How to write an Essay on the Role of Small Scale Industries in The Indian Economy?

Essay Introduction:

In India, the Small-Scale Industries play an important role in the growth of the economy. Industries can be classified on the basis of their size in terms of money invested on the basis of investment, industries are classified into — Large-Scale Industries, Small-Scale Industries, Ancillary Industries and Tiny Industries. Industries whose investment is upto Rs. 60 lacs are treated as small-scale industries. This limit of investment was fixed in the year 1991 . It has been changing from time to time.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!

order now


Small-Scale Industries have an important place in the-Indian economy. As we know India is a developing country. There is shortage of capital in our country. We are not so advanced in using technology. Small-Scale Industries do not need huge amount of capital. They provide immediate large-scale employment. Small-Scale Industries do not depend on very advanced technology. The Industrial Policy Resolution of 1956 was in favour of small- scale industries. 836 items were reserved for manufacturing in the small-scale industries.

Arguments in favour or importance of Small Scale Industries:

Small-Scale Industries have great importance in the growth and development of the Indian economy. Small-Scale Industries require a low amount of capital. Entrepreneurs with a small amount of capital can start of a small-scale units. In India there is shortage of capital. So, it has great importance. Small-Scale Industries employ more workers per unit of investment as compared to large scale units. In India unemployment is high so, small-scale industries can reduce the problem. Small-scale industries use the locally available resources which otherwise would remain unutilized. By locally available resources we mean natural resources available locally, craftsmanship, family labour, entreprenurial ability etc. Small-scale production units can be opened in any part of the country, even in remote villages. Spread of industrialisation throughout the country can be done easily. Small-Scale Industries can check imbalances created by the large scale industries. It has contributed to the overall growth of Gross Domestic Product. It has been contributing almost 40% of the industrial production and nearly 35% of direct exports. They also serve to preserve handicrafts. These industries help in generating exports and earning foreign exchange.

Problems faced by Small Scale Industries in their growth:

There are many problems which are faced by Small-Scale Industries in their growth and development. The scarcity of finance and credit is the main obstacle in the growth of Small Scale Industries. The capital base of the small industrial units is usually very weak. The most severe problem faced by small- scale industries and communication problems in the development of small-scale industries. The small-scale industries do not have any marketing organization and as a result their products quality is compared with the quality of the products of the large-scale industries.

Measures taken by the government for their development:

To help the Small Scale Industries the government announced the small sector, industrial policy on 6th August in 1991. The main aim of this policy was to provide access to the capital market and encouraging modernisation and technical development of the Small-Scale Industries. It was also announced that other industrial undertakings can also take equal participation in the small-scale industries. To solve the problems of delayed payments to the sector. Small Industries Development Bank of India was announced factoring services. Marketing of the products was propsed to be undertaken through co-operatives and Small-Scale Industries was given priority for the allocation of raw material. The government has decided to improve their credit facilities and introduce schemes to address the problems of the collaterals and encourage technology upgradation.


The Small-Scale Industries has acquired an important place in the socio-economic development of the country. The number of Small-Scale Industries stood at 28.03 lakhs in 1996-97 and increased to 34.64 lakhs in 2001-02. After the policy of liberalization and establishment of the WTO several challenges and new opportunities have grown for the Small-Scale Industries.