Importance of small scale and cottage industries in Indian economy is as follows :

• Share in Industrial Output : In 2006-07, the total production value of MSME was 1198,818 crore rupees, and their contribution in GDP was 35.13 per cent. In 2012-13, the total production value of MSME increased to 18,09,976 crore rupees, while their contribution in GDP increased to 37.54 per cent. The contribution of MSME in GDP product is about 173rd even today.
• Expansion of small scale sector : The number of MSMEs in 2006-07 was 361.8 lakh, which increased to 467.54 lakh in 2012-13. This number further increased to 488.56 lakh in 2013-14. 
• Role in employment : In 2006-07, the MSME sector employed 805.23 lakh people, and in 2012-13, the number of people employed in MSME sector increased to 1114.29 lakh.
• Efficiency of small scale industries : Experts have different views in this context. Some experts believe that the efficiency of small scale industries is greater than that of large scale industries, while several others think otherwise. 
• Decentralization of national income : In comparison to large scale industries, their ownership is scattered and extensive. In addition, they are more capable in creating employment than large scale industries. A large number of people have been successful in providing greater contribution in national production. 
• Contribution in exports : Small scale industries have been expanding rapidly after independence. Their contribution in total exports has been increasing continuously. In 1971 -72, the total export from MSMEs was 155 crore rupees which increased to 6,77,318 crores in 2012-13.
• Regional dispersal of industries : Large scale industries are concentrated mainly in Maharashtra, West Bengal, Gujarat and Tamil Nadu, but small scale industries have been established in all regions. Today, Punjab is more prosperous than Maharashtra due to the presence of small scale industries. 
• Less industrial disputes : Experts are of the opinion that in comparison to large scale industries, less disputes emerge in small scale industries. They have a cordial relationship, thus have lesser disputes, problems like strikes and lockouts are also less in them. 
• Utilization of local resources : Small scale industries employ local capital and resources, which are not required by large scale industries. Local savings, raw materials and workers have been better used by MSMEs, which enhances their income. In urban areas, artisans, workers, craftsmen etc. are employed in them. 
• Conservation of traditional and artistic goods : Traditional and artistic goods are provided conservation and protection by small scale and cottage industries, which are a part of our cultural heritage.
• Less dependence on imports : MSME sector has less dependence on imports, which enables saving of our foreign exchange reserves. They use local technology and foreign technology is used at the minimum.