Topic: General Studies 3,2:
- Government policies and interventions for development in various sectors and issues arising out of their design and implementation
Aatmanirbhar Bharat & Small Entrepreneurs
- The slow growth of India’s manufacturing sector has been a long-standing concern for policymakers.
- India’s manufacturing sector generates less than 20% of the national output, and it has been overshadowed by China.
- It is aimed at addressing this deficiency. More restrictive trade will enable entrepreneurs to tap into India’s large domestic market rather than relying just on exports.
- The shift towards the domestic market has been fueled by the size of the domestic market, the rise of the middle-class, and India’s young demographics.
- Restrictive trade regime
- India’s expansion in the manufacturing sector came primarily from the expansion of small entrepreneurs, who account for 99% of establishments and create 80% of jobs in the manufacturing sector.
- Small entrepreneurs expanded in the tradable sector but contracted in the non-tradable sector.
- The shift towards a more restrictive trade regime may benefit a few large conglomerates, but it will harm small entrepreneurs, and slow down the pace of job creation.
- The entire net job growth in the manufacturing sector during the last three decades came primarily from small enterprises in the tradable sector.
- This trend in the expansion of jobs and small enterprises in the manufacturing sector was not observed in the non-tradable sector.
- The expansion of small entrepreneurs in the tradable sector and contraction in the non-tradable sector shows that India’s trade alkanization has primarily benefitted small entrepreneurs, who became an integral part of the global supply chains.
- Trade alkanization played a key role in enabling small enterprises to become an integral part of the global supply chains.
- Trade alkanization and the rapid pace of alkanizatio boosted India’s size of the informal tradable sector.
- Young entrepreneurs in the informal sector have created more jobs compared to the large established conglomerates in the formal sector.
- The informal sector has remained the key driver of poverty reduction, compared to publicly funded poverty programmes.
- Small entrepreneurs conform much more closely to the overall contours of India’s economic geography than large conglomerates.
- Not all jobs in the informal economy yield paltry incomes. Many self-employed earn more than unskilled or low-skilled workers in the formal economy.
- There are huge horizontal and vertical linkages between large and small firms. Small firms are an important supplier of inputs to large firms.
Friendly Trade Regime
- India’s young demographics, and limited employment generated by large industrial conglomerates, has increased the importance of a friendly trade regime for small entrepreneurs who create a majority of jobs in India.
- Trade flexibility and global integration has enabled millions of more women to find jobs, and better manage work-life balance.
- The reversal in the trade regime may break the friendship that currently exists between large and small enterprises and informal and formal sectors.