The M.S.M.E. sector is the backbone of the Indian Economy. It contributes to around 40 % of exports and 45 % of manufacturing output. India’s archaic labor laws and complex bureaucracy are hampering the growth of this sector as enterprises prefer not to expand.
The lack of expansion by M.S.M.E.’s means that new jobs are not being created. This jobless growth is the reason for rising unemployment in the country. India’s labor laws are limiting the growth potential and employment generation capabilities of M.S.M.E.’s. Unlike other countries in Asia, India’s manufacturing sector is not able to reap benefits of cost reduction in large-scale manufacturing.
The rise in labor costs in China presents a unique opportunity for India. If India implements reforms and eases compliance, it can become the next manufacturing hub in Asia. To successfully execute the ‘Make In India’ Campaign, the Government needs to muster up the will to reform long-standing labor laws and aid in the growth of M.S.M.E.’s
Source: Economic Times