Small Scale Industries (SSI) - Definitions, Types, Objectives, Examples Eligibility & Registration

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The small-scale industry, or SSI, encompasses businesses working on a modest scale regarding capital, workforce, and production. It provides products or services to communities targeting their specific need or demand. Their structures influence their capabilities of ownership, liabilities, and business operations. Understanding SSI and its types can help develop the right structure suitable for the needs. This article will define small-scale industries and discuss their types, eligibility, examples, registration process, etc.

What are Small-Scale Industries?

Small-scale industries include privately or independently owned and operated companies with less revenue and fewer employees than other companies in the particular industry. Since these companies generate less profit than larger businesses, they have more access to government support and resources. Firms in the SSI also provide unique products or services matching their community's demands and needs. Moreover, they establish collaborative sponsorships or partnerships for community events and activities.

Objectives of Small-Scale Industries

The main objectives of small-scale industries revolve around economic, developmental, and social goals. They improve the economy by creating jobs and income-generating opportunities in the country.

Moreover, they support regional and local economic development by encouraging entrepreneurship among people with limited resources. They also aim to reduce dependence on imported products and decentralise economic activities to reduce the burden on urban centres. Furthermore, they foster adaptability and innovation by responding to consumer demands and market changes, driving uniqueness and creativity in the products and services.

Types of SSI

The features of small-scale industries depend on the type of SSI established. Following are the three main types of small-scale industries:

Manufacturing Industries: Manufacture goods for further processing or finished products for consumption, such as food processing units, engineering units, and power rooms.
Ancillary Industries: Manufacture components for other manufacturing units where they turn into final products. Industries manufacturing automobiles, railway engines, tractors, etc., are examples of ancillary industries.
Service Industries: Rather than manufacturing products, these industries deliver services like repair, upkeep, and maintenance of products.

Role of Small-Scale Industries in the Indian Economy

Small-scale industries account for a significant percentage of the total products and services, contributing greatly to the economy's growth and strengthening. Besides, they are a primary source of employment in the informal sector, especially in labor-intensive jobs. Many exports from India are products of these industries, contributing to the country’s development and growth.

Apart from economic reasons, companies in SSI are also crucial for the country’s social growth. Since lower and middle-class people usually start these industries, they give such individuals an opportunity to earn wealth and create employment opportunities. The characteristics of small-scale industries largely help with income distribution, contributing to social progress.

Small-Scale Industry Examples

India has multiple small-scale industries with high revenue potential. Some common and lucrative examples include toy manufacturing, paper manufacturing, jewellery guilds, bakeries, food manufacturing and processing, craft guilds, agarbatti manufacturing, pickles manufacturing, leather manufacturing and tanning, beauty products, firecrackers manufacturing, etc. Other examples include handmade cosmetics, khadi products, tissue, candles, and chocolate manufacturing units.

Prerequisites for Establishing SSI

An aspiring entrepreneur must be ready with the following prerequisites for establishing an SSI:

Products or Services: Depending on demand, one must decide whether to venture into product manufacturing or service delivery.
Establishment: Decide the establishment of the SSI, including a company, partnership, or sole proprietorship.
Location: Finalise the location, plot size, and exact site to start an SSI
Registration: An SSI must obtain company registration, partnership firm registration, or Shop & Establishment Act registration, as applicable.
SSI Registration: Apply for SSI or MSME registration to start operations.
Machinery and Equipment: Acquire the appropriate machinery and equipment to manufacture the intended products or provide services.
Water and Power Connection: Apply for adequate water and power connections and gain permission from the pollution board.
Workforce: Recruit workforce to start and run the business unit.
Raw Materials: Source raw materials to manufacture the products.
Marketing: Plan an efficient marketing strategy to gain customers.

Frequently Asked Questions (FAQs)

What is the definition of Small-Scale Production?

To define small-scale industries, SSI is an industry that produces, manufactures or renders services on a micro or small-scale level.

What are the benefits of Small-Scale Industries?

Apart from giving business opportunities to young people in rural and semi-urban areas of the country, it also creates jobs, contributes to exports, and reduces imports to strengthen the economy.

What is one of the objectives of SSI?

Growing the economy with industrial contributions.

This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.