9 Negative role (implications) of small scale industries
- This leads to misallocation of resources in the economy
- They lead to low government revenue. This is because they are associated with a small tax base and high levels of tax evasion. This makes it difficult for the government to realize the planned revenue required to provide the necessary social services to the people. .
- They lead to poor standards of living for the people. This is because they are associated with the production of poor quality products.
- They limit the foreign exchange earnings of the country. Small scale industries mainly produce goods and services for domestic consumption. This limits the export potential of the country hence low foreign exchange earnings.
- They promote underemployment and disguised unemployment. This because small scale industries mainly operate at excess capacity due to limited capital.
- They lead to congestion in semi-urban areas. This is due to the development of slums as a number of low income earners leave the rural areas to look for employment in urban and semi-urban areas. This increases the cost of living and crime rate in such areas.
- They lead to low rate of economic growth and development. This is due to underutilization of resources and use of poor production techniques hence low output.
- Environmental degradation. Small scale industries encourage environmental degradation in form of noise, air and water pollution. This negatively affects the society.
- They increase the administrative costs by the government especially in terms of providing the social and economic infrastructure. It also makes it difficult for the government to carry out proper planning due to uncoordinated development
CATEGORIES Economics
TAGS Dr. Bbosa Science
