Important factors which decide the size of the project.

  • Capital investment
  • Output of the business unit
  • Consumption of raw material
  • Strength of workers (unions, associations)
  •  Nature and value of the product
  • Capital formation for the business unit


Types of scale industry

  • Large scale
  • Medium scale
  • Small scale


Source of capital

Capital resources are to be located and pooled for starting a business enterprise.

Source of Capital for Large Scale Industry

Large Scale Industries are normally owned by the Government or by the Joint Stock Companies. They require a huge amount of capital investment. Large Scale Industries can tap many sources of capital. They can acquire capital from private individuals, from financial institutions and may even obtain grants from government.

The sources of capital for Large Scale Industries are

  • Shares
  • Debentures
  • Public Deposits
  •  Loans from financial institutions


If the production is to be started on a large scale, the following institutions provide financial assistance for investments.

  • Industrial Finance Corporations of India
  • Life Insurance Corporation of India (provides loans for the industries engaged in mining, manufacturing steel, cement etc.)
  • Unit Trust of India
  • Industrial Development Bank of India


Sources of Capital for Medium and Small Scale Industrial Units.

As the Medium and Small Scale Industries are capable of creating more employment opportunities the government lays emphasis on their development. Persons possessing the technical ability but lacking in financial resources are helped by the government, by making provision of loans.

The following are the resources of finance for Small Scale and Medium Scale Industries.

  • State Governments
  • State Finance Corporations
  • State Bank of India and other nationalized Banks
  • State Industrial Co-operative Bank


Small Scale Industries

An Industrial unit with an investment of not more than twenty lakhs in building and machinery and employing ten to fifty workers is defined as a Small Scale Industry.

Ancillary Industries

An ancillary industry is one which helps other industries, whether large scale or otherwise. These ancillary industries generally manufacture components, tools etc. useful to other industries.

Cottage Industries

Industries which are run by members of a family, for full or part time and which do not use modern sources of power and engage a maximum of nine workers are recognised as a Cottage Industry.

In India, the small scale sector provides 40 percent of the Industrial output and employs nearly forty lakhs of workers (1980-81). There is ample scope for engineers to start small scale industry and utilise their technical skill. Government also helps entrepreneurs coming forward with their plans and estimates.