Micro Small Medium Enterprises India 1980-2005

Abstract

In India quite contrary to earlier Censuses the growth of rural enterprises for 1998-2005 witnessed a much higher growth (5.4% p.a) than the urban enterprises (3.7% p.a). This is an interesting finding which suggests that there is a shift towards growth of rural non-farm enterprises as against only urban centered growth witnessed in earlier pre 1998 Economic Censuses, a much awaited shift from a long time. It would also have implications on positive changes in rural incomes and reduction in outmigration of population due to distress induced elements. This finding needs to be corroborated with further studies to find the overall impact of growth of rural enterprises on people living in rural areas. Compared to previous censuses of 1980-1990 and 1990-98 both agriculture and especially non-agriculture enterprises witnessed a higher growth by 2005 Census. Another interesting finding is that among the rural enterprises the growth of establishments was much higher (8.8 % p.a) than OAE enterprises (4.2% p.a) between1998-2005. Whereas in earlier Censuses of 1980-1990 and 1990-98 establishments (employing larger wage workers along with larger investment and value addition) had always higher growth than the OAE (own account family run small enterprises).

Establishments also witnessed a higher growth in urban enterprises. There is a need to investigate what kind of establishments are emerging and what type of OAEs are on a decline to get a complete clear picture of enterprise transformation in the rural areas.The growth rate of employment during 1998 to 2005 was of the order of 2.8% per annum (3.9%in rural and 1.7% in urban). This is considerably higher than the growth rate (1.75%) observed during 1990 to 1998. However the growth of workers in the enterprises (2.8% per annum) is much lower than the number of enterprises (4.7 % p.a). Even in establishments where hired workers are used the employment growth is lower. A striking point is the very low percentage shares of women workers as compared to men in the enterprises especially in urban areas.

It is regrettable to look at rural diversification being concentrated only in one major activity i.e Farming of Animals. There is tremendous need to diversify the agricultural enterprises from simple animal husbandry to other activities such as agro-processing enterprises having higher value addition; processing of cereals, pulses, oilseeds and other cash crops, agro-processing and agro-services (spraying, tractor operation, repairs).

Coming to the growth of the enterprises it is the communications (15.8% p.a) followed by Finance and real estate (9.6% p.a), Transport storage and ware housing (6.4% p.a), Manufacturing (6.0 % p.a), Retail Trade ( 4.9% p.a), Restaurants&Hotels (3.3 % p.a) which showed a positive and higher growth from 1998-2005. Distribution of establishments by size class of employments revealed that around 95% of establishments were having just 1 to 5 workers, 3.42% of establishments employed 6 to 9 workers and only 1.51% of establishments employed 10 workers and above. The emerging smaller scale distribution of enterprises may be due to the preference for having smaller and medium enterprises. Further one needs to look at why this preference for small sector is growing all together? Is it due to economies of production or is it due to evading the Factory’s Act (laws which apply for employing higher number of workers).

The total enterprises owned by Scheduled Castes (SC)/Scheduled Tribes (ST) are 8.82% and 3.64% respectively; however it does not correspond to their proportion in total population SC (19.7%) / ST (8.5%). There is also need for inclusive policy intervention by the State.

In correlation and regression analysis Agriculture enterprises do not have any correlation to any of the independent enterprises. For non-agriculture enterprises only Literacy, Electricity and Per-capita State Gross domestic Product (Lnnagri) are significantly correlated. Many other variables like poverty irrigation etc. were not significantly correlated with the dependent variable.

Keywords: enterprises, India, growth, industry, service sector

JEL Classification: M2, J16, O53, O18, O17, N85