Small is not beautiful: India's bias against large factories is damaging

Recent work by economist Arvind Subramanian and others, recently summarised in this newspaper last week, shows the problem is even worse than the ASI data suggests

India’s persistent underperformance in manufacturing, particularly labour-intensive manufacturing, is one of the major issues in Indian economics. In fact, it is not so much a puzzle as it is over-determined, with multiple possible and overlapping explanations. Inconsistent trade policy, poor gender relations, problematic law and order, and an ineffective educational and skilling system all play a role. But one major contributor, it has long been understood, is over-regulation, particularly of labour and employment. For at least two decades, the effect of regulations on firm size in India has been observed. Labour regulations increase unit costs by more