CHAPTER III

INTRODUCTION

In a labour abundant and capital scarce country like India, small-scale

industries occupy a significant position in the industrialization of the economy. Most
small scale industries have low capital intensity and high potential for employment
generation. It contributes to the socio-economic goals such as decentralization and
dispersal of manufacturing activities from the metropolitan to the non-metropolitan
and rural areas, reduction of regional economic imbalances within the country and
the diffusion of entrepreneurial skills as well as technology throughout the country.

Finance is a basic requirement for all kinds of business activities. It is the master
key which provides access to all other resources that are employed in the production
and marketing of goods and services. It guides and regulates investment decisions
and expenditure. However, efficient functioning of every business is dependent, not
only on the mere availability of finance, but on the efficient utilization of finance.

POST LIBERALISATIION
The small scale industries in India have been experiencing a major turn around
in the post liberalization period with the growth rate hovering at 15% which is much
higher than the large scale industries in the past twelve years, despite constraints like
infrastructure, finance, market trends and technology. In India, small scale industry
undertakes to manufacturing activity. Recently it has also ventured into servicing
activities such as health care, educational, transport, tourism and hospitality services

In the light of the important role that small scale units play for the development of
entrepreneurs and entrepreneurship, it is rightly referred to as the seedbed of
entrepreneurship. Small scale industries have greatly contributed for the growth of any
economy in the world. Small scale sector contributes to about 40% GDP of the country.

OPERATIONAL DEFINITION
An industrial undertaking in which the investment in fixed assets in plant and
machinery , whether held on ownership terms or by hire purchase , does not
exceed Rs 100 lakhs as on March 31, 2001 is to be treated as a small scale
industrial unit.
TYPES OF SMALL SCALE INDUSTRIES
The small scale sector covers a wide spectrum of industries which is
categorized as the following :
Small scale industrial undertakings.
Ancillary industrial undertakings.
Export oriented units (EOU).
Tiny enterprises .
Small scale service enterprises (SSSE).
Small scale services business enterprises (SSBE).
Artisans, village and cottage industries.
Women entrepreneurs enterprise .