A small scale industry is defined with reference to the maximum investment allowed on the assets of a unit. This limit changes over a period of time. In 1950, a small scale industrial unit was one which invested a maximum of Rs.5 lakhs, at present the maximum investment allowed is Rs. One crore. These industries play a very significant role in every economy even in the more advanced countries like Japan and U. S. A and even in developing countries like India. Hence they are very important.
1. Small scale industries are labour intensive and capital light industries. The labour requirement per unit is high.
2. The import requirements of these industries are limited.
3. These industries promote regional balanced development and help to avoid concentration of economic power.
4. These industries are useful for those goods whose market is limited.
5. These industries can solve the problem of unemployment, poverty, and backwardness.
6. They help in decentralisation of industries throughout the country.