India’s unemployment crisis: Not enough jobs because small firms cannot grow, says a new book

India’s Employment Crisis And What the Future Holds
Book Excerpt 

Why do small companies remain small in India? And how do they even survive if they are unproductive?

In India’s case a deadly cocktail of economic and non-economic factors inhibits small firms from becoming larger. The economic factors include capital, labour, land and infrastructure, and many of these have played out in the case of SLN Technologies

Professor Amit Khandelwal, Jerome A Chazen Professor of Global Business at Columbia Business School in New York, throws light on the missing middle. He talks about how, in India, it is very hard to fire workers once they are hired, because of the country’s labour regulations that have remained unchanged for decades.

The country’s labour laws incentivise firms to stay small and hire informal labour.

Capital is required to become a large company. But as we see in SLN’s case, borrowing from banks isn’t easy in India.

“The majority of the lending [is . . .