Small-scale industries (SSI) and cottage industries (CI) can be established easily within a short span of time. They produce at a greater speed and consequently provide faster returns to their owners. Nearly 40% of the total industrial production is from these industries. The value of output from the SSI sector has increased from Rs 3,06,771 crore in 2002–03 to Rs 4,71,663 crore in 2006–07.
|Small-scale Industries||Cottage Industries|
|SSI units are usually located in urban areas.||Production units of CI are located in rural areas.|
|They produce goods with the help of mechanized equipment.||Production in CI units is undertaken without any machines.|
Significance of Small scale Industries and CI units in India
Employment generation: Total employment generated by SSI units has increased from about 40 lakh in 1973–74 to nearly 295 lakh in 2005–06. With the addition of CI, employment opportunities would give a figure of about 60% of the total employment in manufacturing industries.
Investment: According to a report of the Small Industries Development Organisation, investments in the registered SSI sector have grown significantly from about Rs 2,200 crore in 1972–73 to about Rs 91,792 crore in 2001–02.
Problems faced by the Small scale Industries and CI sectors in India
Finance and credit: Finance and credit are limited to meet both fixed and working capital requirements and are supposed to be the main obstacles in the growth path of the SSI and CI sectors. These sectors avail credit at a high rate of interest from different non-institutional sources of credit.
Availability of raw materials: Raw material requirements of the majority of the SSI and CI units depend on the local sources. Local traders often fix a relatively higher price for their raw materials.
Underuse of capacity: The average cost of production would not come to its minimum if the production capacity is not fully used. On average, about 50% of the actual capacity of SSI units could be used.
Steps taken by the government to promote CI and SSI in India
Creation of special boards: The CI Board was set up in 1947 and has been split into three boards—All India Handloom Board, All India Handicrafts Board, and All India Khadi and Village Industries Board.
All these boards formulate different plans and programs for the upliftment of CI units.
Creation of district industries centers: The industrial policy statement of 1977 introduced the concept of district industries centres. These centers started assisting SSI units from 1979 onwards at the district level.