Small Scale Business, Business Scales

By: EconomyWatch   Date: 29 June 2010

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Small Scale Businesses help every economy to achieve industrial growth and industrial diversification. Small Scale Business Enterprises are mainly of four different categories:

1.Small Scale Industrial Undertaking

A Business Enterprise will be called Small Scale Business Undertaking if Investment in Fixed Assets, in Plant and Machinery, whether held on Ownership basis or on Lease or on Hire Purchase does not exceed 10 million Rupees and it is in no way owned, controlled or subsidiary of any other industrial undertaking. Here it should be explained that if two or more enterprises are set up by a same person as a sole proprietor, each such enterprise shall be considered to be controlled by the other industrial undertaking or undertakings. If two or more undertakings are set up as partnership firms and one or more partners are common, then each enterprise shall be considered as controlled by other industrial undertakings. In such cases none of these business enterprises will be graded as Small Scale Industrial Undertaking even if Investment is below 10 million. Here it should also be mentioned that investment in Plant and Machinery includes cost of tools, dies, spare parts for maintenance, R&D equipments, pollution control equipments, generator sets, fire-fighting equipments, cost of installation of plant and machinery, cost of transportation of machinery and cost of import duty, sales tax, shipping charges in case of imported machinery.

2.Ancillary Industrial Undertakings

Ancillary Industrial Undertaking is that business enterprise which is engaged in manufacturing and supplying of parts, components and intermediaries or is engaged in providing services by the amount not less than 50% of its total production or services and the total investment in fixed assets, in plant and machinery, whether held on ownership basis or on lease or on hire purchase does not exceed 10 million rupees.

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3.Tiny Enterprise

Tiny Enterprise is that business enterprise in which total investment in plant and machinery does not exceed 2.5 million rupees.

4.Enterprise by Women Entrepreneurs

If a small business enterprise is operated by one or more women entrepreneurs or if there is women proprietorship or if women have individually or jointly not less than 51% capital investment as partners or shareholders, then the business enterprise will be graded as Enterprise by Women Entrepreneurs.The contribution of Small Scale Business to the country is enormous. Its’ contributions to the different genres of the economy are:

  • Production Contribution-The small-scale sector has really grown over the years revealing a highly impressive growth rate in every plan period. The small-scale businesses altogether produce almost 40% of gross manufacture of Indian Economy.
  • Employment Generation Contribution-Next to Agriculture, Small Scale Industries Sector in India generates largest Number of employments, which is very crucial for an overpopulated country like India.
  • Export Contribution-Small Scale Businesses in India play a vital role as far as the export of the economy is concerned.45% to 50% of total export of the economy is generated by small-scale enterprises. Among these almost 35% is direct export and nearly 15% is indirect export. This indirect export happens through merchant exporters, trading houses or in the form of export order from large business houses, which use intermediary goods made by small-scale industries in manufacturing finished products.

    Opportunities in Small Scale Business

    As Small Scale Businesses are less capital intensive and highly labor intensive, there are huge opportunities for this sector in a labor-abundant capital-scarce economy like India. The other factors that are cater to the fast growth of this sector are Extensive Promotion & Support by the govt., available grants & Subsidies, raw material procurement, rising export demand for Indian products and rising domestic demand which is the result of overall economic growth. But, the growth rates can increase further if more development measures are taken to improve the Technology and Marketing side of Small Scale Business and thus small-scale businesses can construct the most dynamic and vibrant sector of the economy.

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