Small scale industries have been considered as the engine of economic growth and promotion of equitable development. The major advantage of the sector is its employment potential at low capital cost. The labour intensity of the small scale industry (SSI) sector is much higher than that of the large enterprises. The role of small industries in the economic and social development of the country is well established. The sector is a nursery of entrepreneurship, often driven by individual creativity and innovation. MSMEs are providing immediate large scale employment, with lower investments and prove to be a second largest manpower employer, after agriculture and occupy a position of prominence in Indian economy. But in Jammu and Kashmir Lakhs of unemployed educated youth are suffering there is no way of providing employment to them. If we setup MSMEs in great numbers in the state then it will definitely reduce unemployment and increases the GDP of state. But despite of the fact that SSIs helps in providing employment to the people, it has been seen that the working conditions of this sector is in a worse condition. Still there is lot of problems which comes in the way of development of this sector. The present paper is an attempt to find out these challenges which hampers the growth and development of this sector.

KEYWORDS: Micro, Small and Medium Enterprises, Employment, Problems, Jammu and Kashmir.