Chapters :

Industry & Infrastructure – 07

Role of SSIs in Economic Development

Provide Employment

  • SSIs use labour intensive techniques. Hence, they provide employment
    opportunities to a large number of people. Thus, they reduce the unemployment problem to a great extent.
  • SSIs provide employment to artisans, technically qualified persons and professionals, people engaged in traditional arts, people in villages and unorganized sectors.
  • The employment-capital ratio is high for the SSIs.

Bring Balanced Regional Development

  • SSIs promote decentralized development of industries as most of the SSIs are set up in backward and rural areas.
  • They remove regional disparities by industrializing rural and backward areas and bring balanced regional development.
  • They help to reduce the problems of congestion, slums, sanitation and pollution in cities. They are mostly found in outside city limits They help in improving the standard of living of people residing in suburban and rural areas in India.
  • The entrepreneurial talent is tapped in different regions and the income
    is also distributed instead of being concentrated in the hands of a few individuals or business families.

Help in Mobilization of Local Resources

  • SSIs help to mobilize and utilize local resources like small savings, entrepreneurial talent etc., of the entrepreneurs, which might otherwise remain idle and unutilized.
  • They pave way for promoting traditional family skills and handicrafts. There is a great demand for handicraft goods in developed countries.
  • They help to improve the growth of local entrepreneurs and self-employed professionals in small towns and villages in India.

Pave for Optimisation of Capital

  • SSIs require less capital per unit of output. They provide quick return
    on investment due to shorter gestation period. The payback period is quite short in SSIs.
  • SSIs function as a stabilizing force by providing high output-capital ratio as well as high employment capital ratio.
  • They encourage the people living in rural areas and small towns to mobilize savings and channelize them into industrial activities.

Promote Exports

  • SSIs do not require sophisticated machinery. Hence, import the machines from abroad is not necessary. On the other hand, there is a great demand for goods produced by SSIs.Tus they reduce the pressure
    on the country’s balance of payments.
  • However, with recent past large scale industries are able to borrow large funds with low interest rate and spend large sums on advertisements. Hence SSIs are gradually vanishing.
  • SSIs earn valuable foreign exchange through exports from India.

Complement Large Scale Industries

  • SSIs play a complementary role to large scale sector and support the
    large scale industries. SSIs provide parts, components, accessories to large scale industries and meet the requirements of large scale industries through setting up units near the large scale units.
  • SSIs serve as ancillaries to large scale units.

Meet Consumer Demands

  • SSIs produce wide range of products required by consumers in India.
    Hence, they serve as an ant inflationary force by providing goods of daily use.
  1. Develop Entrepreneurship
  • SSIs help to develop a class of entrepreneurs in the society. They help
    the job seekers to become job givers. They promote self-employment and
    spirit of self-reliance in the society
  • SSIs help to increase the per capita income of India in various ways. They facilitate development of backward areas and weaker sections of the society.
  • SSIs are adept in distributing national income in more efficient and equitable manner among the various participants of the society

Development Experiences in India

At the time of Independence in 1947, India was a typically backward economy.
Owing to poor technological and scientific capabilities, industrialization was limited and lop-sided. Agricultural sector exhibited features of feudal and semi-feudal institutions, resulting into low productivity.

Means of transport and communications were underdeveloped. Educational and health facilities were grossly inadequate and social security measures were virtually non-existent. In brief, the country suffered from the twin problems of rampant poverty and widespread unemployment, both resulting in low standard of living.

The year 1991 is an important landmark in the economic history of post-independent India. The country went through a severe economic crisis in the form of serious Balance of Payments problem. Indian economy responded to the crisis by introducing a set of policies known as Structural Reforms. These policies were aimed at correcting the weaknesses and rigidities in the various
sectors of the economy such as Industry, Trade, Fiscal and Agriculture.

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