Long Answer Questions<\/span><\/p>\nQuestion 1.
\nHow do small scale industries contribute to the socio economic development of India?
\nAnswer:
\nSmall scale industries in India enjoy a distinct position in view of their contribution to the soc io-economic development \u2018of the country. The following points highlight their contribution.
\n(i) Small industries in India account for 35 percent of the industrial value added and 45 percent of the total exports (direct and indirect exports) from India.<\/p>\n
(ii) Small industries are the second largest employers of human resources, after agriculture. They generate more number of employment opportunities per unit of capital invested compared to large industries. They are, therefore, considered to be more labour intensive and less capital intensive. This is a boon for a labour surplus country like India.<\/p>\n
(iii) Small industries in our country supply an enormous variety of products which include mass consumption goods, readymade 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.<\/p>\n
Among the sophisticated items manufactured are electric and electronic goods like televisions, calculators, electro-medical equipment, electronic teaching aids like overhead projectors, air conditioning equipment, drugs and pharmaceuticals, agricultural tools and equipment and several other engineering products. A special mention should be made of hand looms, handicrafts and other products from traditional village industries in view of their export value.<\/p>\n
(iv) The contribution of small industries to the balanced regional development of our country is noteworthy. Small industries with produce simple products using simple technologies and depend on locally available resources both material and labour can be set up anywhere in the country.<\/p>\n
Since they can be widely spread without any locational constraints, the benefits of industrialisation can be reaped by every region. They thus, contribute significantly to the balanced development of the country.<\/p>\n
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(v) Small industries provide ample opportunity for enterpreneurship, The latent skills and talents of people can be channelled into business ideas which can be converted into reality with little capital investment and almost nil formalities to start a small business.<\/p>\n
(vi) Small industries also enjoy the advantage of low cost of production. Locally available resources are less expensive. Establishment and running costs of industries are on the lower side because of law overhead expenses. Infect; the low cost of production which small industries enjoy is their competitive strength.<\/p>\n
(vi) Due to the small size of the organisations, quick and timely decisions can be taken without consulting many people as it happens in large sized organizations. New business opportunities can be captured at the right time.<\/p>\n
(viii) Small industries arebest suited for customised production, i.e. designing the product as per the tastes\/preferences\/needs of individual customers, say for example tailor-made shirt or trouser. The recent trend in the market is to go in for customised production of even non-traditional products such as computers and other products. They can produce according to the needs of the customers as they use simple and flexible production techniques.<\/p>\n
(ix) Last but not the least, small industries have inherent strength of adaptability and a personal touch and therefore maintain good personal relations with both customise and employees. The govt. doesYiot have to interfere in the functioning of a small scale unit.<\/p>\n
Due to the small size of the organization quick and timely decision can be taken without consulting many people as in large sized organisations. New business opportunities can be captured at the right time, thus providing healthy competition to big business which is good for the economy.<\/p>\n
Question 2.
\nDescribe the role of small businesses in rural India.
\nAnswer:
\nSmall-scale enterprises provide numerous benefits in rural area. The role of small business in rural India is explained in the following points:
\n(i) Non – farm Employment:
\nTraditionally, rural households in India were exclusively engaged in agriculture. But now rural households have varied and multiple sources of income and participate in a wide range of non – agricultural activities such as wage employment and self employment in commerce, manufacturing and services, along with the traditional rural activities of forming and agricultural labour. This can be largely attributed to the setting up of agro-based rural small industries.<\/p>\n
(ii) Employment for Artisans:
\nCottage and rural industries play an important role in providing employment opportunities in the rural areas, especially for the traditional artisans and the weaker sections of society.<\/p>\n
(iii) Prevention of Migration:
\nDevelopment ofrural and village industries can also prevent migration of rural population to urban areas in search of employment.<\/p>\n
(iv) Poverty Alleviation:
\nVillage and small industries are significant as producers of consumer goods and absorbers of surplus labour, thereby addressing the problems of poverty and unemployment. Promotion of small scale industries and rural industrialization has been considered by the Government of India as a powerful instrument for realizing the twin objective; of accelerated industrial growth and creating additional productive employment potential in rural and backward areas \u2019.<\/p>\n
(v) Socio-economic Aspects:
\nThese industries contribute to other socio-economic aspects, such as reduction inequalities, dispersed development of other sectors of the economy.<\/p>\n
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Question 3.
\nDiscuss the problems faced by small-scale industries.
\nAnswer:
\nProblems of Small Scale Business – Small scale industries are at a distinct disadvantage as compared to large scale industries. The scale of operations, availability of finance, ability to use modern technology, procurement of raw materials are some of these areas.<\/p>\n
This gives rise to several problems. Most of these problems can be attributed to the small size of their business, which prevents them from taking advantage, which acquire to large business organisations. However, the problems faced are not similar to all the categories of small businesses.<\/p>\n
For instance, in the case of small ancillary units, the major problems include delayed payments, the uncertainty of getting orders from the parent units and frequent changes in production processes. The problems of traditional small-scale units include remote location with less developed infrastructural facilities, lack of managerial talent, poor quality, traditional technology and inadequate availability of finance.<\/p>\n
The problems of exporting small-scale units include lack of adequate data on foreign markets, lack of market intelligence, exchange rate fluctuations, quality standards, and pre-shipment finance.<\/p>\n
In general, the small businesses are faced with the following problems:<\/p>\n
(i) Finance – One of the severe problems faced by SSIs is the non-availability of adequate finance to carry out its operations. Generally, a small business begins with a small capital base. Many of the units in the small sector lack the creditworthiness required to raise as capital from the capital markets.<\/p>\n
As a result, they heavily depend on local financial resources and are frequently the victims of exploitation by money lenders. These units frequently suffer from a lack of adequate working capital, either due to delayed payment of dues to them or locking up of their capital in unsold stocks. Banks also do not lend money without adequate collateral security or guarantees and margin money, which many of them are not in a position to provide.<\/p>\n
(ii) Raw Materials – Another major problem of small businesses is the procurement of raw materials, If the required materials are not available, they have to compromise on the quality or have to pay a high price to get good quality materials. Their bargaining power is relatively low due to the small number of purchases made by them.<\/p>\n
Also, they cannot afford to take the risk of buying in bulk as they have no facilities to store the materials. Because of general scarcity of metals, chemicals and extractive raw materials in the economy, the small scale sector suffers the most. This also means a waste of production capacity for the economy and loss of further units.<\/p>\n
(iii) Managerial Skills – Small business is generally promoted and operated by a single person, who may not possess all the managerial skills required to run the business. Many of the small business entrepreneurs possess sound technical knowledge but are less successful in marketing the output.<\/p>\n
Moreover, they may not find enough time to take care of all functional activities. At the same time they are not in a position to afford professional managers.<\/p>\n
(iv) Labours – Small business firms cannot afford to pay higher salaries to the employees, which affects employee willingness to work hard and produce more. Thus, productivity per employee is relatively low. Because of lower remuneration offered, attracting talented people is a major problem in small business organisations.<\/p>\n
Unskilled workers join for low’ remuneration but training them is a time consuming process. Also, unlike large organisations, division of labour cannot be practised, which results in lack of specialisation and concentration.<\/p>\n
(v) Marketing – Marketing is one of the most important activ ities as it generates revenue. Effective marketing of good’ requires a thorough understanding of the customer\u2019s needs and requirements. In most cases, marketing is a weaker area of small organisations.<\/p>\n
These organisations have, therefore, to depend excessively on middle men, who at times exploit them by paying low price and delayed payments. Further, direct marketing may not be feasible for small business firms as they lack the necessary infrastructure.<\/p>\n
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(vi) Quality – Many small business organizations do not adhere to desired standards of quality. Instead they concentrate on cutting the cost and keeping the prices low. They do not have adequate resources to invest in quality research and maintain the standards of the industry, non do they have the expertise to upgrade technology. In Tact maintaining quality is their weakest point, when competing in global markets.<\/p>\n
(vii) Capacity utilisation – Due to lack of marketing skills or lack of demand, many sn sail business Finns have to operate below full capacity due to which their operating costs tend to increase. Gradually this leads to sickness and closure of the business.<\/p>\n
(viii) Technology – Use of outdated technology is often stated as serious lacunae in the case of small industries, resulting in low productivity and uneconomical production.<\/p>\n
(ix) Sickness – Prevalence of sickness in small industries has become a point of worry to both the policy makers and the entrepreneurs. The causes of sickness are both internal and external. Internal problems include lack of skilled and trained labour and managerial and marketing skills. Some of the external problems include delayed, payment, shortage of working capital, inadequate loans and lack of demand for their products.<\/p>\n
(x) Global Competition – Apart from the problems stated above small businesses are not without fears, especially in the present context of liberalisation, privatization and globalisation (LPG) policies being followed by several countries across the world. Remember, India too has taken the LPG path since 1991. The areas where small businesses feel threatened with the on slaight of global competition.<\/p>\n
(a) Competition is not only from medium and large industries but also from multinational companies which are giants in terms of their size and business volumes. Opening up of trade results in cutthroat competition for small-scale units.<\/p>\n
(b) It is difficult to withstand the quality standards, technological skills, financial creditworthiness, managerial and marketing capabilities of large industries and multinationals.<\/p>\n
(c) There is limited access to markets of developed countries due to the stringent requirements of quality certification like 1509000.<\/p>\n
Question 4.
\nWhat measures has the government taken to solve the problem of finance and marketing in the small scale sector?
\nAnswer:
\nThe contribution of small-scale industries is remarkable. Thus, Government has provided the following institutional support to solve the problem of finance and marketing in the small scale sector:
\n1. National Bank for Agriculture and Rural Development (NABARD):
\nNABARD was setup in 1982 to promote integrated rural development. Since then, it has been adopting a multi-pronged, multi-purpose strategy for the promotion of rural business enterprises in the country.<\/p>\n
Apart from agriculture, it supports small industries, cottage and village industries, and rural artisans using credit and non-credit approaches. It offers counseling and consultancy services and organises training and development programmes for rural entrepreneurs.<\/p>\n
2. The Rural Small Business Development Centre (RSBDC):
\nIt is the first of its kind set up by the world association for small and medium enterprises and is sponsored by NABARD. It works for the benefit of socially and economically disadvantaged individuals and groups. It aims at providing management and technical support to current and prospective micro and small entrepreneurs in rural areas.<\/p>\n
Since its inception, RSBDC has organised several programmes on rural entrepreneurship, skill upgradation workshops, mobile clinics and trainers training programmes, awareness and counselling camps in various villages of Noida, Greater Noida and Ghaziabad.<\/p>\n
Through these programmes it covers a large number of rural unemployed youth and women in several trades, which includes food processing, soft toys making, ready-made garments, candle making, incense stick making, two-wheeler repairing and servicing, vermicomposting, and non-conventional building materials.<\/p>\n
3. National Small Industries Corporation (NSIC):
\nThis was set up ini955 with a view to promote, aid, and foster the growth of small business Units in the country. This focuses on the commercial aspects of these functions.<\/p>\n