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    Question

    With reference to the ‘dwarf firms’,

    consider the following statement: I. Firms employing less than 100 workers. II. It account for more than half of all the firms in the organized manufacturing sector. III. These are the biggest contributor to the economy in terms of employment and productivity. Which of the statements given above is/are NOT correct?
    A I only Correct Answer Incorrect Answer
    B II only Correct Answer Incorrect Answer
    C III only Correct Answer Incorrect Answer
    D I and II only Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Statement 1 is correct - Firms that are both small (less than 100 workers) and older than ten years are categorized as dwarfs firms. Statement 2 is correct - The dwarf firms account for half of all the firms in organized manufacturing by number. Hence, Despite the dominance of dwarf firms in economy their share in Net Value Added (NVA) or productivity and employment is very small (i.e 7.6%). In contrast, young, large firms (firms that have more than 100 employees and are not more than 10 years old) account for only 5.5% of firms by number but their contribution to the economy is higher than dwarf firms i.e (21.2% of the employment and 37.2% of the NVA). Firms that are able to grow over time to become large are the biggest contributors to employment and productivity in the economy. Statement III is not correct - Dwarfs that remain small despite becoming older remain the lowest contributors to employment and productivity in the economy.

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