Small business plays a vital role in the development of rural India. Small business units provide multiple sources of income in a wide range of non-agricultural activities and provide employment opportunities in rural areas, especially for the traditional artisans and weaker sections of the society.

The development of MSME prevents migration of rural population to urban areas in search of employment. This contributes to other socio-economic aspects such as reduction in income inequalities, dispersed development of industries, and linkage with other sectors of the economy.

MSME are the second largest employers of human resources, after agriculture. They generate more number of employment opportunities per unit of capital invested compared to large industries. They are considered to be more labour intensive and less capital intensive, which is a boon for a labour surplus country like India.

Small industries contribute to the balanced regional development of the country by using locally available material and indigenous technology. They provide ample scope for entrepreneurship and enjoy the advantage of low cost of production.

The promotion of MSME and rural industrialisation has been considered by the Government of India as a powerful instrument for realising the twin objectives of accelerated industrial growth and creating additional productive employment potential in rural and backward areas.