In most of the developing countries including India, Small Scale Industries (SSIs) constitute a dynamic sector. At present, both the Industrial Sector in general and SSI sector in particular are exposed to international competitive environment. The interesting point about the SSIs is that the export intensity is not helping these units in improving its employment productivity.The Small Scale Industries are viewed as an important vehicle for meeting both the growth and equity objectives of developing economies.

The last two decades have witnessed the steady re-emergence of Small Scale Industries in both industrialized as well as industrializing countries, reducing the importance of economies of scale in mass production. Although correlation between the size of the industry and stage of industrialization is not universal, the growth and expansion of small scale industrial sector have a positive impact on the rate of industrialization in developing countries. In most of the developing countries including India, Small Scale Industries are a dynamic sector. In the early stage of industrialization, Small Scale Industries are mainly craft-based and located mainly in rural area. But with increasing industrialization, the structure of small scale industrial sector undergoes a change in favor of organized segment. This phenomenon is mainly due to the replacement of tiny sectors in the informal economy by relatively larger Small Scale Industries.

The policy initiatives have seen SSI contributing towards the growth of the country. It is a fact that small firms has a capacity to produce large stock of consumer goods, before meeting an increase in demand. The demand arises due to sudden increase in incomes, because of the investments made in the industries. It is also taken for granted that small firms would, in the process, create additional employment opportunities. Implicit also is the assumption that SSIs are less capital intensive and more labour absorbing.