ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Small Sector and Fiscal Reform

THE finance ministry's protestations to the contrary notwithstanding, the budget for 1994-95 has to a great extent nullified the government's policies aimed at promoting the small-scale sector. The various fiscal concessions extended to small-scale units over the years have played an important role in their growth. The small-scale sector is a heterogeneous entity: apart from registered SSI units, there are unregistered small-scale units, powerlooms and a large number of village and traditional industries like hand looms, khadi, sericulture, coir and handicrafts. Amongst them the most rapid growth has been experienced by the modern SSI units generally registered with the state directorates of industries, as the fiscal concessions have been most relevant for them. From less than 10 lakh in the early 1980s, the number of SSI units was 22.35 lakh in 1992-93, producing an estimated Rs 2,09,300 crore of gross output which was more than seven times their output in 1980-81 at current prices. The increase in employment has been less than commensurate, from about 71 lakh in 1980-81 to an estimated 134.1 lakh in 1992-93. Nevertheless, this employment expansion has been significant as the entire organised private sector could boast of a direct employment of not more than 80 lakh at the end of March 1993 and had to generate not more than 6 lakh additional jobs during the 13-year period since the beginning of the 1980s. This compares with the increase in employment of over 60 lakh in the modern SSI sector. In the factory sector, as many as 38 per cent of all workers are employed in units whose capital size, in terms of investment in plant and machinery, is below Rs 35 lakh. The SSI sector has been estimated to contribute 6.9 per cent of net domestic product, 35 per cent of value added in the entire manufacturing sector and 30 per cent of the country's exports.

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