Abstract
This paper evaluates the effects of a voluntary registration policy with government authorities on financial performance of urban microenterprises in the Indian manufacturing sector. Using data from the 2006 World Bank survey of Indian microenterprises and applying the semi-parametric propensity score matching technique, we find that being registered leads to significant gains in sales per employee and value added per employee. Large gains are also noted for male-owned firms, those operating with or without paid labor and those operating outside of the owner’s home.
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Notes
A detailed discussion of the evolution of the small-scale industries sector in India can be found in Little et al. (1987).
We use the exchange rate of USD 1 = Rs. 50 for the entire analysis.
This classification has been in place since the enactment of the Micro, Small and Medium Enterprises Development Act (MSMED), 2006. Prior to this, manufacturing enterprises were defined as either micro or small on the basis of investment in plant and machinery. The classification was as follows: enterprises with investment of up to Rs. 2.5 million were classified as micro; and enterprises with investment between Rs. 2.5 million and Rs. 10 million were classified as small. In addition to this, the Industrial Policy Resolution of 1977 defined a ‘tiny’ sector as one with investment in machinery and equipment up to Rs. 0.1 million and situated in towns with a population of less than 50,000 according to 1971 census, and in villages.
Coad and Tamvada (2012) use the 2002–2003 all-India census of registered small-scale industries to explore determinants of firm growth and various types of barriers faced by small enterprises.
The detailed sampling methodology is available in Ferrari and Dhingra (2009).
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Acknowledgments
I thank Jeffrey Nugent, Saurabh Singhal, Deepti Goel, Ashwini Deshpande and two anonymous referees for detailed comments. All remaining errors are mine.
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Sharma, S. Benefits of a registration policy for microenterprise performance in India. Small Bus Econ 42, 153–164 (2014). https://doi.org/10.1007/s11187-013-9475-y
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DOI: https://doi.org/10.1007/s11187-013-9475-y