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Unit 9: Small Groups Organizations

2. The SSI sector encompasses both the traditional and ............................. sub-sectors. Notes

(a) non-traditional (b) non-organization
(c) government (d) None of these.
3. Modern SSIs produce wide range of goods from comparatively simple items sophisticated
products such as .................
(a) television sets (b) cloths
(c) building construction items (d) None of these.
4. Agreement on Trade Related Investment Measures (TRIMS) would enhance the flow
of .............. into Indian industry.
(a) FDI (b) WTO
(c) R&D (d) None of these.

9.4 Disabilities

Small enterprises are presently seriously handicapped in comparison with larger units by
an inequitable allocation system for scarce raw materials and imported components, lack
of provision of credit and finance; low technical skills and managerial ability; and marketing
contracts. It is, therefore, essential to develop an overall approach to remove these
disabilities.

9.4.1 Output versus Employment
One argument is that the emphasis on employment is irrelevant, as the basic thing is the
output that the economy needs for its growth. From this angle, it is contended that, since
the productivity of these industries is low compared to that of large industries, the small
industries simply waste the capital which is very scarce, and which, if diverted to large
industries, can produce more. From this viewpoint, small industries are more capital-
intensive. It is also argued that the labour-productivity in the small industries is also small
compared to large industries.

9.4.2 Adverse Effect on Capital Formation
It is also contended by some persons that small industries have unfavourable consequences
on saving and capital formation. They argue that the establishment of these industries will,
over a period of time, reduce the availability of capital for large-scale industries with higher
productivity of capital.
First: It will happen because capital, used inefficiently in the small industries, will not be
available for large-scale industries.

Second: These industries being labour-intensive, use a major proportion of the sale proceeds
of output to pay workers whose marginal propensity to save is low. As a result, a large part
of their incomes will be used for consumption resulting in a lower rate of saving and capital
formation for the economy.
9.4.3 Inefficient Production

Another charge against these industries is that the cost of production is higher than in the
large industries, because these industries suffer from several inefficiencies.

No doubt, the fact of large-scale entails, what is described as economies of scale, lowering
the costs.

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