Classification of Projects and Importance

Classification of Projects

Different authorities have classified projects in different ways. The following are the major classifications of projects:

  1. Quantifiable and Non-Quantifiable Projects
  2. Sectoral Projects
  3. Techno-Economic Projects
  4. Financial Institutions Classification
  5. Miscellaneous Projects

Quantifiable and Non-Quantifiable Projects

Little and Mirrless have divided projects into two main heads i.e. quantifiable projects and non-quantifiable projects. Quantifiable projects are those projects in which quantitative estimation of benefits can be made.

Projects concerned with industrial development, power generation, and mineral development come in this category. Non-quantifiable projects are those projects where such an estimation or assessment is not possible. Projects concerning health, education, and defense fall in the category of nonquantifiable projects.

Sectoral Projects

Sectoral projects as a criterion have been accepted by the Planning Commission of India for the classification of projects. As per this classification, a project may fall into any one of the following sectors:

  1. Agriculture and Allied Sector
  2. Irrigation and Power Sector
  3. Industry and Mining Sector
  4. Social Services Sector
  5. Miscellaneous sector.

The sectoral basis of classification has been found useful in resource allocation at the macro level.

Techno-Economic Projects

Projects can also be classified on the basis of their techno-economic characteristics. There can be three main groups of classification under this head

  1. Factor-Intensity Oriented Classification: On the basis of intensity classification projects may be classified as capital-intensive or labour-intensive. If large-scale investment is made in plant and machinery, the project will be classified as capital intensive. On the other hand, projects involving a large number of human resources will be called labour-intensive.

  2. Causation-Oriented Classification: Under this head, projects can be classified as demand-based or raw material-based projects. The existence of demand for certain goods or services makes the project demand-based and the availability of certain raw materials, skills, or other inputs makes the project a raw material-based project.

  3. Magnitude-Oriented Classification: The size of the investment becomes the basis for the classification of projects. Projects can be classified as large-scale, medium scale or small-scale projects depending upon the project investment.

Financial Institutions Classification

Various national and state-level financial institutions classify the projects as per their standing and the purpose for which the project is taken up. Projects under this head can be divided into:

  1. New Projects
  2. Expansion Projects
  3. Diversification Projects
  4. Modernisation Projects

The basic motive of these projects is to generate profit.

Miscellaneous Projects

Under this category projects can be classified as under:

  1. Service Projects
  2. Welfare Projects
  3. Educational Projects
  4. Research and Development Projects.

Importance of Projects

The importance of projects can be highlighted with the following main points:

  1. Projects serve as catalytic agents of economic development and growth.

  2. Projects initiate the process of development i.e. production, employment, income generation, and so on.

  3. Projects provide a framework for future activities of the enterprises.

  4. Projects also determine the nature of future patterns of services.

  5. Projects facilitate the development of basic infrastructure and environment.
  6. Project identification brings about necessary changes in society over a period of time.
  7. Projects help accelerate the pace of socio-cultural development.

After gaining knowledge about the current business environment and the role of the small-scale sector, an enterprising individual can think in terms of taking certain concrete steps for setting up his own enterprise. The government, through its various promotional agencies, assists potential entrepreneurs in setting up their units.

The new class of techno-entrepreneurs is more awakened and has got strong urge to do something on their own. They have the right training knowledge and are prepared to assume risks for setting up their own enterprises.


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