Give incentives to infants instead of all small firms

The need of the hour is to give incentives to infant firms, which not only create more employment opportunities but also have the potential to grow, instead of nourishing dwarfs — the small but older firms that never grow.

Incentives given in this manner will push the small industries to grow as they will stop receiving benefits just by remaining small despite ageing. The survey highlighted that dwarf firms — those that are older than 10 years and have less than 100 employees — in countries such as the US and Mexico contributed more to employment creation and productivity unlike in India. 

In a bid to make firms self-sustainable, there has to be a ‘sunset’ clause for incentives. Firms should be incentivised for a period of less than 10 years with necessary grandfathering, post which they should be able to sustain themselves, according to the survey.

Dwarfs account for over half of all organised firms in manufacturing by number but their contribution to employment is mere 14.1 per cent, according to latest Annual Survey of Industries (ASI) 2016-17. Their share in Net Value Added (NVA) is only 7.6 per cent.

Meanwhile, young, large firms (those which have more than 100 employees and are less than 10 years of age) account for only 5.5 per cent of firms by number, but contribute a much larger share in employment (21.2 per cent) and NVA (37.2 per cent). 

To increase job opportunities, the services sector which has high spillover effects on other sectors should be given importance. For example, the development of main tourist spots will lead to job creation in areas such as tour and safari, guides, hotels, catering and house-keeping. Such a step would not only create economic activity along the entire route but also reduce the rural labour force. 

“The economic survey for the last fiscal year is a indication of focus of the government now on boosting growth and development of the MSME sector which is reflected in identifying five core sectors — investments, savings, exports, growth and jobs — as the primary engine to drive economy which will ..(help)..sustain a real GDP growth of eight per cent per year,” stated Confederation of All India Traders (CAIT).

Under MSME’s Priority Sector Lending (PSL) targets, it is necessary to prioritis ‘start-ups’ and ‘infants’ in high employment elastic sectors. This would enhance direct credit flow to sectors that can create the most jobs.

In a bid to impart skill training in hilly, inaccessible and difficult terrains, the personnel of railways and other para-military forces could be used, the Survey said.

To further improve the quality and financing of skill development, coordination is needed between various departments/ministries and State governments. There has to be a greater participation of local industries for skilling programmes and should be involved in making curriculum development, training modules, and provision of equipment.

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