Small-scale industries in India are considered as the line-of-life for the Indian economy and are the need of the hour for financial and social progress of the country. Even though these industries are labor intensive, they demand little capital.
Small scale industries consist of all the small enterprises that are engaged in the activities related to manufacturing of goods or grant services with the support of smaller machines along with a small pool of workers as well as employees. Small scale industries can mainly exist in two forms, i.e., manufacturing industries or service providers. The Indian government has set the guidelines for the enterprises that fall under the category of small-scale industries in India.
Although small scale industries have made a substantial contribution to the development and economic progress of the nation, they have failed to utilize their actual potential to the fullest. The reason behind their underperformance is that they face certain issues in the functioning part, and most of them run in an incompetent manner. Since most of the small scale industries are still working on outdated technology, they are facing hindrances on the path of raising their level of productivity.
In India, the government has centralized its vision on formation and upliftment of small-scale industrial units due to the demand of vendors for multinational corporations. Through these industries, skilled labors get the right set of job opportunities to flourish their career. Various small-scale industries and manufacturing units in India are involved in exporting goods and thereby, pulling foreign currencies. The inclination of the Indian government in the direction of enhancing small scale units and small businesses is because of the fact that these industries and corporations are capable of ushering India on the path of economic prosperity.
Problems Encountered by Small-scale Industries in India
Small-scale industries in India face numerous problems on a daily basis. They have to live and survive anyhow as they don’t get much open space and expansion opportunities as large scale industries. In a developing nation like India, these industries can soar high if they get support from government via initiatives and schemes favoring them and also when they receive assistance from giant market players and Non-government organizations as well.
In the past, the Indian government had reserved certain items for getting produced and manufactured only by small-scale industrial units. Such items that were reserved for small players in the industry were not permitted to get produced by large scale industries. However, the principles of liberalization and globalization have opened the doorway for one and all. Thus, the competition has increased for SSI.
The problems encountered by SSIs are-
Financial Scarcity
One of the most daunting problems that SSIs in India face is the issue of inadequate finance and a shortage of funds to meet the crucial requirements. These industries are unable to access the local capital market to stir up resources, and financial constraints hinder their growth. Now, can you even expect a business to soar high in the sky of accomplishments without sufficient funds? Well, even in the second thought to you can’t expect the same. Due to their small capital structure, they fail to tap international markets by issuing Global Depository Receipts as well as American Depository Receipts.
Their dependency on financial institutions and finance-based government bodies and NGOs make them feeble to exist and run smoothly. However, in the last few years, the central government has taken several crucial decisions to arrange loans for them and uplift their financial position so that they can ride the vehicle of their business with much ease.
Lack of Market Awareness and Market Trends
Small-scale industries in India are not much aware of the market requirements. The lack of market knowledge concerning rivals, preferences of the consumers and ongoing trends in the market create obstruction on their way to success. The market of small scale corporations is restricted up to a great extent as their production volume is not gaining momentum and is low and cannot meet large quantities’ requirements. These small players have to face cut-throat competition from domestic industries along with international competitors who sell highly qualitative products at reduced prices due to the existence of liberalization and globalization in the market.
For instance, heavily subsidized but better quality imports from China has dominated the Indian Small-scale units producing/ manufacturing toys, electronic goods, chemicals, machine tools, locks and paper etc. Small-scale industries in India must gather information about the marketing tactics, competitors’ strategies, what consumers want, and more knowledge related to the market and consumers. After the announcement made by Indian Pm Narendra Modi regarding Aatmnirbhar Bharat and after the birth of Aatmnirbhar Sena last year, things have started getting better and improved for small scale industries and medium scale enterprises.
Shortage of Raw Materials
Due to the limited region of conducting business activities and limited finances, SSIs face difficulty meeting the demand for raw materials. Raw materials are the driving force for small scale units, and their shortage would increase the difficulty for those engaged in small-scale industries. As it’s a well-known fact that the demand for raw material is too high compared to the supply in the market, thereby pushing the costs to elevated heights.
One of the most growth-hindering problems in the smooth functioning of small-scale industries in India is the inadequate quantity and shortage of raw materials. If there were limited raw materials available, it would break the production part’s consistency and, thereby, hurt the business growth, revenue and eventually, it would lead to a loss of customers. With the rising support of government agencies and non-government organizations, small scale industries have started flourishing at a rapid pace in recent time, and we can just hope that they will be maintaining the same pace in the years to come.
Lack of Skilled People at Managerial Level
Handling the management part of any organization is not a piece of cake. It requires a lot of knowledge, experience along with qualified and efficient people at the managerial position on board. At the project management part, small-scale industries in India suffer a lot as people who are running such small scale enterprises or firms are not competent enough in terms of experience or skill. They fail to understand the current market demand, issues pertaining to availability of finance, location of the plant, production methods, and future prospects with respect to the small-scale industries. Marching ahead with inexperienced promoters would affect the cash flow and processes of production.
Industrial Relations below Par
The pay and benefits associated with large scale businesses are far better than the pay and benefits provided in small-scale industries in India. As we all know that the money minted and overall profitability achieved by small scale enterprises are very low, and even the certainty factor is missing, SSIs can’t touch the pay and benefits that large scale industries offer. Therefore, the labour problems exist up to a great extent in SSIs.
Labors working in the SSIs feel that they are not getting their due and thus, they fail to upgrade their performance level hindering the growth of small-scale industries in India. Expecting higher wages and other benefits from small scale enterprises is a pipe dream. In the normal scenario, it has been observed that such fights for benefits and higher wages has always lead to strikes, losses or property damage due to violence by employees, and downfall in the production part, and more negative consequences.
Running with Obsolete Technology
India is leaving its impact with growth and advancement on global parameters. Nevertheless, the growth of small scale enterprises has not been up to the mark. Most of the small-scale industrial units are running with outdated technology behind the times, and thus, there is a lack of quality production and low productivity from such industries. In order to conduct research and development activities, the requirement of the fund becomes more significant than anything else. Thus, due to lack of financial riches and required skillset, SSIs are unable to immerse themselves into the development of new technologies and are rather surviving and running anyhow with obsolete technology.
They can acquire modern technology from different firms, but even that would cost them too much. In the last few years, the Indian government has started supporting the SSIs via various schemes introduced to increase the longevity of small-scale industries and boost their growth. Also, Aatmnirbhar Sena is willing to bridge the gap between small scale industries and small business owners by increasing awareness about government policies. Small sector enterprises must take two points into consideration if they want to flourish themselves and gear up for the next step of accomplishment, i.e., productivity and competitiveness. Both these factors would demand up gradation in technology.
Issues Related to Export
It’s next to impossible for SSIs to penetrate foreign markets as they are far behind in delivery quality and lack of cost competitiveness. Their scarcity of knowledge concerning the procedures involved in export, various patterns of demand, likeability factor linked with the products, international buyer behavior and foreign currency rates.
In countries such as Taiwan, Japan etc. products developed and produced by SSIs are exported to various foreign countries. In India, no major impactful action has been taken to enhance the export competitiveness of SSIs, and it’s an alarming condition for the growth of export of products produced within the geographical boundaries of India.
Trapped in the Shackles of Sickness
Due to a lack of strategic planning, most of the small scale units are suffering on all the grounds. Another issue is that they are operating without trained and skilled personnel. As customers are not making timely payment, the burden increases on the head of small scale units. Sickness is widespread among small scale units. Getting financial assistance from banks or other financial institutions has been a challenge. The large scale bad debts are creating hindrances on the path of advancement. Workers performing their tasks in sick units are being thrown out from their jobs and thereby, affecting the industrial development. In brief, we can say that small-scale units are trapped in the shackles of sickness.
Measures to Withstand and Overcome Problems Faced by SSIs
Ushering small-scale industries in India on the path of growth and all-round development is possible by framing an overall approach to hold the line against problems faced by SSIs.
The measures that would be a surefire shot for overcoming problems faced by small scale industries are-
Embracing Up-to-Date Techniques of Production
- The small scale units must incorporate the latest methods and techniques of production and should use these techniques as a replacement of antiquated technology.
- Upgrading the techniques and methods would ensure the production of the finest goods matching the industry standards.
- Here, the government must take the responsibility of examining and assessing whether the goods are in accordance with standards or not.
- Also, the responsible bodies must ensure that the products are manufactured without compromising with the quality part.
- Malpractices such as misrepresentation, adulteration, etc. need to be suppressed, and thereafter, the road for small-scale industries in India would be full of bliss and hope.
- The small-scale industries in India must conduct research on various production techniques as well as methods and should strive to make strides in the direction of brushing up the production methods along with strategies and look for embracing modern technology in their small scale industrial units.
- Standardization of products must be a factor that should get considered for sure.
Strengthening Marketing Framework
- A sound marketing framework would ensure better outcomes for small-scale industries in India.
- Adding fuel to market research, intelligence, and knowledge enlightenment would give strength to the marketing framework, and such results would assist the small scale units in uplifting their level. Marketing of products at moneymaking prices is the significant problem most of the small scale industries are facing nowadays.
- Thus, there is a cloudless case for the intervention of the government with a view to minimizing the disadvantages emerging out of market shortcomings and flaws.
- By strengthening the entire mechanism of marketing, small-scale industries in India can change their fortune.
- The government must set up efficient marketing organizations to eradicate the comparative limitations compared to large scale establishments in the realm of marketing.
Equitable Pattern of Allocation
- In the equitable allocation pattern of raw materials, required equipment, and imported components, the small-scale industries in India must get ample degree of preference.
- The government must ensure that things should take place in a fair and on the up and up.
- In addition to this, the government needs to make provision for increasing the availability of a better quantity of raw materials at reasonable prices and making sure that quality is as per the market standards.
Imparting Meaningful Industrial Education and Training
- Along with upgrading to latest techniques and methods of production, imparting technical knowledge related to the industries not only to the entrepreneurs running their small-scale businesses but also to the workers must be the substantial component of the plan.
- The government must make a mandatory arrangement in order to dispense meaningful knowledge related to technical education and provide training to workers engrossed in small-scale industries in India.
- The emphasis must be on providing requisite facilities for industrial education as well as proper training programs should be organized for enhancing the knowledge of one and all.
Arrangement of Sufficient Finance
- The capital invested in the small scale units by promoters is usually not very high.
- They are largely dependent on external sources of financing in a significant measure.
- Thus, the need of the time is an integrated credit system that would meet the short-term as well as long-term financial requirements of small-scale entrepreneurs and small scale industrial units.
- Short-term and long-term financial credit assistance is possible at a rate of interest such small-scale undertakings can bear in the future course of time.
- In recent time, the government has initiated the process of liberalizing the practices and rules of banking along with norms of financial institutions assisting the small-scale industries in India by furnishing credit so that they can meet their capital demands and smoothly operate their units.
Secured Lodge for Small-scale Industrial Units
- A secured lodge will be granted to small scale units after their role in the Indian economy receive recognition.
- The separation of small-scale industrial units and large-scale industrial units must betide as it would sort out the things for small-scale industries in India.
- All the measures must get interlinked in a single frame and applied simultaneously to make the journey of small-scale industries in India a plain sailing one.
Government Schemes for Small-scale Industrial Units in India
In recent years, the Indian government has introduced several schemes for small-scale industries and baby businesses in India.
Few of the popular government schemes are mentioned below-
PSB Loans in 59 Minutes
PSB Loans in 59 Minutes, known as the scheme of rapid business loans, introduced by our PM Shri Narendra Modi Ji on the rosy day of Diwali on 2nd November in the year 2018. Through this scheme, MSMEs can get loan amount in the range of Rs. 1 lakh to Rs. 5 crore within 59 minutes from public as well as private sector banks and NBFCs. The interest rate for such type of loan starts from 8.50%. It’s an initiative to encourage self-employment business model in the geographical boundaries of India.
Now, there is no need to wait for 7-8 working days and 30-day long process time is also reduced after the approval. With PSB Loans in 59 minutes, the overall process of a Small Business Loan for MSMEs is anticipated to become hassle free that too with minimal documentation requirements.
MUDRA Loan
MUDRA loan scheme is expanded as Micro Units Development and Refinance Agency. This scheme endeavors to bring the target audience into the financial fold. MUDRA scheme can be availed by individuals, MSMEs, SMEs, Units, businesses engrossed in Trading, Manufacturing, and Services Sectors, only. The maximum loan amount for MUDRA scheme is Rs. 10 lakh. This scheme promotes women entrepreneurs by helping them in availing easy loans at reduced rates.
Three categories of MUDRA Loan scheme are-
- SHISHU Loan – Young businesses and emerging startups can avail this loan up to 50,000 Rs.
- KISHOR Loan – Existing enterprises can avail this loan from Rs. 50,001 to Rs. 5 lakh to purchase raw materials, machinery, equipment, and expand the business.
- TARUN Loan – Established enterprises and businesses can avail this loan from Rs. 5, 00,001 to Rs. 10, 00,000.
Credit Guarantee Fund Scheme
In order to grant security free or collateral-free credit facility to small as well as micro-enterprises, the Indian government has introduced a scheme known as the Credit Guarantee Fund Scheme. The credit facilities that are eligible to be embedded under this scheme are term loans as well as working capitals up to Rs.100 lakh each borrowing unit without any collateral or security or third party guarantee for small and micro-enterprises. For those units encompassed under the credit guarantee fund scheme, which may fall to factors beyond the management control, regrowth aid is also enhanced by the lending institution, which is also incorporated under this scheme.
Stand-up India Scheme
This scheme lends bank loans between the range of Rs. 10 lakh and Rs. 1 crore to at least one SC/ST borrower as well as one woman borrower per bank branch. Regulated by SIDBI (Small Industries Development Bank of India), Stand-up India came into existence to grant funding to those who fall under the category of SC and ST and women entrepreneurs also receive benefits under this scheme.
Role of Aatmnirbhar Sena
Aatmnirbhar Sena is consistently working to assist the budding entrepreneurs from small-scale industries in India so that they can reconstruct their business and uplift their businesses with short-term as well as long-term loans. The organization is standing up with the government to help the business organizations and small-scale industries in India avail the benefits of MUDRA scheme.
We will be lending assistance from the point of applying for the loan till the time business would get established. Through seminars and workshops, we will be creating awareness about several government schemes and will be guiding the budding entrepreneurs and small-scale industries with the hope of a positive transformation.
To Wrap Up
The growth and progress of Small-scale industries in India would establish the ground for all-round development of the nation. Once these industries utilize their utmost potential, they are capable of bringing positive transformation in the economic structure of our country. In recent years, the Indian government has introduced several schemes to accelerate the advancement of small-scale industries in India. At Aatmnirbhar Sena, we are enthusiastically working to lend our wholehearted support to small business owners, and we will be glad to serve our best and contribute to the welfare of the country in every possible way.
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