Small Scale Industries , UNIT -3

2 marks Question and Answer

1) What is small scale industry?(2006)

Industrial units with a capital investment of not more than Rs 1 corer are treated as small scale
industries.” Small scale industries can be defines on the basis of, size of employment, investment
and national income.
Note: investment limit has raised in October 2004, from Rs 1 corer to Rs 5 corer.
2) What do you mean by cottage industries?(2008)
Cottage industries also called household industries. These are managed mostly by artisans, skilled
craftsman and technician, who can work in their own house. Generally these industries are engaged
in traditional activities such as agriculture, khadi, handloom, handicraft etc.
3) What are the different forms of ownership in small scale industries? (2009)
1) Sole proprietorship 2) partnership 3) co-operative society 4) Joint Stock Company.
4) Mention four nonbanking institution assisting SSI units?(2006)
1. Technical consultancy organization (TCO’s) 2. District Industrial Centers (DIC’s).
3. National Alliance of Young Entrepreneurs (NAYE).4. khadi and village industries commission
(KVIC).
1) Which forms of organization are suitable for small-scale industries?(2006)
Sole proprietorship and partnership form of organization are suitable for small scale industries.
2) State importance of export oriented units?(2007)
Its increase the foreign reserve, strengthen the national currency, Helps to balance the countries
balance of trade and payment etc.
3) Sate two laws applicable to SSI units?(2008)
Payment of Wages Act 1936 and Minimum Wages Act 1948.
4) What do you mean by handicrafts?(2009)
Artistic and decorative items, products prepared by hand are classified as handicrafts. They make
use of wood, metal clay, ivory cloths etc
5) What is sick industrial unit?(2009)
Sick industrial unit means unhealthy unit which does not provide reasonable profit on the capital
invested in a unit. The performance and financial position goes on decreasing or diminishing.
6) What is Tiny Unit?
Very small industries having fixed investment in plant and machinery does not exceed 25 lakhs, are
called tiny unit.
7) Who is “Spontaneous entrepreneur”?(2008)
The person who start their business out of their natural talents, are called spontaneous
entrepreneurs.
5 and 15 marks questions answers
8) Explain the scope of SSI’s in India.
Small scale industries can start any kind of business that requires less capital and organization.
Except heavy industries like steel mills, ship building, airplanes manufacturing of automobiles etc.
remaining every types of industry can start in SSI sectors. In fact government of India has reserved
and earmarked certain area for SSI’s. The industrial policy of 1947 reserved 47 items, it was
increased to 836 items in 1983 and policy of 2002 has brought it down to 824. In these items or
areas big industries are not allowed to start a business. Reservation of items exclusively for SSI is
 undertaken to avoid competition between large scale industries and small scale industries. Using
their limited capital, available technology and sufficient man power they can start any kind of
business.
9) What is small scale unit? Explain the rules and regulation governing small scale industries in
India. Or what are the acts applicable to SSI’s units in India. Explain them in brief. (2007)
Industrial units with a capital investment of not more than Rs 1 corer are treated as small scale
industries.” Small scale industries can be Define on the basis of, size of employment, investment
and national income.
The rules and regulation governing small scale industries in India are as follows:
FACTORIES ACT OF 1948:
The main object of this act is to ensure health and safe working conditions for workers. The main
provision of this Act is as follows.
1. Definition of factory: the act has Define factory as any premises including its precincts.
2. Health of workers:
The act directs to undertake following measure to protect health of workers.
a) Cleaning b) lighting c) latrines, Urines
d) Ventilation and temperature e) drinking water etc.

3. Safety of workers:

The act prescribes various safety measures to be undertaken to protect life and limbs (arm and
legs of the persons) of workers.
Examples: (a) Appointment of safety officers.
(b) Fencing or Casing (covering to protect something) of machinery.
(c) Prohibition of young, women and children on dangerous machine.
(d) Protection against dangerous fumes (gas) etc

4. Welfare of workers:

The act provides for various facilities to the workers like proper facilities of shelters, canteen rest
room, first aid, etc.
5. OBLIGATION OF EMPLOYER:
a. To obtain license, approval, permission before starting construction or production
activities.
b. Implementation of all provision of the act.
c. Display notice.
d. Maintain register and records as prescribed by the act.
e. Report to the appropriate authorities in any injuries or accidents in the factory.

THE EMPLOYEE STATE INSURANCE ACT 1948

The main object of this act is to provide financial support to the employee or his family during sickness or
death of an employee.

APPLICATION: this act is applicable to all categories of workers, whose monthly salary does not exceed Rs
3000.

BENEFITS AVAILABLE :

a) Employee and his dependent are provided free medical treatment at ESI (employee State Insurance)
hospitals.

b) Sickness benefit: payment during sickness when the employee is unable to attend the duty.
 c) Maternity benefit: periodical payment and other benefits when the women are on maternity leave.
d) Disablement benefit: periodical payment to the employee, if he is disabled due to injury during employment.

e) Dependent benefit: dependent of insured employee, who dies due to employment Injury are entitled to
periodical payment.

3. Time of payment: payment shall be made on a working day. Wages should be paid before the expiry of the tenth
day after the last day of wages period. .

RULES FOR FINE:

 Fines can be imposed for mistake or omission in duty.

 The list of such activities and amount of fine for such act must be displayed in factory.

 Before imposing fine employee should be given show cause notice. Total amount of fine shall not exceed
3% of such wages payable to employee of that wage period.

 No fine shall be imposed on a person below the age of 15 years.

 All fines charged must be recorded in a register.

AUTHORIZED DEDUCTION: the act allows only following deduction from the wages of an employee.

a. fines

b. Absence from the duty

c. Damage / loss of goods or money entrusted to employee.

d. Housing accommodation and other amenities provided by the employer.

e. Income tax etc…

OBLIGATION OF THE EMPLOYER: Employer has to ensure that

1. Wages are paid on time.

2. No Unauthorized deduction is made.

3. Maintain proper wages register etc…

10) Explain the need for and importance of SSI’s in India.

SSI can play importance role in a developing country like India. SSI’s need less capital and their
dependence on technology is minimum. They provide more job opportunities. These aspects favor
conditions in Indian economy which has scarcity of capital, technology is not advanced and there are
problems of unemployment. SSI can play an important role in developing the nation and also the people.
The rational or importance of SSI can be understood from following factors.
1. Employment opportunities: SSI’s provide more job opportunities compared to LSI’s (large scale
industries). Employment offered per unit of capital is more in case of SSI’s. they offer 8 to 10 times
more number of jobs compared to LSI’s.
2. Equity: SSI’s are located in rural, semi urban and backward areas. They help for creation of wealth
in these areas. They create employment opportunities in backward areas. This result in creation and
distribution of wealth in rural areas that will reduce the gap between urban rich and rural poor.
3. Decentralization: LIS’s are concentrated in cities and urban areas; they do not come to rural areas
due to non availability of facilities and resources. SSI’s make use of locally available factors of
production and start business units in rural areas. This result in decentralization of industrial
activities and helps in balance regional development of economy.
4. Exploitation or use of local resources: SSI’s are formed by making use of locally available resources.
They do not depend on foreign or borrowed technology and capital. They exploit or use local saving
 raw material, labour and technology. By using local resources they provide employment
opportunities to the factors or resources belonging to rural areas.
5. Innovative: SSI’s are started to meet the requirements of local people, particularly in rural and
backward areas. Business started by SSI’s will be more innovative to suit to the taste, fashion,
customs and tradition of each area. Each region or locality may have its own type of business that
suits particular locality and its people.
6. Encouragement of entrepreneurship: Every individual cannot start a LSI’s as it requires huge
capital, adequate technology and managerial skills. SSI’s are simple. They require less capital,
technology is simple and no formal degree in management is required. Any common man who is
dynamic, bold risk taking and has organizational skills can start a SSI. SSI’s give encouragement to
common man to start and own his industry.
7. Mobilization of resources: small industries provide with opportunities to the talented entrepreneur
for proper utilization of local resources and entrepreneurial talent in the best possible manner.
8. Small is beautiful: giant scale organization cause environment pollution, result in wastage of
resources and inefficiency. SSI’s which have small size and capacity makes use of local resources.
They do not cause pollution. Working relation between owners and workers is also harmonious.
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