12 Jul 2019

Nourishing Dwarfs to become Giants

Source: Economic Survey 2018-19

Nourishing Dwarfs to become Giants: Reorienting policies for MSME Growth

    • Survey focuses on enabling MSMEs to grow for achieving greater profits, job creation and enhanced productivity.
    • Dwarfs (firms with less than 100 workers) despite being more than 10 years old, account for more than 50% of all organized firms in manufacturing by number.
    • Contribution of dwarfs to employment is only 14% and productivity is a mere 8%.
    • Large firms (more than 100 employees) account for 75% employment and close to 90% of productivity despite accounting for about 15% by number.
  • Unshackling MSMEs and enabling them to grow by way of:
    • A sunset clause of less than 10 years, with necessary grand-fathering, for all size-based incentives.
    • Deregulating labor law restrictions to create significantly more jobs, as evident from Rajasthan.
    • Re-calibrating Priority Sector Lending (PSL) guidelines for direct credit flow to young firms in high employment elastic sectors.
    • Survey also focuses on service sectors such as tourism, with high spillover effects on other sectors such as hotel & catering, transport, real estate, entertainment etc., for job creation