Small scale and cottage industries in India occupy a vital position in the planned industrial development in the country. Not only they provide immediate large scale employment but also offer a method of ensuring a more equitable distribution of the national income. Moreover they facilitate an effective mobilization of capital. The Planning Commission of India is also aware of the vital role of small and cottage industries which has been reflected in different plans and policies. But the small and cottage industries are seriously handicapped in many ways.
Those problems faced by the Small Scale Industries in India are as follows:
1. Non-availability of raw materials: Our small scale and cottage industries suffer from the want of raw materials, important components and equipment. The allocation of these inputs is residuary in this sector.
2. Problem of finance: The small enterprises are naturally very weak in matter of finance. They are often to depend on indigenous and unscrupulous money lenders who charge very high rates of interest.
3. Low technical skill: There is scarcity of technical skill and managerial ability in this sector. The organizers and artisans of the small enterprises lack proper knowledge of the modern technology and the marketing conditions.
4. Problems of the market: Products of these enterprises in spite of their originality are not often standardized and therefore, are not exposed to advertisement. There is a gap of information between the producer and the prospective buyers.
5. Competition of large scale industries: Large stale industries enjoy the economics of scale and are at the same time favored by the bureaucrats. The clearance of the applications of the smaller units often takes unduly 1ong time.
The Government of India has taken certain measures to mitigate the problems of Small Scale Industries. Our Five-Year Plans have, given importance to the small sector.