Role of large and small firms in India's engineering exports

Abstract

This paper examines the role of large and small firms in India's engineering exports under the existing policy regime and industrial structure. The government's industrial and trade policies and the domestic market structure appears to have encouraged large firms to be more inward oriented. The domestic market for final products is not only protected from imports but also characterised by strong entry barriers, which, in turn, appears to have resulted in higher relative profitability of domestic sales compared to exports. On the other hand, several small firms, which concentrate in producing intermediate products for (a few) large firms appear to be driven to export markets to reduce their dependence on the domestic market. The paper derives certain broad observations and policy implications based on a firm level field study and a set of econometric exercises.