Dwarf firms

Indian Economy glossary

Also called: Dwarfs · Topic: Industrial Policy, Public Sector, MSMEs and Disinvestment · NCERT: Beyond NCERT

Meaning

Dwarf firms are firms that stay small even after many years in business. Infant firms are small only because they are young and may still grow. Dwarfs matter because they add little to jobs and productivity. The Economic Survey 2018-19 ("Nourishing Dwarfs to become Giants") found that small firms over 10 years old make up more than half of India's organised manufacturing firms but provide only a small share of its jobs and productivity. A common reason is rules tied to size. Growing past a limit can mean losing benefits or facing stricter labour laws, so firms choose to stay small.

Example

A 15-year-old auto-parts unit still has 20 workers. If it grows, it will cross the MSME limit and lose its concessions, so it stays small. That makes it a dwarf. A 2-year-old unit with 20 workers that is growing fast is an infant firm.

Don't confuse with

  • Infant firms: Both are small, but an infant is small because it is young. A dwarf is small even though it is old.

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