Published in April 1958
IMPACT OF TAXATION ON
SMALL AND MEDIUM SCALE INDUSTRIES
MURARJI J. VAIDYA
(Text of a public lecture delivered under the auspices of
Forum of Free Enterprise on April 9, 1958 in Bombay.
The author was Founder-Vice-President, Forum of Free Enterprise).
It is necessary at the outset to define the terms, “Small Scale” and “Medium Scale” industries because there appears to be a deal of confusion over the precise connotation of these terms. Government have defined small industries as those which employ 50 workmen where power is employed and 100 workmen where power is not employed and the industry is manually ...view middle of the document...
The importance of these industries cannot be underestimated. The small and medium scale industries provide the greatest scope for employment both at present and in future. The total employment in all organised industries in the country is about 27 lakhs. Out of these, the organised medium and small scale industries account for an employment of over 12 lakhs of workers. This means that nearly 45 per cent of total employment in organized industries is provided by these industries. Moreover, there are another 8 or 10 lakh workers who are employed in unorganised small industries. Thus the total number of workers employed by both the medium and small scale industries is about 20 to 22 lakhs.
Apart from the large employment provided by these industries, their importance in the matter of national income is next to agriculture, commerce and transport. Agriculture accounts for Rs.4,220 crores of our national income and commerce and transport put together account for about Rs.1,490 crores. Small-scale industries account for Rs.960 crores, whereas large industries all put together, account for only Rs.910 crores. Other services account for Rs.590 crores. It is obvious from these figures that the small and medium scale industries are more important from the point of view of national income than large-scale industries just as they are more important from the point of view of employment.
Then again, in these industries the efficiency of utilisation of financial, personnel and technical resources is higher than that in large-scale industries. The reason is that these industries are started and run generally by people who know the technique and who are also the organisers of capital because they bring finance from their friends and relations. Then again, due to the personal factor, overheads are less in these industries than in large-scale industries. The employee-employer relationship, which is very important is much better in these industries because of the small size of the units and personal contact. As the number of employees is small, it is possible for the management to be in close touch with employees. Therefore, the amount of labour trouble and the number of industrial disputes are much less in small and medium scale industries than in large industries where it is not possible to maintain the human touch because of physical limitations. Due to these factors, small and medium scale industries do play and will continue to play an important role in the development of the country. But unfortunately, the importance of these industries is not recognised even by the Planning Commission. The study devoted by the Commission to these industries is almost next to nothing. The result has been that these industries have not received the amount of assistance and encouragement which their economic importance requires in the context of our plans of development.
The people who run these industries...