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Phase out reservation in SSIs: Survey

The Economic Survey asked the government to de-reserve SSI industries to effectively face global competition in wake of free imports.

india Updated: Feb 27, 2003 13:43 IST
Press Trust of India
Press Trust of India

The pre-Budget Economic Survey on Thursday asked the government to de-reserve industries earmarked for SSIs to effectively face global competition in the wake of free imports following removal of restrictions under the WTO agreement.

Although Small Scale sector performed creditably, reservation needs to be phased out for achieving efficient economies of scale in order to take on the competition from countries like China particularly after removal of quantitative restrictions, said the Survey, tabled in Parliament.

Despite the global and domestic recession, the Survey noted that the small scale industries had registered a higher growth rate than the overall industrial sector in terms of number of units, production, employment and exports.

During 2002-03, number of SSI units was estimated to have increased to 35.72 lakh from 34.42 lakh in the previous year, registering an increase of 3.8 per cent.

Exports also surged by 28.7 per cent to Rs 69,797 crore during 2000-01 from Rs 54,200 crore a year earlier.

With the removal of Quantitative Restrictions, imported goods are now marketed in India which has raised basic questions about the role for SSI reservation, it said.

"SSI reservation in India is handicapping the development of efficient economies of scale, while firms in countries such as China are able to compete effectively in the international and in the Indian market," the Survey said.

"The process of phasing out of SSI reservation, in consultation with stakeholders, would constitute an important element of policies that foster efficiency and productivity in India," it added.

First Published: Feb 27, 2003 13:43 IST