Small Scale Industries

Small scale industries (SSI) are those industries in which manufacturing, providing services, productions are
done on small scale or micro scale. For example, these are the ideas of Small scale industries: Napkins, tissues,
chocolates, toothpick, water bottles, small toys, papers, pens. Small scale industries play an important role in
social and economic development of India. These industries do a one-time investment in machinery, plants,
and industries which could be on an ownership basis, hire purchase or lease basis.

Small Scale Industries

Essentially small scale industries comprise of small enterprises who manufacture goods or services with the
help of relatively smaller machines and a few workers and employees. Basically, the enterprise must fall under
the guidelines set by the Government of India. At the time being such limits are as follows,

 For Manufacturing Units for Goods: Investment in plant and machinery must be between 25 lakhs
and five crores.

 For Service Providers: Investment in machinery must be between 10 lakhs and two crores.
In developing countries like India, these small scale industries are the lifeline of the economy. These are
generally labor-intensive industries, so they create much employment. They also help with per capita income
and resource utilization in the economy. They are a very important sector of the economy from a financial and
social point of view.

Weaknesses of SSI
The following issues may be generally considered as weaknesses of SSI sector:
1. Raw Material: The problem with respect to raw material could be in shape of
(i) Absolute scarcity
(ii) Poor quality
(iii) High costs.

2. Finance: The problem of finance in small sector is mainly due to two reasons-
Firstly, it could be partly due to scarcity of capital in the country as a

whole. Secondly it is due to weak creditworthiness of small units in the

country.
3. Marketing: SSI units may lack professional marketing executives as employed by
large sectors. Hence marketing can be a weakness.
4. Capacity under-utilization: Studies have shown that capacity in SSI is not fully
utilized leading to lower optimization and profitability.
 5. Outdated Technology: Continued usage of old technology and no upgradation brings
down their efficiency.
6. Over protection: Most SSI units do not have desire to grow to medium and large
scale because of the benefits of protection and reservation given to them.
7. Inefficient Entrepreneurs: Entrepreneurs who are young, and lack industrial
experience, and also whose financial background is weak and those who are stressed
out, are all likely to fail faster.
8. Zero R&D: Small Scale sectors hardly invest in R&D which prevents them
from introducing any innovation into the market.
9. Lack of Successors: When many entrepreneurs who run SSI units become old-
(i) They may transfer the responsibilty to their children who might be inefficient, or
(ii) They may have children who are unwilling to continue family
business. Due to both these reasons the unit may die a slow death.

SUPPORTING AGENCIES OF GOVERNMENT FOR SSI

The Central Government through its ministry of Small-Scale Industries and all the State
Governments have started a number of agencies – both at Central and State level – to provide
infrastructure and support services to small enterprises. Classifications of all such agencies are:
I. Central Level Institutions
II. State Level Institutions
III. Other Agencies

I. Central Level Institutions

1. SSI BOARD: Small Scale Industries Board. It is the apex advisory board to the
central government in matters related to small scale sector in the country.
2. KVIC: Khadi and Village Industries Commission. It promotes development of
Khadi and other village industries.
3. SIDO: Small Industries Development Organization: It mainly acts as a nodal agency
and an interface between Central and State Govenments. It also gives wide ranging
technical and consultancy services.
4. NSIC: National Small Industries Corporation Ltd.,
5. NSTEDB: National Science and Technology Entrepreneurship Development Board.
This agency promotes usage of science and technology in SSI sectors.
 6. NPC: National Productivity Council. This agency suggests various ways of
improving productivity.
7. NISIET: National Institute for Small Industry Extension and Training. It imparts
high quality training to budding as well as existing entrepreneurs. It is located in
Hyderabad.
8. NIESBUD: National Institute for Entrepreneurship and Small Business Development.
It co-ordinates the efforts of various agencies involved in entrepreneurship
development. It is located in New Delhi.
9. IIE: Indian Institute of Entrepreneurship. It aims to carry out research and
development activities in entrepreneurship studies. It is located in Guwahati.
10. EDII: Entrepreneurship Development Institute of India. It is an autonomous body
sponsored by financial institutions like IDBI, ICICI etc., and engaged in
spearheading and inspiring entrepreneurship movement in India. It is located in
Ahmedabad.

II. State Level Institutions

1. DI: Directorate of Industries. It is involved in promotion of small scale sector at the
state level.
2. DIC: District Industries Centre

3. SFC: State Financial Corporation. It provides financial support for starting SSI's
4. SIDC: State Industrial Development Corporation. It promotes infrastructure facilities
5. SSIDC: State Small Industrial Development Corporation. It helps small and tiny
units in procurement of scarce raw materials. It also gives other services.

Other agencies:
There are a number of other agencies – both Central and State level – which directly or indirectly
help the cause of Small Scale sector in India, mainly in financial and industrial domain. They are:
1. SIDBI: Small Industries Development Bank of India
2. NABARD: National Bank for Agricultural and Rural Development
3. HUDCO: Housing and Urban Development Corporation Ltd.,
 4. NGO's: Non-Governmental Organizations
5. EPC: Export Promotion Council
6. CII: Confederation of Indian Industries
7. FICCI: Federation of Indian Chambers of Commerce and Industry
8. ASSOCHAM: Associated Chamber of Commerce and Industry of India
9. WASME: World Association for Small and Medium Enterprise
10. LUB: Laghu Udyog Bharati
11. ICSI: Indian Council of Small Industries
12. CSIR: Council of Industrial and Scientific Research.

Industrial Development Bank of India (IDBI)

Functions and Developmental Activities of IDBI

Industrial Development Bank of India (IDBI) established under Industrial Development Bank of India Act,

1964, is the principal financial institution for providing credit and other facilities for developing industries

and assisting development institutions.

Till 1976, IDBI was a subsidiary bank of RBI. In 1976 it was separated from RBI and the ownership was
transferred to Government of India. IDBI is the tenth largest bank in the world in terms of development.

The National Stock Exchange (NSE), the National Securities Depository Services Ltd. (NSDL), Stock

Holding Corporation of India (SHCIL) are some of the Institutions which has been built by IDBI.

Organisation and Management:

IDBI consist of a Board of Directors, consisting of a chairman and Managing Director appointed by the

Government of India, a Deputy Governor of the RBI nominated by that bank and 20 other Directors are

nominated by the Central Government.

The board had constituted an Executive Committee consisting of 10 Directors, including the Chairman and

Managing Director. The executive committee is empowered to sanction financial assistance.

The Head office of IDBI is located in Mumbai. The bank has five regional offices, one each in Kolkata,

Guwahati, New Delhi, Chennai and Mumbai. Besides the bank have 21 branch offices.

Functions of IDBI:

The main functions of IDBI are discussed below:

(i) To provide financial assistance to industrial enterprises.

(ii) To promote institutions engaged in industrial development.

(iii) To provide technical and administrative assistance for promotion management or expansion of

industry.

(iv) To undertake market and investment research and surveys in connection with development of industry.

IDBI Assistance:

The IDBI provides financial assistance either directly or through some specified financial institutions:
(i) Direct Assistance:

The IDBI grants loans and advances to industrial concerns. There is no restriction on the upper or lower

limits for assistance to any concern itself. The bank guarantees loans raised by industrial concerns in the
open market from the State Co-operative Banks, the Scheduled Banks, the Industrial Finance Corporation

of India (IFCI) and other ‘notified’ financial institutions.

(ii) Indirect Assistance:

The IDBI can refinance term loans to industrial concerns repayable within 3 to 25 years given by the IFCI,

the State Financial Corporation and some other financial institutions and to SIDCs (State Industrial

Development Corporations), Commercial banks and Cooperative banks which extend term loans not

exceeding 10 years to industrial concerns. IDBI subscribes to the shares and bonds of the financial

institutions and thereby provide supplementary resources.

Developmental Activities of IDBI:
(1) Promotional Activities:

In fulfillment of its developmental role, the bank continues to perform a wide range of promotional

activities relating to developmental programmes for new entrepreneurs, consultancy services for small and

medium enterprises and programmes designed for accredited voluntary agencies for the economic

upliftment of the underprivileged.

These include entrepreneurship development, self-employment and wage employment in the industrial

sector for the weaker sections of society through voluntary agencies, support to Science and Technology

Entrepreneurs’ Parks, Energy Conservation, Common Quality Testing Centers for small industries.

(2) Technical Consultancy Organisations:

With a view to making available at a reasonable cost, consultancy and advisory services to entrepreneurs,

particularly to new and small entrepreneurs, IDBI, in collaboration with other All-India Financial

Institutions, has set up a network of Technical Consultancy Organisations (TCOs) covering the entire

country. TCOs offer diversified services to small and medium enterprises in the selection, formulation and

appraisal of projects, their implementation and review.

(3) Entrepreneurship Development Institute:

Realising that entrepreneurship development is the key to industrial development; IDBI played a prime role

in setting up of the Entrepreneurship Development Institute of India for fostering entrepreneurship in the
country. It has also established similar institutes in Bihar, Orissa, Madhya Pradesh and Uttar Pradesh. IDBI

also extends financial support to various organisations in conducting studies or surveys of relevance to

industrial development.
 Small Industries Development Bank Of India (SIDBI)

The best way of improving rural economy is by creating more employment through dispersal
of various industrial activities so that there will be development of backward areas and at the
same time improvement in the standard of living of the people. The above object could be
achieved easily by the promotion of small scale industry as it contributes nearly 40% of the
manufacturing sector in the country.

In India, small scale industry’s contribution during 1998-99 was INR 5,38,357 crores as against INR.
4,65,171 crores in 1997-98. The growth of SSI was 8.43 per cent. It has an employment potentiality of
171.58 lakhs. Hence, it is important to create an apex institution which can provide finance to small scale
industries.

Origin of SIDBI
In order to promote small scale industries in the country, a special Act was passed in Parliament in April
1990 for starting of Small Industries Development Bank of India. SIDBI is a wholly owned subsidiary
of IDBI. It is providing assistance to all those institutions which are promoting small scale industries.
Capital of SIDBI
SIDBI has an authorised capital of Rs. 1000 crores which can be increased to Rs. 1000 crores. The RBI has
also allocated INR 10,000 Crores to SIDBI for various venture capital activities and company startups in
2015. The entire operations of IDBI connected with small scale industries are now handed over to SIDBI.

Objectives of SIDBI
1. To promote marketing of products of small scale sector.
2. To upgrade technology and also undertaking modernization of small scale units.
3. To provide more financial assistance to small scale ancillary and tiny sector.
4. To encourage employment oriented industries.
5. To coordinate all the other institutions involved in the promotion of small scale industries.

Functions of SIDBI
Coordinating and financing the various institutions involved in the development of small industries are
undertaken by SIDBI.

Functions

Refinance to SSI:
Refinancing loans and advances provided by commercial banks to small scale industrial units. Different
types of loans are given to small scale industries and as per the recommendations of Nayak Committee,
additional funds have been given to commercial banks for promoting more borrowings of small scale
industries. In fact, there are commercial banks with separate branches meant exclusively for small scale
industries.
Discounting the bills of SSIs:
Apart from discounting the bills of small scale industries, even hurdles arising out of financing small scale
industries are being discounted. The bank credit has gone up to Rs. 2,18,219 crores. The percentage of bank
credit to SSI has gone up to 17.5.

SIDBI offers assistance to exports:

Direct assistance to export oriented units and also to import substituting units in the small scale sector is
given the highest priority. There has been a simplified procedure for the exports of small scale industries.
Products of SSI exporters are displayed in international exhibitions with the help of SIDBI. Other export
related expenditures are borne by SIDBI. Latest packing standards and training programmes on packing for
exports are also financed by SIDBI. Trade delegations and sales and study teams are sponsored for small
scale sector under Marketing Development Assistance scheme.

Seed capital and also soft loan Assistance:

Seed capital is provided for starting of SSI units. Under this, the initial expenditure in starting the small
scale units are being met by SIDBI. In addition to that, SIDBI, under this scheme, undertakes the following
activities:

 Identification of potential entrepreneurs in the district.

 Providing training facility for these entrepreneurs.
 Linkage with banks for financial assistance
 Follow-up and monitoring the progress
Under soft loan, SIDBI provides long-term loan repayable in a period of 15 to 20 years with a very low rate
of interest.

Non finance services:

Under this scheme, SIDBI undertakes with the help of other institutions marketing survey and the
potentialities of small scale industries in the particular area. Wherever possible, it helps in the procurement
raw materials.

Factoring, Leasing and HP finance:

In factoring services, SIDBI finances 80% of the bills to the seller and after obtaining the remaining 20%
balance, it repays to the seller and for this service it obtains a factoring commission.
Leasing:
After the increase in the fixed capital limit of Rs. 1 crore to SSI, there has been increasing demand
for leasing equipment. The small scale industries have expanded their activities as lease finance institutions
have enabled them to obtain costly equipment which are otherwise, not possible within the purview of small
scale industries, In fact, this has helped them in modernizing their industry.
HP finance:
Hire purchase financing has also helped small scale industries in acquiring machinery of a higher value. In
fact, certain machinery are even imported from foreign countries on a deferred payment basis.
Assistance to other financial institutions:
In every State, State Finance Corporations have been promoted for financing small scale industries. They
are under the control of respective state governments. At the national level, a separate corporation is
promoted for financing small scale industries called National Small Scale Industries Corporation. This was
started in 1995 to promote, aid and ensure faster growth in small scale industries.
Automatic finance scheme:
Refinance facilities under automatic finance scheme is also provided which was initially for Rs. 50 lakhs.
Now with the increase in the capital limit of small scale industries, this finance scheme has also increased
its limit to Rs. 2 crores.

Modernization:
The technology development which has taken place in various industries has also spread to small scale
industries and to meet the requirements of technology upgradation, a separate fund has been set up by
SIDBI, through which it provides Technology upgradation equipment finance.

Venture capital:
Venture capital fund for the promotion of new entrepreneurs has been set up. For this purpose, IDBI, the
holding company of SIDBI provides funds. New ventures in different areas with high technical know how
is encouraged under the scheme. Though this scheme is in the initial stage, this will promote more new
small scale industries.

Single window scheme:

This scheme was introduced by SIDBI for providing finance to commercial banks which in turn will give
all kinds of assistance to small scale industries. That is, from registration units to marketing of products will
be undertaken under this scheme.

The creation of SIDBI has certainly improved the growth of small scale industries in the country. Apart
from financing, banks have identified the weak areas of small scale industries and have attempted to
improve the same. This will go a long way in not only strengthening SSI units but also in the creation of
employment opportunities in rural areas.

National Bank for Agriculture and Rural Development

(NABARD)
NABARD is a development bank established under statutory provisions. Let us briefly go through
important characteristics of this development bank to get a clear understanding of its role and functions.

Role and Functions of NABARD

The National Bank for Agriculture And Rural Development is popularly referred to as NABARD.
NABARD is designated as an apex development bank in the country. This national bank was established in
1982 by a Special Act of the Parliament, with a mandate to uplift rural India by facilitating credit flow in
agriculture, cottage and village industries, handicrafts and small-scale industries. It is also required to
support non-farm sector while promoting other allied economic activities in rural areas. NABARD
functions to promote sustainable rural development for attaining prosperity of rural areas in India.
It is basically concerned with “matters concerning policy, as well as planning and operations in the field of
credit for agriculture and other economic activities in rural areas in India”. It is worth noting with reference
to NABARD that RBI has sold its own stake to the Government of India. Therefore, Government of India
holds 99% stake in NABARD.
Important Points to Remember about NABARD:

 National Bank for Agriculture and Rural Development (NABARD) is an apex development bank in
India.
 NABARD was established on the recommendations of Shivaraman Committee.
 NABARD was established by an act of Parliament on 12 July 1982 to implement the National Bank
for Agriculture and Rural Development Act 1981.
 NABARD replaced the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell
(RPCC) of Reserve Bank of India, and Agricultural Refinance and Development Corporation (ARDC).
 Headquarters of NABARD is situated in Mumbai, Maharashtra, India.
 The Present Chairman of NABARD is Dr. Harsh Kumar Bhanwala.
 NABARD completed its 25 years on 12 July 2007 and Completed its 30 year in 12 July, 2012.
 NABARD announced Rural Innovation award to celebrate it’s 30th foundation day.

Role of NABARD:

 It is an apex institution which has power to deal with all matters concerning policy, planning as well
as operations in giving credit for agriculture and other economic activities in the rural areas.
 it is a refinancing agency for those institutions that provide investment and production credit for
promoting the several developmental programs for rural development.
 It is improving the absorptive capacity of the credit delivery system in India, including monitoring,
formulation of rehabilitation schemes, restructuring of credit institutions, and training of personnel.
 It co-ordinates the rural credit financing activities of all sorts of institutions engaged in
developmental work at the field level while maintaining liaison with Government of India, and State
Governments, and also RBI and other national level institutions that are concerned with policy
formulation.
 It prepares rural credit plans, annually, for all districts in the country.
 It also promotes research in rural banking, and the field of agriculture and rural development.

Functions of NABARD:

 NABARD gives high priority to projects formed under IRDP.

 It provides refinance for IRDP accounts in order to give highest share for the support for poverty
alleviation programs run by IRDP.
 Other than the activities included under IRDP, it also makes the service area plan, to provide
backward and forward linkages and also infrastructural support.
 NABARD also prepares guidelines for promotion of group activities under its programs and
provides 100% refinance support for them.
 It is making efforts to establish linkages between Self-help Group(SHG) that are organized by
voluntary agencies for poor and needy in rural areas and other official credit agencies.
 It refinances to the complete extent for those projects that are taken under the ‘National Watershed
Development Programme‘ and the ‘National Mission of Wasteland Development‘.
 It also has a system of District Oriented Monitoring Studies, under which, study is conducted for a
cross section of schemes that are sanctioned in a district to various banks, to ascertain their
performance and to identify the constraints in their implementation, It also initiates appropriate
action to remedy them.
  It also supports  Vikas volunteer Vahini programs which offer credit and development activities to
poor farmers.
 It also inspects and supervises the cooperative banks and RRBs to periodically ensure the
development of the rural financing and farmers’ welfare.
 NABARAD also recommends about licensing for RRBs and Cooperative banks to RBI.
 NABARD also provides assistance and support for the training and development of the staff of
various other credit institutions that are engaged in credit distributions.
 It also runs programs for agriculture and rural development.
 It is engaged in regulations of the cooperative banks and the RRB’s, and manages their talent
acquisition through IBPS CWE conducted across the country.

Small Industries Development Corporations (SIDCO)

Small Industries Development Corporations (SIDCO) are state-owned companies or agencies in the

states of India which were established at various times under the policy of Government of India for the
promotion of small scale industries.
A few of the SIDCOs are:

 Kerala Small Industries Development Corporation Limited

 Small Industries Development Corporation of Jammu and Kashmir.
 Tamil Nadu Small Industries Development Corporation Limited (TANSIDCO).

Need for Small Industries Development Corporation (SIDCO)

In many state governments, for the promotion of small scale industries, a separate corporation has been set
up which is known as Small Industries Development Corporation. They undertake all kinds of activities for
the promotion of small scale industries. Right from the stage of installation, to the stage of commencing
production, these Corporations help small scale industries (SSI) in many ways.
In short, they provide infrastructure facilities to small scale industries. Due to the assistance provided by
SIDCO, many backward areas in most of the states have been developed. So, SIDCO has also been
responsible in spreading the industrial activity throughout several states.
Objectives of SIDCO
The following are the main objectives of SIDCO
1. The main objective of SIDCO is to stimulate the growth of industries in the small scale sector
2. To provide infrastructure facilities like roads, drainage, electricity, water supply, etc is one of the
primary objective of SIDCO.
3. To Promote industrial estates which will provide industrial sheds of different sizes with all basic
infrastructure facilities.
4. To Provide technical assistance through training facilities to the entrepreneurs.
5. To Promote skilled labor through the setting up of industrial training institutes.

Small Industries Develompent Corporation, Tamilnadu:

In Tamilnadu, India, Small Industries Development Corporation (SIDCO) was set up in 1971. The prime
function of SIDCO was to identify potential growth centres in various parts of Tamilnadu. There is a
network of 76 industrial estates in the State which are maintained by SIDCO. 32 of these were formed by
the government initially and subsequently handed over to SIDCO. The remaining 44 estates were set up by
SIDCO itself. Source (SIDCO – TAMILNADU SMALL INDUSTRIES DEVELOPMENT
CORPORATION LIMITED) It has set up these estates in rural and most backward areas to ensure
balanced industrial development.

Functions of SIDCO
SIDCO supplies scarce raw materials:
Some of the scarce raw materials are procured by the corporation either from the domestic market or from
abroad and are provided to the needy small scale industries. For this purpose, SIDCO has a number of raw
material depots and these depots are procuring various scarce raw materials, as per the requirements of
small scale industries in the state.
SIDCO provides marketing assistance:
In order to provide an efficient marketing support to small scale industries, the corporation has taken up
various schemes. In fact, the corporation participates in the tenders floated by the state government
departments and also with the DGS & D (Director General of Supplies and Disposal). SIDCO makes
advance payments for obtaining orders and distribute them among the various small scale units. SIDCO
also arranges for buyer — seller meets frequently.
SIDCO assists in Bills discounting:
When small scale units supply goods to government departments, there is a delay in receiving payments. In
such a situation, the bills drawn on government departments will be discounted by SIDCO and upto 80% of
the bill value is given to the supplier. This helps the SSI units in solving their working capital crisis.
SIDCO provides Export marketing assistance:
To promote export marketing among the small scale industries, SIDCO has developed websites because of
which it is able to display the products of the small scale industries in foreign markets and obtain export
orders. Once an export order is obtained, the Common export manager of SIDCO will make arrangements
for extending various services for export of the product. SIDCO also helps in the small scale units taking
part in the international trade fair at New Delhi, Pragati Maidan so that the products of small scale
industries of Tamilnadu are displayed.
SIDCO set up Captive power plants:
In order to provide uninterrupted and good quality power supply, SIDCO has taken up a plan to set up
captive power plants in major industrial estates. It is now planning to set up these plants in 10 industrial
estates.
SIDCO promotes skill development centres:
In an effort to supply skilled laborers to various small scale industries, skill development centres are being
set up in various industrial estates which will be training workers in varied industrial activities and they will
be trained in modern skill.
SIDCO promotes women entrepreneurs:
In addition to the above, in order to promote women entrepreneurs, a separate industrial estate for women
has been set up at Tirumullaivoyal, near Chennai, where women entrepreneurs are trained in various fields
of small scale industries.
In addition to SIDCO, there are various corporations that assists in the promotion of small scale industries
such as, Small Industries Promotion Corporation of Tamilnadu (SIPCOT), Tamilnadu Small Industries
Corporation (TANSI), Industrial and Technical Consultancy Organisation of Tamilnadu (ITCOT) and
Tamilnadu Industries Investment Corporation (TIIC).

Indian Institute of Entrepreneurship (IIE)

Indian Institute of Entrepreneurship (IIE) is an autonomous organization under the Ministry of Skill
Development & Entrepreneurship. The main aim of the Institute is to provide training, research and
consultancy activities in Small and Micro Enterprises (SME),with special focus on entrepreneurship
development. The Indian Institute of Entrepreneurship (IIE)  registered under the Societies Registration
Act,1860  was established in the year 1993 in Guwahati by the erstwhile Ministry of Industry (now the
Ministry of Micro, Small and Medium Enterprises), Government of India. The Institute began operating
from April 1994 with the North East Council (NEC), Governments of Assam, Arunachal Pradesh and
Nagaland and SIDBI as its other stakeholders.

IIE has been transferred to the Ministry of Skill Development & Entrepreneurship on 22nd May’2015.

The headquarter of IIE is at Lalmati, Basistha Chariali, 37 NH bypass,Guwahati-781029.

OBJECTIVES
1. To promote and develop entrepreneurship.
2. To conduct research and provide consultancy for entrepreneurship development.
3. To coordinate and collaborate with other organizations in undertaking training, research and other
activities to increase outreach of the institute.
4. To provide consultancy and monitoring service to MSMEs/ potential entrepreneurs and enhancing
employability of participants.
5. To promote greater use of information technology in the activities/ functions of the IIE.
6. To comply with statutory responsibility.
 FUNCTIONS
1. Designing and organising training activities for different target group and undertaking research in
the relevant to entrepreneurship.
2. Improving the efficiency, effectiveness and delivery of the change agents and development
practitioners i.e. trainers, support organizations engaged in enterprise building. etc.
3. Provide consultancy service to the prospective and existing entrepreneurs.
4. Increasing the outreach of activities of the institute through collaborative activities and increasing
their effectiveness through use of different tools of information technology.

DIC- A Single Window Agency

Meaning: DISTRICT INDUSTRIES CENTRE. Launched in 1978 in all districts of each state.
There are about 400 DIC's in India.
Nature of support: Information and Consultancy Services. Industrial Inputs.
Objectives:
(i) To effectively promote cottage and small-scale industries in rural areas and small towns.
(ii) To act as a Single Window Agency to help the entrepreneur with all the information
under one roof.

(iii) To serve as an integrated administrative frame work at the district level for industrial
development.
Functions:
(i) Surveys: To carry out surveys to assess the potential of a district with respect to industrial
development taking into account availability of raw material, manpower, infrastructure, demand for a
product etc. This survey provides a basis for advising budding entrepreneurs.
(ii) Action Plan: To prepare an action plan for the industrialdevelopment of the district.
(iii) Appraisal: To appraise various investment proposals received from entrepreneurs.
(iv)Guidance: To guide entrepreneurs in selecting appropriate machinery and equipment.
(v) Marketing: To assist entrepreneurs in marketing their products and assess the possibility of export
promotion.
(vi)R&D: To link R&D institutes with entrepreneurial activities for product innovation.
(vii)Training: To conduct artisan training programs.
Industrial Policy

Industrial policy is a document that sets the tone in implementing, promoting the regulatory roles of the
government. It was an effort to expand the industrialization and uplift the economy to its deserved heights. It
signified the involvement of Indian government in the development of industrial sector.

With the introduction of new economic policies, the main aim of the government was to free the Indian
industry from the chains of licensing. The regulatory roles of the Indian government refer to the policies
towards industries, their establishments, their functioning, their expansion, their growth as well as their
management.

Industrial growth of a country is guided and regulated through its industrial policies. Let’s understand the
journey of various industrial policies

Industrial Policy

Industrial policy is a document that sets the tone in implementing, promoting the regulatory roles of the
government. It was an effort to expand the industrialization and uplift the economy to its deserved heights. It
signified the involvement of Indian government in the development of industrial sector.

With the introduction of new economic policies, the main aim of the government was to free the Indian
industry from the chains of licensing. The regulatory roles of the Indian government refer to the policies
towards industries, their establishments, their functioning, their expansion, their growth as well as their
management.

Industrial growth of a country is guided and regulated through its industrial policies. Let’s understand the
journey of various industrial policies

I. Industrial Policy of 1948

The first industrial policy after independence was announced on 6th April 1948. It was presented by Dr
Shyama Prasad Mukherjee then Industry Minister. The main goal of this policy was to accelerate the industrial
development by introducing a mixed economy where the private and public sector was accepted as important
in the development of the economy. It saw Indian economy in socialistic patterns. The large industries were
classified into four categories:

 Industries with exclusive State Monopoly/Strategic industries:  It included industries engaged in

the activity of atomic energy, railways and arms and ammunition.
 Industries with Government control: This category included industries of national importance. 18
such categories were mentioned in this category such as fertilizers, heavy machinery, defense
equipment, heavy chemicals, etc.

 Industries with Mixed sector: This category included industries that were allowed to operate
independently in private or public sector. The government was allowed to review the situation to acquire
any existing private undertaking.

 Industry in the Private sector: Industries which were not mentioned in the above categories fall
into this category. High importance was granted to small businesses and small industries, leading to the
utilization of local resources and creating employment.
II. Industrial Policy Resolution, 1956
This second industrial policy was announced on April 20, 1956, which replaced the policy of 1948. The
features of this policy were:

 A new classification of Industries.

 Non-discriminatory and fair treatment for the private sector.

Promotion of village and small-scale industries.

 To achieve development by removing regional disparity.

 Labour welfare.

To summarize, the policy of 1956 in which the state was given a primary role for industrial development as
capital was scarce and business was not strong.
III. Indian Policy Statement, 1973
Indian Policy Statement of 1973 identified high priority industries with investment from large industrial houses
and foreign companies were permitted. Large industries were permitted to start operations in rural and
backward areas with a view to developing those areas and enabling the growth of small industries around. And
so the basic features of Indian Policy Statement were:

 The policy was directed towards removing the distortions, it provided for closer interaction between
agriculture and industrial sector.

 Priority was given towards generation and transmission of power.

 The list of industries reserved for the small-scale sector was expanded.

 Special legislation was made to protect cottage and household industries were introduced.
IV. Indian Policy Statement 1977
Indian Policy Statement was announced by George Fernandes then union industry minister of the parliament.
The highlights of this policy are:
A] Target on the development of small-scale and cottage industries.

 Household and cottage industries for self-employment.

 Tiny sector investment up to 1 lakhs.

 Smallscale industries for investment up to 1-15 lakhs.

B] Large-scale sector

 Basic industries: infrastructure and development of small-scale and village industries.

 Capital goods industries: meeting the requirement of cottage industries.

 High technological industries: development of agriculture and smallscale industries such as

petrochemicals, fertilizers and pesticides.
C] Restrict the control of big business houses.

D] Role of the public sector:

 Development of ancillary industries.

 To make available expertise in technology and management in small and cottage industries.
E] Revival and rehabilitation of sick units.

V. Industrial Policy, 1980

The Congress government announced this policy on July 23rd, 1980. The features of this policy are:

 Promotion of balanced growth.

 Extension and simplification of automatic expansion.

 Taking over industrial sick units.

 Regulation and control of unauthorized excess production capabilities installed for industrial houses.

 Redefining the role of small-scale units.

 Improving the performance of the public sector.

VI. New Industrial Policy, 1991
The features of NIP, 1991 are as follows:
 Public sector de-reservation and privatization of public sector through disinvestment.

 Industrial licensing.

 Amendments to Monopolies and Restrictive Trade Practices (MRTP) Act, 1969.

 Liberalised Foreign Investment Policy.

 Foreign Technology Agreements (FTA).

 Dilution of protection to SSI and emphasis on competitiveness enhancement.

The all-around changes introduced in the industrial policy framework have given a new direction to the future
industrialization of the country. There are encouraging trends on diverse fronts. Industrial growth was 1.7
percent in 1991-92 that has increased to 9.2 percent in 2007-08.The industrial structure is much more balanced.
The impact of industrial reforms is reflected in multiple increases in investment envisaged, both domestic and
foreign.

The quest for industrial development started soon after independence in 1947. The Industrial Policy
Resolution of 1948 defined the broad contours of the policy delineating the role of the State in industrial
development both as an entrepreneur and authority. This was followed by comprehensive enactment of
Industries (Development & Regulation) Act, 1951 (referred as IDR Act) that provides for the necessary
framework for implementing the Industrial Policy and enables the Union Government to direct investment
into desired channels of industrial activity  inter alia through the mechanism of licensing keeping with
national development objectives and goals.
The main objectives of the Industrial Policy of the Government are (i) to maintain a sustained growth in
productivity;(ii) to enhance gainful employment;(iii) to achieve optimal utilisation of human resources; (iv)
to attain international competitiveness; and (v) to transform India into a major partner and player in the
global arena. To achieve these objectives, the Policy focus is on deregulating Indian industry; allowing
freedom and flexibility to the industry in responding to market forces; and providing a policy regime that
facilitates and fosters growth. Economic reforms initiated since 1991 envisages a significantly bigger role
for private initiatives. The policy has been progressively liberalized over years to at present, as would be
evident in subsequent paragraphs.
As noted above, Industrial Policy since 1991 has been more for facilitating the industrial development
rather than anchoring it through permits and controls. Industrial licensing has, therefore, been abolished for
most of the industries and there are only 4 industries at present related to security, strategic and
environmental concerns, where an industrial license is currently required:
 Electronic aerospace and defence equipment: all types.
 Industrial explosives including detonating fuses, safety fuses, gunpowder, nitrocellulose and
matches.
 Specified Hazardous chemicals i.e. (i) Hydrocyanic acid and its derivatives; (ii) Phosgene and
its derivatives and (iii) Isocyanates & Disocyanates of hydrocarbon, not elsewhere specified
(example Methyl Isocyanate).
 Cigars and cigarettes of tobacco and manufactured tobacco substitutes.
A number of initiatives have been taken for Ease of doing business for Industrial Licensing, which include
online application submission for Industrial License (IL) and Industrial Entrepreneur Memorandum (IEM)
on 24X7 basis at eBiz website, increasing initial validity period of Industrial License has been increased to
three years from earlier two years with extension of validity upto seven years, simplification of application
Forms for Industrial License & Industrial Entrepreneur Memorandum etc.
Policy for Micro, Small & Medium Enterprises Sector
Government has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006
stepping up the investment limit in Plant & Machinery to Rs.5 crores for small enterprises and Rs.10 crores
for medium enterprises, so as to reduce the regulatory interface with the majority of the industrial units.
Over the period Government has pruned the list of items reserved for exclusive manufacture by MSE sector
vide Notification No. 998(E) dated 10-04-2015, remaining 20 items which were earlier reserved for
exclusive manufacture by MSE Sector has been de-reserved. Presently no item is reserved for exclusive
manufacture by MSE Sector.
Sectors reserved for Public Sector
Consistent with the policy of liberalization of domestic industry, the numbers of industries reserved for
public sector have also been reduced. During 2014, private investment in Rail Infrastructure has been
permitted. Consequently, at present only two industrial sectors are reserved for public sector:
i. Atomic Energy
ii. Railway Operations other than construction, operation and maintenance of the following:
a. Suburban corridor projects through PPP,
b. High speed train project,
c. dedicated freight lines,
d. Rolling stock including train sets, and locomotives/ coaches manufacturing and maintenance
facilities
e. Railway Electrification,
f. signaling systems
g. freight terminals,
h. Passenger terminals,
 i. infrastructure in industrial park pertaining to railway line/sidings including electrified railway lines
and connectivities to main railway line and
j. Mass Rapid Transport systems.
Accordingly, now private investment (domestic as well as foreign) in construction, operation and
maintenance of above has been allowed.

Latest industrial policy of government of India (2017):

The Department of Industrial Policy and Promotion (DIPP) under the Commerce and Industry Ministry is
going to release a new industrial policy. It is expected to replace National Manufacturing Policy (NMP)
released in 2011.

The new policy aims at making India a manufacturing hub by promoting ‘Make in India’ with focus on
encouraging Indian branded products with higher value addition. It will also review the existing foreign
direct investment (FDI) policy regime to facilitate greater technology transfer.

Features of New policy

1. The proposed policy will aim to set clear vision for role of industry and industrial growth in growth
and development of economy.
2. It will be comprehensive, actionable, outcome-oriented policy that will enable industry to deliver a
larger role in economy and full its role as engine of growth and add more value and jobs.
3. DIPP has adopted consultative approach for formulating industrial policy by setting up six thematic
focus groups. These six thematic areas are Manufacturing and MSME, Technology and Innovation,
Infrastructure, Investment, Trade and Fiscal Policy, Ease of Doing Business and Skills and
Employability for Future.
4. The policy will aim to attract $100 billion of FDI in a year, up from $60 billion in 2016-17. It will
also aim at retaining investments and accessing technology. It will also ensure that it facilitates
greater technology transfer, leverages strategic linkages and innovation.
5. It will incorporate measures to facilitate use of smart technologies such as the internet of things
(IoT), articial intelligence (AI) and robotics for advanced manufacturing. A task force constituted on
articial intelligence under the chairmanship of V. Kamakoti will also provide inputs for the policy
6. The policy will aim to harness existing strengths in sectors like automobiles and auto-components,
electronics, new and renewable energy, banking, software and tourism, and create globally scaled-
up and commercially viable sectors such as waste management, medical devices, renewable energy,
green technologies, nancial services to achieve competitiveness.
7. The policy will also push for reforms to enhance labour market exibility with an aim for higher job
creation in the formal sector and performance linked tax incentives. It will also take into
consideration changing economic and business cycles of world and Indian economy, geopolitical
trends and broad policy directions in country.