Small Scale Industries Short Answer Type Questions

Question 1.
Discuss the importance or advantages and disadvantages of small scale industries.
Answer:
The advantages of small scale industries are:

  • Employment generation.
  • Mobilization of resources and entrepreneurial skills.
  • Equitable distribution of income.
  • Regional dispersal of industries.
  • Provides opportunities for development of technology.
  • Promotes exports.
  • Supports the growth of large industries.
  • Better industrial relations.
  • Creates economic stability.
  • Creates jobs in rural areas.
  • Provide training ground for local entrepreneur.
  • Enhance demand.
  • Optimum utilization of local resources.
  • Extensive Promotion and Support by Government

Disadvantages of Small scale industries:
(i) Lack economies of scale: SSI’s produce in small quantities so They do not enjoy economies of scale in purchases, production and marketing.

(ii) Lack of modernizing: Due to their small scale of operations and limited capital resources, SSI’s are not invest in modernization. They do not have access to latest technology and therefore cannot Improve their efficiency of operations.

(iii) Inefficiency: Due to lack of scale economies, low skilled and poorly trained workers and usage of outdated technology, small scale industry suffers from inefficiency of operations.

(iv) Sickness: Due to the ease of setting up and because of the incentives available, many unemployed youth set up SSI’s with very little business knowledge and skills.

(v) Less innovation capacity: SSI’s have limited financial resources, therefore they are not able to invest adequately in research and development or acquire technology.

Question 2.
Explain the features of SSI.
Answer:
The features of SSI are:

  • Labour-intensive: They are fairly labour-intensive.
  • Employment opportunities: Creating employment opportunities in urban and rural areas.
  • Low cost of capital: Low cost of capital investment.
  • Flexible: Flexible in their operation.
  • Individuals: It is mostly set up by individuals.
  • Decision making process: The decision making process is fast.
  • Promote intermediate and capital goods: Use indigenous raw materials and promote intermediate and capital goods.
  • Faster balance economic growth: They contribute to faster balance economic growth.
  • Operation to local areas: Restrict operation to local areas in order to meet the local and regional demands of the people.
  • Lesser development period: Usually have a lesser development period than large industries.
  • The educational level of the employees of small industries is normally low or moderate.

Question 3.
What are the basic objectives of promoting SSI?
Answer:
The basic objectives of promoting SSI are:

  • Creating employment opportunities in urban and rural areas.
  • Technology up gradation.
  • Quality Enhancement.
  • Enterprise promotion with emphasis on rural industrialization
  • Human Resource Development of the SSI sector
  • Infrastructure development.
  • Technology Transfer.
  • Optimum utilization of local resources.
  • To enhance economic growth.
  • Creates economic stability.
  • To enhance people income.
  • To enhance standard of living.

Question 4.
Explain the product range in small scale industries.
Answer:
1. Modern small scale Industries: Modern small scale industries, including tiny units and powerlooms;

2. Traditional industries: Traditional industries like cottage industries, khadi and village industries handicrafts and handlooms etc.

Both the segments differ from each other in their own ways in terms of capital/labour intensity, locational orientation, manufacturing process and skill requirements.
1. Manufactures more than 7000 items: The SSI sector manufactures more than 7000 items involving very simple to highly sophisticated technologies and offers scope for the utilisation of local resources and skills.

2. Major supplier of a variety of products: It is a major supplier of a variety of products meant for mass consumption as well as parts and components to the large industry sector.

3. Manufacture some of the high-value added: Besides handicrafts and items of traditional nature, SSIs also manufacture some of the high-value added and sophisticated products such as electronic typewriters, TV sets, security and alarm systems and other consumer durables.

4. Highly flexible: This sector is highly flexible and can respond to the varied needs of the economy.

Question 5.
Discuss the requirement for capital investment in SSI’s.
Answer:
Capital Investment of SSI is discussed under two dimensions:

  • General Investment Decision
  • Capital Investment in SSIs.

(1) General Investment Decision – An investment decision is concerned with allocation of funds. This is based on the following principles:

  • Availability of funds
  • Capital structure
  • Taxation Policy
  • Government policy
  • Lending policy of FIs
  • Immediate need of the project
  • Earnings
  • Capital return
  • Economic value of the project
  • Working capital
  • Accounting practice
  • Earning trends.

(2) Capital investment in SSI – Capital investment plan in SSI will be well within in the framework of General Investment Principles and focus on:

  • Ensuring a fair return on investment
  • Generate and build up surpluses and reserves for growth and expansion
  • Attaining efficiency in financial operating and
  • Coordination with various departments to ensure discipline in the use of financial resources.

Question 6.
What are the internal and external causes of Industrial sickness? Discuss
OR
Explain the various causes for industrial sickness.
Answer:
Industrial sickness can be defined as a condition wherein an industrial unit fails to generate surplus on a continuous basis and depends on frequent infusion of external funds for its survival.
There are a number of causes that can be attributed to the sickness of small scale industries. These causes are divided into:

  • Internal causes and
  • External causes.

I. Internal Causes: Internal causes which affects the industry relate to organisation structure, production channels, distribution channels, technology etc. Some, of the internal causes are:

  • Poor handling of labour
  • Poor management of strategies
  • Choosing wrong idea or industry
  • Departmental structure of industry
  • Poor management prevailing in industry
  • Unsatisfactory organisation
  • Bad quality maintenance
  • Unsatisfactory marketing abilities
  • Poor utilisation of capacity
  • Poor planning in various functions of departments
  • Lack of project implementation
  • Unsatisfactory training programs
  • Absence of horizontal and vertical integration
  • Unsatisfactory implementation of projects

II. External causes: The external causes are beyond the control of the industry and usually affect the industry as a whole. Some of the important external causes are as follows:
(a) Infrastructural bottlenecks:

  • Inadequate availability of inputs like raw materials due to poor agricultural output, change in import conditions etc.
  • Chronic power shortage
  • Transport bottlenecks.

(b) Financial bottlenecks:

  • Non availability of adequate finance
  • Credit squeeze by banks

(c) Government Controls and Policies etc.:

  • Government price controls
  • Fiscal duties
  • Changes in government policy

(d) Market Constraints:

  • Market saturation
  • Revolutionary technological advances rendering one’s product obsolete.

(e) Extraneous factors:

  • Natural Calamities
  • Political situation
  • War
  • Sympathetic strikes
  • Multiplicity of labour unions.

Question 7.
Explain the revival plan for sick units.
Answer:
The seven steps for the Revival Plan for the sick units are:
(i) Finalise the goals/objectives/targets for performance at all levels to meet the organisation’s mission.

(ii) Issue policy guidelines on major aspects that affect the image of the company in public and the work culture inside the organisation.

(iii) Initiate the preparation of detailed systems manuals for the maintenance budgets, costs, distribution, transportation, purchase, marketing inventory, personnel etc.

(iv) Analyse past reports on production, quality, costs, performance, accounts receivables etc. and the connected financial and audit reports – to get an overall idea of the present working systems and results

(v) Meet senior executives from marketing/finance/personnel/materials. Secretarial/legal departments and (if possible) with competitors – to assess the external situations (Govt, policies competitor’s activities, raw materials position, union-political social factors.)

(vi) Brain storm with a select group – to get creative ideas for improvement.

(vii) Appraise the Board about the diagnosis and request them to spell out a clear “Mission” of the Company.

Question 8.
Explain the various measures taken by the Government for rehabilitation of industrial sick units in small scale sector.
Answer:
The Government of India in co-ordination with RBI has taken several measures to rehabilitate sick units. Some of these are:
1) Industrial Reconstruction Bank of India (IRBI): IRBI was established in 1985 with the objective of industrial revival by undertaking modernisation/ expansion/reorganisation/diversification/rationalisation of industrial units.

2) Special cell at IDBI: A special cell at IDBI has been assigned the task of conducting diagnostic study of industrial units referred by other agencies and formulate appropriate remedial measures.

3) Sick Industrial Undertakings cell: RBI has established a special cell to act as a coordinating agency and clearing house with respect to the sick units. This cell coordinates with commercial banks in monitoring and rehabilitating sick units.

Question 9.
Explain briefly consequences of industrial sickness.
Answer:
The consequences of industrial sickness are:

  • Set back to a employment prospects: It involves lack of opportunity, lack labour intensive, high unsatisfaction rate, etc.
  • Fear of industrial unrest: Here high unemployment rate, low productivity and unfavour of trade union
  • Wastage of resources: It includes lack of infrastructure facilities and block of capital equipment.
  • Adverse impact on related: Channel breakdown between industries.
  • Adverse effect on investor and employment: It has low satisfaction of investor, negative effect on the same line new, effect on the growth rate of industry.
  • Losses to banks: Here low recovery rate of banks and institution, loss image in the market, lack of financial support for new industries.
  • Loss of revenue to government: This is loss of income to government, loss of government benefit, etc.