Economic Survey on MSME

By Moderator July 5, 2019 12:10


Economic Survey 2019-20 puts special focus on the MSME sector and how to make it grow so as to boost profit creation, job creation, and enhance productivity.

More in News

  • It noted that ‘dwarf’ firms (with less than 100 workers), accounted for more than 50% of all organised firms in manufacturing by number.
    • Dwarfs, which the Survey defines as small firms that never grow beyond their small size despite surviving for more than 10 years, dominate the Indian economy and hold back job creation and productivity.
  • Despite this, their contribution to employment was just 14% and to productivity a mere 8%. Large firms, on the other hand, are just 15% in number but account for 75% employment and close to 90% of productivity. Therefore, there is a need to “unshackle” MSMEs and enable them to grow into larger firms.
  • Regarding employment, the Survey pointed out that the general apprehension was that a high investment rate would mean labour would be substituted out by capital. This, the authors said, was an incorrect assessment as shown by the Chinese model.
    • The Chinese experience illustrates how a country with the highest investment rates also created the most jobs
    • Survey said that capital investment fosters job creation since capital goods production, research and development, and supply chains also generate jobs.
  • The Survey favours incentivizing firms based on their lifespan rather than on size, which leads to “dwarfing” of MSMEs, encouraging them to remain small.
  • The Survey also pointed to the need for labour reform, highlighting the fact that factories in States that have flexible labour markets are much more productive than those in States with rigid laws.


By Moderator July 5, 2019 12:10