The Impact of Phasing Out of Import Licensing on Small Scale Industries

Over the past year or so there has been an increasing concern in the country about the likely impact of the elimination of quantitative restrictions on Indian industry. In this context, ICRIER commissioned a market survey in the Delhi metropolitan area to collect information on the products manufactured by small-scale industry that are facing competitive pressure from imported products. Mr. Sridhar Krishna has identified some of these products of the small-scale units that have been affected by increasing imports. The reasons for such adverse impact are very complex. Imports through informal channels (which avoid paying customs duty), and high customs duty on intermediates compound the inherent non-competitiveness of the small-scale sector. Other factors that are responsible include: lack of economies of scale, infrastructural inadequacies, high cost of credit, burdensome labour laws, etc