RIEB Discussion Paper Series No.2021-08

RIEB Discussion Paper Series No.2021-08


The Weak Nexus between Small and Medium Factories and Large Factories in India's Assembly Industries


This article focuses on the present structure of supply chain in the four assembly industries in which multi-tier subcontracting systems have developed after economic reforms. Factories are classified into three sizes—large, medium and small—depending on the average number of workers. The nexus between small and medium factories is strong. While growth in production of small factories depends on the input consumed by medium factories in the same state, the former contributes to the growth of production of medium factories. Interdependence between the two is observed. However, small factories are outcompeted by large factories. As large factories grow, small factories lose their market share. The nexus between small and large factories is weak. At present, a large portion of small factories are not engaged in the supply chain of assemblers. Only some medium factories are involved. Moreover, discontinuity exists between large factories and micro, small and medium enterprises.


Subcontracting; Assembly industries; MSMEs; Supply chain; Subcontractor; Assembler; Procurement


School of Econimics, Senshu University

Takahiro SATO
Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: +81-78-803-7036
FAX: +81-78-803-7059