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

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Economic Reforms and Small-Scale Industry

Economic Reforms and Small-Scale Industry S Nanjundan The composition and terms of reference of the recently-appointed expert committee to review policies and programmes for the small-scale industries sector are a clear indication of what is expected of the committee. More and better of the same thing: finance, technology entrepreneur ship, regulation! THERE seem to be several reasons for the government's inability to enunciate a policy towards or regarding small-scale industry and to reformulate its programme. Firstly, the lofty ideals on which the programme for small industry development started in the mid-1950s-of promoting viable products and viable output-scales based on intermediate/appropriate technology - degenerated from the mid-1970s into a scramble by a lobby to share with the licensed monopoly large-scale sector in the allocation of scarce and imported raw materials and equipment and financial resources. Towards this end an unrealistic reservation list was built up resulting in many cases in cannibalising end-products manufactured through assembling imported components or providing a subsidised outlet (lower tax and wage costs) for large manufacturers. A considerable expansion of ancillary relationships has ensued providing more profits to big industry and increasing the dependence of the small on the large. There have been parallel developments: a number of small enterprises manufacture independently for the replacement market, some of them even spurious and unsafe products. More important; a middle-sized sector entrepreneured by graduate engineers and MB As has been successful in producing and marketing technologically-oriented, skilland knowledge-oriented products in electronics, computers, chemicals, engineering, food processing, etc. The informal sector in urban areas and rural cottage household enterprises in the non-farm sector have had varying experiences: niche markets for differentiated products and services for the low-income groups, agro-processing and some other industrial activities moving away from prosperous rural areas causing migration and growth of the urban informal sector. Secondly, the bewildering heterogeneity of the small industry sector and the steady erosion of their own representative organisations has willy-nilly aided the government's natural inclination to adjust the policy to suit the requirements of established large industry. Thus the continuous increase in the upper limit definition of small-scale industry and the reform package announcement of large industry or foreign direct investment up to 24 per cent permitted in small enterprises. The latter measure has reportedly not in fact attracted much investment. As regards the definition, Karunakaran, the industry minister, announced on January 13 that the limit has been increased from Rs 60 lakh to Rs 3 crorc. The measure of development is that the small man is now three times 'karodpathi'! Damn the wretched destitute poor who cannot have assets of even 3 crore of rupees! Clearly, the beneficiaries will be capital-intensive dependent anciMaries who can siphon off bank credit earmarked for (he small-scale sector.

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