Print Friendly, PDF & Email

Lok Sabha TV- Public Forum: Small Sector: Big Push Needed



Lok Sabha TV- Public Forum: Small Sector: Big Push Needed


A huge percentage of population is employed in the small sector industries which is highly labour intensive and grapples with its own problems of getting access to credits, skill shortage, lack of policies to sustain itself and many others. This sector is a major propeller of growth and may prove to be an answer to a lot of concerns around manufacturing, industrial growth, income gaps and most of all unemployment if it gets the focus it needs in terms of policy decisions.

While the targeted programmes for the sectors such as Prime Minister’s Employment Generation Programme, the Scheme for Promotion of Innovation, Rural Industry and Entrepreneurship- ASPIRE and the Scheme for Generation of Fund for Traditional Industries SFURTI executed by Ministry of MSME are present, there are other ministries and departments like Textiles and Industrial Policy and Promotion running schemes which benefit small enterprises such as  Weaver Mudra Card Scheme and the Start Up India programme.

The Issue and Possible Solutions:

 A large number of people are employed in this sector which is often hit by volatility in the global market. Jobs have not been growing in the last 4-5 years, wages have not been rising and private investment has fallen. Therefore, very clearly the sector which provides most of the non-agricultural jobs in the country which is MSME has to be given high priority. It is a known fact that 99% of the enterprises in India are unregistered. 80% of all workers in the workforce of 500 million work in enterprises which employ less than 10 workers. This shows beyond any shadow of doubt how important the small and medium sector is for jobs. Yet, the biggest problem that MSME faces today is low productivity due to which there are low wages to the workers and the vicious cycle of poverty gets reimposed generation after generation. There is huge work to be done here not only by Central as well as State Governments but also by industry associations.

Most of the MSMEs are located in clusters so, cluster development is important. There are around 6000 clusters across the country in different sectors. Taking an example of leather industry, it plays a crucial role in the Indian economy. It has employed the weakest section of the society that is dalits, minorities and women. This is a totally labour based industry and has huge potential. But unfortunately, its share in the global market is minimal.

There is lack of infrastructure and apart form that the interest rates for credits are very high in India compared to other countries of the world. Traditional public sector banks find it difficult dealing with large number of small enterprises. As a result of high transaction cost and risk involved, they tend to charge high rate of interest than from higher corporates due to which loans are taken by these people from institutions other than banks at a much higher rate of interest because credit flow is important for them. For this, NBFCs and payment banks have to come in.

The education system does not emphasize on skill development or vocational training. The number of students dropping out from schools is large due to which the cognitive skills of these students are not very good. The objective of Skill India programme is to fill the skill gap that exists in India but it has not taken on board the cluster development programme. In Agra and Kanpur, clusters of leather industries are located but emphasis has not been given to the job which is dominant in the cluster. Cluster centric education has to be incorporated in our education system at the school level itself that is children in the age group of 14-15 years can be educated about the basics of a particular industry of that area. MSME can make tool room in that particular school.

There are schemes and plans at present but what is lacking is sector specific policies. Textile sector has been given some package but other sectors like leather, tannery, food processing etc remain more or less neglected. More investment should be there in these sectors along with decent budget allocation by the Government rather than depending on FDIs solely.


In Indian economy, small scale and cottage industries occupy an important place because of the employment potential and their contribution to total industrial output and exports. Over the years, Governments have realized that nurturing small scale industries through supportive policies is key to generating employment and increasing production.