Question

Attempt the following.

Explain in brief the impact of capital on Small Scale industries.

Answer 1

The major problem faced by small scale industries is insufficient capital, which creates the following difficulties with them.

1. Borrowings of Capital from Landlords and Money Lenders: Nationalised and Co-operative banks are not ready to finance Small Scale Industries without security. Thus, they are forced to borrow from money lenders, where they have to pay a very high rate of interest.
2. Storage of Raw material: Small Scale Industries are agro-based. The raw material is available seasonally. To stock goods, they required huge finance. Due to lack of finance, they run industry only in seasons.
3. Lack of Skilled Labour: Only unskilled and semi-skilled labourer are available. Small Scale Industries cannot afford labour cost of skilled labourer which affect the quality and quantity of production and profitability.
4. Outdated technology: Due to insufficient capital, production methods used by SSI are old, which results in poor quality and quantity of output.
5. Weaker Marketing Skill: In today's world marketing plays an important role. The rural area is facing marketing problem due to lack of facilities and knowledge and they are exploited by middlemen too.