At present, direct exports by the SSI sector accounts for nearly 35 per cent of total exports and are mainly on accounts of garments, leather, plastic products, chemicals and gems and jewellery.
The SSI reservation, which was initiated with the twin objectives of ensuring increased production of consumer goods in small-scale sector and expanding employment opportunities, has denied industry to improve the technology content of the product on a sustained basis, the RBI says in the currency and finance report released on Wednesday.
The increasing openness of the economy has posed a challenge before domestic SSI sector on account of cheaper imports and entry of new products.
Increasing competitive pressure and required technology upgradation have induced dereservation in a phased manner and now 675 items are reserved for SSIs as against 836 items reserved for SSIs in 1989.
SSI reservation has also affected entrepreneurial skills, manufacturing production and employment growth. This handicap has also affected the growth of exports from the sector, thereby impeding the growth potential of some of the most dynamic export products from the country, the RBI adds.