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Open Access Publications from the University of California

Regulation of Firm Size in Industrial Development: The Experience of Two Manufacturing Sectors in India

  • Author(s): Guhathakurta, Subhrajit
  • et al.

This paper examines two manufacturing sectors in India and shows that regulation aimed at protection does not provide the necessary impetus for growth and survival of small indus­ tries. Rather, such regulation provides a fertile territOI)' for larger businesses to avail themselves of undue rents through protected markets and regulatory loopholes. The article also proposes a new role for the state to better serve the twin objectives of social equity and industrial growth. Such a role would rely on the existing coalitions of small enterprises and pool resources to consolidate their economic and political power. The article concludes that state institutions can pro­ vide a forum for small-business coalitions that would create conditions for all scales of operation to survive and grow without protective regulations.

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