As per the RBI – “A small scale industrial unit (having been in existence for not less than five years) should be considered as sick if it has at the end of any accounting year, accumulated losses equal to or exceeding 50% of its Net Worth during two previous accounting years”.

In the presence of the resource crunch, the industrial sickness becomes all the more an alarming problem. Two major symptoms of industrial sickness are:

1. Continuous shortage of cash
2. Continuous fall in the price of the shares

As a general rule, the sick units continue to operate below the break-even point and are, thus, forced to depend on exter­nal sources for funds of their long-term survival.

Industrial sickness has become a major problem of the India’s corporate private sector. Five major causes of industrial sickness, are promotional, managerial, technical, financial and political.