How is a 'small-scale industry' defined in India?

The correct answer is Option 2: Based on the maximum investment allowed on assets.

A ‘small-scale industry’ is defined with reference to the maximum investment allowed on the assets of a unit. This limit has changed over a period of time. In 1950 a small -scale industrial unit was one which invested a maximum of rupees five lakh; at present the maximum investment allowed is rupees one crore.