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Small-scale enterprise policy in developing countries: an analysis of India's reservation policy

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  • Homi Katrak

    (Department of Economics, University of Surrey, Guildford, UK)

Abstract

This paper examines the effects of India's reservation policy to help the small-scale enterprises. Empirical tests showed three main results. Firstly, reservation has increased the number of production units, per item produced. Secondly, the units that produce mainly reserved items have higher levels of installed capacities, than those making mainly unreserved items, but the former do not have higher levels of production, thereby resulting in significantly lower levels of capacity utilisation. Thirdly, reservation has not helped reduce the problem of closures of small units. The empirical results suggest that reservation may have brought little help to production and employment in the small-scale units nor to the consumers of their products, while at the same time it may have restricted production and employment in the large units. Thus reservation may have caused a loss in overall economic welfare. Copyright © 1999 John Wiley & Sons, Ltd.

Suggested Citation

  • Homi Katrak, 1999. "Small-scale enterprise policy in developing countries: an analysis of India's reservation policy," Journal of International Development, John Wiley & Sons, Ltd., vol. 11(5), pages 701-715.
    • Handle: RePEc:wly:jintdv:v:11:y:1999:i:5:p:701-715
    DOI: 10.1002/(SICI)1099-1328(199907/08)11:5<701::AID-JID560>3.0.CO;2-M
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    References listed on IDEAS

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    1. Ramaswamy, K.V., 1994. "Small-Scale Manufacturing Industries in India: Some Aspects of size, Growth and Structure," Papers 105, Indira Gandhi Institute of Development Research-.
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    4. Sandee, H., 1994. "Promoting small scale and cottage industries in Indonesia : an impact analysis for central Java," Serie Research Memoranda 0010, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    5. Guhathakurta, Subhrajit, 1993. "Economic independence through protection? Emerging contradictions in India's small-scale sector," World Development, Elsevier, vol. 21(12), pages 2039-2054, December.
    6. Michael McPherson, 1995. "The hazards of small firms in Southern Africa," Journal of Development Studies, Taylor & Francis Journals, vol. 32(1), pages 31-54.
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