Detection the manufacturing of paper by hand is labor intensive, converts waste by recycling, uses non-wood materials, is eco-friendly; it seeks to promote the skills of local workers, generates employment and income, facilitates the participation of women in rural based industries and contributes to the social development as encompassed in the SHD framework. The sample consists of the following four units operating in TamilNadu. Handmade Paper Unit, Pidagam, Villupuram District, Handmade Paper Unit, Ponnavarayankottai, Pattukkottai, Tanjore District, Handmade Paper Unit, Shenbagaputhur, Erode District, Handmade Paper Unit, Veeragavapuram, Poonthmalli, Chennai. Output is the main key to economic development. Capital formation is the process that is interactive and cumulative, generating increase in income and there by facilitating raise in capital formation capital formation is investment that increases productive capacity. Financial capital takes many forms of real or physical capital like building machineries, inventories etc in primary, secondary and tertiary sectors of an economy. Where capital is scares and demands for it are numerous assignment of capital rationing. Therefore planners follow certain criteria for selection of activities for investment. It is nearly a truism that capital should be used where it yields most in the form of output. Thus capital output ratio becomes a valuable instrument of policy for allocation of capital. Capital-output ratio (COR) is the relationship between investment and resulting output over a period of time. Average COR is obtained when total stock of capital is divided by total output. Thus COR is a measure of capital required for producing one unit of output. Marginal or incremental COR is the additional capital required for one unit of additional output. Thus COR embodying the relationship between capital and output will enable us to allocate capital to those activities where in it yields more benefit, than in other activities.
