Items reserved for MSMEs down to 35

The Ministry of Micro, Small and Medium Enterprises (MSME) is planning to bring down the number of items reserved for the small scale industry (SSI) to 35, from 100, according to a senior official.

S K Thade, director, Industrial Policy & Promotion, Ministry of Commerce, told Business Standard that the number of items reserved for SSIs had already been brought down to 100 from 600 a couple of years ago. The government now intends to further bring the number down to 35 in order to dilute its control and attract foreign direct investment (FDI).

Reservation of products for exclusive manufacture in the small scale sector was introduced for the first time in 1967 with the reservation of 47 items. This number increased progressively to 55 in 1970, 128 in 1971, 177 in 1974, and 180 in 1976 respectively.

After the introduction of a National Industrial Classification (NIC) code the list was recast. As a result, the list of reserved items was expanded from 504 to 807 in 1978 and was 836 in 1989. Of this, 39 items were dereserved in four phases viz., 15 items in 1997, 9 items in 1999, and 15 in 2001. Subsequently, 51 items were dereserved in May 2002, 75 items in May 2003 and 85 items in October 2004.

Reservation affords support to MSMEs against competition from large/ multinational companies. The policy received statutory backing in 1984 under Section 29B of Industries (Development & Regulation) Act, 1951.

In India, MSMEs account for over 90 per cent of the total number of industrial enterprises. They are the biggest employment generator after agriculture, and provided employment to more than 31.25 million people in 2006-07.

According to reports, there are 12.5 million MSMEs in India which contribute around 50 per cent of the country's industrial production.

Major MSME export products include readymade garments, chemicals and pharmaceuticals, engineering goods, processed foods, leather products and marine products.

The items that have been de-reserved broadly include the following categories : food and allied items, wood, wood products, paper, paper product, plastic product, organic chemicals, drugs, drug intermediates, other chemicals, chemical products, glass, ceramics, mechanical engineering and electrical machines, appliances and apparatus.