Romantic about SMEs alone will not create jobs | CEA

The West Bengal government might be bullish about small and medium enterprises (SME) but that will not generate jobs, warned Chief Economic Advisor Arvind Subramanian.

“SMEs are things to be romantic about, but that does not generate dynamism or jobs,” Subramanian said in an obvious reference to Tata Motors Singur episode.

For small and medium enterprises to grow, large industries are necessary as it would boost ancillary industries.Recently NITI Aayog Vice Chairman Arvind Panagariya had said that Small and Medium Enterprises had done well in those sectors which had successful and healthy large companies.

There were states competing with each other for large investments, Subramanian said adding the Nano factory did not take off in West Bengal, but it happened in Gujarat.

There is “healthy increase of competitive federalism” in the country, he said.

Subramanian’s views were echoed by noted economist Pranab Bardhan as well. Bardhan felt that `competitive federalism’ might not work for West Bengal.

“The finance commission is likely to provide a large sum to the state, but a big chunk of that is likely to be spent for paying salaries of employees while it might have been used for infrastructure development,” Bardhan said critical of the state government’s unfriendly attitude towards industries.

Present at the Fifth West Bengal Growth Conference organized by the Indian Statistical Institute, economists felt that the `miniaturization of industry’ will not help the state to pull itself out of stagnation implying large industries were necessary for small and medium enterprises to set up shop and grow.

Bandhan Bank Chairman Ashok Lahiri said, “Miniaturization will not serve any purpose, whether it is a model of Big Ben or small themed townships.”

According to Partha Chatterjee, a political theorist and historian, the solution lies in drawing big capital. “The Left Front realized that in 2006 and the present government will also have to realize that, otherwise the state will go for bankruptcy.”

But economist Abhirup Sarkar feels that only large industries cannot be a solution.”Large industries depend more on automation and less number of hands. The job generation comes from the ancillary industries around it. While registered manufacturing has not improved in the state, unregistered manufacturing has grown,” he said.

According to Bardhan, lack of jobs has given rise to extortions and syndicate raj. Subsequently, Chatterjee added that extortion and syndicates cannot thrive without political patronage.

Image Courtesy: Moneylife