For the past 60 years, India has promoted small-scale industries (SSI). Industrial promotion meant
reserving certain products for manufacture by small and medium firms. The stated goal of Indian policy
makers was to promote employment growth and income redistribution. In this paper, we identify the
consequences for employment growth, wages, and output of dismantling India’s SSI reservations. We
find that districts more exposed to the de-reservation experienced higher employment and wage growth.
These effects are driven by the growth of factories that moved into the de-reserved product space, whose
expansion more than compensated for the shrinking of smaller, incumbent firms.