Policy Intervention in Small Scale Industries: A Historical Perspective

The Small Scale Industry sector provides a panacea for less developed countries which aspires for higher growth in the face of shortage of capital, infrastructural bottlenecks, and a dearth of resources. The development of this sector hinges on the synchronized efforts of the governments, financial institutions and the entrepreneurs. There have been policy interventions undertaken by the state to promote this sector both in the pre-independence period and also after India secured its independence. Although some opportunities emerged for indigenous entrepreneurship in selected areas under the patronage of the colonial government however there was no systematic or deliberate approach on part of the British to revive, promote or develop Indian indigenous industries. After independence, state intervention for the development of the small-scale industries in India was policy-specific aiming at varied objectives. The broad policy thrusts was to expand the capability of small and micro enterprises, to generate employment, promote exports, further the process of rural industrialization, and facilitate the development of appropriate technologies and new enterprise. Post-independence, SSI sector has been assigned a special status partly due to ideological reasons and partly due to social realities that created political compulsions. Successive state policies were implemented to inject more vitality and growth impetus to the SSI sector so that it could contribute to the economy in terms of output, employment and exports. Deregulation, de-bureaucratization and simplification of rules, regulations and procedures in establishing and maintaining small units were made. The MSMED Act, 2006 provided for the first ever legal framework for recognition of the concept of ‘enterprise’ and integrated the three tiers of micro, small and medium enterprises. The Act aimed at imparting greater vitality and growth impetus to the three categories of enterprises in terms of output, employment and exports and instilling a competitive culture based on heightened technology awareness. The enactment of this historic MSMED Act represents a paradigm shift where the policy of protection has now been replaced by the policy of promotion of SSI sector.