Following are the various problems faced by small scale industries:
(i) Finance and credit: The scarcity of finance and credit is the main obstacle in the development of small scale units. The position of small scale Industries in this regard is even worse. The capital base of the small industries unit is usually very weak since they generally
have partnership or single ownership.
(ii) Raw material availability: The majority of small scale and cottage industries depend on local source for their raw material requirements. The handloom industry depends for its requirement of cotton on local traders.
(iii) Machines and other equipment: Machinery and other equipment in many small industries has grown obsolescent. On account of this reason while their costs of production are high, the quality is inferior as compared to the large scale units.
(iv) Under utilisation of capacity: Data presented in the second all India census point to considerable under utilisation of capacity in the small scale sector. For small scale units as a whole capacity utilisation was very low.
(v) Problems of marketing: One of the main problems faced by the small scale units is in the field of marketing. There units often do not possess any marketing organisation and consequently their products compare unforgettably with the quality of the products to the large scale industries.
(vi) Other problems: In addition to the problems enumerated above, the small scale industries face a number of other problems like efficient management, nonavailability of cheap power, unchanging
and unresponsive production pattern, burden of local taxes, competition from large scale industries, etc.
