Dwarfs are defined as small firms that do not grow beyond their small size, yet they dominate the Indian economy and hold back job creation and productivity, the Economic Survey said on Thursday.

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"While dwarfs account for half of all the firms in organized manufacturing by number, their share in employment is only 13.3 per cent. In fact, their share in Net Value Added NVA is a miniscule 4.7 per cent despite dominating half the economic landscape, " the survey said.

The survey said the firms that are able to grow over time to become large are the biggest contributors to employment and productivity in the economy.

In contrast, dwarfs that remain small despite becoming older remain the lowest contributors to employment and productivity in the economy.

The survey noted that firms in India do not grow enough to create the necessary jobs and productivity in the economy. The Survey report suggested incentivising infant firms, i.e. firms less than ten years of age.