lower because of low overhead expenses.
(viii) Quick Decision Making Due to the small size of the organizations quick and timely decisions can be taken without consulting many people. New business opportunities can therefore be captured at the right time.
(ix) Customized Production Small industries can design the product as per the tastes/preferences/needs of individual customers. They can provide customized production for even non-traditional products such as computers and other such products. They can produce according to the needs „ of the customers as they use simple and flexible production techniques.
(x) Personal Touch Small industries have inherent strength of adaptability and a personal touch and therefore maintain good personal relations with both customers and employees. The government does not have to interfere in the functioning of a small scale unit.