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

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Small Industries: Round the Mulberry Bush

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The government has, by a notification issued towards the end     of last month, lowered the limit on investment in plant and machinery for small-scale/ancillary industries from Rs 3 crore to Rs 1 crore. This more or less reverses the change effected by the United Front government in 1997 when it raised the limit from the then existing Rs 60 lakh to Rs 3 crore. What this sequence of policy changes underscores is that the small industry category subsumes vastly different types of units with very different, even conflicting, interests. The move three years back to raise the investment limit was justified as being necessary to encourage small units to expand and grow and upgrade their technology. The argument for the present lowering of the limit is that dilution of the small industry category as a result of setting the investment ceiling too high works against the genuinely small units which really need the government's support.

Faced with such divergence of interests, government policies intended to help so-called 'small industry' have been, not surprisingly, muddle-headed and ineffective. (In the era of controls and regulation they were more notable as a happy hunting ground for rent-seeking and corruption.) The creation, by the present government, of a separate ministry of small industry is unlikely to improve matters; very likely quite the opposite. With a minister of state in charge and the usual bureaucratic paraphernalia in tow, there has been, inevitably, talk of a brand new small industry policy statement and of a variety of new institutional arrangements – a BIFR-type body to deal with sickness among small units, another to provide them special access to the equity capital market and a third to guarantee commercial bank credit to them. It is to be hoped that better sense will eventually prevail in regard to most of these proposals, but they are proof of the dangers of setting up a bureaucratic structure where none is in fact required – such as a central government ministry sitting in New Delhi to frame and implement policy covering hundreds of thousands of small units of an infinite variety all over the country. Given all the concern for decentralisation of governmental functioning, can it not be agreed that here clearly is a subject that can very well be left to the different state governments to deal with, each according to its own light? Apparently not; instead the newly-appointed minister of state for small industries, Vasundhara Raje, announced the other day that she was proposing to tour all the states to ascertain for herself the problems of small-scale and tiny industries.

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