A reform agenda on industry and enterprise, focused on decentralisation, is critical for moving the stalled economy of Kerala, says the Kochi based Enterprise Development think-tank, Institute of Small Enterprises and Development (ISED).
This observation is carried by this year’s Pre-budget Memorandum submitted to the State Finance Minister by the Institute. The Institute’s Memorandum puts forward a thirty- two point agenda of reviving existing programmes and schemes, and to bring about an investor- friendly atmosphere, wherein, the focus is on decentralisation..
The Memorandum draws a rather uncomfortable picture regarding the enterprise demography of Kerala. The Institute’s analysis using business demographic tools, note that Kerala’s performance on the enterprise development front cannot be explained in a rather populist way, using numbers like new units registered, and an estimated employment creation thereto.
Compared with the annual birth rate of MSME units in the country, the rate of opening up of new firms is not encouraging. Even though the annual growth rate is in the range of 20%, the compound annual growth rate in new – firm creation is much below this.
The sustainability and growth of the enterprise system requires a constant or declining death rate in the number of units already set up.. However, for every 100 new unit created, not less than 30 units go sick and go out of the stream. The Institute finds a danger signal in the so-called Natality Rate, which means, the ratio of new units registered to the stock of existing units.
For every existing 100 firms in Kerala, on an average 20-30 new firms are added to the stock annually. While this indicates a significant contribution to the Kerala economy, the very sustainability of these units is constrained by various other factors. Entrepreneurship conserved is more valuable than new entrepreneurship created, the Memorandum points out.
ISED advocates a decentralised enterprise development strategy , with an active role and participation of the entrepreneurial people at the Panchayat/Municipal level. The entrepreneurial people, including the village shopkeeper, has every right to get explained in the Gram Sabha as to how the Panchayat has utilised the money collected, by way of taxes, is utilised.
The Institute which coined the concepts of Udyog Aadhar, also points out that the leakage of Professional Tax also is substantial. ISED recommends a participative entrepreneurs platform called Udyami Panchayat, which can bring changes at the grass root level.. The distinct level conflict resolution mechanism called Single Window Scheme has proved to be ineffective, in a State where the local people and the environmental groups often have an unfriendly attitude towards entrepreneurs.
The only solution lies in involving these people themselves in the local economic development process, says ISED Director. Dr. P.M.Mathew. A new policy approach and strategies for the enterprise sector, is the ISED response to the development crisis, as painted by the Finance Minister. Deepening decentralisation, given Kerala’s track record, can be the best solution, says the Memorandum.
The Government of India has appointed ISED to draft the forthcoming National Policy on Micro, Small and Medium Enterprises(MSMEs). The High power Committee, under the Chairmanship of Prabhat Kumar, Former Cabinet Secretary, appointed by the Prime Minister, is expected to submit its report in October this year.
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