Return on capital better for Medium sized enterprises: RBI data
New Delhi, 20 Oct (KNN) In an important finding, RBI Bulletin (October 2021) has found that in MSMEs category the Return on Physical Capital (RoPC) increases with size of the firms.
The RoPC is an important metric to gauge value creation in manufacturing due to the predominant role of physical capital in production.
The aggregate RoPC of the Indian formal manufacturing sector is estimated at 19.5 per cent stands comparable to the returns observed in other developing countries.
“This study explores the variation in RoPC in the formal manufacturing sector across various firm characteristics such as age, location, size, type of ownership, capital intensity and type of activity using the firm level Annual Survey of Industries (ASI) data for the year 2017-18,” the communique adds.
But the medium enterprises constitute a minuscule part of MSME sector.
According to Federation of Indian Micro and Small & Medium Enterprises (FISME), of the total 5.2. Million registered MSMEs as on today with Ministry of MSME, barely 0.6% are Medium sized enterprises.
Due to host of regulatory and promotional policies, most units tend to stay small.
The Economic Survey 2019 dubbed it as if ‘the Indian economy were dominated by dwarfs’.
A demand is growing to free larger among the small firms to grow to medium and large by removing the artificial barriers.
Medium enterprises are barred from taking advantage of 25% set-aside ear-marked for MSMEs in central purchase and are denied access to delayed payment support available for their smaller counterparts.