THE
ECONOMIC
WEEKLY
June 27,1959
Cottage and Small Scale Industries
A Reclassification
MC S
THE
definition of the different
sectors of the i n d u s t r i a l structure of an economy has to be baaed
on a p r a g m a t i c appraisal of the
prevailing
conditions,
with
due
allowance
for
adjustments
and
variations. if it is to be economically meaningful.
Such an approach is needed a l l the more in
the context of a g r o w i n g economy,
fast developing as a result of conscious and planned efforts on the
part of the people and their government
The need for categorising Indus
t r i a l activities into certain broad sectors arose f r o m the necessity of prov i d i n g a m e l i o r a t i v e measures for the
unorganized i n d u s t r i a l sectors in
the face of ever increasing compet i t i o n f r o m their organized counterparts.
Since the m a i n concern
was to d i s t i n g u i s h the unorganised
sectors f r o m their organised counterparts, the problem of e v o l v i n g a
scientific definition was a subordinate one a n d was only incidental to
the general and more i m p o r t a n t
problem of f r a m i n g policies and
devising ways and means f o r the
provision of official aid, The result
has been that, more often t h a n not,
one found certain w o r k a b l e descriptions of the different sectors of
i n d u s t r i a l activities r a t h e r t h a n
scientific definitions.
C r i t e r i a Adopted in the Past
I t i s i m p o r t a n t t o bear i n m i n d
t h a t the general basis or the criter i a adopted for e v o l v i n g scientific
definitions depend m o s t l y on the
purpose they are required to serve.
Thus, while the official purpose m a y
lie in seeking to regulate a n d cont r o l a n d / o r b r i n g about a h a r m o nious balance in the development
of the different sectors of the indust r i a l structure, t h a t o f academic
studies consists i n t h r o w i n g i n t o
relief the conditions o b t a i n i n g In
each of these sectors either relatively or i n d i v i d u a l l y a n d to diagnose
these objectively in order either to
serve as a guide f o r those who are
charged w i t h the t a s k o f f o r m u l a t i n g policies or as a basis f o r empir i c a l enquiry.
A review of the various past definitions of the cottage industries
indicate t h a t the f o l l o w i n g factors
formed the m a i n basis of these
definitions; (1)
Work-place; (2)
Employment;
(3)
M o t i v e power
used; and (A) E x t e n t of m a r k e t
served. Thus a unit was, broadly
speaking,
termed a cottage unit
when
(1) the production activities are
conducted in the residence of
the a r t i s a n ;
(2) the unit, employed is mostly
f a m i l y labour;
'3) the unit was r u n m a i n l y
m a n u a l labour; and
on
(4) the m a r k e t for the unit's pro
ducts did not extend beyond
the locality where the unit
was situated.
Industries Committee and the Government of Madras provided for
the use of power in cottage industries. A g a i n , w h i l e the U P Committee allowed for the organization
of these industries on more or less
commercial
basis,
Bombay
and
Madras did not. Significantly, however, a l l the three definitions were
unanimous about
(1) the w o r k place being separate f r o m the residence of the artisans, and (2) employment of hired labour- of course,
w i t h a ceiling of 9 workers (as in
the case of the U P). They were
also unanimously silent over the
extent of capital employed and the
m a r k e t to be served.
T w o points become clear f r o m
this b r i e f review There is an utter
The R u r a l and Cottage Industries lack of u n i f o r m i t y in the basic
Sub-committee of
the
N a t i o n a l c r i t e r i a employed and a m b i g u i t y in
P l a n n i n g Committee of the A l l - the f o r m and content of these defiNone of these provide &
I n d i a Congress (5939) defined indus- nitions.
and adequate y a r d - s t i c k to
tries of different size-classes w i t h ready
reference to (1) the use of power distinguish the cottage industries
and the average q u a n t u m thereof, f r o m the rest. Perhaps, these d r a w were inherent in the very
and (2) employment of hired labour backs
and the average n u m b e r thereof. nature of the objectives sought to
(National
Planning
Committee. be achieved. The point to be noted
is that, if these definitions
Rural And
Cottage Industries', here
3949. F i r s t edition, p 53.
How- failed to clearly define cottage inever, this i n v o l v e d not only consi- dustries as they operated a decade
derable overlapping but also con- or so ago. their a p p l i c a b i l i t y today
sideration of i n d i v i d u a l units for is more doubtful indeed. For, it m a y
being fitted i n t o one or the other of j u s t i f i a b l y be m a i n t a i n e d t h a t none
of the four c r i t e r i a mentioned earthe size-classes.
The Fiscal Com
mission sought to distinguish be- lier could be taken to reflect, either
tween cottage and small scale i n - i n d i v i d u a l l y or collectively, the predustries on the p r i m a r y c r i t e r i o n of sent status and the general characthe use of hired labour. ('Report of teristics of 'cottage' industries. Perhaps, it m a y even be contended t h a t
the Fiscal Commission', 1949-50
these characteristics of the t r a d i V o l I , p 99.)
t i o n a l industries of I n d i a have since
been or are being g r a d u a l l y e l i m i Regional Variations
nated.
A p a r t f r o m the v a r y i n g degrees
of emphasis placed on one or more
Small Scale Industries
of the different c r i t e r i a by differThe present status and the operaent authors, it can also be observed tive conditions of a m a j o r i t y of the
t h a t different P r o v i n c i a l Committees so-called cottage Industries appear
a n d Government agencies evolved to be of the same complexity, if not
and adopted definitions more or less magnitude, as those of w h a t are
to accord w i t h the general condi- termed s m a l l scale industries. F o r
tions p r e v a i l i n g in t h e i r respective example,
a carpentry
unit
enregions.
Thus, f o r example, the gaged in the manufacture of u t i l i t y
B o m b a y Economic and I n d u s t r i a l goods such as f u r n i t u r e , e m p l o y i n g
Survey Committee (1938-40), pre- r e l a t i v e l y i m p r o v e d and modern
cluded the use of power by cottage equipment, pr a b l a c k s m i t h y u n i t
industries, whereas the U P Cottage using a lathe, either hand-operated
843
June 27 1959
THE ECONOMIC WEEKLY
or power-operated, or, again, a cobbler w o r k i n g on a sowing machine
a n d other mechanical devices are
today termed as cottage industries,
but in effect
they are small-scale
i n d u s t r i a l establishments.
I n f o r m e d academic opinion, of
late, has come to accept t h a t both
f o r purposes of scientific analysis
and developmental efforts, it is
desirable to forget the t e r m cottage
industries w i t h a l l its connotative
implications and speak only of small
scale m a n u f a c t u r i n g establishments.
Recent
Classifications
Notable among the recent classifications is the one adopted by the
Regional Programmes
Committee
of the P l a n n i n g Commission. The
surveys of small-scale industries
undertaken under its aegis do not
generally distinguish between cottage and small-scale establishments,
but include all units (a) w h i c h use
power and employ less than 10
w o r k e r s ( i n c l u d i n g f a m i l y labour)
and b) w h i c h do not use power
but employ upto 20 workers. Thus
in the survey of 'Small Scale Industries in Delhi', conducted by the
U n i v e r s i t y of Delhi under the auspices of the R P C. a small-scale
establishment has been defined to
include "a m a n u f a c t u r i n g or processing establishment w o r k i n g w i t h
not more than 19 and less t h a n 2
persons and w i t h a m i n i m u m block
capital of Rs 250."
The size l i m i t imposed by the
above definition both in respect of
capital as well as employment is
designed, on the one hand, to include
all
industries or
establishments
w h i c h have
been excluded f r o m
coverage by the Census of M a n u factures, and also to exclude " v e r y
s m a l l sized cottage industries, w h i c h
are based m a i n l y on one-man economic activities o n the o t h e r ' I t
m a y also be added here t h a t the
exclusion of one-man establishments
was m a i n l y to avoid difficulties of
coverage and not for purposes of
d i f f e r e n t i a t i n g between the cottage
and small scale industries.
A more or less s i m i l a r demarcation has been employed by the
N a t i o n a l Sample Survey in their
series of Rounds, in the coverage of
industries. Even the N a t i o n a l I n come Committee (1954) followed a
similar
basis
inasmuch as
the
sector of s m a l l enterprise was taken
to comprise of the residual of a l l
economic activities f a l l i n g under the
classification
'industry' by
the
Census, minus, those c o m i n g under
the I n d i a n Factories Act, 1948.
TWO Trends
S i m i l a r l y , the various State Directorates of Industries restrict the
t e r m small scale' to only such i n d u s t r i a l establishments as f a l l beyond the purview of the I n d i a n
Factories A c t , 1948. In other words
all establishments w h i c h employ
less t h a n 20 w o r k e r s w i t h o u t the
use of power or less t h a n 10 w o r k are using power, are generally treated as small scale i n d u s t r i a l establishments. Of course, for purposes
of a d m i n i s t e r i n g the C e n t r a l Government aid to industries in their
respective States, the various State
Governments adhere to the definit i o n adopted by the former, w h i c h
w i l l be referred to presently. H o w ever, the Bureau of Economics and
Statistics of the
Government of
Bombay, in a series of surveys of
various cottage
and small
scale
industries, confined to the pre-reorganised B o m b a y State, has defined a
s m a l l scale
establishment as one
w i t h a capital investment of more
t h a n Rs 6,000 but less t h a n Rs
30,000. The criterion of employment adopted was more than 9 and
less t h a n 50 w o r k e r s .
As against this, the Development
Commissioner for Small Scale I n dustries,
Government
of
India.
M i n i s t r y of Commerce and I n d u s t r y ,
defines a small-scale u n i t as one
w h i c h has capital assets not exceed
i n g Rs 500,000 and employs less
than 50 persons, if power is used or
less than 100 persons if no power is
used. In order that a unit m a y be
termed as s m a l l scale, both the c r i teria should be satisfied. T h i s definition generally excludes a l l indust r i a l establishments w h i c h come under the a m b i t of the Industries Development and
Regulations A c t ,
.1951, on the higher side, as well as
all those industries which are covered by the five other A l l I n d i a Boards
such as the K h a d i and V i l l a g e I n dustries
Commission. A l l India
H a n d l o o m Board, A l l I n d i a H a n d i crafts Board, etc on the lower side.
In its application this definition is
treated w i t h utmost f l e x i b i l i t y . A l l
unit?; in industries such as the
sports goods industry, have been
treated as small scale irrespective
of their size.
It should be conceded that as a
w o r k i n g f o r m u l a , the above definition has much to commend itself.
It not only attempts to avoid overlapping and duplication, but also
has the
merit of c o m b i n i n g the
three essential criteria, viz, capital,
employment and power. T h i s i m parts a harmonious blend and renders it a more or less composite definition
For, the application
of
any one of the c r i t e r i a w i t h o u t bei n g related to the other two, w o u l d
result in misleading classifications.
This is especially true,
as w i l l be
seen presently, in the context of
recent technological developments,
w h i c h have tended to be both laboursaving as w e l l as capital-saving.
Concepts N o t Clear
T a k i n g , however, the t w o
trends in this
sphere, as
844
broad
noted
THE ECONOMIC WEEKLY
above, it can be seen t h a t there is
considerable a m b i g u i t y a n d l a c k of
unanimity
both in
the general
approach to the p r o b l e m as w e l l as
in the c r i t e r i a adopted. Besides,
doubts m a y also be expressed about
the exact m e a n i n g attached to cert a i n terms
and concepts used in
these definitions.
F o r example the
t e r m 'capital assets' used in the
C e n t r a l Government definition, m a y
mean first, the aggregate resources,
i e. the fixed as well as w o r k i n g
capital, commanded by a u n i t . It
may also mean, as is officially interpreted, only the fixed assets component of the t o t a l capital resources.
T h o u g h the Government of I n d i a
has not adopted any definite views
on these m a t t e r s , the S m a l l Scale
Industries Board, at its meeting held
in September .1957. has clarified the
t e r m 'capital
assets to
include
"land, b u i l d i n g
and e q u i p m e n t ,
T h i s is not a l l . W h a t about those
units w h i c h w o r k in rented premises?
H o w and on what basis is
the ' o r i g i n a l ' as well as the depreciated value of that p o r t i o n of the
premises w h i c h is occupied by a
unit on a r e n t a l basis to be i m puted?
A g a i n , w i l l the method of
assessing the ' o r i g i n a l ' value of the
land a n d buildings, as is suggested by the Smallscale Industries
Board, be satisfactory in i m p u t i n g
the present ' m a r k e t ' value of these
assets?
June 27 1959
i n g v a r i a t i o n s i n output.
Need
for
Reclassification
These doubts apart, there is need
for e x a m i n i n g the feasibility of
r e v i s i n g the present size-limits on
the one hand and of r e a d a p t i n g the
various c r i t e r i a on the other, to
c o n f o r m to the e x i s t i n g conditions
p r e v a i l i n g in the c o u n t r y today, as
also to evolve a more u n i f o r m and
academically acceptable,
scientific
definition of the various sectors of
i n d u s t r i a l structure of the c o u n t r y
In this respect it is necessary to
emphasize that f r o m the
developm e n t a l angle the need of the day is
to distinguish clearly between the
typical problems confronted by i n d u s t r i a l units w h i c h are at different levels of efficiency, stages of
development and scales of operat i o n , and to render them suitable
measures of help, and u l t i m a t e l y
enable them to reach their respective
optimum
size-limits. The p r i m e
objectives of i n d u s t r i a l policy of a
c o u n t r y such as ours w i t h a massive
b a c k - l o g of under-employed independent
artisans
and
craftsmen,
should not merely be the
promotion of the general process of indust r i a l g r o w t h and expansion. Equally
i m p o r t a n t should be the objective,
as has been r i g h t l y recognised by
the country s planners and
the
T a k e again the terms 'persons
and the ' w o r k e r s ' employed. The
t e r m 'persons' is not the same thing'
as 'workers', and the t o t a l number
of 'persons' employed by a unit may
be m u c h more t h a n ' w o r k e r s ' employed. In the aggregate of 'labourinputs' for a given unit of output
in any plant, is included those not
o n l y of ' w o r k e r s ' , but of m a n y more
w h o may be classified as 'others".
Where a direct correlation between
a unit of output and labour input
thereon
can be established, such
labour is generally termed as w o r k ers. Where such direct c o r r e l a t i o n
cannot be established but has to be
i m p u t e d i n d i r e c t l y , such as in the
case
of m a n a g e r i a l ,
supervisory,
clerical a n d the m i n i s t e r i a l staff
they are categorized under 'others'.
An addition to or withdrawal from
the e x i s t i n g force of ' w o r k e r s ' is
d i r e c t l y reflected in a correspondi n g v a r i a t i o n i n the t o t a l output;
whereas such additions or w i t h drawals
f r o m the
category of
'others' need not show, at least to
a n y perceptible degree, correspond845
Government, of a decentralised patt e r n of i n d u s t r i a l development and
the establishment of an i n d u s t r i a l
democracy. In a c o u n t r y w i t h an
acute shortage of capital resources
and a relatively plentiful supply of
labour, the future lies in encouraging relatively labour-intensive methods of production, consistent of
course w i t h efficiency or production.
It is from this viewpoint t h a t
one should judge the present definitions. The attempt to relate sizel i m i t s as judged by c a p i t a l invested and
persons employed w i t h
the use of power is obviously
directed towards the p r o m o t i o n of
labour intensive industries, H o w ever, it may be doubted t h a t barr i n g a few industries such as h a n d '
l o o m w e a v i n g or beedi m a k i n g , if
m a n y other modern lines of m a n u facture could be spotted today,
w h i c h would not make use of power
at a l l . and yet employ 99 w o r k e r s .
On the other hand, there are quite'
a number of organised
industrial
units w h i c h employ power and have
an
investment
in capital assets
Touch below the Rs 5.00,000, but
w h i c h may be e m p l o y i n g more
t h a n 50 w o r k e r s . A c c o r d i n g to the
present definition, they are largescale and are not entitled, there-
June 27 1959
THE ECONOMIC WEEKLY
T H E
E C O N O M I C
W E E K L Y
f o r e , t o the m a n y k i n d s o f official
help w h i c h are n o r m a l l y a v a i l a b l e
to those n o w classified as s m a l l
scale u n i t s .
In point of f a c t , these
m a y have a l l the
difficulties a n d
handicaps b o s e t t i n g a s m a l l scale
u n i t . A s i t stands today, therefore,
the present
definition appears to
put a p r e m i u m on c a p i t a l Intensive
units.
Technology and Seale of Operation
There is yet a n o t h e r
important
point to be considered.
T h i s pertains to recent technological developments and their effects on plantsize, as
measured by the convent i o n a l standards.
These developments
have
tended
to he
both
labour-saving
as well as
capital
saving
If the various a u t o m a t o n s
and the other ' s w i t c h - h o a r d ' apparatus are
' l a b o u r - s a v i n g / there is
also an equally impressive a r r a y of
mechanical devices a n d techniques
of r a t i o n a l i z a t i o n , w h i c h are ' c a p i t a l saving'These
developments rule
out either number
of w o r k e r s or
capital
by themselves as
reliable
m e a s u r i n g devices of scale of operation.
F o r , if technology is laboursaving
a n d / o r capital
s a v i n g , it
w i l l reduce plant-size, if measured
by any one of these standards, even
if by a l l
other s t a n d a r d s
it m a y
r e m a i n the same or keep increasing.
The New Criteria
Recent
thinking
is
therefore
focussed on f i n d i n g standards other
t h a n either c a p i t a l or
employment
alone. The new c r i t e r i a include the
average net
value added p e r - u n i t ;
the average H P of power per w o r k er; the average c a p i t a l - p e r - w o r k e r ;
and last but not of least i m p o r t a n c e
is the devise of 'Representative Size'
as evolved by P Sargent Florence.
It should be added, however, t h a t
there are perceptible v a r i a t i o n s in
the degree and extent of the impact
of the forces of technology a m o n g
d i f f e r e n t countries in the w o r l d today and f u r t h e r t h a t i n a n underdeveloped c o u n t r y l i k e I n d i a , technological
developments
have
not
advanced to such extent as to v i t i a t e measurement of scale of operation d e t e r m i n e d by the c r i t e r i a of
capital and
employment,
i n conjunction with
other f a c t o r s .
For
this reason, besides c a p i t a l a n d employment,
the
following
factors
should also be kept in v i e w in determining
scale
of
operation;
(1)
technique of p r o d u c t i o n ; (2) v o l u m e
of o u t p u t ; (3) sphere a n d extent of
market;
(4)
quantum of
power
used; (5) l e v e l o f o r g a n i z a t t o n ; a n d
(6) n u m b e r of labourers
employed
a n d r e l a t i o n s h i p w i t h such labourers.
Keeping in view
these as also
t h e v a r i o u s o t h e r f a c t o r s discussed
earlier,
the
following
suggested
classification m a y be e x a m i n e d :
(1) H a n d i c r a f t s o r t h e T r a d i t i o n a l
Industries;
(2) H a n d
tries;
and
Household
Indus-
(3) S m a l l Scale I n d u s t r i e s ;
(4) M e d i u m Scale I n d u s t r i e s ; a n d
(5) L a r g e Scale
Industries.
In w h a t follows
an attempt is
made to delineate the
important
c h a r a c t e r i s t i c s of each of these categories in r e l a t i o n to the f a c t o r s
noted
above.
Attention
w i l l be
focussed
principally
on
the first
three sectors. An a t t e m p t w i l l also
be made at the end to provide a
q u a n t i t a t i v e basis f o r each of the
above categories, in
t e r m s of t o t a l
capita) employed and employment
afforded. .
Handicrafts
The t e r m H a n d a n d Household
industries is n o t m e a n t to be a mere
substitute f o r either cottage or the
h a n d i c r a f t s industries.
I t i s meant
to connote a basically d i f f e r e n t concept.
Cottage industries, a p p a r e n t ly, may mean a n y i n d u s t r y w h i c h
is plied at or near the house of the
owner
T h i s is to say, it does not
necessarily mean, as is o f t e n sought
to be implied, those t r a d i t i o n a l or
handicrafts
industries, w h i c h
are
better k n o w n f o r t h e i r ; (1) e x c l u sive reliance on m a n u a l operations.
(2i
dependence
mainly,
if
not
exclusively, on f a m i l y labour, and
(.'J) u t i l i t y as a c o m p l e m e n t a r y avo
c a t i o n t o a g r i c u l t u r e a n d f o r supplem e n t i n g the
t o t a l income of the
agricultural
families.
Hand-spinn i n g , bee-keeping, h a n d p o u n d i n g of
rice, the
'atta-chakki'
or h a n d g r i n d i n g i n t o f l o u r , a n d sericulture,
etc m a y be cited as i n s t a n c e s The
point of
i m p o r t a n c e here
is t h a t
primarily
they are the subsidiary
means of livelihood of the f a m i l i e s
u n d e r t a k i n g these industries.
There are also such line a r t s a n d
c r a f t s cane w o r k , lacquered w o r k ,
g o l d a n d silver w o r k s , i v o r y articles,
w o o d c a r v i n g , etc, w h i c h are wholet i m e occupations a n d are also t r a d i t i o n a l industries. B u t the i m p o r t a n t
point about t h e m is t h a t , by t h e i r
v e r y n a t u r e they are not capable
847
o f being r u n o n m a c h i n e r y o r elect r i c i t y a n d are dependent exclusively on
the
accumulated
dexterity
and c r a f t s m a n s h i p i n h e r i t e d , so to
say, t h r o u g h
the generations, Gen e r a l l y , t h e i r products are n o t amenable to ' s t a n d a r d i z a t i o n ' .
Household Industries'
On the other h a n d there are i n d u s t r i a l avocations w h i c h o f late
are designated by the t e r m cottage
industries but w h i c h basically d i f f e r
in
essence f r o m
the
handicraft
variants
Their
important
hallm a r k s can be s u m m e d up as f o l l o w s :
(1) They constitute i n v a r i a b l y the
p r i n c i p a l means of l i v e l i h o o d
of the a r t i s a n s ;
(2) T h e i r saleability m a i n l y depends on the u t i l i t y value of
the products r a t h e r t h a n on
a r t i s t i c or s e n t i m e n t a l considerations;
3)
They need not entirely depend
on f a m i l y l a b o u r but m a y also
employ outside hired l a b o u r ;
(4) T h e y need not necessarily be
located in the d w e l l i n g places
of the a r t i s a n s concerned, but
m a y be housed separately;
(5) The s k i l l
a n d the t r a i n i n g
involved
in these
industries
can be acquired t h r o u g h i n s t i tutions other than
those of
' t r a d i t i o n a l inheritance 1 w i t h out i m p a i r i n g the q u a l i t y of
the
product or efficiency of
operation,
unlike
those
of
artistic handicrafts;
(6) These have
potentialities of
being r u n on e l e c t r i c i t y and
other power d r i v e n m a c h i n e r y
and can be reorientated i n t o
s m a l l scale organized u n i t s .
Small Scale Industries
S m a l l scale i n d u s t r i a l u n i t s essent i a l l y connote
an i d e n t i t y of m a nagement and ownership. T h e p r o cesses of m a n u f a c t u r e i n v o l v e d are
r e l a t i v e l y simple
w i t h o u t necessit a t i n g an elaborate set of specialised
machinery
and
equipment.
T h e i r efficient f u n c t i o n i n g does n o t
call f o r a n y elaborate set of specialised m a n a g e r i a l skills.
There
is
an i n t i m a t e , personal r e l a t i o n s h i p
between the p r o p r i e t o r (or the m a n a g e r ) a n d the w o r k e r s , b o t h because of the r e l a t i v e l y s m a l l n u m ber of persons employed as w e l l as
the absence of specialisation in the
d a y - t o - d a y management
functions.
Their requirements of
c a p i t a l are
very
modest
a n d the
sources of
THE
June 27 1959
finance are u s u a l l y restricted to
friends
and relatives. T h e i r best
guarantee, b o t h in respect of credit
requirements and m a r k e t outlets, is
t h e i r personal contacts and the relationship w i t h t h e i r customers.
It m a y not be correct to assume
that all
i n d u s t r i a l establishments
f a l l i n g under t h i s sector f o r m a
homogenous group. On the c o n t r a r y
they m a y display a maze of diverse
complexities. F o r example, a few
of t h e m may employ power-driven
machinery and m a y exclusively depend on hired labour, w h i l e there
may ho others w h i c h employ only
the t r a d i t i o n a l hand-operated equipment. Some of them m a y be w o r k i n g a l l - r o u n d the year, while others
m a y be w o r k i n g only seasonally.
White some m a y undertake job w o r k
and repairs, others m a y m a n u f a c t u r e
composite products. Some may have
a restricted local m a r k e t
while
others may have n a t i o n a l or evert
international markets
There m a y
be m a n y who are dependent on
dealers and other intermediaries for
the disposal, of their finished products and for financing t h e i r various operations while others m a y no
these on their own. T h i s is by no
means a complete list of the various
complexities
a n d diversities found
among: the small
scale i n d u s t r i e s
but is o n l y i l l u s t r a t i v e . W h a t is i m portant, however, is the fact that
it is possible to generally distinguish
these f r o m the medium and largescale industries
on the one hand,
and the household type of industries
on the other.
Medium Scale Industries
Considering the medium scale industries, it. is necessary to concede
at the very outset t h a t they may
have m a n y basic characteristics to
distinguish them f r o m the first
three categories, but these characteristics m a y not be s u b s t a n t i a l l y different f r o m those of the large scale
industries
F o r example, there are
quite a large number of industries
which involve huge capital investment and require elaborate o r g a n i z a t i o n a l apparatus and yet are conducted on a scale w h i c h do not qual i f y t h e m to be termed large scale.
These units m a y have the 'headaches' of the s m a l l scale u n i t s for
some purposes and the bother' of
the large scale ones in others.
T h i s point
m a y be i l l u s t r a t e d
w i t h reference to the Glass Product
M a n u f a c t u r i n g i n d u s t r y , A u n i t of
this i n d u s t r y in the B o m b a y State,
has a. t o t a l capital asset not exceed-
i n g Rs 5,00,000 but employs in its
various branches of operation and
management a complement exceedi n g 100 persons.
The m a c h i n e r y
and equipment
they have include
t w o T a n k Furnaces, the replacem e n t cost of each being r o u g h l y
Rs 1.50,000; an A n n e a l i n g L e h r
( B a k i n g Oven) w i t h conveyor belts
the i n i t i a l cost of w h i c h was estimated at r o u g h l y Rs 50,000 and the
replacement cost at Rs 1,00,000,
I t was gathered t h a t the u n i t
w a n t e d to replace these t w o sets of
equipment w i t h those which could
be r u n on electricity but are at the
m o m e n t deterred o w i n g to financial
difficulties.
The
replacement of
these equipment, it
was reported,
w o u l d not only raise p r o d u c t i v i t y of
the plant, hut also provide for more
employment. This is an instance of
a u n i t w h i c h partakes the qualities
and characteristics of a large scale
unit, while it has a l l the difficulties
besetting a s m a l l scale one.
Instances such as these could be gener a l l y found
in m a n y more industries.
N a t u r a l l y these i n d u s t r i a l
units can be termed as medium scale
units.
CapitaI and Equipment
A c c o r d i n g to an
analysis of 21
out of the 29 industry-groups found
in the I n d i a n Census of M a n u f a c tures 1953), the
average per unit
investment for industries under the
size class 20-19 employees, w o r k s out
at Rs 1,55 lakhs, r a n g i n g f r o m Rs
0.31 l a k h to Rs 3.22 l a k h s . (These
21 industry-groups a r e : 1.) Wheat
Flour, (2. Rice M i l l i n g , (3) Biscuit
M a k i n g , 4) F r u i t and Vegetable
Processing, (5 I Gur, (6» Vegetable
Oils, 7) Paints and Varnishes, (8)
Soap, 9) T a n n i n g , (10) Glassware.
(10) Ceramics (12) P l y w o o d and
Tea-chests, (13) Paper a n d Paper
Boards i 14 Matches. (15) Bicycles.
(16) Sewing Machines, (17) Woollen
Textiles, (18) C o t t o n Textiles, (19)
E l e c t r i c Lamps, (20) Electric Fans
and (21) General Engineering.) The
average per u n i t e m p l o y m e n t w o r k s
out to be persons w i t h a range of 26
to 38. Considering the i m p o r t a n t
chaiaetenstics discussed earlier, it
may be. t a k e n t h a t under the classification 'small scale' observed earlier,
a l l units w i t h a capital investment
not exceeding Rs 3,00,000 and emp l o y i n g less t h a n 50 persons m a y be
included.
This
r o u g h l y gives a
m a x i m u m of Rs 6,000 as the t o t a l
capital per person w h i c h figure m a y
be accepted as the m a x i m u m per
848
ECONOMIC
WEEKLY.
person investment reasonably representing a s m a l l scale u n i t .
I t m a y b e noted here t h a t Professor Bert F Hosclitz, after scrut i n i z i n g e x i s t i n g figures of investm e n t f o r s m a l l scale u n i t s i n I n d i a
( E c o n o m i c W e e k l y , F e b r u a r y 22,
1958) a r r i v e d a t a n A l l - I n d i a average
of RR 1,622 per w o r k e r as investment o n l y in m a c h i n e r y and equipment. A s s u m i n g t h a t investment
per w o r k e r in other items, such as
l a n d and b u i l d i n g a n d w o r k i n g capit a l , to be r o u g h l y double this figure
(Rs 3.244), the aggregate
investment per Worker comes to Rs 4,866
or in the neighbourhood of Rs 5,000.
A more or less s i m i l a r trend could
be discerned from an analysis of
the
figures
available f r o m the
various P l a n n i n g and A n a l y s i s reports of the Development Commissioner for S m a l l Scale Industries.
New Delhi.
C o m i n g to
the
medium
scale
industries, the characteristics men
tioned under this head earlier appear
to more or less
correspond to the
size-classes
"'100-249"
employees.
T h a t is, a l l units w i t h a capital in
vestment not exceeding Rs 35.00,000
and e m p l o y i n g more t h a n 50 and
less t h a n 300 persons may be taken
as m e d i u m scale industries.
The rest, n a t u r a l l y , fall under the
classification large scale industries.
The five-fold classification of i n dustries provided above is p r i m a r i l y
meant to provide an unambiguous
basis for a. r a t i o n a l d i f f e r e n t i a t i o n
of various types of industries, keepi n g in view the overall objective, as
b r i e f l y outlined earlier. The object
of revising the capital l i m i t downw a r d s In the case of s m a l l scale
u n i t s is to provide a t r u l y l a b o u r intensive bias to the classification
The category of
medium-scale i n dustries, as defined here, w o u l d go
a l o n g w a y in p u t t i n g the 'middlesized' units i n t o the forefront for
official help.
In conclusion, it
should be emphasised t h a t
no
rigid
set of
standards w o u l d provide an adequate
definition o f
industries. I n
this
respect it is w e l l to remember t h a i
i n the U S A different sets o f c r i t e r i a are applied in defining different types of industries and categories of establishments. T h i s
only
reinforces our c o n t e n t i o n t h a t the
c r i t e r i a o f c a p i t a l and employment
should be tempered
by the other
q u a l i t a t i v e characteristics referred
to earlier.