Factor Substitution and Factor Demand in Indian Modern Small Enterprise: A Case Study of Metal Products

This study analyses the possibilities for substitution of labour for other factors namely capital and materials in the modern small scale sector. This is in the light of the notion that small enterprises face a lower labour cost in Telation to other factors like capital. A study of metal products industries shows that they are not employment generators in the sense of substituting labour for other inputs. In other words, cheap labour does not guarantee more/increased employment. There is also a need for firms to have easy access to capital at cheaper interest rates. The result also imply a need for more meaningful policy relating industry-specific factor prices rather than a general one covering all industries.