Problems of Small scale industries in India: 

(a) Lack of Finance: It is a huge problem faced by these industries. They have little capital at their disposal. They generally suffer from lack of working capital. They do not have the credit worthiness to borrow from banks. Hence, have to depend on local money lenders, who exploit them. 

(b) Difficulty in procurement of raw materials: They do not have the bargaining power and they cannot buy in bulk, which may force them to compromise on the quality of raw materials or pay a high price for them. Moreover, there is scarcity of extractive raw materials, which harms their operations. 

(c) Difficulty in maintaining the standards of quality: Due to lack of resources to spend on acquiring or upgrading technology and skills. They generally concentrate on cost cutting and keeping prices low. 

(d) Lack of managerial skills: Since the business is generally operated by a single person, he may not have all the skills to run a business. Moreover, they cannot afford to hire professionals in different functional areas. 

(e) Lack of marketing skills and resources: They may face lack of information on the latest customer needs and requirements. There is too much dependence on middlemen for selling their produce who in turn exploit them. 

(f) Lack of skilled staff and labour: Business cannot employ talented managerial staff or labour due to scarcity of funds. Moreover, they may not be able to pay high salaries which may affect the willingness of the staff to perform. The labour turnover remains high and productivity is low. 

(g) Under utilisation of capacity: Due o lack of demand the firms operate at below their capacity, thus increasing their production costs. Over a period of time, it may lead to sickness and closure of unit. 

(h) Unable to match Global competition: In the era of globalization, liberlisation and privatization, small units are unable to face competition from multinationals due to the MNC’s giant size and business volumes. They cannot match the technology, skills, financial resources, standards and quality of global firms. Also lack of knowledge of export procedures and not meeting ISO 9000 parameters, limits their access to international markets.