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Creating and supporting small and medium-sized industries in economic development programs and the emphasis on improving efficiency and productivity in the policies adopted, shows the vital position of such industries in developed as well as developing economies. In general, the most important role of these industries in the economic development process can be summarized as; effective employment, production and supply chain management, creating value added and reducing dependence on unnecessary commodity imports. Since any improvement in the efficiency of small scale industries will bring more equitable distribution of income, the main purpose of this study is to measure the performance of various technical, management and scale efficiencies in subsectors of small scale industries and provide policy recommendations to the inefficient industries. For this purpose, the principal component analysis (PCA) and factor analysis is used to determine the variables of the model and the DEA is used for evaluation and sensitivity analysis of the factors affecting the efficiency and productivity of small scale industries during the period 2002 - 2007. The results show that out of 22 industries, only 8 ones are found to be perfectly efficient. Productivity measurement of these industries according to the "Malmquist" index reveals that, the trend of productivity enjoys positive growth.

Keywords: DEA, Sensitivity analysis, Performance Evaluation, Principal component analysis, Small scale industries JEL Classification: O12- C02

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