Industries Reserved for MSME Sector in India

Reservation and de-reservation of the products for particular sector is done under the Industries (Development & Regulation) Act, 1951. The original list was containing around 873 items that could be legally produced by only small / cottage sector in 1960s and 1970s. The idea of the governments of those days was to promote and facilitate the small sector because they were engines of employment generation. However, as of today, not a single item is reserved for small industries.

The last list was of 20 items in April 2015 and it contained items viz. pickles & chutneys, mustard oil (except solvent extracted), groundnut oil (except solvent extracted), wooden fixtures, exercise books and registers, wax candles, laundry soap, glass bangles, steel almirah, rolling shutters, steel chairs and tables, padlocks, stainless steel and aluminium utensils. On 13th April 2015, the NDA Government has de-reserved these products also.

Is the decision to not to reserve anything for small sector justified?

Yes. This is because the reserving manufacturing of products for small sectors implies that it blocks the production via latest technology and economy of scale. Due to this, such products face competition and threat from cheap imports. For example, today a huge part of market in padlocks is occupied by cheap Chinese locks. Not allowing big industries to take up their production was a counterproductive restriction.  This happened with garment products which was once in this reserved list. India could never realize its potential as garment exports because of this restriction as the average size of an Indian garment factory was not even 10th of such factories in Bangladesh. Today, Bangladesh has gone much ahead of India in Garment exports. This move though symbolic is a good step towards making India a genuine manufacturing hub.