Assertion: Small-scale industries are believed to have a higher labor-intensive nature compared to large-scale industries.

Reasoning: Small-scale industries do not face any challenges in competing with larger industrial firms because of reservation policy followed by the government for such units.

Assertion (A) is true but Reasoning (R) is not correct.

Assertion (A) is true but Reasoning (R) is not correct. Only certain products are reserved for small scale units and hence it is wrong to say that "Small-scale industries do not face any challenges in competing with larger industrial firms".

Small-scale industries are believed to have a higher labor-intensive nature compared to large-scale industries, meaning they employ a larger workforce. Consequently, they contribute significantly to employment generation. However, these industries face challenges in competing with larger industrial firms. It is evident that the growth of small-scale industries necessitates protection from the dominance of larger firms. To address this, certain products were exclusively designated for production by small-scale industries. The criteria for reservation were based on the capacity of these units to manufacture the goods. Additionally, they were granted benefits such as reduced excise duty and access to bank loans at lower interest rates.