Small minds at work

It8217;s a hard act to follow. The Vajpayee government8217;s attempts to balance Gandhi with globalisation; an official policy of liberalisation with orders from the Swadeshi Jagran Manch, makes for nothing but confusion. And never is this confusion more manifest than when it comes to the small scale sector. Some time ago, a high-powered committee headed by Home minister L.K. Advani was constituted to decide the items which should come under the small scale industry list and the ones that need to be dereserved. Consensus eluded it completely 8212; with the textiles and commerce ministries arraigned against the ministry of small scale industries. The committee also got itself entangled in knots over whether it was advisable to increase foreign direct investment from the 24 per cent at present to 49 per cent with a view to providing a fillip to technology transfer in the sector. At long last, the committee agreed to bring three sectors 8212; leather, toys and readymade garments 8212; out of the protectionist regime.

These were crucial issues that need to be tackled given India8217;s commitments to the WTO regime. There are, at present, some 800-odd items reserved for the small scale sector, out of which 143 items are protected by quantitative restrictions on imports. But the country has, willy-nilly, to prepare for the final phase of the quantitative restriction phase out over the next few years and political pussyfooting will not work. On Wednesday, at the first-ever national conference on small scale industries, Prime Minister Vajpayee announced a package for the small scale sector that was a curious combination of pragmatic economics and populist politics. The streamlining of the inspector raj that the new policy envisaged made eminent sense. As minister for small scale industries Vasundhara Raje Scindia herself pointed out, even a single-man unit is subjected to a minimum of 37 inspections, 52 laws and 116 forms and registers and it8217;s time to do away with such an anachronistic system. But having said this, the Rs 447crore that the prime minister announced as a bail-out for the handloom sector smacked of financial profligacy that the country can ill afford. It is not even clear how this relief will provide a fillip to the sector.

All this is not to decry the importance of this sector to the economy. Apart from its crucial contribution to the export profile of the country, it has been long recognised as an important source of employment in semi-urban and semi-rural areas. From all evidence, the rural-urban divide is growing significantly. According to the recent National Sample Survey on Household Consumer Expenditure, there has been a 6.7 per cent decline in rural spending between 1991 and 1998 and rural poverty has actually registered a rise of 3.42 per cent in this period. Given this reality small scale units could, ideally, have acted as localised engines of employment and growth. While the government spent Rs 370 crore during the Eight Five Year Plan on a programme to train rural youth for self-employment, it has not led to a commensurate growth in local small scale units, as it should have. What is required is money spent in providing targeted assistance to this sector, rather than pouring it down a bottomless pit. This is whythe proposal to conduct a fresh census of this sector is perhaps the most sensible of all the policy measures announced so far.