Small Businesses in India Origin and Growth

Since independence, India has had strong policies to promote the small-scale industrial sector. The small-scale sector is now adopting improved technologies which are helping them manufacture products that are more competitive both nationally and internationally.

Small businesses in 2005, have contributed to 40% of the gross industrial value added in the economy. An estimated Rs. 4.62 mn worth of goods or services could be produced from Rs. 1 mn of investment.1 The small businesses in India have their origins dating back to more than a century. They have been growing at a rapid and impressive rate over the years. In the last two centuries, as India saw its population grow, and its cities assume greater economic importance,the dream of being in a self-run business evolved to include small merchants and independent craftsmen.The turn of the century saw also the establishment of small outlets called Kirana stores by these small entrepreneurs and merchants. The Kirana stores were perhaps the first kind of small businesses to be established in India. These enterprises focused on the basic needs of livelihood of the residents of a particular colony,community or society. Their importance could not be played down, given the rapid increase of demand for easily accessible goods. The presence of these small stores became almost inevitable in domicile areas.

The Advent

By the beginning of the 20th century,wholesale units, which sold a range of items including basic necessities like salt, vegetables, rice, pulses and other essentials of livelihood like clothes in large quantities, became ubiquitous. The period also saw the rise of a new socioeconomic class in the society, called the middle-class.The middle-class was often plagued by lack of funds to purchase large quantities of anything and preferred purchasing smaller quantities of necessities and replenish the stuff whenever indispensable. This made the wholesale units branch out and establish themselves as smaller units called retail outlets. These retail outlets gave middle-class the freedom to purchase desired quantities and also make deferred payments. These perceived advantages gave the retailers a prime place in society and they started to mushroom in small as well as big cities, in response to the demands of this new socioeconomic class. Thus retailing as a small business came into existence.Partly as a result of the industrial revolution in the prior century and partly because of the rise of the middle-class, small businesses in India assumed considerable shape, in various forms like small-scale or cottage industries that manufactured products like cloth, essentials and groceries. Family members using their own equipment ran these firms. The period also saw the small farmer, until then an ideal economic individualist,diverge into other businesses to support himself in the off-season.

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