New Delhi, Jul 4 (IANS): Startups and young firms in sectors such as tourism, textile and leather with potential to create more jobs should get priority lending from the banks, the Economic Survey said on Thursday.

"Under MSME's Priority Sector Lending (PSL) targets, it is necessary to prioritise startups and 'infants' in high employment elastic sectors. This would enhance direct credit flow to sectors that can create jobs in the economy," the survey suggested.

As per PSL guidelines, 7.5 per cent of adjusted net bank credit (ANBC) or credit equivalent amount of off-balance sheet exposure, whichever is higher, is applicable to micro enterprises.

A day before the Union Budget, the flagship economic document said that there was need to re-orient government policies for the growth of micro, small and medium enterprises (MSMEs).

Grouping the MSMEs as "dwarfs" and "infants", the survey said that every incentive for fostering growth should have a "sunset" clause, say, for a period of five to seven years after which the firm should be able to sustain itself.

"The policy focus would thereby remain on infant firms," it said.

As compared to the small firms, it is the young firms that contribute significantly to employment and value added. Firms less than 10 years of age account for about 30 per cent of employment and about half the net value added (NVA).

The survey termed firms with less than 100 workers and 10-year old as "dwarfs". In comparison, firms that are small when they are young but can grow to become large as they age are called "infants". They have high productivity and higher value added in manufacturing.

"Therefore, while dwarfs consume vital resources that could possibly be given to infant firms, they contribute less to creation of jobs and economic growth as compared to infant firms," the survey said.

The survey also sought to focus on service sectors with high spillover effects such as tourism. It suggested to develop key tourist centres across various states.

"It is possible to identify 10 tourism spots in each of the larger 20 states and five spots in the nine smaller states and build road and air connectivity in these tourist attractions, which would boost economic activity along the entire route and would also reduce the migration of the rural labour force who form a major proportion of the total labour force," the Economic Survey said.