Abstract: Evidence suggests that unorganised manufacturing units are extremely credit starved. We study the effect of this credit unavailability for small firms and observe that it has altered the erstwhile production organization in a way that has led to the withdrawal of the small firms from both input and output market leading to increased production outsourcing between the formal and informal firms. Based on data collected from two major textile clusters in Maharashtra, India, we show that credit unavailability has led small firms to increasingly work for bigger firms as outsourced units. The paper also uses a measure of technology and productivity to point out that production re-organization resulting from credit unavailability should provide additional insights for standard measures of intra-country intra-industry trade.

 

Speaker Profile: Dr. Meghna Dutta is an Assistant Professor of Economics at the Indian Institute of Technology, Patna. A doctorate from Jadavpur University she has published in several Indian and international journals. She has also taught at the Tata Institute of Social Sciences, Goa Institute of Management, Naval War College, Goa. Her broad area of work includes micro economic modelling, econometrics and development economics. Her research mainly focuses on issues related to international trade, informal sector and micro economic modelling. 

 

Patna, 23 July. Asian Development Research Institute (ADRI) organised an online lecture on Friday, entitled "Credit Constraint and Intra-country Production Reorganization – evidence from Maharashtra”. Dr. Meghna Dutta, faculty at IIT Patna, delivered the lecture. The lecture was presided by Dr. Ashmita Gupta, Assistant Professor at ADRI.

In her lecture, Dr. Dutta said, “The growing emphasis on small and marginal enterprises as a major source of economic growth has caused greater focus to be placed on the efficiency of credit markets in meeting the needs of these businesses. The exclusion of the unorganized production units from the formal lending process has over the years led to increasing outsourcing of the existing production structure whereby the small firms are forced to work for bigger formal firms on ‘piece rate’ basis. This is effectively reducing even the owners of informal firms to becoming mere ‘piece rate’ wage labourers.”

Lack of formal credit for unorganised sector units has been a burning issue for a long time across the country and governments’ responses have often been far from being satisfactory. 

The lecture was attended by scholars and academics from Patna and other places in the country. Professor Prabhat P Ghosh, Member Secretary of ADRI was present on the occasion.