The Economic Survey 2019 suggested re-orienting policies to boost the growth of MSMEs in India. It said that "nourishing dwarfs to become giants" will "not only create greater profits for their promoters but also contribute to job creation and productivity in the economy" and to do so, the government will have to push policies that unshackle them.
The concern was brought to light considering the Economic Survey's prediction that the working-age population will grow by roughly 97 lakh per year during the coming decade and 42 lakh per year in the 2030s.
"If we assume that the labour force participation rate (LFPR) would remain at about 60 per cent in the next two decades, about 55-60 lakh jobs will have to be created annually over the next decade."
In its chapter on policies for the MSMEs (Micro, Small & Medium Enterprises), the survey said that policies followed over the last seven decades have stifled the growth of MSMEs in the economy and that greater job creation and productivity can only be achieved by re-orienting the policy stance to foster the growth of MSMEs.
"Job creation in India, however, suffers from policies that foster dwarfs, i.e. small firms that never grow, instead of infant firms that have the potential to grow and become giants rapidly," it said.
The survey also pointed out a significant difference in employment and production contribution between small scale and large firms in India.
"While dwarfs, i.e., firms with less than 100 workers despite being more than ten years old, account for more than half of all organized firms in manufacturing by number, their contribution to employment is only 14 per cent and to productivity is a mere 8 per cent. In contrast, large firms (more than 100 employees) account for three-quarters of such employment and close to 90 per cent of productivity despite accounting for about 15 per cent by number," it said.