Growth of small-size enterprises in India: Its nature and content

World Developmenr. Vol. 16. No. 6. pp. 467431. Printed in Great

1988.

OiO5-7jOxlSS S5.00 + 0.00

Britain.

0

1988 Pergamon Press plc

Growth of Small-size Enterprises in India: Its Nature and Content S. P. KASHYAP* Sardar Pate1 Institute of Economic and Social Research, Ahmedabad Summary. -The paper highlights the nature of growth of small-size enterprises in India and discusses how far the growth is accompanied by the fulfillment of objectives such as poverty eradication and the removal of regional imbalances without hampering the long-term growth prospects of the economy. To facilitate the discussion. village. cottage and handcrafts enterprises of the small-scale sector are separated from its modern component. The available evidence, as is based on a number of studies in this area. suggests that the somewhat unusual and high growth of the small-scale sector is not accompanied by efficiency, innovativeness and social justice. Policy bias against largeness seems to explain the growth, whereas an elaborate system of subsidies and incentives has had only a marginal role.

sketched briefly in the subsequent discussion)’ continue to doubt the general validity of virtues assumed in the small-scale enterprises. official policy appears to have been swayed more by faith than facts. Over time, small-scale enterprises have been expected to play a positive and lasting role rather than a transitional one. Thus the Industrial Policy Statement of 1977, which provided the framework for industrial policy during the Janata regime.* stated: ‘*It is the policy of the Government that whatever can be produced by small and village industries must only be so produced.” The current thinking builds on the inherited approach. The latest policy statement (1980) mentions:

1. INTRODUCTION (a) Policy frame and institutional support The theme that village and small-scale industries can play a crucial role in overcoming the problems of poverty and unemployment has been an integral part of the Indian development strategy, more particularly since the Second Five Year Plan. It was envisaged that household industries would play an important role as producers of consumer goods and absorbers of surplus labor so that the heavy industry bias of the plan could be pursued without undue inflationary pressures in the economy. Other virtues of small enterprises - that they ensure a more equitable distribution of the national income, that they facilitate an effective mobilization of resources, capital and skill which might otherwise remain unutilized, and that these enterprises could be used to mitigate the problems created by an unplanned urbanization - were also noted in the Industrial Policy Resolution of 1956. It was recognized that in order to perform its assigned role, the household sector and smallscale enterprises would need protection from the threat posed by large-scale manufacturing. The transitional role of this sector was not denied and in fact it was visualized that eventually the household sector, aided by the supply of cheap labor and small machines, would modernize and integrate itself into the mainstream of economic life. Despite the fact that various studies (as

Government is determined to promote such form of industrialization in the country as can generate economic viability of villages. Promotion of suitable industries in rural areas will be accelerated to generate higher employment and higher per capita income for the villagers in the country without disturbing the ecological balance. Handlooms. handicrafts, khadi, and village industries will receive greater attention to achieve a faster rate of growth in the villages. Whereas the traditional household and smallscale enterprises are expected to shape villages into viable economies, modern small-scale units

‘The author is grateful to Professor D. T. Lakdawala and two anonymous referees for useful comments on an earlier draft of this paper. The usual disclaimers apply.

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668

are likely to aid the process development.

of backward

DEVELOPMENT

area

The proposed nuclear plants in industrially backward districts would generate a spread-out network of small-scale units or the existing network of smallscale units would acquire a faster growth by the coming up of nuclear plants in the area. It is thus assumed that small-scale enterprises would help in the generation of employment, wage goods, and incomes in a fairly dispersed manner; mobilize dormant skills and resources; energize village economies and aid the process of backward area development; and help the overall process of industrialization without disturbing the ecological balance. This is truly a tall order. But to foot the bill an elaborate institutional framework has been evolved. Separate boards exist for handlooms, handicrafts, and coir: and there is the Khadi (coarse handspun cotton cloth) and Village Industries Commission to look after khadi and other village enterprises (hand pounding of rice, extraction of oil, gur and khandsari, palm gur, leather, soap, handmade paper, etc.) and the Small Scale Industry Board to help the growth of modern small-scale enterprises. Besides District Industries Centres, or alternatives that might emerge in due course, are expected to lend a helping hand. Under the umbrella of such an elaborate institutional framework many measures have been initiated. These include an ambi-. tious industrial estate program, artisan training programs, entrepreneurial training programs to enlarge the catchment area from where the new talents could be drawn, and incentive packages. Further, financial assistance is provided through commercial banks, cooperative banks, Regional Rural Banks, and the State Financial Corporations. The other elements of the program include liberalization of imports, tax incentives for increasing production, and easy availability of critical raw materials. Most of these steps could be considered promotional to the extent they aim at enhancing the productive efficiency of small units and make them viable. Besides promotional measures, a number of protective measures have also been introduced. These are protective in the sense of their being specific to products, or to scale of production, or to area of production. First the scale of production is demarcated for the purposes of official assistance. The cutoff point, however, has changed from time to time (Table 1). Second, some items have been exclusively reserved for village and small-scale enterprises. This list too over time has become fairly bulky. The number of items exclusively reserved for small-scale production was enhanced during the Janata regime

to over 800 from about 200. By the end of March 1983, the number of reserved products increased to 87-t. Further the government has reserved as many as 40-I items for exclusive purchase from the small-scale sector. The rest of the products of the small-scale sector are also given a price preference of up to 15% over those of large-scale enterprises. The aggregate value of subsidies form (or can form) a substantial component of the ex-factory value of output. A study by SandeSara (1985) shows that the aggregate value of assistance from selected programs (excise duty exemption and price preference, power subsidy. interest subsidy on seed capital, sales tax subsidy, octroi concession, etc.) in the case of some industries could be as high as 70% of the ex-factory value of output. The protective approach to household industries has been under considerable fire since its very inception. Critics considered the approach as a clog on progress, a deliberate turning away from efficiency in favor of antiquated methods of production. and a dishonest concession to tradition. The approach of subsidizing traditional household factories was considered as a curious case of internal tariff protecting the rural handworkers against the low-cost factory goods produced in the same country. Nurkse (1956) also argued that if the handworkers drawn from disguised unemployment in agriculture were to enjoy tariff protection from the competition of Indian factory products they would, through higher prices, still be receiving subsidy from the rest of the community, just as they aere subsidized on the farms where their marginal productivity fell short of their consumption. This meant that the loc~cs of disguised unemployment was shifted: one make-work scheme replaced another.

(b) Gro\tfth performance

of small-scale sector

It is unfortunate that, for want of adequate information base, no exact or even approximate correspondence can be established between the various promotional and protective measures and the performance of village and small enterprises. Nevertheless the growth performance of smallscale units by broad economic magnitudes has been quite impressive. Sandesara’s (1980) careful analysis from 19.5G.51 to 1976-77 by broad components of industrial performance reveals: (a) The importance of manufacturing activities as a whole as also of the registered and the unregistered sectors has increased over the period. (b) The registered sector has increased at a faster rate than

SMALL-SCALE

Table

1. Small-scale

Changes over time

ENTERPRISES

rnrerprises:

Investment Normal units

small-scale

IN

669

INDIA

Definitional

criterion

changes Employment criterion

Ancillaries

Up to 1958

Fixed capital investment up to Rs. 0.5 million

Same

Employment up to 50 workers if using power or up to 100 workers if not using power

1959

The value of machinery was taken as the original price paid, irrespective of new or old machinery

-do-

-do-

1960

Gross value of fixed assets up to Rs. 0.5 million

Gross value of fixed assets up to Rs. 1.0 million

Employment criterion dropped

Investment limit (applicable only to plant and machinery, Rs. million) 1.0

1966

0.5

1975

1.0

1.5

1980

2.0

2.5

Latest position

3.0

4.5

Source: Tyabji

(1980) for details till 1980.

the unregistered sector, so that the latter has shrunk relatively over the period. (c) Further. unregistered sector went on shrinking in relative importance up to 1965-66, since then it appears to be resisting that trend. Interestingly enough the trend decline in the relative share of the unregistered sector in the manufacturing sector was halted and even reversed during the period that coincided with the period of overall industrial stagnation and/or fluctuations. The Sixth Plan (Government of India, 1981, p. 2.59) notes: After a steady growth of about 8% during the initial 14 years, there was a fluctuating trend in the industrial growth rate, approaching near stagnancy in 1966-68, climbing to a level of 9.5% in 1976-77 and dipping to -1.4% in 1979-80. During the last decade (1970-71 to 1979-80) the average growth rate has been about 4% per annum.

As against the overall 4% growth of the industrial sector during the 1970s it may be noted that during 1973-74 to 1979-80 the village and smallscale enterprises (VLS) sector grew at a rate of 6.8%. Perhaps encouraged by this performance the Sixth Plan targets household and small-scale

enterprises to grow at 8% per annum as against the annual growth rate of 7.6% for the manufacturing sector. These enterprises thus are not only expected to play a lasting role but perhaps a dominant one as well. As of today, the smallscale sector accounts for more than half of total manufacturing in terms of value added and provides full or part-time employment to more than three-fourths of the persons engaged in manufacturing. It also accounts for more than one-third of total exports. Impressive though these statistics are, some peculiar features of the pattern of industrial growth, particularly since the mid-1960s deserve attention. Growth patterns of most countries show that as industrialization proceeds the relative importance of household, village, and traditional industries declines almost continuously because of onslaughts from the factory sector; the importance of small workshops or factories (which can broadly be termed as modern smallscale enterprises) rises in the initial phase in response to growth of markets and then declines; and the share of the large-scale factory sector rises almost continuously.3 The dominance of large-scale factories is explained by the fact that

670

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gradually the market size expands and economies of scale with respect to plant size, management, and marketing play an important part in overall growth performance. hluch of the growth of large-scale firms also is explained by the .. . . . expansion of once small firms through the size distribution.“’ It is apparent that the Indian growth experience is at considerable variance with the experience of most countries. Another aspect, which many country case studies note, is that in times of prosperity small firms maintain their share, but in times of declining demand their position is extremely precarious.’ Once again the Indian growth experience seems to be in the opposite direction. It is ironic that the performance of large-scale factories over time has been unsatisfactory. decelerating, and even halting, even though they are relatively small in number and easily amenable to control; the state also plays a major and direct role. In sharp contrast, small and tiny enterprises. although they are too numerous in number, spatially much dispersed, and too difficult for direct intervention or influence through policy initiatives, have recorded a much better growth performance. Obviously, a detailed look at the emerging industrial structure is required to understand the nature of changes. Unfortunately, the analysis of growth of the small-scale sector is handicapped because of inadequate data base. A further complication is added by frequent definitional changes. While the definition adopted for official purposes is based on the size of investment in plant and machinery at historical value, most information about the size structure comes from sources that generally use employment for size demarcation. It is, thus, rather difficult to establish even a rough correspondence between information base and policy. Diverse sources of information differ in coverage and time periods and pose serious conceptual problems. Thus, while the emerging picture is likely to be blurred, the main contours may nevertheless be highlighted. Available evidence indicates that the industrial economy in India is undergoing a structural change, giving greater weight to small-scale units. This is apparent from the relative growth performance of small vis-ci-vis large enterprises but additional support is provided by the changing size structure of Indian industry. Nagaraj (1985b) shows that the average factory size has fallen from 110 workers in 1950 to fewer than 60 workers in 1976. This is also supported by the Annual Survey of Industries on average plant size in disaggregated details. it is seen that except for jute textiles, and transport equipment where average employment per unit continues to be

more than 100. other industries have shown a distinct small-scale orientation. A comparison between 1956 and 1977 of those industries that did not pose definitional problems highlights the ongoing structural changes in the registered manufacturing sector. It is seen that (Table 2) during 195677 small (fewer than 100 employees) and medium (100 to 500 employees) size enterprises more than doubled their share at the cost of large firms (more than 500 employees). Large firms have, however, maintained their dominant position because of their concentration in some industries (cotton textiles, jute, sugar. and iron and steel) that contribute a large share in total industrial employment. Further, the fact that during 1961-81 employment in factories not registered under the Factories Act rose at a faster rate than that in registered factories would imply that, for the manufacturing sector. the decline in size was even sharper.6 The resilience and growth shown by the village and small industries sector might be welcome provided we are sure that its growth experience includes the fulfillment of other desirable objectives of planning such as poverty eradication and removal of regional imbalances. without hampering long-term growth prospects. No categorical answer, unfortunately, can be given because the information base for the VLS sector is inadequate. Some studies, however, are quite suggestive as to what might have happened with spectacular growth of the VLS sector. To aid our understanding we may briefly review some of the recent works in the area. To facilitate the discussion we separate the village, cottage, and handicrafts component of the VLS sector from its modern component. It must. however, be recognized that such a separability does not imply that the two components of the VLS sector are mutually esclusive. Often the characteristics of the two components overlap.

2. TRADITIONAL COMPONENT VLS SECTOR

OFTHE

The traditional component of the VLS sector is a heterogeneous category and includes village crafts (pottery, blacksmiths, edible oil processing, handloom), urban cottage industry (goldsmithy, bidi making, matches, diamond cutting and polishing. jari making), urban seasonal industries (brick and pottery, etc.), and supplementary industries (sericulture. khadi, etc.). Most of these enterprises are dependent on landbased inputs and invariably produce goods for final consumption for local markets. Given the fact that these enterprises are highly scattered, it

SMALL-SCALE

Table

2. Relative change

Factories by emp!oyment size

ENTERPRISES

in share of emplo~mmt Number of employees

IN

INDIA

671

in factory sector by si:e groups: Percentage share employment

in

1935-V

Compound rate of growth

(in ‘@W ,956

1977

1. Fewer than 100 2. 100 to 199 3. More than 500

138.2 135.9 1,377.2

1.528.8

Total

1.651.3

2.346.0

Source: Derived

from Little,

Mazumdar,

420.0 397.2

and Page (1985).

has not been easy for the official assistance to cater to their needs. Nor is there any evidence to suggest that government training programs to upgrade the skills of artisans engaged in these activities have been very successful. The Sixth Plan (Government of India, 1981, p. 193) notes:

. the existing training programmes are not result oriented. In some cases, the trainees gravitate towards the training centres for the stipend in the absence of anything to do; as a result very few persons engage themselves in the trade trained. It appears that to be engaged in productive work can be a simple function of training only if the existence of profitable market opportunity is assured. This rarely happens, A study that looked into these matters noted: It is no use training students in improved methods unless there is some chance of their putting them to use after the training is over. The pottery training centres at Cuddapah and Harpanhalle have turned out to be a waste and one at Betmcherla has been closed. Out of 35 students trained by Harpanhalle, only one has set up the production of improved quality of goods. The others have gone back to the old ways. The potter, the carpenter and the blacksmith are the important three out of five artisans which every village has been provided with by grant of Inams. Their hereditary skill is amply adequate for the simple needs of the villagers. Their services and wares are within the slender means of villagers. So unless the training centres are also the producing centres of the same kinds of goods of better quality at the same old prices, the efforts at improvement cannot be successful.’ It appears that most of the rural traditional crafts have been largely bypassed or ineffectively handled by the official programs. The meager evidence, however, suggests that an important reason for the swelling of the ranks of landless workers has been the lack of diversification and even shrinkage of occupation base in rural areas. ’ In some cases rural industries have survived and even prospered, but here too the main

1956

1977

8.1 8.2 83.4

17.9 16.9 65.2

100.0

100.0

5.44 c .-71 _ 0.50

Table A J.5.

contributory factors seem to be external to the village economies. As Papola and Mishra (1980, p. 1745) note: Proximity to road connections seem most important industrial units in the the village economy, and structure, show

and urban centres determinants of the state of village. The characteristics of including its population size no perceptible influence.

Instead of viewing villages as closed or isolated economies there is need to consider them as an integral part of the spatial hierarchy. and village industries. unless aided by favorable exogeneous influences, are unlikely to energize or enhance the viability of village economies. A major problem that the policymakers face is how to integrate these non-competing enterprises or crafts, whether in rural or urban areas, into the mainstream of economic life. Such crafts, even in the urban areas, tend to lead an isolated existence. A recent study of the jari industry in Surat notes: A striking feature of the industry is its inbreeding and restricted entry from outside the Rana community. Child-labour seems to be widely prevalent and not much importance is attached to education and health care. Further, there are manufacturing processes that are positively injurious to health. Fresh investment in plant and machinery is also negligible. It appears that, but for isolated instances.

the forces of modernization have largely by-passed the so called “jari island” in Surat.’ Hitherto we have dealt with traditional household industries that for various reasons, such as limited and localized markets, do not compete with the factory sector. But an important class of these household industries - handloom weaving, matches, bidi making, shoe making, etc. provide employment to a substantial workforce and compete with ‘the factory sector. The developmental efforts for this class of industries have been primarily guided by the “common production program,” the main features of which

672

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DEVELOPMEf’iT

have been preservation of spheres of production, non-expansion of capacity in large-scale manufacturing. imposition of cess or excise duty on large-scale manufacturing, and direct subsidies. Amongst the household industries that face competition from the factory sector, the case of handloom weaving has aroused much interest. This is not unexpected because handloom weaving ranks next only to agriculture in terms of size, income, and employment that it provides. Available evidence unfortunately points out that the policy of protection has not been of much help to handloom weavers.” As early as 1954 the Textile Enquiry Committee had recommended that in order to improve the economic conditions of handloom weavers handlooms may be gradually converted into powerlooms. About a decade later the Powerloom Enquiry Committee had also echoed the same sentiment. However, the efforts to provide powerlooms to handloom weavers (one powerloom to one handloom weaver) or to locate them in villages or towns with population less than 30,000 do not appear to have succeeded. On the contrary, as Jain (1983) puts it, instead of becoming power in the hands of poor weavers (who are distributed all over the country and located in the rural areas). about three-fourths of the over 6 lakh powerlooms have come to be concentrated in just six towns in a few states namely Maharashtra, Tamil Nadu and Gujarat. . The growth of powerlooms, therefore, has had nothing to do with technological upgrading of the handloom weavers’ traditional equipment. Meanwhile the powerloom sector has grown fairly rapidly. It is estimated that between 1975 and 1981 the number of powerlooms increased by 120%. To begin with, powerlooms were installed unauthorizedly but were regularized over time. A number of reasons account for the rapid growth. First, as Jain (1983) indicates,

. there are numerous reports which have hammered the point that a large number of the powerlooms have benami owners. Many mill interests which are otherwise precluded from expanding textile production have found the powerloom sector a convenient outlet for expansion.

Second, it has been possible. although fraudulently, to pass powerloom cloth as handloom cloth and thereby gain the subsidy meant for handloom weavers. In fact the tax policies provide strong incentives for subterfuge. A case study dealing with textile weaving in Gujarat observed:

. an unregistered unit of four looms would pay excise taxes at the rate of Rs. JO per year. Four

looms in a composite mill or in a unit using more than 18 looms would be responsible for generating excise taxes of well over Rs. 32.OCM per year. hlany mill owners or friends or associates of mill owners have established small powerloom units several four-loom units are located together in a single room or a factory shed with only a sign board to indicate that the room contains several, theoretically distinct, business enterprises. The “distinct” units are often owned, respectively, by a man, his wife, his brother, their sons and their wives.”

There is thus no reason to suppose that the intended policy measures have benefited the handloom weavers. This is also supported by the fact-finding studies. A recent study of East Godavari weavers revealed that the overwhelming majority of handloom weavers’ households (about 75%) were poverty stricken. that they lacked not only education but also capital, that their incomes from the supplementary sources were negligible, and that most of them were at the mercy of private moneylenders and master weavers for their financial needs.” The only redeeming feature seemed that, though handloom weaving revealed household and hereditary characteristics, the prevalence of child labor was not noted. In this respect the findings of a study of match and fireworks industries in Sivakasi (a small municipal town of Ramanathapuram district in Tamil Nadu) and neighboring villages are quite different.13 The match industry in the region was started in the cottage sector in 1920 and as a result of subsidies has grown since then fairly rapidly. The production in the cottage sector got a further boost during the Janata regime because of significantly enhanced benefits in excise duty. It must, however, be underscored that in the process of development a matter of crucial importance is not how much is produced but how it is produced. The study revealed a wide prevalence of child labor (about 45%) and inhuman working conditions. Between 3 a.m. and 5 a.m. every morning. children in these villages are woken up and loaded on to buses or vans belonging to the industries in Sivakasi town. In most cases over 200 of them are jampacked in a single bus which takes them to their factory. The age of the youngest child whom we found working was 3’/2 years. Legally. children employed at these industries have to acquire a doctor’s certificate clearing them for employment. Xt the large villages and in Sivakasi town. we found that a racket flourished where doctors. some on the grounds of compassion, issued certificates, without ensuring the age and health of the child. The working conditions in the industries are unsafe and detrimental to the mental and physical health of the child. Staying a total of fifteen hours away from

SMALL-SCALE

ENTERPRISES

home. twelve at work. they work in cramped environments with hazardous chemicals and inadequate ventilation.”

A more recent newspaper report on the exploitation of child labor is still more horrifying. It revealed how 27 harijan (belonging to the class that has been traditionally dubbed as untouchables in India) children were kidnapped and tortured to work in a carpet weaving unit of one Mr. Pannalal. For the first few days. the children were locked in a room and got nothing but severe beating. Later. this was changed to hanging them upside down from the branches of a tree until they begged forgiveness and promised total compliance with Pannalal’s orders. The children were divided in groups of five and made to weave carpets in accordance with his instructions. Whenever they erred or talked of going back home they were punished.15

It is apparent that, inhuman working conditions apart, the village and household enterprises are not able to provide its workforce a satisfactory standard of living. I6 This is partly caused by low productivity arising out of obsolete techniques of production, but it also appears that because of their weak bargaining power a lion’s share of surplus generated is appropriated by agents not directly involved in the production process. A recent study that looked into the problems and prospects of the diamond processing industry in Surat noted: Weak bargaining power is amply reflected in the way fruits of labour are shared in the industry. In an industry that primarily exists on the basis of “export of labour”, somewhat shockingly the commission agents make as much as two-thirds of all the workforce put together and about four times of the rewards that accrue to the entrepreneurial class for all their toils.”

The findings of some of the earlier studies are similar. For instance a study that dealt with handmade brassware at Moradabad stated:18 The small units compete strenuously amongst themselves. But there is a limited number of large-scale dealers and wholesale traders to whom they are obliged to sell. These latter exercise considerable degree of monopoly and monopsony. . The small producers suffer not only because the dealers put out work to them through middlemen and agents, tending to reduce them to the status of contract labourers, but also because at the time of payment certain illegal and unauthofized deductions are made.

The plight worse:

of Agra

The artisan realizes

shoemakers

has been

even

with dismay how little he will

IFi INDIA

673

have for his labour beyond what he pays for materials he lacks “holding power’. and the merchants know it. He must sell at once in order to have a little money to purchase leather for his next day’s work and food for him and family.”

Almost the same is the story of sandal makers of Calcutta. The only difference being that their output is purchased by big companies (Bata and Flex) and passed on to consumers in their own brand names. “Although the small producers barely make a living out of the work they do, these savings in the labour cost are not passsed on to the consumers. There is an eighty per cent markup on this cost in the rice at which the sandals are ultimately sold.” P” Our brief overview of traditional household enterprises indicates that most of these either lead an isolated and waning existence or exist in a manner that offers low wages, low levels of living, unhealthy working conditions, absence of modernization, and exploitation of children. The intended help either fails to reach the target groups or is far from adequate and is marked by high leakages either by manipulation of ownership by large enterprises or the exploitative role played by the middleman. In these circumstances it is difficult to fathom how these enterprises could be given a place of lasting and growing importance. Indeed official efforts, instead of harping on protective devices, could be geared to creating conditions under which the grave abuses from which these enterprises suffer could be curbed.2’ 3. MODERN SMALL-SCALE ENTERPRISES Whereas the traditional household enterprises rarely stand up to the competition from the factory sector and in most of the countries show a tendency to shrink into a position of relative insignificance, the modern small-scale enterprises have carved out a niche for themselves even in the most advanced countries. It, however, does not ipso facro apply that every product under the sun can be efficiently produced by small plants. Most perceptive observers feel that the small firms succeed best where they have either favorable locational influences (factories which process dispersed raw materials; products with local markets and relatively high transfer cost; service industry), or process influences (separable handwork; simple assembly, mixing or finishing operations), or market influences (differentiated products having low-scale economies; industries serving small total markets).** Given that the survival and growth of small firms in some

674

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DEVELOPMENT

product lines is justified on efficiency grounds, policymakers would induce an environment that leads to cost conscious specialization and interfirm complementarities. Such a policy approach would then be selective rather than free for all. and promotive rather than protective. This, however, does not hold good for the Indian industrial policy. This is because it is based on the unshaken belief that the goals of poverty removal, employment generation, dispersal of industries, and diffused inccmes could all be achieved or approached by arranging the scales of production rather than product choices. Therefore, India has an institutional umbrella that envelopes all small-scale firms (though it is sometimes felt that those who really need help are left out) and is generally non-discriminatory between output types. The available evidence unfortunately suggests that the policy has not been based on correct premises and the assistance arrangements have been wasteful, ineffective, and even counterproductive.

(a) Lubor absorption argwtzent Take the case of employment generation. It is generally believed that small firms are quite frugal in the use of capital and therefore, compared to large firms, create more jobs per unit of capital. The evidence is far from conclusive. Most studies have shown that labor-intensity need not decline with size, and small-scale enterprises may not always possess capital-saving virtues.‘3 Some of the recent studies also support the findings of earlier studies. Goldar (1985) shows that, although small-scale units may not be relatively inefficient in general, there are industries in which small-scale units are inefficient compared to large-scale units and these account for a sizable part of the small-scale sector. The World Bank study (Little, Mazumdar, and Page, 1985) also indicates that, among modern factories, the larger ones very often have higher capital productivity, at least around 200 workers. The very small firms may also have high capital productivity, but at the cost of very low wages.” If employment is taken as the size variable, it emerges that it is the medium size, not the small, that is beautiful. An interesting finding of the Goldar (1985) study is that small-scale units are efficient mostly in those industries in which the difference in the capital-labor ratio between large- and small-scale units is rather small, implying that small-scale units cannot be a device to generate a large amount of employment efficiently. The World Bank study (Little, Mazumdar, and Page, 1985,

p. 97) also mentions that “The only way to increase labour intensity of the economv would be to increase demand for products ot’ industries which are typically labour intensive and have high labour productivity.” The surmise that labor absorption may be a function of output composition rather than scale of production is supported by other country studies as well. An analysis based on the case studies of Korea, Taiwan, Hong Kong, and Singapore states: It is rapidly becoming fashionable to propose support for small firms on the grounds that they emplo) more labour intensive technologies the development of the four lends no support to this idea. The idea that small modern firms are labourintensive may well be based on statistical aggrcgation of like with unlike. There is scattered evidence that. \vith sufficient disaggrrgation. medium and large firms have both higher labour and capital productivity.‘5

Another

recent

study

mentions:

Apparently, the success of Korea’s and Taiwan‘s manufacturing sectors in absorbing labour is due, to a large part. to the development of industries that produce Iabour-intensive products rather than to any special attention to small-scale manufacturing. This is because small establishments arc efficient only in few industries. and u here they are efficient. the industries do not absorb large numbers of workers. Thus. if the objective is employment creation. the development of the small enterprises may not be the most appropriate policy to pursue.2” It must be recognized that enhancement of labor-absorption through changes in the output mix would imply specialization in the production of labor-intensive commodities and utilization of transformation possibilities through inrernational trade to obtain capital goods. Such an approach is disputed on two counts.” First, it is mentioned that in theory it is possible that the same commodity might be produced by capital-intensive or labor-intensive methods (factor intensity reversal argument). Second, the tariff and non-tariff barriers raised by the developed countries against the Third World countries might forbid the espansion of labor-intensive commodities at an expanded scale. These diffiollties of course are not insurmountable and may not even be real. For instance Little (1979, p. 28) mentions that, “I nowhere observed the famous Cambridge (England) theory of reswitching in action.” And even in the case of a large country like India, a fairly convincing case for export-led growth. or what the author likes to call the “growth on the basis of competitiveness or efficiency in resource use,” can be made.“8 It is possible that such an approach would boost the prospects of small-

SF.tALL-SCALE

ENTERPRISES

size firms as it is noticed in many countries that compared to large firms the small firms show greater concentration in labor-intensive industrial sectors.”

(b) Working condirions in small firms There is, however, no need for us to participate in this debate. Suffice it to say that the options for labor absorption through scalar arrangements are quite restricted. Even when such options exist, that is, where small firms as compared to large firms create more jobs (per unit of value added or productive capital), this does not necessarily imply higher total earnings for employees. Small firms are often poor paymasters and resort to dubious means to avoid paying the statutory benefits to workers. For instance Streefkerk (1981, p. 661) notes: Owners are able to keep the official number of workers low by keeping two sets of books: one for themselves. and another adjusted for Government there are few inspections officials. Moreover, carried out by the latter who are in any case biased in favour of management. Another way to circumvent the labour laws is to split an enterprise into a number of separate units, each officially having not

more than 9 (or 49) workers. Working conditions in small firms at Ahmedabad were no different. 3” John Harriss (19SO) mentions that “A strong and recurrent theme in discussions with industrialists in Coimbatore was that of the desirability - sometimes stated as ‘the necessity’ - to keep manufacturing units small.” We have cited various studies not only to give an idea of the working conditions in modern small factories but also to have a clue as to why large factories do not grow in relative importance through size distribution. It is apparent that what goes in the name of growth of the small-scale sector may in fact partly be a device to conceal the growth of large factories with concomitant evils of loss in tax revenue, raising the proportion of unaccounted income and employment, and creating a production system that generally favors manipulation and subterfuge. It may be mentioned that wage differentials in large and small firms are considerable and that these reflect more the weak bargaining power of workers in small firms than prdductivity differentials. Often the productivity differences between large and small firms by broad homogeneous product divisions are marginal and even nonexistent.” Contrary to popular belief, small-scale enterprises rarely serve the purpose of “waiting space.” There is hardly any vertical mobility

IN

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675

across the scalar hierarchy in the sense of workers ultimately succeeding in getting better paid jobs in large-scale units. *-It was found that no more than one per cent of the workers in the organized factory sector in Bombay ever worked in the informal sector, and most of the workers in the informal sector have been working there for periods between ten to fifteen years, which is too long for “apprenticeship”.” The study relating to the functioning of the labor market in Ahmedabad also indicates that the entry into the formal sector is mainly determined by family background and influence, and that the role of workexperience in the informal sector is negligible.”

(c) Role offiscal and financial incentives

It is not that small firms have no role to play. We have already indicated that given the “favorable influences” these can hold their own in selective fields. Another virtue of small enterprises is that they use (or should use) resources that may have little or no opportunity cost. Residential buildings (or portions of these) used for production purposes, installation of secondhand or discarded machinery after suitable modifications, and mobilization of personal savings of near and dear ones are instances of such resources which are put to productive uses by small firms. Also, the ‘.. . . division of labour between enterprises in different size groups, e.g., in the form of sub-contracting, enhances the overall efficiency of the industry.“3’ Unfortunately, the full advantage of these virtues has not been reaped in India. Rather, evidence suggests that the overenthusiasm in helping the small-scale firms might have even destroyed or distorted these virtues. The studies that examined the role of fiscal and financial incentives in Gujarat noted that not only has borrowing been indiscriminate, but the picture about repayment of loan is also quite distressing.35 That financial assistance might not go along with efficient use of resources receives support from the findings of a recent study that compares the performance of the assisted units (assisted by the State Financial Corporation for at least three years) with that of non-assisted. It was seen that non-assisted units generally had a higher capital productivity, higher surplus per unit of capital, and lower capital intensity. Further, it was found that the percentage of excess capacity to be installed in the assisted units was nearly three-fifths as against only one-third in other units.36 Goldar (1985) also notes that greater availability of term credit induces the entrepreneur to maintain a

WORLD

676

DEVELOPMENT

larger stock of raw materials, which leads to lower capital productivity.” Another aspect, noticed by a number of studies. has been that financial assistance programs are not only accompanied by a high degree of wastage but often the assistance fails to reach where it is needed most. On one extreme, we have what Sandesara (19S0. p. 28) calls “ghosts” that are not “formless.” “They have some sort of a shed to shelter the junk that is their plant and machinery. On the strength of this workshop, they qualify as ‘small industry’ and get assistance.” On the other extreme, The largest single group of entrepreneurs in Coimbatore - that of the former workers - is the one which experiences the greatest difficulty in raising funds. and yet which is the least likely to have access to the assistance of the regular banks and the other financial institutions which supposedly serve the small industrialists.‘x

A study of industrial entrepreneurs in Faridabad also notes that “. . it is quite evident that in many ways Faridabad is a topsy-turvey industrial world, those who deserve benefits and encouragement do not get it.“”

(d) lnhstrial estutes

It is evident that small firms are taken care of at a considerable cost to the exchequer. Often little effort is made to assess the ability of entrepreneurs to take advantage of incentives and facilities that are offered. This is quite glaringly seen in the case of the ambitious industrial estate program. A study, which is now more than 20 years old, looking into the functioning of the Jaipur industrial estate had this to observe: In spite of technical and financial assistance and allotment of factory space at low rent. the working of a large number of units is unsatisfactory even after three years of their starting. In some cases the “chosen entrepreneurs” have quit the estate after making easy money by black marketing plant and equipment and essential materials.*’ Sandesara

(1980)

cites

a number

of more

recent

works, relating to the industrial estates in West Bengal, Kerala and Mysore, that paint a picture which is not much different. Further, these studies support the conclusion that, other things remaining same, performance of the units functioning within the estate was inferior to those existing outside the estate. Our research efforts (Desai and Kashyap, 1979; Kashyap, Pathak, and Shah, 1976) aimed at understanding the functioning of industrial estates in Gujarat also indicated that most units in the industrial estates

showed a higher proneness to use capital than labor and. what was worse. the rising capital intensity was unrelated to capacity utilization. Further, these estates in Gujarat. rather than being integrated with the local economy, showed material use areal linkages that were far-flung and in no way different from that of large-scale enterprises. In particular the large estates and those located near the major industrial centers were found generally linked with the national economy. Among the smaller estates and those existing in backward regions only one estate was found to be linked with the local area. This makes us doubt the efficacy of the industrial estate program for developing backuard regions. Most’of the studies that examine the role of small-scale enterprises in backward area development indicate that they play the role of “follower” in the process of industrialization. Indeed industry in India, as has been the case in other countries during comparable phases of development, shows a strong tendency toivards spatial concentration. An analysis based on the industrial structure of a major metropolitan center and also on a preliminary cross-section of cities (more than 30 cities with population ranging from three to 18 lakh were considered) suggested the following: (1) clustering of industrial units in the cities was not only due to agglomeration economies but also to strong inter-industrial linkages, and (2) city-size (population) and area under industry were observed to be a highly correlated phenomenon. It could therefore be inferred that firms tended to cluster at different space points and the size of the cluster tended to grow along with the size of the city. Further, there was evidence that such spatial clustering across urban spaces conferred productivity advantages, and concentration of population in a few cities had an important say in explaining inter-regional industrialization.“’ Given these tendencies, mere tinkering with the spatial phenomenon through the industrial estate program or incentives to backward area development may not always result in spatial dispersal of industry. But the forced piecemeal steering away of industry from spaces where it enjoys external economies can jeopardize the potential for future growth, apart from the fact that steering away might itself involve considerable direct costs.

(e) Entrepreneurial developmmt The findings of various studies in India and elsewhere suggest that there is a pressing need to enhance the effectiveness of existing small-size enterprises. The Indian government. however,

SMALL-SCALE

ENTERPRISES

to follow a policy, through its promotional and protective devices, to ensure fresh entries into the small-scale sector. In fact the need of the hour is not so much to have training programs aimed at enlarging the “catchment area” for drawing the untapped enterprises as it is to enhance the productive efficiency of existing enterprises. The approach that entrepreneurship could be induced by training programs appears to be quite unrealistic and superfluous. Rarely, if ever, is it felt in India that small-scale units fail to emerge because of shortage of enterprise. A study of the diamond processing units in Surat states: continues

Entrepreneurship in the industry, largely unaided by any training or developmental programmes. appears to have emerged in abundance to take advantage of an expandmg market situation. If this case study is any guide, it appears that existence of profitable opportunities where small scale operators could have a significant role, rather than the government sponsored programmes to unearth the dormant enterprise. seems relevant for the growth of small scale enterprises.” It is not the quantitative aspects but the quality of entrepreneurship that has aroused apprehensions.” The successful entrepreneurs in India are often dubbed as “conservative” (mainly follow the beaten track), or “moderate risk takers,” or orientation.” The are swayed by “commercial traits of “commercial orientation” include: (i) involvement in a wide range of disparate commercial and industrial activities; (ii) short-term perspective; (iii) and desire for quick and easy profits. A natural outcome of such a behavior is that the entrepreneurs. rather than applying their energies in enhancing the productive efficiency (which would be socially desirable), tend to spend considerable effort on the purchasing or marketing aspect of their enterprise. Commercial orientation of course does not lead to cost minimization behavior. Here it may be noted that concepts like “X inefficiencies” are not relevant in the Indian case as these primarily relate to firms’ internal functioning.4J These might become important once the size bias in the process of industrialization is eliminated and innovativeness and efficiency are encouraged. As of now, Van der Veen (1972), on the basis of a number of case studies, correctly notes that “. . . economic circumstances and government policies combine to produce a set of incentives-towards commercially oriented, rather than production oriented, patterns of behaviour.” Most of the entrepreneurs prize their flexibility as it occasionally enables them to make windfall gains. This style of functioning of course does not encourage inter-firm complementarities that could lead to

IN

INDIA

677

“cost-conscious specialization among firms.” NO doubt, from the point of view of a small firm, ancillary relationships could mean opportunities for technological improvement, a steady access to raw materials, and assured market for their products. But this would also invariably imply a curb on operational flexibility and capacity to make a fast buck.

(f) Ancillarization The commercial orientation at least partly gives a clue to the failure of the officially sponsored programs to foster much ancillary development. Indian policymakers, from time to time, have initiated a number of measures to promote the “healthy” relationship between small and large firms. These include: (i) separate identity for an ancillary unit in the sense that the investment limit in plant and machinery has been relaxed to Rs. 35 lakh (Rs. 35 lakh in the case of an ordinary unit) and (ii) the government has made it obligatory for large enterprises to subcontract a part of their work to small firms. More recently, inter-departmental teams have been set up to identify items which could be taken up by ancillary units: plant level committees have been asked to work out details of ancillary development programs and 25 broad groups of industries have been identified for intensive development. It was expected that because of the various policy measures, output of ancillary units from a bare 0.5% of the total industrial output in 1975 would increase to 15% by 1985. Though there have been some bright spots, by and large the ancillary development program, as a Sixth Plan document notes (Government of India, 1981). has “yet to make a headway in terms of its share in the total production of small scale sub-sector.” Some studies have also examined the nature of linkages between small and large units.45 The tenor of their findings has been that the transfer of technology from the large to the small and the “two legs” phenomenon, so successlfully practiced in Japan, is missing. Instead, the relationship has been one of dependence. The entrepreneurs in small firms merely receive wages rather than a share in profits. The benefits of government fiscal and financial subsidy to the small-scale sub-sector have, thus. ultimately flowed to the large-scale sector. The linkage arrangements also have a whiff of feudalism about them. The small-scale operators are constrained to keep the functionaries in the large firms in good humor. There is some evidence that the linked enterprises tend to grow at a faster rate than the “non-linked,” but most studies have

678

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DEVELOP%fENT

found it difficult to be categorical about the contribution of complementarity to growth. Doubts persist that the edge in growth performance of the linked units might merefy. be a reflection of the relatively large units dlvlding their output into more than one unit to hoodwink the legislation. Linkages, as Papola and Mathur (1981) mention, do not appear “. . . to constitute a planned and positive step on the part of enterprises to improve the efficiency of their resource use. Rather, linkages or subcontracting appeared to be an outcome of the policy bias disfavouring largeness.” What has caused the tardy development of ancillary units? It is usually mentioned that small firms fail to meet the orders in time and are often not in a position to provide the desired quantities of goods according to specifications. This happens because of the difficulties that the small firms face in procuring raw materials, technical know-how, and working capital. No doubt there is merit in these arguments. But the real reason appears to be that, while we have been greatly inspired by Japan in formulating the policy, the fundamental conditions that led to success in Japan do not exist in India nor could these be created over time.‘6 First, effective sub-contracting in Japan is regarded as a prerequisite to the growth and technical progress of large firms, whereas in India the promotion of the small-scale sector has been guided by a desire to curb largeness. Second, in Japan the spirit of competition is kept alive by appropriate trade and industrial policies, e.g., keeping the door open to competition from abroad. In this process cost-conscious specialization through inter-firm interdependence plays a key role in giving Japan an edge over its competitors in the world market. No such motivation exists in India, to say the least.

4. CONCLUSION Our excursion into the small-scale sector does not suggest an unqualified success for the official policy. On the basis of available evidence it would be hard to accept that the somewhat unusual and high growth of the small-scale sector has been accompanied with efficiency, innovativeness, and social justice. Instead, the growth to some extent appears to be an outcome of con-

cealment of income and employment, and of manipulation of scales of production as well as the official machinery. Policy bias against largeness seems to be explaining the growth of the small-scale sector, whereas an elaborate system of subsidies. incentives. and financial assistance has had perhaps only a marginal role. True, advantage is taken of subsidies and other devices but not necessarily by persons who needed it most. Very little evidence could be unearthed that could suggest that inter-firm independence between different sized firms (where it existed). whether voluntary or induced by legislation. has resulted in a cost-conscious specialization. There is no doubt that given favorable influences small units have a role to play; they can also mobilize resources (personal savmgs, labor. discarded machinery, residential buildings) that might otherwise remain dormant. But these virtues are lost when the country seeks global solutions rather than following a selective approach and providing costly infrastructure and other facilities which have alternate and more productive uses. Despite the fact that various studies continue to doubt the premises on which the policy is based, India continues to favor entrepreneurs because of their smallness, not because they fulfill any laudable objectives. When the policy fails in achieving the intended objectives, the approach seems to be to offer more of the same instead of revising it. This is apparent from the frequent definitional changes, deepening of the base for excise concession, and enhancement of promotive and protective measures. This is despite the fact that various studies continue to indicate that small-scale enterprises resist modernization, exploit labor, are perhaps given to grave abuses by middlemen and large firms, and are not amenable to control. It appears that the present policy framework is deliberately destroying the scale (as it relates to the size of the firm) and external economies (that arise mainly from spatial juxtapositioning of firms) which, as has been the case in other countries, could engineer growth. Indeed, there is pressing need to view the scalar structure of Indian industry as a continuum so that the scalar bias of growth could be eliminated. For the existing small-sized units, a plan for enhancing their productive efficiency and helping them to cross the size barrier cannot be overemphasized.

NOTES 1. Our emphasis would be on some of the recent works. For a survey of literature, covering a period up to the end of the 1960s. see Subrahmanian and Kashyap

(1975). For an inter-country perspective. Morse (1965) and Anderson (1982).

see Staley and

SMALL-SCALE

2. This was the period between the Congress Party led by Mrs ousted from power. 3.

For a detailed

4.

Ibid..

5.

Wellisz

6.

See Nagaraj

7.

See Rao

S.

See Kashyap

9.

Desai

analysis

ENTERPRISES

1977 and I9SO when Indira Gandhi was

see.

Anderson

(19S2).

p. 936. (1957). (1985b).

and

Brahme

See Jain

II.

Van

12.

Subramanyam.

13.

Kothari

11.

Ibid.,

p. 62.

(1982).

(19S2).

10.

(1973).

p. 115.

(1983).

der Veen

(1972). Rao,

and

Rao

(1983).

Surveys. also concludes: -. profitability and capital efficiency in the small scale sector as a whole is much higher than that of the corporate sector. The plausible reasons for the relatively‘higher profitability in the small scale sector seem to be the lower wages and greater exploitability of labour on the one hand and the fiscal concessions on the other.‘. 25.

Little

26.

Ho (19SO). p. 102.

27.

Chakravarty

2s.

Ezekiel

29.

Anderson

30.

Sharan

31.

Kashyap.

32.

Papola

(1981),

33.

Mehta

(1952).

34.

Watanabe

35.

Kashyap

36.

Sandesara

(1979).

p. 27.

(1979).

(19S3). (19S2). (1980).

pp. 93S-939.

p. M-SO.

Tiwari,

and

Veena

(1981).

p. 256.

(1983). pp.

1191-l 192.

15. Singh (198-l). p. 1. A recent report of Glass Factories of Firozabad (Burra, 19S6) paints a similar picture. On the basis of factory visits, the author brings out appalling conditions under which children and adults use up their lives in the glass factories. The study notes that the .. . experience of twentieth century does not appear to be significantly different from what industrial workers in nineteenth century England must have gone through some of Marx’s observations about the predicament of workers appear to be remarkably apposite even in the context of the workers in Firozabad” (Burra, 1986). 16. Mehta (1979). based on 29th round of National Sample Survey, shows that the household enterprises or those employing fewer than five hired workers depict dismally low productivity levels. A vast majority of them had a monthly value added of less than Rs. 150 ($10). 17.

679

IN INDIA

Kashyap

and Tiwari

(1982).

(1973). (1982)

p. -111. and

Pate1 (1983).

(1980).

and 37. The World Bank study (Little, Mazumdar, Page, 1985, p. 30) also mentions that “Our analysis of capital markets. and of the economics of small enterprises does not support the view that such subsidization is called for. especially as there is no prima fucie case that there are benefits from the point of view of overall income distribution. In general, banks should be permitted to charge higher rates for loans to the small, since they are both more risky and more costly to process.” Also, see Anderson (1982) for a detailed theoretical discussion. 38.

Harriss

39.

Panini

40.

Kashyap

(19SO) (1980)

as cited

in Harriss

(19SO).

p. 163.

Singh (1961) as cited in Staley and Morse (1965). PP. 39-40.

(1964),

p. 1021.

1s.

19.

Ibid.,

20.

Banerjee

21.

See Staley

22.

Ibid.,

23. and

See Dhar and Lydall Kashyap (1975).

2-t.

Nagaraj

41. Kashyap, Tiwari, Wadhva and Kashyap

and Veena (1983).

(198-t).

p. 51, and

p. 73. (1981),

pp.

and

p. 288. Morse

(1965).

pp.

7S-82.

11&122.

(1985a.

(1961)

and Subrahmanian

p. 1746) based

on two all India

42. Kashyap and Tiwari (1982). p. 159. We quoted from a recent study. Interestingly enough, and Lvdall (1961) in the earlv 1960s noted that was no shortage of entrepreneurship in India. fore, there was no need for deliberate search for resources.

have Dhar there therelatent

43. Anderson (1982, pp. 926-932) also cites the experience of a number of developing countries to emphasize the pressing need for training to improve production efficiency because the crucial issue is not

680

WORLD

the elasticity efficiency.

of entrepreneurial

response

but that

DEV’ELOPMENT of

4-l. For a detailed discussion of Liebenstein’s concept of “X inefficiencies” and its relevance for developing countries. see Anderson (1982). pp. 927-932.

45. Banerjee (1981); Brahms and Pranjape Lall(1980). Nagaraj (198-l): Papola and Mathur Shah (lYS1): and Watanabe (1974). 16.

See W’atanabe

(1974)

for a detailed

(1979): (1979):

discussion.

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and urban labour markets,” in Amiya Bagchi and Nirmala Banerjee (Eds.). Change and Choice in Indian Industry (Calcutta: K. P. Bagchi and Co., 1981). Papola, T. S.. and R. S. Mathur, “Inter-Sectoral Linkages in Manufacturing: A Study of Metal Engineering Industry in Kanpur. India.” Mimeo (Lucknow: Giri Institute of Development Studies. 1979). Papola, T. S., and V. N. Mishra. “Aspects of rural industrialization,” Economic and Political 1Veekly. Special Number, Vol. 15 (1980). pp. 1733-17-16. Patel. V. G.. “Industrial health: Future of small and medium enterprises in Gujarat,” in D. T. Lakdawala (Ed.), Gujarat Economy: Problems and Prospects, Sardar Pate1 Institute of Economic and Social Research, (New Delhi: Allied Publishers Pvt. Ltd., 1983). Rao, R. S., and S. Brahme, “Regional planning as a Anvesak, Vol. 3 (1973), tool of development.” pp. 57-65. Sandesara, J. C., “Small industries in India: Evidence and interpretation.” Presidential Address, Glljarar Economic Associafion (Ahmedabad: 1980). Sandesara, J. C., “Small industry development programme in India: Efficacy, explanations and lessons: Some field studies,” Conference on Small Scale Industry Development (Delhi: Institute of Economic Growth, 22-29 March 1985). Shah, A., “Economics of scale: A study in Gujarat’s industrial sector,” PhD thesis (Ahmedabad: Gujarat University, July 1982). Sharan. G., “Informal education among workers: An experiment in Ahmedabad,” Economic and Poliricul Weekly (Review of Management), Vol. 15 (1980). pp. M.74-M.8-l. Singh, B., The Economics of Small Scale Indusrries: A Case Study of Small Scale Industrial Establishments ar Moradabad (Bombay: Asia Publishing House. 1961).

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..” The Singh, J.. -‘while the limb of law sleeps Times of India, Ahmedabad Edition (11 April 198-l). p. 1. Staley, E.. and Richard Morse. Modern Small-lndusrry for Developing Countries (New York: McGraw-Hill Book Company, 1965). Subrahmanian. K. K.. and S. P. Kashvao. “Small scale industry: A trend report.” A S&y Lf Research in Economics. Vol. 5 (New Delhi: Indian Council of Social Science Research, 1975). Subramanvam. G.. B. R. Rao. and K. R. Rao, “East Godavari vvcavers: The woof and warp of poverty.” Business Srrmdard (28 July 1983). Streefkerk. H.. “Too little to live on. too much to die on: Employment in small scale industries in rural South Gujarat.” Economic and Poliricrd Weekly. Vol. 16 (19Sl). pp. 659-668. Tyabji, N.. “Capitalism in India and the small industries policy.” Economic and Polifical Weekly (Special Number) \.ol. 15 (1980). pp. 1721-1732. Van der Veen. Jan H., “Small industries in India: The case study of Gujarat.” PhD thesis (Ithaca, NY: Cornell University, 1972). Wadhva, K.. and S. P. Kashyap, “Interregional industrialization in India: Role of urbanization and urban structure,” Paper presented at the Seminar on Development and Interregional Disparities in India (Lucknovv: Giri Institute of Develooment Studies. i983). on current policies for Watanabe, S.. “Reflection promoting small enterprises and subcontracting,” Internationul Labour Review, Vol. 110 (1974), pp. 405422. Wellisz, S. H.. “The coexistence of large and small firms: A study of Italian mechanical industries,” Quarreriy Jotlrnal of Economics. Vol. 71 (1957). pp. 116-131.