Industry : Role Of Small And Large Scale Industries In The Era Of Globalization


  • They provide an impetus to the industrialization of the country.
  • Large scale industries, usually, produce capital and basic goods (instruments, machines, chemicals, etc.)
  • They are capable of generating funds for the research and development of new technologies.
  • Due to the large scale of operations, they have the potential to lower the cost of goods.
  • Further, they create opportunities for small-scale and cottage industries to evolve and flourish.
  • Also, the employment opportunities created by large scale industries are huge.



  1. HIGH CONTRIBUTION TO DOMESTIC PRODUCTION :- The small Scale industries have highly contribute to the domestic production of the economy.  
  2. SIGNIFICANT EXPORT EARNINGS :- The small scale industries have the significant of their export earnings.
  3. EMPLOYMENT GENERATION: Small scale industries are one of the best sources of employment generation in India. Employment is one of the most important factors that determine the growth of a nation. Therefore, development of small scale industries should be encouraged for the development of more employment opportunities in the nation.
  4. LESS CAPITAL REQUIREMENT : Small scale industries are less capital intensive than the large scale industries. Capital is scarce in developing countries like India and therefore, small scale industries are most suitable for maintaining the balance.
  5. SHORT PRODUCTION TIME : Small scale industries have a shorter production time than the large scale industries which results in flow of money in the economy.
  6. IMPROVEMENT IN EXPORT : Small scale industries contribute to around 40% of the total exports done by India, which forms a significant part of the revenue earned from the exports. Small scale industries work towards increasing the forex reserves of the country that reduces the load on balance of payment of the country.



  1. UNBALANCED INDUSTRIAL STRUCTURE : Despite all efforts India has not been able to attain self sufficiency in respect of industrial material. India is still dependent on foreign imports for transport equipments, machineries (electrical and non-electrical), iron and steel, paper, chemicals and fertilisers, plastic material etc. In the total industrial production consumer goods contribute 38 per cent. In newly industrialised countries like Singapore, South Korea and Malaysia this percentage is 52, 29 and 28 respectively. This shows that import substitution is still a distant goal for the country.
  2. LOW DEMAND : There is low demand for industrial products in the country due to low consumption level, weak purchasing power and poor standard of living. The domestic market is chronically underdeveloped through lack of enthusiasm generated by the middle and upper class segment who do not wish to raise their standard and improve their living conditions.
  3. REGIONAL CONCENTRATION : In India most of the industries are located in few selected areas leaving out vast expanse of the country devoid of industrial establishments. Most of the industries are located in and around metropolitan cities like Mumbai, Kolkata, Delhi etc.
  4. LOSS IN PUBLIC SECTOR INDUSTRIES :- Owing to focus on socialistic pattern of development investment under public sector industries increased phenomenally during early five year plans. But due to defective policy of the government characterised by redtops and inefficiency and strained labour management relations most of these public sector enterprises are running in loss.
  5. LACK OF INFRASTRUCTURE :- An inadequate infrastructural facility is another major problem faced by the Indian industries. Energy crisis has a great bearing on the industrial development and production. Although the installed capacity of electricity increased from 66.08 million km in 1990-91 to 85.79 million km in 1996-97 but it is much short of the actual demand.
  6. IMPROPER LOCATION BASE :- Industrial locations, in several instances, were established without reference to cost-effective points. Each state clamors for the establishment of major industries in the public sector within its boundaries, and the location decisions are often politically motivated.
  7. LACK OF CAPITAL :- Indian industrial development is facing acute shortage of capital. The short-term and long-term loans from international agencies like World Bank and Asian Development Bank etc 



  1. SHORTAGE OFFUNDS : Small business entrepreneurs don’t have enough long- term or short-term funds. These are, therefore, short of both fixed assets as well as working capital. Even the banks do not come to their help in a big way. Financial institutions like ICICI, IDBI and IFCI help only large scale industries.
  2. LACK OF LATEST TECHNOLOGY : Small business lacks funds. Latest technology is not used because it is expensive. Only old methods and techniques are being used. Due to this they earn less margin of profit.
  3. SHORTAGE OF RAW MATERIALS : There is shortage of raw material because of less working capital. They can’t buy in bulk during the season and cannot enjoy the economies of large scale.
  4. SHORTAGE OF POWER : Because of shortage of power, the small business enterprises are not able to use full capacity of the plant at their disposal. They cannot afford to have their own power generators.
  5. LABOUR PROBLEM : The labour is mostly unskilled. Small business don’t have resources to provide good training. Labour are also not paid well. There is no motivation forprofessional growth. Small business is incapable to bargain with powerful trade unions.
  6. MARKETING PROBLEM : Small business cannot face the competition with large scale units in marketing and selling. They cannot afford to spend much on advertising and proper distribution of goods. They have to depend on middlemen, who pay low prices and even the recovery from the middlemen is very slow.
  7. MANAGERIAL SKILLS : Only individuals or a small group of people own and operate the small business units. They don’t possess professional managerial skills required to run a business successfully.