What is the role of small business in India?

   

 Small scale industries are small in size but play a big role in the economic development of a developing country like in India. India has adopted the ideal of a socialistic pattern of societyy with full employment, balanced regional development and self-reliance as the major objectives.

      Small scale firms are helpful in the achievement of these goals in the following ways :

 

1. Employment : Small scale firms use labour-intensive techniques and, therefore, they have high potential to provide employment to a larger number of people per unit of capital. For every worker employed in large scale industries, about three workers are engaged in small scale industries. Small firms promote self-employment particularly among the educated and professional class. They also provide employment to agriculturists who remain idle during a part of the year. Several studies have revealed that the employment generating capacity of small scale industries is about ten times more than that of the large scale industries.

2. Balanced Regional Development : Small scale industries  promote decentralised development and help to remove regional disparities in industrialisation. The development of small scale industries leads to industrialisation in rural areas. By providing employment in rural areas, they help to check migration and overcrowding in urban areas.

3. Optimisation of capital : Small scale require less capital per unit of output and, therefore, greater output can be obtained with small investment. Small firms also provide quick returns after their establishment on account of short gestation period.

4. Mobilisation of local resources : Small scale industries facilitate mobilisation and utilisation of local resources and skills which might otherwise remain latent or unutilised.

5. Exchange Earnings : Small scale industries help in reducing pressure on the country's balance of payment in two ways. Firstly, they do not require imports of sophisticated machinery. Secondly, they earn valuable foriegn exchange through export of their products.

6. Even-Handed Society : Small scale industries help in reducing concentration of economic power in few hands. They promote a more equitable distribution of national income and wealth. Development of small scale industries helps to reduce monopolies and exploitation of consumers.

7. Feeder to large industries : Small scale sector is complementary to the large scale industries. Small scale industries manufacture various types of components, spare parts, tools and accessories which are required by the large scale sector. Small firms also distribute the goods produced by large scale firms.

      Small scale firms provide an excellent opportunity to young men and women with limited money to start their own business and therby become entrepreneurs. In the absence of small business, they will have to go in for employment in large scale concerns because they cannot launch enterprises by their own. Small business serves as the seedbed of entrepreneurship because

 i) Small business requires less capital investment and people with limited money can start their own business.

ii) Small business can be started anywhere and even in one's own residence.

iii) the risk involved in small business is less

iv) Small business requires little training and technical skills.

v) Small firms  can do job work for large firms. 

vi) Small firms can succeed with traditional skills and local resources.