Economic Reforms and the Prospects for Small Firms in the Globalisation of the Economy

Abstract

Since the initiation of the economic reform, much change has taken place in the policy environment, which in relation to the past may be fruitfully seen as a paradigm shift. Yet the direct policy towards small firms or the small scale industries have shown little or no change. Change here has been limited to the de-reservation of a few of the items which were earlier reserved for exclusive manufacture by the sector, he periodic rise in the limit or fixed asset holding in plant and machinery tat as defined the small sector. It is by now apparent that the government is keen on an overhaul of the policy towards small firms. It has set up a high powered committee under the chairmanship of Abid Hussain to make policy recommendations, but the committee's report is likely to be available only after the elections. No doubt the Government has been cautious in its approach towards small firms, since it is a sector with over 2.5 million units and any precepts of shift in policy against the sector would not be electorally wise. Thus, repeated initiatives from the Ministry of Finance, from which many of the recent changes have emanated, to do away with reservations, or to greatly reduce the excise duty concessions for the sector have been put aside not only due to the pressure from the Ministry of Industry but also because the Prime Minister's office itself sees he issue of reform of the sector to be a sensitive one.