Small Enterprises have always had an important place in the Indian economy, may it be output, employment or exports. Apart from this, they have been vehicles of growth with equity and decentralization. Therefore, economic policy should rightfully be targeted at promotion and protection of small enterprises. However, for more than two decades, this sector has
been in a serious crisis. Closure of a large number of small enterprises had not only creation of jobs, growth and development of the economy is also getting out.

Impact of Liberalization and Globalisation

Industrial policy adopted in the post independence period imposed various restrictions on large scale private industries, and industrial policy at that time became synonymous with ‘License and Quota Raj’. While existing industries learned the art of living with this policy, the same policy created barriers for new enterprises.

So far as the small scale industries were concerned, the policy allowed SSIs to operate in the consumer goods sector and even many items were reserved for SSIs. Before items were reserved for SSIs. Before the advent of the new economic policy in 1991, 812 items were reserved for production in the small scale sector. The new economic policy storm mercilessly killed this policy of reservation. Similarly, small industries were given preference in government procurement as well, both in terms of price and purchase performance.

Policy of open imports in the era of globalization did help us in getting number of goods and sometimes even technology, but at the cost of closure of millions of small enterprises, which couldn’t face fierce competition from the rest of the world. Though, in some sectors like automobile, we do find some growth in ancillary small scale units; however, Small scale sector in general faced extinction especially due to import flood from China. Huge import surge from China, not only caused huge burden of foreign exchange payment on the country due to heavy imports of toys, power equipment, mobile, computer and other electronics accessories, project goods, power plants etc., our industry and businesses were also destroyed, causing widespread unemployment.

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Banks and other financial institutions feel that it’s risky and cumbersome to lend to small enterprises. There is hardly and truth this thinking, given the NPA crisis being faced by banks due to big loans tuning bad. Due to this preconceived notions of banks, they try to avoid lending to small enterprises, even circumventing their legal binding of priority lending to small enterprises. Further, small enterprises get loans at higher interest rates, whereas big borrowers get loan at much cheaper rates and on more easy terms, without hassles.

After the current government took over the rein of power, it has tried to facilitate small and micro enterprises through micro unit’s development and refinance agency, start up schemes etc. So far a total loan of 3.9 lakh crore of rupees has been disbursed under MUDRA scheme alone; and 9.3 crore beneficiaries of MUDRA loans have not only employed themselves, rather they have created many more jobs.

Ending Inspector Raj

There are more than 40 laws applicable on SSIs and more than 50 inspectors visit their factories, and many of them have wide ranging powers to penalize SSIs. Living under these threats, SSIs find it difficult of concentrate on core areas like production, marketing and up gradation of technology. there are many such laws which have lost utility in modern times, and there are many others which come in way of healthy functioning of the economy in general and industry in particular. There is a sire need to end this tragedy. In this context the process has been started to repeal some redundant laws under the present government, for smooth functioning of the economy. So far 1200 acts have been repealed and 1824 more such Acts have been indentified for repealing.

By nature Indian people are entrepreneurs, hardworking and enthusiastic. They need conductive environment for entrepreneurship development. This is a majority a work of the government. Government has to make good laws, make atmosphere conductive. Not much budget is needed for the same, except in case of physical infrastructure, which too can be developed in public private partnership. Despite improvement in the recent years, we are still at 130th rank internationally, so far as ‘Ease of doing Business’ is concerned. Much has been done by the government and much more is expected.

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Courtesy: Yojana