How policy shift towards infant MSMEs can create more jobs? This report unveils blueprint

Economic Survey 2019: Union Minister for Finance Nirmala Sitharaman tabled the Economic Survey in Parliament today. The Economic Survey says the government needs to nourish small MSMEs to help them grow into big companies, though the more focus should also be given to creating more jobs. "Our policies must, therefore, focus on enabling MSMEs to grow by unshackling them," said the survey.

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The Economic Survey has said the job creation has suffered because the policies focus on fostering dwarfs MSMEs (i.e. small firms that never grow) instead of infant firms that can become giants rapidly. While dwarfs, i.e., firms with less than 100 workers despite being over 10-years old, account for 50 per cent of all organised firms by number, their contribution to jobs is only 14 per cent, reveals the survey. In contrast, large firms (i.e. those with over 100 employees) account for 75 per cent total job creation and close to 90 per cent of productivity despite accounting for about 15 per cent by number, it added.

The survey cites "size-based incentives" irrespective of the firm's age and inflexible labour regulation as reasons for this problem. To unshackle the real potential of the MSME sector, the survey says the government needs to re-calibrate policy towards supporting "infant firms". "Once small firms know that they would receive no benefit from continuing to remain small despite ageing, their natural incentives to grow would get activated. This will generate economic growth and employment," said the survey.

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The survey says the government also needs to deregulate labour law restrictions to create more jobs, as evident from Rajasthan. To ensure smooth credit flow towards young firms, the survey says, the government needs to re-calibrate 'priority sector lending' guidelines for high employment elastic sectors. The Economic Survey 2019 also focuses on service sectors such as tourism, with high spillover effects on other sectors such as hotel and catering, transport, real estate, entertainment etc., for job creation.

Edited by Manoj Sharma

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