Small and Medium industries, which are main sources of employment, can expand only if the improve efficiency not depend on merely tax sops, NITI AAYOG Vice Chairman Arvind Panagariya has said.
For achieving transformational economic growth, the industry particularly small and medium enterprises would have to think big in terms of production, scale and efficacy to capture bigger markets domestically as well as abroad, he told a CII global summit on MSMEs here
“We will not progress into transformational kind of growth… unless we think bigger like China… tweaking (tax regulation) here and there (will not help)… for a transformational kind of change you need very different demands from the industry,” he said.
Panagariya also stressed on the need for labour reforms as it is a hindrance for firms that are either not very small or very big.
He said a large number of labour laws does not apply to very small firms and compliance is easy for big firms having worker’s strength in thousands.
Panagariya was critical of reservation policy in tthe past that came in the way of growth of small industries. Industry much grow. “ A micro should become small; small, a medium industry; and medium industry a large industry.” Reservation policy acted as a disincentive to grow and these industries remained where they were, he said adding government policy to phase out reservation after economic reforms in 1991 was a step in the right direction.
Citing examples, he said China did well in textiles exports starting with 1980s and 1990s because large textile industries were set up. In India 85 per cent of textiles industry were in SME sector, unlike in China where over 50 per cent of textiles were large scale industries.
India exported only $18 billion of garments where as it was $190 billion for China. Even Bangaladesh and Vietnam exported more. If SMEs have to thirive large industries should must be there in the sector.
Case studies indicate that if there are successful large industries in a sector, there are thiriving small industries in the same sector.