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Unformatted text preview: SPECIAL ARTICLE June 19, 2010 vol xlv no 25 EPW Economic & Political Weekly 64 Mousumi Majumdar ( firstname.lastname@example.org ) and Sarbajit S engupta are at the department of economics and politics, Visva Bharati, Santiniketan, West Bengal. Declining Registration by Small Manufacturing Units: A Case Study of Durgapur Mousumi Majumdar, Sarbajit Sengupta Economic policy since Independence has provided various benefits to small enterprises to ensure employment to workers who did not find work in the organised sector. These benefits provided incentives to small entrepreneurs to formally register their enterprises. This paper examines the impact of liberalisation – which led to a withdrawal of many of these benefits – on the registration of small enterprises. There appears to be a sharp fall in the growth rate of employment in registered small enterprises around the time of liberalisation. A case study of Durgapur in West Bengal shows that while registration has a positive impact on profits for firms set up before liberalisation, no such trend exists for post-liberalisation firms. O ne of the major objectives of the liberalisation of the I ndian economy in the 1990s was the modernisation of the industrial sector, to raise it to global standards in terms of technology, processes, rules and efficiency. However, there is reason to be worried that such liberalisation may lead to increasing “informalisation” of small manufacturing units in India – a phenomenon that runs directly counter to these objectives. India is one of the very few countries to have consistently sup- ported small-scale enterprises in order to promote greater em- ployment and perhaps also a more egalitarian distribution of wealth. Even the heavily capital-intensive Second Five-Year Plan model reserved the crucial roles of providing employment and relatively inexpensive consumer goods for the “small-scale s ector”. In addition to the creation of small industrial estates, tax and other financial incentives were provided and later, many products were “reserved” for this sector. All these benefits were available to small firms which “registered” their units. Registra- tion is, of course, also a means of bringing firms, which would have been otherwise been “informal” enterprises, into the d omain of the formal sector of the economy. Partly as a result of such encouragement, small-scale enterprises, which provide most of the industrial employment in India, have recorded a high rate of growth since Independence in spite of stiff competition from the large-scale sector. Constant support to the small-scale industry ( SSI ) sector by the government in terms of in- frastructure development, fiscal and monetary policies have helped it to emerge as a dynamic and vibrant sector of Indian economy....
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