Getting micro, small and medium enterprises (MSMEs), who employ 92 per cent of the workforce, to grow more rapidly should be one of the pillars of any strategy for job creation. This year’s Economic Survey does candidly state that “Our policies must, therefore, focus on enabling MSMEs to grow by unshackling them”, and that “Job creation in India suffers from policies that foster dwarfs, i.e., small firms that never grow.”
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Compliance with the over 40 labour laws becomes mandatory once the number of workers employed by a firm crosses the prescribed threshold. There are different thresholds under different laws. Small firms find the costs of compliance too high and so often prefer to remain small or open a few more units in other names. They lose the gains that flow from the economies of scale. It is with scale that technological modernisation, marketing and advertising, which are necessary for growth, make commercial sense.
Source: Business Line