Problems of Small Scale Industry

(d) Problems of Small Scale Industry

Despite their importance, small-scale units in India commonly face a recurring set of difficulties, many of which trace directly back to the very features (limited capital, owner-dependence, local scale) that define them as "small" in the first place:

• Finance — small units often find it hardest of all to raise adequate capital, both to start up and to expand: they typically lack the collateral/security that formal lenders want, cannot access capital markets the way a large company can (through shares/debentures), and are frequently dependent on relatively expensive informal-sector borrowing when institutional credit is delayed or insufficient.
• Raw material — small units often cannot buy raw material in the same bulk quantities as large industry, so they lose out on the bulk-purchase discounts large buyers get, and are more exposed to shortages or price fluctuations of key inputs.
• Marketing — small units usually lack the dedicated marketing department, brand recognition, and distribution network that large companies build up, making it harder for them to find buyers, negotiate favourable prices, and compete against large, well-advertised brands — particularly once liberalised trade exposes them to cheaper imported goods.
• Technology and skilled labour — small units often cannot afford the latest machinery or the cost of continuously upgrading technology, and struggle to attract and retain skilled, trained labour, who are frequently drawn away by the higher, more stable wages large industry can offer.
• Infrastructure — inadequate or unreliable power supply, poor transport/road connectivity (especially for units located in smaller towns, which is exactly where sub-topic (c) noted small industry is valuable for balanced regional development), and limited access to industrial estates/sheds all add to a small unit's operating costs and unpredictability.
• Managerial deficiency — because the owner is usually also the manager (sub-topic (b)), a small unit is fully dependent on that one person's managerial ability; professional management expertise, which a large company can afford to hire in specialised functions (finance, production, marketing, HR), is usually out of reach for a small unit. …