WORLD BANK ISSUES REPORT ON NEED FOR POLICIES TO PROMOTE HIGH GROWTH FIRMS IN INDIA

The World Bank has recently published a report on 16.11.2018 on the need for policies to encourage and promote high-growth firms and companies in emerging economies such as Brazil, India, Mexico, South Africa, Thailand, Turkey, etc.

As per the World Bank, entities that are young and have crossed their start-up phase are known as high-growth firms (HGFs). Further, entities having the following features are likely to experience high growth in their business life:

HGFs, generally, comprise of 3-20 percent of the manufacturing and service industries and contribute to over 50 percent of new jobs and sales in these sectors.

HGFs are larger in size than start-ups and, generally, employ more than 50 workers.

HGFs operate in various sectors ranging from low-tech to high-tech industries across a range of locations.

Investment in research and development (R&D) and new products, adoption of innovative ideas and techniques, employment of highly experienced and skilled staff, payment of higher wages and salaries, participation in global trade and foreign direct investment, etc, in manufacturing and services sector may lead a company to the high-growth stage.

Certain HGFs may specialize in providing knowledge-intensive services such as technical support, professional know-how about a particular subject, hardware consultancy, legal, tax, business and accounting consultancy, etc.

Whereas, certain HGFs may specialize in providing technology-intensive services such as scientific and technological knowledge, R&D services, engineering and computer related services, technical consultancy, technical testing and analysis, electronics and electrical appliances, etc.

Thus, the HGFs are capable of contributing to the overall growth of the economy.

The World Bank has, therefore, acknowledged the extraordinary capabilities and competence of the HGFs which have the potential to boost economic performance of the country.

But the high-growth stage is very volatile, unpredictable and difficult to sustain. As a result, HGFs either go back to the start-up stage or exit the market.

Further, the existing policies of the Government of India mostly focus on facilitating and supporting high-tech companies (say, employing more than 3000 staff), and start-ups in specific sectors, through easier registration and licensing procedures, easy access to finance, etc.

Therefore, there is a need for policies and framework to encourage and facilitate companies at their high-growth stage, such as Government schemes or grants, ease of entry and exit of HGFs to and from new markets, access to use of technology parks and clusters, presentation of financial and non-financial incentives, etc. Such policies would ensure that the companies sustain the high-growth stage, continue to survive in the market, continue to create employment opportunities and improve the economy of the country.

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer