Remove quota, allow investment

ECONOMIC SURVEY 2004-05/ SMALL SCALE INDUSTRY

Legislation planned to end inspector raj.

Calling for dereservation, the Economic Survey said reservation of items for exclusive manufacture in the small-scale sector has constrained investment in critical areas with large growth potential.

As most items in the reserved category can now be imported freely, continuing with the policy made no sense. The survey has identified knitwear as a critical area that can attract investment.

At present, there are 605 reserved items. In October 2004, the government dereserved 85 items from the reserved list.

Availability of credit, technological obsolescence, infrastructure bottlenecks and marketing regulations are major impediments for the sector.

A promotional package is now being formulated. A suitable legislation to address issues of "inspector raj" is being finalised, according to the survey.

Nearly 80 per cent of the lending from the Rs 10,000 crore Small and Medium Enterprises Fund that was operationalised by SIDBI in April 2004, has been earmarked for the small-scale sector. The loans will be charged at an interest rate of 2 per cent below the prime lending rate of SIDBI.

The National Commission on Enterprises in the unorganised sector that was set up in September 2004 will recommend measures to increase productivity and generate large-scale employment in the sector.

There were 118.53 lakh small scale units in the country in 2004-05, out of which 102.15 lakh were unregistered. The production in the sector stood at Rs 3,99,020 crore. It employed 282.82 lakh people.