Small could be ugly

The development commissioner, small-scale industry, has just published the Third All India Census of Small-Scale Industries. The census was conducted in 2001-02. The previous census was conducted in 1987-88.

This round goes beyond the scope of the previous one, and covers the so-called "unregistered" sector, comprising small industries that were eligible to register with the commissioner's office but did not.

Both the results of the census and comparisons with the previous round provide a rather worrying picture of the state and dynamics of what has, for decades, been a holy cow for the country's industrial policy-makers.

To begin with, the numbers are staggering. The registered sector has 2.26 million establishments, out of which a huge 0.89 million (39 per cent) were found to be not working. The unregistered sector, for which complete enumeration was not possible and a sampling approach followed, is estimated to have 9.15 million units.

Of these, about 57 per cent are in rural areas. Within the registered sector, a striking feature is the enormous rise in the proportion of service establishments. In the previous census, 90 per cent of the working units were into manufacturing.

This time round, the share of this traditional segment has shrunk to about 66 per cent, while the share of service establishments has increased 10-fold from about 3 per cent in 1987-88 to over 30 per cent now.

The frailties of the manufacturing sector during the 1990s have obviously victimised the smaller establishments. Conversely, the dynamism and buoyancy shown by services have been reflected in the surge of activity amongst small units.

From the viewpoint of social objectives, there has been hardly any improvement. The percentage of units owned/operated by members of scheduled castes and women has increased only marginally.

Scheduled castes, scheduled tribes, and women, together, account for less than 20 per cent of the working units. Employment intensity, an often-used justification for persisting with the protection that these units receive, has declined from 6.3 workers per working unit to 4.5.

A revealing feature of the sample survey of unregistered units is the fact that about 53 per cent claimed that they were unaware of the provisions for registration. As many as 40 per cent claimed that they were simply not interested.

Another 4 per cent said that the procedures were too complicated. An entire bureaucracy has been set up and maintained at taxpayer expense to supposedly incubate and nurture small enterprises.

But, after almost five decades, almost 97 per cent of 9.1 million entrepreneurs in this country, wittingly or unwittingly, do not have access to this infrastructure. The census should serve as a wake-up call to those who have resisted fundamental reforms in the policy approach to small enterprises.

It is, clearly, neither incubatory nor nurturing. The sector, for the most part, functions independently of the massive establishment that exists for its sake. The economy is paying an unjustifiable price to keep this establishment going.