Small scale enterprise has proved to be the main engine of economic growth. The main reason behind this is their frontline role in matters of the high level of productivity, generating employment, accumulating local capital formation, and at last, increasing the standard of living of common masses. In this article, we will discuss small scale industries and its impact in india
Nowadays SMEs share almost half of the total share of employment and sales thus they have become the deciding factor in reducing unemployment, eliminating poverty, and reducing income inequalities.
Small Scale Industries and its impact in India
In developing countries like India, Small scale industries constitute the backbone of the country as 50% of the total exports from India originates from the small and medium-sized business.
Earlier, due to a lack of support from the government in terms of loans to run startups, there were very few small scale industries. However, with the enactment of the Micro, Small, and Medium enterprises development act 2006 the number of Small scales industries is rising.
Now there are almost 44 lakhs of small scale industries in India providing almost 15 crore jobs throughout the country. This makes them the strongest sector to reduce unemployment in India as they do not require machinery to produce goods and services but they rely on people for this role. They not only employ professionals but also artisans and not so qualified people.
However, employment generation is not the only reason why the government is promoting small scale industries but they also help the Indian economy in the following ways-
Reduce urban-rural income- With the evolution of small-scale industries in rural areas, the gap between rural and urban income has reduced to a great extent. As now more small scale industries are set up in rural areas which are employing people to a large extent.
Reduce Migration- Before the advent of SMEs there was a mass migration from rural areas to urban areas for seeking jobs but the set up of small-scale industries in rural areas has reduced this migration to a great extent.
Boost Exports- In India, 40% of total production is produced by small-scale industries which have made it possible to boost the exports and help in increasing per capita income.
Improve Quality of life- Small scale industries have raised the employment levels in the country and employ the artisans and least technical employees which in turn boost the quality of life.
Encourage regional development- Small scale industries have made it possible to raise the backward and downtrodden sections of society. This in turn helps in development regionally.
What are the main sectors of small scale industries?
Small scale industries comprise of small scale industrial sector (SSIs) and small scale service and business enterprise (SSSBEs). Both of these sectors are contributing majorly to the country's per capita income. However, the main sector is the industrial sector as they are promoting the country's national income to a great extent.
Package for Micro and Small Enterprise
Now, one must wonder when was the package for promotion of micro and small enterprises announced? Well, micro and small enterprise has undergone a major drift in 2020 with the revised definition of MSME given by PM Narendra Modi while introducing 20 lakh crore Atma-nirbhar Bharat Abhiyaan economic package. As with the revised definition, there is an expected rise in micro and small enterprises.
Revised MSME classification are as follows-
Type of Enterprise
Rs 1 Crore
Rs 5 Crore
Rs 10 Crore
Rs 50 Crore
Rs 50 Crore
Rs 250 Crore
Package includes some key announcements which are as follows-
1. 3 lakh crore collateral-free automatic loans for MSMEs
2. Equity support for MSME
3. Equity infusion for MSME through ‘Fund to Fund’ which will increase MSME size in future
4. Investment limit has been updated.
This was the overall small scale industries and its impact in India. Due to the highest share of MSMEs in the country's per capita income, even the government has realized its importance. They are making it possible to boost these small scale industries by amending laws and promoting more people to own their startups. Thus, the Contribution of small-scale industries cannot be neglected and will boost in near future.
Small and Medium Enterprises in India