MPSC 2024 Prelims Paper-I · Question 38 of 100

Correct — option (4), Small Industry. The committee constituted under the chairmanship of Dr Abid Hussain in December 1995 was the Expert Committee on Small Enterprises, and it submitted its report on 27 January 1997. Its subject was the small-scale sector and the whole apparatus of protection built around it since Independence. India had promoted small industry through two main instruments: a definition based on a ceiling on investment in plant and machinery, which conferred eligibility for concessional credit, excise relief and other assistance; and a reservation policy under which a long list of products could be manufactured only by small-scale units. The committee's terms of reference asked it to examine the promotional and protective policies and the direct assistance programmes for small industry, to review the definition, the legal framework and the very heterogeneous composition of the sector, and to assess what the reservation policy had actually done to the growth of small enterprises. Its central conclusion was that protection had outlived its usefulness. Reservation, it found, had become irrelevant in a liberalising and globalising economy, had left protected units small, technologically backward and uncompetitive rather than helping them grow, and should be withdrawn in a phased manner. The report accordingly argued for a shift from protecting small firms to enabling them — better credit, better technology and a policy environment that let a successful small unit expand rather than penalising it for crossing the investment ceiling. The timing is what makes the question answerable: 1995 places the committee squarely in the post-1991 liberalisation period, when the protective structures of the earlier decades were being reviewed one by one, and the small-scale sector's reservation list was among the most conspicuous of them.

• (1)Education — Dr Abid Hussain's public career lay in trade, industry and economic administration — he served as a member of the Planning Commission and as India's Ambassador to the United States, and he chaired an earlier committee on trade policies in 1984. He is not associated with education policy, which in this period was being reviewed through a quite different set of bodies working on the National Policy on Education and school curriculum load. Attaching a committee to the wrong subject because the chairman's name is only half-remembered is precisely the error this option is set to catch.
• (2)Agriculture — No agriculture committee was constituted under Abid Hussain in 1995, and nothing in his record connects him to farm policy. The confusion is understandable in a general way, since the mid-1990s saw a great deal of committee activity across sectors as the post-1991 reforms worked outward from trade and industry, but the specific body chaired by Abid Hussain in December 1995 was the Expert Committee on Small Enterprises, and its report of January 1997 dealt with the definition, protection and competitiveness of small industrial units, not with agriculture.
• (3)Large Industry — This inverts the committee's subject. Large industry was not what the committee studied; it was, in effect, the competition from which the small-scale sector had been shielded by the reservation of products and by concessional treatment. The whole question the committee was asked to answer was whether that shielding still made sense, and it concluded that it did not and that reservation should be phased out. An option naming large industry therefore names the other side of the very policy debate the committee was appointed to settle, which is what makes it a plausible-looking but clearly wrong choice.

India's policy towards small industry rested for four decades on protection rather than competition. A small-scale industrial unit was defined by a ceiling on its investment in plant and machinery, and units below that ceiling received concessional credit, excise concessions, priority in government purchase and other support. Alongside this ran the reservation policy: a schedule of products, at its height running to several hundred items, that only small-scale units were permitted to manufacture. The rationale was employment — small units are labour-intensive and geographically dispersed — and the protection of a sector that could not have withstood competition from larger firms. The difficulty, which became acute after the liberalisation of 1991, was that the same structure discouraged growth: a unit that succeeded and wanted to expand would cross the investment ceiling and lose its eligibility, so the incentive was to stay small, and reserved products faced no competitive pressure to improve in technology or quality. The Abid Hussain committee of 1995-97 is the landmark statement of that critique, and the dereservation it recommended was carried out in stages over the following years, with the sector eventually redefined and re-legislated as micro, small and medium enterprises.

Committee-and-chairman questions are a standing feature of MPSC's economy and polity sections, and they are asked as bare recall: name the subject given the chairman, or the chairman given the subject. Two habits make them manageable. The first is to attach a date and a sector to each name, because the date usually explains the sector — a 1995 committee sits in the post-liberalisation review period, when protection of every kind was being reassessed, which points towards industry policy rather than education or agriculture. The second is to attach the committee's single most quotable recommendation, since the harder version of the question asks what the committee said rather than what it studied; for Abid Hussain that recommendation is the phased withdrawal of the small-scale reservation list. Note also that the paper's stem is compressed to the point of being unclear — it reads 'to study the problems of India in the year 1995' — and the blank is asking for the sector the committee examined.

• The Expert Committee on Small Enterprises was constituted under the chairmanship of Dr Abid Hussain in December 1995 and submitted its report on 27 January 1997.
• Its terms of reference covered the promotional and protective policies for small industry, the definition and legal framework of the sector, and the effect of the reservation policy on the growth of small enterprises.
• The committee concluded that the reservation of products for the small-scale sector had become irrelevant under globalisation and recommended that it be withdrawn in a phased manner.
• Small-scale status in India was defined by a ceiling on investment in plant and machinery, which conferred access to concessional credit and other assistance but also penalised a unit that grew beyond the ceiling.
• Dr Abid Hussain served as a member of the Planning Commission and as India's Ambassador to the United States, and had earlier chaired a committee on trade policies in 1984.

• Guessing the subject of a committee from the chairman's name alone; the same name can be attached to more than one committee, and Abid Hussain chaired an earlier one on trade policies in 1984
• Confusing the year the committee was constituted, 1995, with the year it reported, 1997 — questions are set on both and the two are often interchanged
• Reading 'large industry' as plausible because the committee discussed competition from larger firms; the sector it was appointed to examine was the small one
• Remembering that a committee existed without remembering what it recommended, when the harder version of the question asks for the recommendation

MPSC's economy section asks committees and commissions in three forms: match the chairman to the subject, name the year, or name the principal recommendation. The distractor subjects are drawn from other sectors that also saw committee activity in the same period, so elimination by plausibility does not work and the association has to be learned directly. It is worth maintaining a short list of the committees that shaped post-1991 economic policy, each with its chairman, its year, its sector and one recommendation, because that is exactly the granularity at which the questions are set.

No directly related past PYQ was found.

• practice — not a real PYQ

  The Expert Committee on Small Enterprises chaired by Dr Abid Hussain is best remembered for recommending which of the following ?

  • (a)The phased withdrawal of the reservation of products for the small-scale sector
  • (b)The nationalisation of small-scale industrial units
  • (c)A complete ban on foreign investment in small industry
  • (d)The transfer of small industry policy to the state governments

  Answer(a) The phased withdrawal of the reservation of products for the small-scale sector — the committee found that reservation had become irrelevant under globalisation and had left protected units small, technologically backward and uncompetitive, and it argued for shifting policy from protecting small firms to enabling them through credit, technology and a growth-friendly environment.

• practice — not a real PYQ

  Under India's traditional small-scale industry policy, small-scale status was determined chiefly by which criterion ?

  • (a)The number of workers employed
  • (b)Annual turnover
  • (c)Investment in plant and machinery
  • (d)The share of exports in total sales

  Answer(c) Investment in plant and machinery — a unit below the prescribed investment ceiling qualified as small-scale and became eligible for concessional credit, excise relief and other assistance. The perverse effect was that a growing unit crossing the ceiling lost its benefits, which is one of the reasons the Abid Hussain committee criticised the framework.