India’s Industrial Base: Small Scale Industries

By Raushan Rajput

Small Scale Industries are the backbone of India. They play a crucial role in creating employment, maintaining regional imbalance and migration and providing income generation in developing countries like India. About 60-70% of new innovation comes from small and cottage industries, it’s a myth that small-scale industries contributes less than large scale sector. An economic survey of 2012-13 declared that small scale and unorganized sector contributed to around 38-40% of Indian GDP and employed over 800 million people.

Globalization brought demise of small-scale and cottage industries and before the colonial period, cottage industries were second largest employment generator after agriculture. Village cottage industries were smartly slaughtered by Britishers in the eighteenth century. People were forcibly maneuvered from rural to urban areas in the name of the high standards of living. Several of the Small-scale industries are closed entirely among them are jute industries of Bengal, silk industries of Bhagalpur Bihar, Mithila painting of Bihar and many more. After India rose from the dark facet of the colonial rule, it should have constructed its own industries, factories, and agriculture base, however the Nehruvian policies of were most inward-looking and import-substituting rather than outward-looking and export-promoting. One example, in 1950’s Nehru built Ashoka hotel to hold UNESCO conference rather than focusing on our small-scale sector, agriculture, IITs and factories.

To quote Mohandas Gandhi “Production should be organised in a large no.of places on small scale”. As Gandhi ji was strong proponent for the development of cottage and rural industries, he suggested delocalization and decentralisation of industries”. Whereas, in some sectors govt. has approved 100% FDI, this is so embarrassing.

We have to form our own industrial base and system as we all recognize that India has the largest youth population and our human resources ought to be used well. One more reason for the disappearance of small-scale industries is that during earlier times cooperative banks were mostly operated by the political class and currently they are hauled by RBI. Since politicians running the co-operative banks had political interests, providing social assistance was not one of their priorities in general.

These days our country spends a lot of capital to assist and revive small-scale sectors. During 2012-13 the expenditure was 2391 crore and in 2017-18 it magnified to 5384 crores. However the main question is that is this expenditure seriously working to serve to our small sectors? Swaminathan Gurumurthy, a widely known Journalist, and economic thinker has suggested that India needs a separate financial architecture for small-scale sectors and it ought to be free from GST for three years. In my opinion, first there needs to be a decentralization of power from Prime Minister to panchayat leadership. Each panchayat should think about their own village like what kind of industries would be appropriate for their village. We need a robust panchayat level leadership. And the second is to create own Indic system like Japanese, who have maintained their system of SSI. The production of small goods should be in small scale industries and large goods in large scale industries. There should be maintained a relationship between small scale and large scale industries. India must follow the example of Japan, not USSR and USA. India can take advantage of this moment to get rid of the remaining obstacles that have prevented it from realizing its full potential.

About the Author: Raushan Rajput is a graduate of Sri Aurobindo College, Delhi University and is currently pursuing Masters from University of Lucknow. His area of Interest are Education and Public Policy, he has worked in organizations like Vision India Foundation, Ekal Foundation and ‘The India Iris’ Org. 


One Comment

  1. Suraj Gupta says:

    That was very helpful and smartly illustrated. Your article is truly appreciable work.

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