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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 and cottage industries. Next to agriculture small business constitutes the most popular occupation of people in India. 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. In fact, the healthy growth of small scale industries can be an effective approach to the pressing problem of unemployment in the country. Several empirical studies have revealed that the employment generating capacity of small scale industries in about in times more than that of the large scale industries.
2. Balanced Regional Development: small scale industries promote decentralized development and help to remove regional disparities in industrialisation. Decentralized development contributes to the process of self-sustained growth and avoids concentration of industries in particular areas. By providing employment in rural areas they help to check migration and overcrowding in urban areas. Small scale firms can be a useful means of rural reconstruction and development. Development of decentralized sector also improves the standard of living of people in backward regions.
3. Optimization of Capital: Small scale firms require less capital per unit of output and, therefore, greater output can be obtained with small investment. The Annual Surveys of industries reveal that fixed capital per employee in case of small scale industry was Rs. 3,706 as compared to Rs. 27,757 in case of large scale industry. Small firms also provide quick returns after their establishment on account of short gestation period.
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 and cottage industries. Next to agriculture small business constitutes the most popular occupation of people in India. 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. In fact, the healthy growth of small scale industries can be an effective approach to the pressing problem of unemployment in the country. Several empirical studies have revealed that the employment generating capacity of small scale industries in about in times more than that of the large scale industries.
2. Balanced Regional Development: small scale industries promote decentralized development and help to remove regional disparities in industrialisation. Decentralized development contributes to the process of self-sustained growth and avoids concentration of industries in particular areas. By providing employment in rural areas they help to check migration and overcrowding in urban areas. Small scale firms can be a useful means of rural reconstruction and development. Development of decentralized sector also improves the standard of living of people in backward regions.
3. Optimization of Capital: Small scale firms require less capital per unit of output and, therefore, greater output can be obtained with small investment. The Annual Surveys of industries reveal that fixed capital per employee in case of small scale industry was Rs. 3,706 as compared to Rs. 27,757 in case of large scale industry. Small firms also provide quick returns after their establishment on account of short gestation period.