Small Business in India

Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 has classified enterprises as follows:

1. Manufacturing Enterprises

  • Micro Enterprise: A unit with an investment up to Rs. 25 lakh.
  • Small Enterprise: A unit with an investment above Rs. 25 lakh and up to Rs. 5 crore.
  • Medium Enterprise: A unit with an investment above Rs. 5 crore and up to Rs. 10 crore.

2. Service Enterprises

  • Micro Enterprise: A unit with an investment up to Rs. 10 lakh.
  • Small Enterprise: A unit with an investment above Rs. 10 lakh and up to Rs. 2 crore.
  • Medium enterprise: A unit with an investment above Rs. 2 crore and up to Rs. 5 crore.

Role of Small Business in India

Small Scale Industries are small in size but constitute 95% of the industrial units in India. They contribute 45% of the total exports from India. They are helpful in the following ways:

  1. Employment: As Small Scale Industries are labour-intensive, they provide employment to a large number of people.

  2. Supply Variety of Products: SSIs supply variety of products like mass consumption goods, ready-made garments, stationery items, detergents, leather, plastic and rubber products, processed foods and vegetables, wood and steel furniture, safety matches etc. Some sophisticated items like electric and electronic goods such as TV, Calculator, agricultural tools etc. and handloom and handicraft products are made by SSIs.

  3. Balance Regional Development: SSIs use single technologies and depend on locally available resources (material, labour, etc.). This enables it to start its unit anywhere in the country.

  4. Opportunity for Entrepreneurship: SSIs provide opportunity for entrepreneurship. These units can be started with little capital so talented and skilled people can have their own business units.

  5. Low Cost of Production: SSIs use locally available resources which are less expensive. Therefore, establishment and running cost of small industries are less.

  6. Capture New Business Opportunities: Due to the small size of the organisations, quick decisions can be taken by SSI units. This enables them to capture new business opportunities.

  7. Customised Production: SSI units manufacture products according to the needs of customers. They manufacture products according to the specifications provided by consumers.

Role of Small Business in Rural India

Earlier rural people used to engage only in agriculture. With the formation of SSI Units many rural people started setting up agro-based rural industries. Traditional artisans and persons engaged in cottage and rural industries get a good employment opportunity because of SSI unit. This prevented migration of rural population to urban areas in search of jobs.

In SSI units, labour intensive techniques are used. Therefore, it helped to remove the problem of poverty and unemployment. At the same time, SSIs help to utilise the rural potential to the maximum, thus, helping the country in a balanced regional development.