The pre-Budget Economic Survey on Thursday asked the government to de-reserve industries earmarked for SSIs (small scale industry) to effectively face global competition in the wake of free imports following removal of restrictions under the World Trade Organisation agreement.
Although the small scale sector performed creditably, reservation needs to be phased out for achieving efficient economies of scale in order to take on the competition from countries like China particularly after the removal of quantitative restrictions, the Survey, tabled in Parliament, said.
Despite the global and domestic recession, the Survey noted that the small-scale indstries had registered a higher growth rate than the overall industrial sector in terms of number of units, production, employment and exports.
During 2002-03, the number of SSI units was estimated to have increased to 35.72 lakh (3.6 million) from 34.42 lakh (3.4 million) in the previous year, registering an increase of 3.8 per cent.
Exports also surged by 28.7 per cent to Rs 69,797 crore (Rs 697.97 billion) during 2000-01 from Rs 54,200 crore (Rs 542 billion) a year earlier.
With the removal of quantitative restrictions, imported goods are now marketed in India, which has raised the basic questions about the role for SSI reservation, it said.
"SSI reservation in India is hurting the development of efficient economies of scale, while firms in countries such as China are able to compete effectively in the international and in the Indian market," the Survey said.
"The process of phasing out of SSI reservation, in consultation with the stakeholders, would constitute an important element of policies that foster efficiency and productivity in India," it added.
The estimated value of production at current prices by the SSI units also increased by 7.5 per cent to Rs 7,42,021 crore (RS 7420 billion) during the current fiscal from Rs 6,90,316 crore (Rs 6903 billion) during 2001-02.
At constant prices, production increased by 7.5 per cent to Rs 5,14,292 crore (Rs 5143 billion) in 2002-03 from Rs 4,78,456 crore (Rs 4785 billion) a year ago.
Employment also increased marginally to 199.65 lakh (19.9 million) people in the current fiscal from 192.23 lakh (19.2 million) people in the previous year.
The Survey noted that the third Census of the SSI sector was presently being conducted, which would cover registered as well as unregistered units, the issue of sickness and its causes in the sector.
Results of the Census is expected to be available by March-end this year, it said.
Highlighting some of the policy initiatives in the sector taken during the current fiscal, it said that 51 items were de-reserved, a bio-technology cell created in the ministry of SSI and SSI excise exemption extended to air-guns, air rifles, air pistols and articles of apparel, knitted, marble and Bengal lights.
PTI