The latest round of interest rate hikes by banks has hurt the profitability and competitiveness of micro, small and medium enterprises (MSMEs) by increasing the cost of credit. The move was triggered by the increase in repo and reverse repo rates by the Reserve Bank of India (RBI) on January 25.
“The government wants to cool down the economy by bringing down credit off-take, but by doing so, it is eroding our competitiveness in the international market. Almost all public and private sector banks have hiked their interest rates after RBI’s key rate hike. This is affecting our profitability as well,” said Ashok Patel, former president, Federation of Gujarat Industries (FGI).
Reserve Bank of India had raised the repo and reverse repo rates by 25 basis points each. The repo rate, the one at which RBI lends to banks is now 6.50 per cent, while the reverse repo rate, the rate banks get for depositing funds with RBI, stands at 5.50 per cent. In 2010, RBI had raised the key rates six times by 25 basis points each.
Gujarat houses significant numbers of MSMEs in sectors like engineering, chemicals, pharmaceuticals, plastics, ceramics and food processing. “We have around 950 SMEs in dyes and dyestuff operations alone. All of them are facing margin pressures due to increased interest rates. There has been an average two per cent hike in interest rate over the past six months, which small units find difficult to bear,” said Shankarlal Patel, president, Gujarat Dyestuff Manufacturers’ Association (GDMA).
“There is ample opportunity for MSMEs in Gujarat. But at the same time, industry needs to move cautiously ahead, as factors like inflation, interest rates and reduction in competitiveness may limit their profitability compared to what was visualised at the time of signing the MoU,” cautioned P K Modi of PKM Advisors, a financial advisory firm in Ahmedabad.
Banks do not see much pressure on micro and small units. But medium units with a turnover of over Rs 5 crore may feel the pinch due to the rate hikes. “MSMEs are our priority. Micro units are almost exempted from the pass-on effect of the rate hike. Small units may feel a little impact due to increased interest rates. They need not worry as of now,” said a senior official of Bank of India in Ahmedabad.
Industry players said the situation was becoming more difficult, as raw material and transportation costs had increased sharply over the past several months. “The situation is unfavourable for new units. Many existing units may avoid expansion due to high interest costs,” added Ashok Patel.
Monday, May 9, 2011
SMEs in home decor sector back on their feet
The home furnishings and home decor accessories industry is back on its feet, with the effects of the economic slowdown waning slowly, according to the findings of a survey of SMEs in the industry, conducted by IndiaMART Knowledge Services (IKS).
About 58.3 per cent of the respondents reported that the market has picked up since 2009, while 29.17 per cent replied that there was no change. Consumer sentiment also showed an upward trend, with 70.8 per cent of respondents witnessing an upward trend, though marginal, while 12.5 per cent said the rise had surpassed their expectations.
When compared to 2009, 16.67 per cent of the respondents said their sales had risen by more than 20 per cent and 66.67 per cent said their sales increased by up to 20 per cent. As against this, 16.67 per cent said their sales had declined.
With respect to product prices, five per cent said prices had shown adverse trends in 2010 and 25 per cent reported no change over 2009. While 45 per cent of the respondents recorded a slight improvement in prices, 25 per cent reported a significant improvement compared to 2009.
The findings reveal that the increase in input costs is greater than the improvement in product prices. A majority of the respondents (60 per cent) experienced significantly increased input costs, while 35 per cent said that the rise was marginal. Only five per cent reported stability in inputs costs.
As regards exports, 16.67 per cent of SMEs said their export demand had declined in 2010, 62.5 per cent reported an improvement of up to 20 per cent, and 20.8 per cent reported an improvement of more than 20 per cent. Clearly, the sector has begun to witness better export demand.
Only 15 per cent of the respondents are satisfied with the liquidity scenario, while 85 per cent said that liquidity needs to be further eased.
About 58.3 per cent of the respondents reported that the market has picked up since 2009, while 29.17 per cent replied that there was no change. Consumer sentiment also showed an upward trend, with 70.8 per cent of respondents witnessing an upward trend, though marginal, while 12.5 per cent said the rise had surpassed their expectations.
When compared to 2009, 16.67 per cent of the respondents said their sales had risen by more than 20 per cent and 66.67 per cent said their sales increased by up to 20 per cent. As against this, 16.67 per cent said their sales had declined.
With respect to product prices, five per cent said prices had shown adverse trends in 2010 and 25 per cent reported no change over 2009. While 45 per cent of the respondents recorded a slight improvement in prices, 25 per cent reported a significant improvement compared to 2009.
The findings reveal that the increase in input costs is greater than the improvement in product prices. A majority of the respondents (60 per cent) experienced significantly increased input costs, while 35 per cent said that the rise was marginal. Only five per cent reported stability in inputs costs.
As regards exports, 16.67 per cent of SMEs said their export demand had declined in 2010, 62.5 per cent reported an improvement of up to 20 per cent, and 20.8 per cent reported an improvement of more than 20 per cent. Clearly, the sector has begun to witness better export demand.
Only 15 per cent of the respondents are satisfied with the liquidity scenario, while 85 per cent said that liquidity needs to be further eased.
New tool to help MSMEs register Indianised Net addresses
A new tool now makes it easier to find and register ‘Indianised’ Internet addresses. It has been developed by Verisign and launched by Tradeindia.com, an online B2B marketplace in India, which provides users with suggestions for Indianised domain names, as well as names based on popular lucky numbers.
Demand for internet addresses in India is growing exponentially. With 1.8 million domain names registered in India already and more being added every day, finding the perfect domain name can be challenging. The Verisign Indianised Name Localiser helps users by suggesting domain names tailored to Indian audiences or addresses that incorporate users’ lucky numbers.
“This tool will greatly enhance the user experience while registering a domain name by making domain name suggestions that are Indianised,” said Bikky Khosla, chief executive officer of Tradeindia.com.
Manish Dalal, vice-president-Asia Pacific, Verisign, said, “The Indianised Name Localiser makes the user experience of searching for a domain name simple and relevant.”
Tradeindia.com has since 1996 been offering business solutions to the global EXIM community through online services, directory services and facilitation of trade promotional events. VeriSign, Inc. is a provider of Internet infrastructure services for the networked world, and helps companies and consumers to connect online.
Demand for internet addresses in India is growing exponentially. With 1.8 million domain names registered in India already and more being added every day, finding the perfect domain name can be challenging. The Verisign Indianised Name Localiser helps users by suggesting domain names tailored to Indian audiences or addresses that incorporate users’ lucky numbers.
“This tool will greatly enhance the user experience while registering a domain name by making domain name suggestions that are Indianised,” said Bikky Khosla, chief executive officer of Tradeindia.com.
Manish Dalal, vice-president-Asia Pacific, Verisign, said, “The Indianised Name Localiser makes the user experience of searching for a domain name simple and relevant.”
Tradeindia.com has since 1996 been offering business solutions to the global EXIM community through online services, directory services and facilitation of trade promotional events. VeriSign, Inc. is a provider of Internet infrastructure services for the networked world, and helps companies and consumers to connect online.
Leather units saw recovery in 2010, says survey
A survey of SMEs in the leather industry, conducted by IndiaMART Knowledge Services (IKS), revealed that 61.9 per cent of the respondents said the market for leather products had picked up in 2010 vis-a-vis 2009, while 19.05 per cent replied that it had declined. A similar number of respondents (19.05 per cent) reported no change.
According to the survey, overall sales growth was far better than export growth in 2010, compared to 2009. While 42.86 per cent of respondents said their sales grew by more than 20 per cent in 2010 compared to 2009, only 33.33 per cent said their exports increased by more than 20 per cent in 2010.
Similarly, 47.62 per cent of respondents said their sales grew in the 0-20 per cent range, while 38.10 per cent reported that their export growth was 0-20 per cent.
Customer sentiment also showed signs of improvement. A majority of the respondents (57.14 per cent) reported that they witnessed an average improvement in consumer sentiment in 2010 as against 2009, while 23.81 per cent said consumer sentiment showed a negative trend, and only 19.05 per cent said that the improvement surpassed their expectations.
The survey further revealed that 61.90 per cent of respondents felt that the main challenge facing them was the liquidity crunch, while 33.33 per cent felt that their main challenge was poor consumer response. Only 4.76 per cent listed lack of infrastructure as their main challenge. A majority of those surveyed (57.14 per cent) said that liquidity needs to be eased.
According to the survey, overall sales growth was far better than export growth in 2010, compared to 2009. While 42.86 per cent of respondents said their sales grew by more than 20 per cent in 2010 compared to 2009, only 33.33 per cent said their exports increased by more than 20 per cent in 2010.
Similarly, 47.62 per cent of respondents said their sales grew in the 0-20 per cent range, while 38.10 per cent reported that their export growth was 0-20 per cent.
Customer sentiment also showed signs of improvement. A majority of the respondents (57.14 per cent) reported that they witnessed an average improvement in consumer sentiment in 2010 as against 2009, while 23.81 per cent said consumer sentiment showed a negative trend, and only 19.05 per cent said that the improvement surpassed their expectations.
The survey further revealed that 61.90 per cent of respondents felt that the main challenge facing them was the liquidity crunch, while 33.33 per cent felt that their main challenge was poor consumer response. Only 4.76 per cent listed lack of infrastructure as their main challenge. A majority of those surveyed (57.14 per cent) said that liquidity needs to be eased.
Indian SMEs not prepared for disasters by Symantec
Symantec Corporation’s 2011 disaster preparedness survey for small and medium enterprises, which measured the attitudes and practices of SMEs and their customers towards disaster preparedness, reveal that though SMEs in India are at risk, they are still not making disaster preparedness a priority until they experience a disaster or data loss.
The findings show that many SMEs do not understand the importance of disaster preparedness. Sixty-eight per cent of the respondents do not have a plan in place, 50 per cent said that it never occurred to them to put together a plan and 17 per cent stated that disaster preparedness is not a priority for them.
Twenty-seven per cent of respondents live in regions susceptible to natural disasters while in the past 12 months, any given typical SME experienced six computer outages. The leading causes cited were cyber attacks, power outages or natural disasters.
“Disasters are unpredictable and can happen due to natural causes, human errors or IT system failures. SMEs that handle sensitive information such as customer records, credit card details or personnel files, cannot afford to risk data loss incidents. Findings from the research show that SMBs in India still haven’t recognised the tremendous impact of disasters. Simple planning can enable SMBs to protect their information in the event of it, which in turn will help them build trust with their customers,” said Vineet Sood, Symantec’s head, channels & alliances.
The findings show that many SMEs do not understand the importance of disaster preparedness. Sixty-eight per cent of the respondents do not have a plan in place, 50 per cent said that it never occurred to them to put together a plan and 17 per cent stated that disaster preparedness is not a priority for them.
Twenty-seven per cent of respondents live in regions susceptible to natural disasters while in the past 12 months, any given typical SME experienced six computer outages. The leading causes cited were cyber attacks, power outages or natural disasters.
“Disasters are unpredictable and can happen due to natural causes, human errors or IT system failures. SMEs that handle sensitive information such as customer records, credit card details or personnel files, cannot afford to risk data loss incidents. Findings from the research show that SMBs in India still haven’t recognised the tremendous impact of disasters. Simple planning can enable SMBs to protect their information in the event of it, which in turn will help them build trust with their customers,” said Vineet Sood, Symantec’s head, channels & alliances.
SME vendor development scheme launched
The presence of leading companies like Tata Motors, Bajaj Auto, Nestle, Hindustan Unilever (HUL), Hero Honda and Ashok Leyland, which have set up manufacturing units in Uttarakhand, is offering new opportunities for micro, small and medium enterprises (MSMEs), according to the Confederation of Indian Industry (CII).
Realising the immense potential, CII has launched an initiative to provide a platform which can help MSMEs look for new opportunities like the supply of components and provision of services like transport and logistics.
The recent three-day expo at the Haridwar industrial estate, jointly organised by CII and the state government, was an effort in this direction. It also ensured a dialogue between manufacturers, service providers and end-users, setting the stage for further industrial growth in the hill state.
More of such expos are in the offing. “We are planning to organise at least one such expo every year. The next time, we are planning to move to the Pantnagar industrial estate, which is a hub of big companies like Nestle, Britannia and Dabur,” said Vibha Malhotra, head of policy at the CII Northern Region here.
After the Centre announced a concessional industrial package for Uttarakhand in 2003, comprising tax sops and other benefits, the state government established several modern industrial estates where companies set up shop. In the next few years, over 2,446 new units entailing an investment of over Rs 29,000 crores were established.
CII roped in businessmen from various states to showcase the potential of the Haridwar industrial estate. The key highlight of the expo was the vendor development programme and procurement system, specially designed to promote intra-industry trade, healthy business relationships, outsourcing of MSME products and components, and the adoption of best practices, in order to avail of collective bargaining for common benefits from governments, public sector enterprises (PSEs) and industry.
A Sanyal, a senior deputy general manager at BHEL, said the company was looking for vendors to supply various components.
“The Indian auto component industry is expected to grow over four-fold to $113 billion by 2020, according to the Automotive Component Manufacturers Association (Acma). The industry is highly fragmented and we expect that such industrial expos will create a platform to boost this industry by providing meaningful opportunities and an interactive platform for MSMEs,” said S P Chowdhary, an official of Shivam Autotech, Haridwar.
Narinder Bhambra, president of the All Indian Fasteners Association, said he had fruitful talks with officials of Tata Motors and Sterlite Technologies, and hoped that something meaningful would come of it.
Realising the immense potential, CII has launched an initiative to provide a platform which can help MSMEs look for new opportunities like the supply of components and provision of services like transport and logistics.
The recent three-day expo at the Haridwar industrial estate, jointly organised by CII and the state government, was an effort in this direction. It also ensured a dialogue between manufacturers, service providers and end-users, setting the stage for further industrial growth in the hill state.
More of such expos are in the offing. “We are planning to organise at least one such expo every year. The next time, we are planning to move to the Pantnagar industrial estate, which is a hub of big companies like Nestle, Britannia and Dabur,” said Vibha Malhotra, head of policy at the CII Northern Region here.
After the Centre announced a concessional industrial package for Uttarakhand in 2003, comprising tax sops and other benefits, the state government established several modern industrial estates where companies set up shop. In the next few years, over 2,446 new units entailing an investment of over Rs 29,000 crores were established.
CII roped in businessmen from various states to showcase the potential of the Haridwar industrial estate. The key highlight of the expo was the vendor development programme and procurement system, specially designed to promote intra-industry trade, healthy business relationships, outsourcing of MSME products and components, and the adoption of best practices, in order to avail of collective bargaining for common benefits from governments, public sector enterprises (PSEs) and industry.
A Sanyal, a senior deputy general manager at BHEL, said the company was looking for vendors to supply various components.
“The Indian auto component industry is expected to grow over four-fold to $113 billion by 2020, according to the Automotive Component Manufacturers Association (Acma). The industry is highly fragmented and we expect that such industrial expos will create a platform to boost this industry by providing meaningful opportunities and an interactive platform for MSMEs,” said S P Chowdhary, an official of Shivam Autotech, Haridwar.
Narinder Bhambra, president of the All Indian Fasteners Association, said he had fruitful talks with officials of Tata Motors and Sterlite Technologies, and hoped that something meaningful would come of it.
Defence cluster sees big business
The offset policy will offer a $5 billion opportunity for local industry
The city’s SME cluster, which has evolved over the past few decades around defence research establishment activities, is getting ready for an all-new business environment provided by the offset policy.
Until now, what mattered to a vendor was its ability to fabricate components. Now, global corporations setting foot in India are going beyond this technical aspect, since they have to source 30 per cent of the contract value domestically.
“The offset policy will be a $5 billion opportunity by the time the defence ministry finalises the aircraft contract. The policy unveiled in 2009 has now started translating into new business opportunities for local industry. Even if three per cent of this business comes to the Hyderabad cluster, the opportunity would be huge,” says Subba Rao, chairman and managing director of Ananth Technologies.
To qualify for a contract from a global company, a vendor has to comply with specific standards in terms of testing, quality and management practices. “This is a major challenge faced by several SMEs, as they have to make additional investments to achieve the standards required by global companies. This is not an easy proposition, as many of these companies are small,” says Ravinder Reddy, chairman of MTAR Technologies, which is involved in defence and aerospace.
There are over 100 engineering and electronics companies in the city with annual turnover in the Rs 10-150 crore range. These form the vendor base of the defence and aerospace sectors. Though most have attained a high degree of technological prowess, not many have grown in size — defence contracts have been a low-volume business so far.
“Hyderabad is the centre for the entire knowledge-based defence industry and is much larger in size than the one in Bangalore. Core defence research and development happen here. That is why the support industry is also much larger here,” says Subba Rao.
These companies together generate an annual business of over Rs 2,000 crore. They operate in the fields of mechanical, metallurgical, alloys, electrical, electronics and software support systems, composites, hydraulics, tooling, forging and foundry.
A few SMEs also have global exposure. Ananth Technologies, an electronics and embedded systems company, provides core embedded systems, telemetry, telecommand, avionics systems for launch vehicles, simulator units among other products and services to the Indian Space Research Organisation (Isro), Space Applications Centre and National Remote Sensing Agency.
Similarly, Zetatek Industries Limited’s product portfolio includes test equipment, vibration testing, climatic chambers and quality control services for all defence projects. The company also makes motion simulators for testing of defence equipment, avionics components and navigation components. “We are the only company in the country that can calibrate guided systems,” says its chairman and managing director, R Siva Kumar.
The embedded systems and other electronic equipment developed by Ananth Technologies also go into foreign satellite systems being built by Isro. Zetatek exports its equipment to Israel, Russia, China, Germany and Spain. Siva Kumar says exports contribute 20 per cent of Zetatek’s business.
According to a survey by PricewaterhouseCoopers, global companies can achieve cost savings of 15-25 per cent through local sourcing, depending on the type of component.
The Tata group’s decision to establish four aerospace manufacturing units in collaboration with Sikorsky and Lockheed Martin in Hyderabad is testimony to the strengths of this cluster. The state government has also set up an exclusive aerospace SEZ near Hyderabad to boost the sector.
To cash in on global opportunities, 40-50 companies led by Ravinder Reddy of MTAR Technologies and Subba Rao of Ananth Technologies have jointly formed a company of technocrats christened Samuha Engineering Industries Ltd. The government has given 200 acres of land in the aerospace SEZ to this cluster company, which includes SEC Industries, S&U Mek Engineering and SKM Technologies.
Apart from developing basic infrastructure with Rs 200 crore, the group will also set up facilities for high-precision meteorological tests and measurements to be utilised by its members.
Samuha plans to launch operations at the SEZ in the first quarter of 2012. Later, it will upgrade to sub-systems, systems and integration from the present level of component fabrication, says Sriram M M, director of Samuha. It will bid for high-value global contracts, which in turn will be sub-contracted to SMEs, including its promoter members, in the SEZ.
The city’s SME cluster, which has evolved over the past few decades around defence research establishment activities, is getting ready for an all-new business environment provided by the offset policy.
Until now, what mattered to a vendor was its ability to fabricate components. Now, global corporations setting foot in India are going beyond this technical aspect, since they have to source 30 per cent of the contract value domestically.
“The offset policy will be a $5 billion opportunity by the time the defence ministry finalises the aircraft contract. The policy unveiled in 2009 has now started translating into new business opportunities for local industry. Even if three per cent of this business comes to the Hyderabad cluster, the opportunity would be huge,” says Subba Rao, chairman and managing director of Ananth Technologies.
To qualify for a contract from a global company, a vendor has to comply with specific standards in terms of testing, quality and management practices. “This is a major challenge faced by several SMEs, as they have to make additional investments to achieve the standards required by global companies. This is not an easy proposition, as many of these companies are small,” says Ravinder Reddy, chairman of MTAR Technologies, which is involved in defence and aerospace.
There are over 100 engineering and electronics companies in the city with annual turnover in the Rs 10-150 crore range. These form the vendor base of the defence and aerospace sectors. Though most have attained a high degree of technological prowess, not many have grown in size — defence contracts have been a low-volume business so far.
“Hyderabad is the centre for the entire knowledge-based defence industry and is much larger in size than the one in Bangalore. Core defence research and development happen here. That is why the support industry is also much larger here,” says Subba Rao.
These companies together generate an annual business of over Rs 2,000 crore. They operate in the fields of mechanical, metallurgical, alloys, electrical, electronics and software support systems, composites, hydraulics, tooling, forging and foundry.
A few SMEs also have global exposure. Ananth Technologies, an electronics and embedded systems company, provides core embedded systems, telemetry, telecommand, avionics systems for launch vehicles, simulator units among other products and services to the Indian Space Research Organisation (Isro), Space Applications Centre and National Remote Sensing Agency.
Similarly, Zetatek Industries Limited’s product portfolio includes test equipment, vibration testing, climatic chambers and quality control services for all defence projects. The company also makes motion simulators for testing of defence equipment, avionics components and navigation components. “We are the only company in the country that can calibrate guided systems,” says its chairman and managing director, R Siva Kumar.
The embedded systems and other electronic equipment developed by Ananth Technologies also go into foreign satellite systems being built by Isro. Zetatek exports its equipment to Israel, Russia, China, Germany and Spain. Siva Kumar says exports contribute 20 per cent of Zetatek’s business.
According to a survey by PricewaterhouseCoopers, global companies can achieve cost savings of 15-25 per cent through local sourcing, depending on the type of component.
The Tata group’s decision to establish four aerospace manufacturing units in collaboration with Sikorsky and Lockheed Martin in Hyderabad is testimony to the strengths of this cluster. The state government has also set up an exclusive aerospace SEZ near Hyderabad to boost the sector.
To cash in on global opportunities, 40-50 companies led by Ravinder Reddy of MTAR Technologies and Subba Rao of Ananth Technologies have jointly formed a company of technocrats christened Samuha Engineering Industries Ltd. The government has given 200 acres of land in the aerospace SEZ to this cluster company, which includes SEC Industries, S&U Mek Engineering and SKM Technologies.
Apart from developing basic infrastructure with Rs 200 crore, the group will also set up facilities for high-precision meteorological tests and measurements to be utilised by its members.
Samuha plans to launch operations at the SEZ in the first quarter of 2012. Later, it will upgrade to sub-systems, systems and integration from the present level of component fabrication, says Sriram M M, director of Samuha. It will bid for high-value global contracts, which in turn will be sub-contracted to SMEs, including its promoter members, in the SEZ.
Non-conventional finance needed: CII
In a study on the need for financial support for MSMEs, the Confederation of Indian Industry (CII) has emphasised that conventional methods of financing need to be supplemented by non-conventional measures as well, pointing out that the government itself believes in the need for non-conventional ways of providing finance.
The study quotes the Secretary in the ministry of MSME, Uday Kumar Varma, as saying, “Conventional financing is not enough to help the MSME sector and there is need for out-of-the-box thinking.”
Varma adds, “Perhaps capital gains tax exemption could be extended to those re-investing their wealth in MSMEs. This might bring in substantial funds into the sector in the backdrop of the buoyancy in the real estate sector.”
The study describes efforts by other countries to bring MSMEs on a par with other organisations. In Singapore, for example, under a programme called Micro Loan, the authorities provide loans of up to S$50,000 per enterprise (in enterprises having 10 or fewer employees) to fund daily business operations.
The Japanese government provides affordable funding through institutions such as Japan Finance Corporation for Small Business, National Life Finance Corporation and Shoko Chukin Bank. South Korea has a specialised agency, the Small and Medium Business Administration, to provide a boost to the country’s SME sector.
In Hungary the financial system offers a full range of financial and support services to SMEs through commercial banks and development finance institutions, while South Africa has established the Micro Finance Apex Fund to facilitate the provision of affordable access to finance on the part of SMEs.
The study notes that in a bid to help MSMEs, the government has launched ‘UDYAMI’, a helpline to satisfy the long-felt need for a single-point facility through which to provide MSMEs with a wide spectrum of information and accessibility to banks.
CII favours tax benefits to companies to source from MSMEs and pay the latter promptly, as well as efforts to encourage foreign direct investment (FDI) in MSMEs through such measures as automatic approval for 100 per cent FDI from NRIs and single-window clearance across all sub-sectors of MSM
The study quotes the Secretary in the ministry of MSME, Uday Kumar Varma, as saying, “Conventional financing is not enough to help the MSME sector and there is need for out-of-the-box thinking.”
Varma adds, “Perhaps capital gains tax exemption could be extended to those re-investing their wealth in MSMEs. This might bring in substantial funds into the sector in the backdrop of the buoyancy in the real estate sector.”
The study describes efforts by other countries to bring MSMEs on a par with other organisations. In Singapore, for example, under a programme called Micro Loan, the authorities provide loans of up to S$50,000 per enterprise (in enterprises having 10 or fewer employees) to fund daily business operations.
The Japanese government provides affordable funding through institutions such as Japan Finance Corporation for Small Business, National Life Finance Corporation and Shoko Chukin Bank. South Korea has a specialised agency, the Small and Medium Business Administration, to provide a boost to the country’s SME sector.
In Hungary the financial system offers a full range of financial and support services to SMEs through commercial banks and development finance institutions, while South Africa has established the Micro Finance Apex Fund to facilitate the provision of affordable access to finance on the part of SMEs.
The study notes that in a bid to help MSMEs, the government has launched ‘UDYAMI’, a helpline to satisfy the long-felt need for a single-point facility through which to provide MSMEs with a wide spectrum of information and accessibility to banks.
CII favours tax benefits to companies to source from MSMEs and pay the latter promptly, as well as efforts to encourage foreign direct investment (FDI) in MSMEs through such measures as automatic approval for 100 per cent FDI from NRIs and single-window clearance across all sub-sectors of MSM
Retail SMEs expect 20%-plus growth in 2011: Survey
A survey of SMEs in the retail sector, conducted by IndiaMART Knowledge Services (IKS), has revealed that 72 per cent of the respondents expect sales to grow by more than 20 per cent in 2011. Twenty-four per cent expect growth of up to 20 per cent and four per cent predict a decline in sales, compared to 2010.
About 60 per cent of the respondents reported that the market had picked up pace in 2010, 36 per cent reported no change and four per cent felt the situation had worsened. For 16 per cent of the respondents, consumer sentiment surpassed expectations in 2010 while a majority (72 per cent) witnessed an average improvement in consumer sentiment. Twelve per cent experienced a negative change.
When respondents were asked to compare sales of 2010 with 2009, 40 per cent said sales had increased by more than 20 per cent, 40 per cent reported a sales increase of up to 20 per cent, and 20 per cent reported that sales had declined in 2010.
The survey also revealed that 16 per cent of the respondents reported that export demand had increased by more than 20 per cent in 2010, 56 per cent said that demand increased by up to 20 per cent, and 28 per cent said that export demand had declined since 2009.
According to the survey, 44 per cent of the respondents felt that product prices fared better in 2010 as compared to 2009. Of these, eight per cent experienced significant improvement in product prices and 36 per cent found that prices improved only marginally. While 32 per cent of the respondents found no change in product prices, 24 per cent reported that they declined in 2010.
About 60 per cent of the respondents reported that the market had picked up pace in 2010, 36 per cent reported no change and four per cent felt the situation had worsened. For 16 per cent of the respondents, consumer sentiment surpassed expectations in 2010 while a majority (72 per cent) witnessed an average improvement in consumer sentiment. Twelve per cent experienced a negative change.
When respondents were asked to compare sales of 2010 with 2009, 40 per cent said sales had increased by more than 20 per cent, 40 per cent reported a sales increase of up to 20 per cent, and 20 per cent reported that sales had declined in 2010.
The survey also revealed that 16 per cent of the respondents reported that export demand had increased by more than 20 per cent in 2010, 56 per cent said that demand increased by up to 20 per cent, and 28 per cent said that export demand had declined since 2009.
According to the survey, 44 per cent of the respondents felt that product prices fared better in 2010 as compared to 2009. Of these, eight per cent experienced significant improvement in product prices and 36 per cent found that prices improved only marginally. While 32 per cent of the respondents found no change in product prices, 24 per cent reported that they declined in 2010.
Pharma exporters oppose mandatory bar coding
Say the move will increase input costs and adversely impact exports
Small and medium-sized pharmaceutical companies, which account for 40 per cent of India’s total drug exports, are opposed to mandatory implementation of bar coding on all medicine consignments meant for export. They claim that this decision by the Centre, to take effect from 1 July this year and aimed at combating the problem of spurious drugs, will not serve this purpose.
On the contrary, they say, it will increase the input costs of SMEs and could also have an adverse impact on Indian exports of drug formulations to the highly competitive world markets.
Total exports of pharmaceuticals by SMEs are about Rs 20,000 crore. There are about 6,000 SMEs in the pharma industry, spread across the country.
SPIC (SME Pharma Industries Confederation) Secretary General Jagdeep Singh told Business Standard, “The Director General of Foreign Trade (DGFT) order, which makes bar coding essential for exports from July 2011, should be withdrawn. If it isn’t, SMEs in the pharma industry will be wiped out from the formulations business. We are already facing tough competition from China, and with the guidelines in place, we fear that our exports will decline, as it will make products costlier.”
He added that even the bar coding company appointed by the government agrees that bar codes cannot prevent fake or spurious drugs, arguing that they can be replicated more easily than credit cards. He said separate bar codes being mandated for every strip of tablets will add to the cost for manufacturers.
He added, “The cost of registration for each SME will be around Rs 20,000, besides which there will be recurring expenses of Rs 1 lakh per month for bar coding. Besides that, the installation of machines would require an investment of Rs 1 crore per packing line. This will increase the input cost and virtually hand over the export market to China or multinationals, to the detriment of Indian SME exporters.”
He said that he had already written a letter to the prime minister, seeking his intervention for withdrawal of mandatory bar coding for drug exports in the national interest. SPIC has about 3,000 members.
Earlier, in an interaction with Business Standard, Surinder Singh, Drug Controller General of India, said, “The cost will not be too high as feared by the pharma companies. According to me, it will cost less than 30 paise per strip.” But manufacturers think that even 30 paise per strip is too high, citing the example of paracetamol tablets which are exported at Rs 1.50 for a strip of 10 tablets.
Indian Drug Manufacturers’ Association President N R Munjal said, "According to the Central Drugs Standard Control Organisation (CDSCO), the extent of spurious drugs in retail pharmacies is only 0.003 per cent, so I don’t think there is any need to implement bar coding. The move will definitely affect small pharma units, as they would need at least Rs 1 crore to set up one line for bar coding, besides other recurring expenses. The whole process needs computerisation, while currently SMEs have manual packing lines.”
Munjal added that if the government wants to implement it at any cost, IDMA had recommended that soft loans should be provided to SMEs. “We have proposed that the department of industries should give soft loans to pharma units at 3-4 per cent,” he said.
IDMA is one of the oldest associations of pharma companies. It has 800 members, consisting of large, medium and small companies.
Small and medium-sized pharmaceutical companies, which account for 40 per cent of India’s total drug exports, are opposed to mandatory implementation of bar coding on all medicine consignments meant for export. They claim that this decision by the Centre, to take effect from 1 July this year and aimed at combating the problem of spurious drugs, will not serve this purpose.
On the contrary, they say, it will increase the input costs of SMEs and could also have an adverse impact on Indian exports of drug formulations to the highly competitive world markets.
Total exports of pharmaceuticals by SMEs are about Rs 20,000 crore. There are about 6,000 SMEs in the pharma industry, spread across the country.
SPIC (SME Pharma Industries Confederation) Secretary General Jagdeep Singh told Business Standard, “The Director General of Foreign Trade (DGFT) order, which makes bar coding essential for exports from July 2011, should be withdrawn. If it isn’t, SMEs in the pharma industry will be wiped out from the formulations business. We are already facing tough competition from China, and with the guidelines in place, we fear that our exports will decline, as it will make products costlier.”
He added that even the bar coding company appointed by the government agrees that bar codes cannot prevent fake or spurious drugs, arguing that they can be replicated more easily than credit cards. He said separate bar codes being mandated for every strip of tablets will add to the cost for manufacturers.
He added, “The cost of registration for each SME will be around Rs 20,000, besides which there will be recurring expenses of Rs 1 lakh per month for bar coding. Besides that, the installation of machines would require an investment of Rs 1 crore per packing line. This will increase the input cost and virtually hand over the export market to China or multinationals, to the detriment of Indian SME exporters.”
He said that he had already written a letter to the prime minister, seeking his intervention for withdrawal of mandatory bar coding for drug exports in the national interest. SPIC has about 3,000 members.
Earlier, in an interaction with Business Standard, Surinder Singh, Drug Controller General of India, said, “The cost will not be too high as feared by the pharma companies. According to me, it will cost less than 30 paise per strip.” But manufacturers think that even 30 paise per strip is too high, citing the example of paracetamol tablets which are exported at Rs 1.50 for a strip of 10 tablets.
Indian Drug Manufacturers’ Association President N R Munjal said, "According to the Central Drugs Standard Control Organisation (CDSCO), the extent of spurious drugs in retail pharmacies is only 0.003 per cent, so I don’t think there is any need to implement bar coding. The move will definitely affect small pharma units, as they would need at least Rs 1 crore to set up one line for bar coding, besides other recurring expenses. The whole process needs computerisation, while currently SMEs have manual packing lines.”
Munjal added that if the government wants to implement it at any cost, IDMA had recommended that soft loans should be provided to SMEs. “We have proposed that the department of industries should give soft loans to pharma units at 3-4 per cent,” he said.
IDMA is one of the oldest associations of pharma companies. It has 800 members, consisting of large, medium and small companies.
Large companies give small units a helping hand
Large corporate houses are helping micro and small enterprises (MSEs) to keep pace with the changing times, especially in the matter of introducing innovative measures to help them turn cost-efficient.
Last month the logistics company DHL organised a “CEO mentoring clinic” in Chandigarh, which focussed on providing MSEs with insights on cost reduction and time management. Chandigarh has over 2,500 units which are registered as small-scale units.
Officials from DHL said the programme was conceived and developed with a perspective aimed at equipping MSEs with knowledge that would enable them to take a big leap forward.
The series will be held in 12-15 cities across India, where DHL will participate as the logistics mentor, using these events as a platform from which to address the logistics needs of MSEs.
J R Singhal, former chairman, CII (Punjab region) maintained that MSEs had a symbiotic relationship with large corporate houses, which offered corporate houses an opportunity to outsource their requirements, while MSEs gained an opportunity to modernise.
The CII-Avantha Centre for Competitiveness for MSEs, established in Chandigarh by the Avantha Group, is another example of a large corporate house offering its expertise to MSEs.
The centre is currently providing consultancy services to 54 companies in Ludhiana (Punjab) in areas such as energy management, quality management, cost management, and human resource management. The centre has already completed consultancy exercises with 64 clusters, impacting 524 companies across sectors all over India.
Last month the logistics company DHL organised a “CEO mentoring clinic” in Chandigarh, which focussed on providing MSEs with insights on cost reduction and time management. Chandigarh has over 2,500 units which are registered as small-scale units.
Officials from DHL said the programme was conceived and developed with a perspective aimed at equipping MSEs with knowledge that would enable them to take a big leap forward.
The series will be held in 12-15 cities across India, where DHL will participate as the logistics mentor, using these events as a platform from which to address the logistics needs of MSEs.
J R Singhal, former chairman, CII (Punjab region) maintained that MSEs had a symbiotic relationship with large corporate houses, which offered corporate houses an opportunity to outsource their requirements, while MSEs gained an opportunity to modernise.
The CII-Avantha Centre for Competitiveness for MSEs, established in Chandigarh by the Avantha Group, is another example of a large corporate house offering its expertise to MSEs.
The centre is currently providing consultancy services to 54 companies in Ludhiana (Punjab) in areas such as energy management, quality management, cost management, and human resource management. The centre has already completed consultancy exercises with 64 clusters, impacting 524 companies across sectors all over India.
Favourable procurement policy will help SMEs: CII
Closer links between large and small units will benefit the entire supply chain
Many of the problems faced by micro, small and medium enterprises (MSMEs) — lack of structured markets, delayed payments from large customers, low availability and high cost of capital, obsolete technology and lack of skilled manpower — can be addressed through preferential procurement of goods and services produced by MSMEs, according to a paper by the Confederation of Indian Industry (CII).
Such a procurement policy would be a powerful tool for exercising a positive influence on the fortunes of MSMEs, considering that the government and public sector units (PSUs) are the biggest buyers in the country, according to CII.
The paper notes that Australia, Brazil, China, the European Union, the UK and the US all have preferential procurement policies favouring small businesses.
The MSME Development Act, 2006 does in fact stipulate that the central and state governments “may, by order, notify from time to time” such preferential procurement policies. Accordingly, the Union government’s MSME ministry is drawing up a public procurement policy which provides that 20 per cent of Central/State government and PSE procurements will be made from MSMEs over a period of three years. The policy is at the draft consultative stage.
CII quotes Union Ministry of MSME Secretary Uday Kumar Varma as saying, “Notification of the proposed Public Procurement Policy...will offer a much needed and less optimally used avenue for increased consumption of MSME products by Government departments and PSUs.”
The paper also suggests that the government and government agencies need to fashion a policy providing for buying, on a much larger scale, products manufactured by women, in order to help in the uplift of women entrepreneurs.
CII has suggested that the government should provide tax benefits to companies that source from MSMEs and notify a preference policy governing procurement (by the Central and State governments, their ministries, aided institutions and PSUs) of goods and services produced by MSMEs.
CII noted that such supplier-customer relationships between MSMEs and large companies would benefit the entire supply chain, and motivate large companies to help in the development and modernisation of MSMEs.
Many of the problems faced by micro, small and medium enterprises (MSMEs) — lack of structured markets, delayed payments from large customers, low availability and high cost of capital, obsolete technology and lack of skilled manpower — can be addressed through preferential procurement of goods and services produced by MSMEs, according to a paper by the Confederation of Indian Industry (CII).
Such a procurement policy would be a powerful tool for exercising a positive influence on the fortunes of MSMEs, considering that the government and public sector units (PSUs) are the biggest buyers in the country, according to CII.
The paper notes that Australia, Brazil, China, the European Union, the UK and the US all have preferential procurement policies favouring small businesses.
The MSME Development Act, 2006 does in fact stipulate that the central and state governments “may, by order, notify from time to time” such preferential procurement policies. Accordingly, the Union government’s MSME ministry is drawing up a public procurement policy which provides that 20 per cent of Central/State government and PSE procurements will be made from MSMEs over a period of three years. The policy is at the draft consultative stage.
CII quotes Union Ministry of MSME Secretary Uday Kumar Varma as saying, “Notification of the proposed Public Procurement Policy...will offer a much needed and less optimally used avenue for increased consumption of MSME products by Government departments and PSUs.”
The paper also suggests that the government and government agencies need to fashion a policy providing for buying, on a much larger scale, products manufactured by women, in order to help in the uplift of women entrepreneurs.
CII has suggested that the government should provide tax benefits to companies that source from MSMEs and notify a preference policy governing procurement (by the Central and State governments, their ministries, aided institutions and PSUs) of goods and services produced by MSMEs.
CII noted that such supplier-customer relationships between MSMEs and large companies would benefit the entire supply chain, and motivate large companies to help in the development and modernisation of MSMEs.
Drop Shipping can help SMEs tremendously
Small and Medium Enterprises (SMEs) are faced with many challenges. First and foremost amongst them is stocking products for which one needs to rent a store or warehouse space. Secondly, the reluctance of a buyer to deal with a small business entity is always there. Thirdly, the financial aspect. With SME financing a distant dream and many manufacturers and distributors having a minimum order, sometimes SMEs are at wits end on how to expand or even to start a business.
I think, for SMEs who face such challenges, drop shipping can be a boon, whereby these problems can be reduced or eliminated. With drop shipping, selling by Internet, mail order, or export, and without much storage space for inventory at home, can be an easier and most profitable option.
Drop shipping is shipping of merchandise from a supplier directly to the buyer and can thus minimize a SME's inventory and administrative costs. So if you are a SME with a minimum budget, or you are looking to start a new retail business, drop shipping can be the best option. Drop shipping can not only save time and money in your existing business, but can also help SMEs to manage their own supply chain with less effort and with more effectiveness. And what's more! Even if the SME is a manufacturer, it can use this supply chain management technique. But in this case, it will need an agent to act as the middlemen between the SME manufacturer and its customers.
However as a drop shipping retailer, one may have to keep samples or images in the store or website for customers to inspect before purchasing the product. I have seen that most drop shippers have found that the effective way to showcase the products online is on a B2B portal.
The foremost advantage I see for a drop shipper is that there is no need to keep an inventory. When one sells a product, one's customer finances the shipping, while the distributor deals with the stock. Moreover, drop shipping also saves some extra cost required for shipping insurance, warehousing, etc.
However assessing one's drop shipper can be a challenging task for SMEs. Having said that, with a little bit of research one can turn these challenges into stepping stones to success.
I think, for SMEs who face such challenges, drop shipping can be a boon, whereby these problems can be reduced or eliminated. With drop shipping, selling by Internet, mail order, or export, and without much storage space for inventory at home, can be an easier and most profitable option.
Drop shipping is shipping of merchandise from a supplier directly to the buyer and can thus minimize a SME's inventory and administrative costs. So if you are a SME with a minimum budget, or you are looking to start a new retail business, drop shipping can be the best option. Drop shipping can not only save time and money in your existing business, but can also help SMEs to manage their own supply chain with less effort and with more effectiveness. And what's more! Even if the SME is a manufacturer, it can use this supply chain management technique. But in this case, it will need an agent to act as the middlemen between the SME manufacturer and its customers.
However as a drop shipping retailer, one may have to keep samples or images in the store or website for customers to inspect before purchasing the product. I have seen that most drop shippers have found that the effective way to showcase the products online is on a B2B portal.
The foremost advantage I see for a drop shipper is that there is no need to keep an inventory. When one sells a product, one's customer finances the shipping, while the distributor deals with the stock. Moreover, drop shipping also saves some extra cost required for shipping insurance, warehousing, etc.
However assessing one's drop shipper can be a challenging task for SMEs. Having said that, with a little bit of research one can turn these challenges into stepping stones to success.
Time to go green for Indian SMEs
The environment trend has been around and it is the best time for our SMEs (Small and Medium Businesses) to go green. As the problems of global warming gaining urgency, a massive number of companies, both small and large, from all over the world are showing interest to implement a green strategy into their business to address climate change.
In the last few years, we have seen a number of large multinational companies like Vestas, Suzlon, Philips and Simens, and even some small start-up businesses taking the 'green' issue seriously and willing to offer a helping hand to tackle climate change and ensure a healthy planet for ourselves.
But while a negligible number of Indian corporate biggies, and mainly the European businesses are showing their eagerness to go green, the the situation in India is far away from satisfactory as a whole; a few businesses are doing it willingly, others, particularly those that are energy-intensive, have the requirements to do so to some extent as a result of government legislations.
Overall, the green concept is not gaining enough popularity in the country - neither among the large businesses nor among the SME community - partly because of a lack of awareness and social responsibility, and partly because the businesses fail to understand fully the burning problem of climate change and global warming.
But sooner or later, Indian businesses will have to change their attitude and rectify their procedures - if not because the earth is going to melt down due to global warming or some new environmental legislations will make them to do so, then only because of growing awareness of their customers - especially the importers from the European countries and the US.
In fact, in the European countries, the number of a new group of customers classified as LOHAS (Lifestyles of Health and Sustainability) is growing at a rapid rate. This LOHAS group of customers takes their purchasing decision depending upon how a business operates itself. They have a profound sense of social responsibility and they are most likely to buy environmentally responsible products.
In India, we lack such customers till now but days are not far away when Indian businesses will have to deal with such consumer groups. And when it comes to the SMEs, engaged in export, particularly to the European countries, they are already in a race against time to turn green and tap into the wielders of a new economic power - the LOHAS.
What does the term 'green' exactly refer to? Let us first delve a little deeper; when energy from the sun heats the earth's surface, the earth radiates back a part of that energy again a part of which is trapped by clouds and by atmospheric gases (greenhouse gases or GHGs) to retain the heat like a greenhouse. As a result, the earth get warmer. Scientists are of the view that the layer of greenhouse gases has been increasing at a rapid pace for the last fifty years due to different forms of human activity and primarily as a result of rapid industrialization. Now the Mother Earth needs to be taken care of, and we can do it turning 'green' - a term that is used to refer to products, services, companies, systems and lifestyles which help to reduce negative environmental impacts compared to those using today's technologies.
What businesses are going to lose or gain implementing a 'green' strategy into their business? Let us take an example; it is estimated that a company with 1,000 employees and $100 million in revenue uses 30 million pages of paper a year. It equivalents to cutting down 1,369 trees and producing approximately 300,000 pounds of CO2 every year. If the company uses e-papers instead of papers, they can not only save a huge sum of money but also contribute keeping the environment cleaner.
So, going green is about saving the environment and saving money. India is a large country with thousands of SMEs (as compared to large companies and MNCs) catering to a population well over one billion. If these SMEs adopt a green strategy, it could help a lot in reducing negative environmental impacts or, at least, stop aiding in global warming.
So, where should SMEs start? They are free to experiment with 'going green' as there is no pressures of meeting compliance regulations. Instead of accepting the 'going green' concept as a lofty ideal not practical enough to be implemented into daily operations, businesses should start concentrating upon using raw materials efficiently, choosing renewable raw materials, reducing and recycling of waste, reducing energy use in production and transportation related operations, using alternative energy sources like solar power instead of electricity, and anything that prevents negative environmental impacts.
There is not a 'one size fits all' formula to going green, and small steps are enough SMEs can take to make a start. Green machinery such as wind turbines, solar panels; green fuels such as bio-diesel, biomass power; green production house such as low carbon factories; green transportation means such as electric vehicle; green office accessories such as papers, fabrics, building materials, packaging materials made of recycled materials; green housing accessories such as bamboo flooring, furniture made of bio-plastics; and many more nobody has even thought of yet - every product, every activity, every industry can have a shade of green.
So, small businesses can experiment with anything while taking their first 'green steps'. It will not only help them to reduce global warming emission and save input costs but also to earn immediate recognition from their customers, employees, shareholders and even the media.
Remember that green will soon go mainstream and it is the right time for Indian domestic businesses and exporters - small and big - to capitalize on the phenomenon. The SMEs can even find a lot of opportunities in the 'green' sector. For example, there are enough growth opportunity for SMEs in the organic product sector. Again, they can even consider new uses for a specific garbage item which could be a business in itself.
Concluding, the moral of the story is that 'going green' is not just merely about social responsibility or staying top of environmental legislation; neither we should treat the trend as something awkward or lofty. A green strategy helps cost savings through efficiency or productivity gains, offers unique opportunities, and the best thing about it - in this game, we all win.
In the last few years, we have seen a number of large multinational companies like Vestas, Suzlon, Philips and Simens, and even some small start-up businesses taking the 'green' issue seriously and willing to offer a helping hand to tackle climate change and ensure a healthy planet for ourselves.
But while a negligible number of Indian corporate biggies, and mainly the European businesses are showing their eagerness to go green, the the situation in India is far away from satisfactory as a whole; a few businesses are doing it willingly, others, particularly those that are energy-intensive, have the requirements to do so to some extent as a result of government legislations.
Overall, the green concept is not gaining enough popularity in the country - neither among the large businesses nor among the SME community - partly because of a lack of awareness and social responsibility, and partly because the businesses fail to understand fully the burning problem of climate change and global warming.
But sooner or later, Indian businesses will have to change their attitude and rectify their procedures - if not because the earth is going to melt down due to global warming or some new environmental legislations will make them to do so, then only because of growing awareness of their customers - especially the importers from the European countries and the US.
In fact, in the European countries, the number of a new group of customers classified as LOHAS (Lifestyles of Health and Sustainability) is growing at a rapid rate. This LOHAS group of customers takes their purchasing decision depending upon how a business operates itself. They have a profound sense of social responsibility and they are most likely to buy environmentally responsible products.
In India, we lack such customers till now but days are not far away when Indian businesses will have to deal with such consumer groups. And when it comes to the SMEs, engaged in export, particularly to the European countries, they are already in a race against time to turn green and tap into the wielders of a new economic power - the LOHAS.
What does the term 'green' exactly refer to? Let us first delve a little deeper; when energy from the sun heats the earth's surface, the earth radiates back a part of that energy again a part of which is trapped by clouds and by atmospheric gases (greenhouse gases or GHGs) to retain the heat like a greenhouse. As a result, the earth get warmer. Scientists are of the view that the layer of greenhouse gases has been increasing at a rapid pace for the last fifty years due to different forms of human activity and primarily as a result of rapid industrialization. Now the Mother Earth needs to be taken care of, and we can do it turning 'green' - a term that is used to refer to products, services, companies, systems and lifestyles which help to reduce negative environmental impacts compared to those using today's technologies.
What businesses are going to lose or gain implementing a 'green' strategy into their business? Let us take an example; it is estimated that a company with 1,000 employees and $100 million in revenue uses 30 million pages of paper a year. It equivalents to cutting down 1,369 trees and producing approximately 300,000 pounds of CO2 every year. If the company uses e-papers instead of papers, they can not only save a huge sum of money but also contribute keeping the environment cleaner.
So, going green is about saving the environment and saving money. India is a large country with thousands of SMEs (as compared to large companies and MNCs) catering to a population well over one billion. If these SMEs adopt a green strategy, it could help a lot in reducing negative environmental impacts or, at least, stop aiding in global warming.
So, where should SMEs start? They are free to experiment with 'going green' as there is no pressures of meeting compliance regulations. Instead of accepting the 'going green' concept as a lofty ideal not practical enough to be implemented into daily operations, businesses should start concentrating upon using raw materials efficiently, choosing renewable raw materials, reducing and recycling of waste, reducing energy use in production and transportation related operations, using alternative energy sources like solar power instead of electricity, and anything that prevents negative environmental impacts.
There is not a 'one size fits all' formula to going green, and small steps are enough SMEs can take to make a start. Green machinery such as wind turbines, solar panels; green fuels such as bio-diesel, biomass power; green production house such as low carbon factories; green transportation means such as electric vehicle; green office accessories such as papers, fabrics, building materials, packaging materials made of recycled materials; green housing accessories such as bamboo flooring, furniture made of bio-plastics; and many more nobody has even thought of yet - every product, every activity, every industry can have a shade of green.
So, small businesses can experiment with anything while taking their first 'green steps'. It will not only help them to reduce global warming emission and save input costs but also to earn immediate recognition from their customers, employees, shareholders and even the media.
Remember that green will soon go mainstream and it is the right time for Indian domestic businesses and exporters - small and big - to capitalize on the phenomenon. The SMEs can even find a lot of opportunities in the 'green' sector. For example, there are enough growth opportunity for SMEs in the organic product sector. Again, they can even consider new uses for a specific garbage item which could be a business in itself.
Concluding, the moral of the story is that 'going green' is not just merely about social responsibility or staying top of environmental legislation; neither we should treat the trend as something awkward or lofty. A green strategy helps cost savings through efficiency or productivity gains, offers unique opportunities, and the best thing about it - in this game, we all win.
Credit rating can help SMEs in more ways than one
While Small and Medium Enterprises (SMEs) are always irked by the fact that banks and financial institutions are not forthcoming in giving loans to them, I feel SMEs too should make some effort so that they are able to get loans easily without sweat. If figures are accurate, I'm told that of more than 14 lakh SMEs operating in the country, only a meager 8.5% of bank loans go to them. The basic reason for this low rate is that most SMEs being from the unorganised sector, their credibility is apparently questionable.
The best way to resolve the issue, I would say, is to get a credit rating. While the government insists that credit rating is not a necessary requirement for any Micro and Small Enterprises (MSEs) to get a loan, rating no doubt serves as a trusted third party opinion on the creditworthiness of SMEs.
The benefits of getting a credit rating are manifold because it makes banks comfortable while dealing with them and thus helps in reducing the interest rates. It is an accepted fact that a good rating helps SMEs in obtaining faster and concessional credit from banks. As such credit rating helps for the capital provisioning requirement for SMEs. So undertaking credit and performance rating from a reputed and accredited independent rating agency, I believe, is energy rightly spent.
Today the rating agencies approved for the purpose are ICRA, Crisil, Care and Fitch. In the first scheme there are four rating agencies that have been empanelled by RBI. Apart from these four, two others are SMERA and ONICRA.
In most cases SMEs shy away from getting themselves rated due to the fear that they may not get a good rating or probably because the financial statements that they have prepared to get rated do not reflect a true and fair picture of their performance. However, credit rating agencies are mainly interested in the qualitative parameters because financial statements in SMEs do not give much idea about their performance. So they mostly look at their management and how sound the promoter is, or how resilient the SME has been.
I think it's time that SMEs look from the point of view of the bank. For banks, lending to a rated SME would reduce their capital charge as against lending to an unrated SME. In addition, banks need to have a benchmark to compare their own credit assessment. So credit rating seems to be the only rational route. Above that, whenever a client sees the credit rating of the company it wants to do business with, it gives him/ her a confidence because of the credibility one earns from getting itself rated. Do we agree on this? We would definitely want to know if any of our readers have ever got their company rated. Did getting a credit rating help you in getting loans easily? For readers who have not got their companies rated, tell us why you went against it.
The best way to resolve the issue, I would say, is to get a credit rating. While the government insists that credit rating is not a necessary requirement for any Micro and Small Enterprises (MSEs) to get a loan, rating no doubt serves as a trusted third party opinion on the creditworthiness of SMEs.
The benefits of getting a credit rating are manifold because it makes banks comfortable while dealing with them and thus helps in reducing the interest rates. It is an accepted fact that a good rating helps SMEs in obtaining faster and concessional credit from banks. As such credit rating helps for the capital provisioning requirement for SMEs. So undertaking credit and performance rating from a reputed and accredited independent rating agency, I believe, is energy rightly spent.
Today the rating agencies approved for the purpose are ICRA, Crisil, Care and Fitch. In the first scheme there are four rating agencies that have been empanelled by RBI. Apart from these four, two others are SMERA and ONICRA.
In most cases SMEs shy away from getting themselves rated due to the fear that they may not get a good rating or probably because the financial statements that they have prepared to get rated do not reflect a true and fair picture of their performance. However, credit rating agencies are mainly interested in the qualitative parameters because financial statements in SMEs do not give much idea about their performance. So they mostly look at their management and how sound the promoter is, or how resilient the SME has been.
I think it's time that SMEs look from the point of view of the bank. For banks, lending to a rated SME would reduce their capital charge as against lending to an unrated SME. In addition, banks need to have a benchmark to compare their own credit assessment. So credit rating seems to be the only rational route. Above that, whenever a client sees the credit rating of the company it wants to do business with, it gives him/ her a confidence because of the credibility one earns from getting itself rated. Do we agree on this? We would definitely want to know if any of our readers have ever got their company rated. Did getting a credit rating help you in getting loans easily? For readers who have not got their companies rated, tell us why you went against it.
MSME Secretary expects procurement policy soon
Amid the industry's demand to make no further delay in approving the MSME procurement policy, the MSME Secretary, Uday Kumar Verma on Monday said that he expects the policy to be implemented soon as it has already been submitted to the Union Cabinet recently.
"I am expecting it (MSME procurement policy) sooner ... what comes before the Cabinet is not in my hands but I really hope to have it very soon," Verma said in the sidelines of a CII event in New Delhi.
The MSME Secretary also said, "The issue of SC/ST has been resolved and there will be sub-reservation, i.e, about 20 percent of the total 20 percent (public procurement for MSMEs) should be for SC/ST categories."
"It means 4 percent reservation to SC/ST. And, if there is not enough SC/ST enterprises who can supply, then that would not actually be blocked but would pass on to the general category," Verma added.
The Ministry of MSME has already modified the draft policy, which now includes SC/ ST category as well for giving them sub-reservation.
It is said that initially, there will be lower procurement targets which will eventually be taken to 20% over a period of three years.
The MSME's share of estimated annual procurements, worth over Rs 1.7 lakh crore, is now a mere 5% (Rs 8,500 crore). The sector contributes about 45 percent of India's total manufactured output and close to 40 percent to the country's exports. It provides employment to about 60 million persons through 26 million enterprises and contributes 8 percent of India's GDP.
"I am expecting it (MSME procurement policy) sooner ... what comes before the Cabinet is not in my hands but I really hope to have it very soon," Verma said in the sidelines of a CII event in New Delhi.
The MSME Secretary also said, "The issue of SC/ST has been resolved and there will be sub-reservation, i.e, about 20 percent of the total 20 percent (public procurement for MSMEs) should be for SC/ST categories."
"It means 4 percent reservation to SC/ST. And, if there is not enough SC/ST enterprises who can supply, then that would not actually be blocked but would pass on to the general category," Verma added.
The Ministry of MSME has already modified the draft policy, which now includes SC/ ST category as well for giving them sub-reservation.
It is said that initially, there will be lower procurement targets which will eventually be taken to 20% over a period of three years.
The MSME's share of estimated annual procurements, worth over Rs 1.7 lakh crore, is now a mere 5% (Rs 8,500 crore). The sector contributes about 45 percent of India's total manufactured output and close to 40 percent to the country's exports. It provides employment to about 60 million persons through 26 million enterprises and contributes 8 percent of India's GDP.
Sunday, April 17, 2011
Share of MSME sector in GDP to touch 10 pc: Ashok Chawla
The share of micro, small and medium enterprises (MSMEs) in gross domestic product of the country is expected to touch double-digit growth from the current 8 percent, said the Finance Secretary, Ashok Chawla in New Delhi.
Speaking at a conference 'Towards Excellence in MSMEs: Innovation Practice for Global Competitive', Chawla said, "The SME sector's contribution to GDP of the country is around 8 percent and is expected to contribute double-digit to our gross domestic product."
"This is the sector which has a great contribution to the growth story. The growth story has to move and will move to a higher level up to 10 percent, which is what the country needs, people need...," he added.
Chawla underscored that India needs to remove poverty in the country and that is what the government wants as well. "...and, the MSME sector's contribution will add to the higher level of growth story in India."
MSMEs need to adopt the best practices and also use innovative practices, upgrade their technology, improve marketing links and promotional activities and access to potential finance, the finance secretary added.
According to the last available data, the micro and small enterprise (MSE) sector shares 7.20 percent in the GDP in the year 2006-07. The latest report of Prime Minister's Task Force on MSMEs said that the sector contributes 8 percent of the country's GDP, 45 percent of the manufactured output and 40 percent of its exports providing employment to about 60 million persons through 26 million enterprises.
Speaking at a conference 'Towards Excellence in MSMEs: Innovation Practice for Global Competitive', Chawla said, "The SME sector's contribution to GDP of the country is around 8 percent and is expected to contribute double-digit to our gross domestic product."
"This is the sector which has a great contribution to the growth story. The growth story has to move and will move to a higher level up to 10 percent, which is what the country needs, people need...," he added.
Chawla underscored that India needs to remove poverty in the country and that is what the government wants as well. "...and, the MSME sector's contribution will add to the higher level of growth story in India."
MSMEs need to adopt the best practices and also use innovative practices, upgrade their technology, improve marketing links and promotional activities and access to potential finance, the finance secretary added.
According to the last available data, the micro and small enterprise (MSE) sector shares 7.20 percent in the GDP in the year 2006-07. The latest report of Prime Minister's Task Force on MSMEs said that the sector contributes 8 percent of the country's GDP, 45 percent of the manufactured output and 40 percent of its exports providing employment to about 60 million persons through 26 million enterprises.
SBI's centralized SME loan process to ensure better loan processing
The Small and Medium Enterprises (SMEs) segment is witnessing a paradigm shift with two clear models emerging and SMEs functioning on a stand-alone basis would find the going tough, according to a senior executive of State Bank of India.
The bank, which launched the concept of SME City Credit Centres (SME CCCs) to quicken the process of loan processing from the SME sector, is planning to replicate the model in rural and semi-urban areas, he said.
Speaking to presspersons in Coimbatore on Friday, after inaugurating the renovated premises of SME CCC in Coimbatore main branch of the bank, J. Chandrasekaran, Chief General Manager, SBI (Chennai Circle), said the entire SME segment was undergoing a structural shift and it was not like earlier when they could be established on a stand-alone basis and survive.
SMEs could be successful and survive in two formats. They flourish when they are in clusters - several auto component and textile clusters were coming up - providing them economy of operation. The other model was SMEs functioning as dedicated ancillaries to big manufacturing units, as has been done by vendors of Hyundai Motors.
He said SMEs functioning on a stand-alone basis, supplying to diverse companies, would find the going tough. SMEs were getting into some sort of a value chain, entering into joint ventures with larger players.
Even foreign buyers were finding outsourcing from SMEs a cost-effective quality proposition. Chandrasekaran said, "SMEs can thrive, but they have to look at global markets now," become net savvy, look at multiple sources of raw material, etc. SMEs making generalised products in hopes of finding a market will die out, he added.
Chandrasekaran, who had earlier worked as CGM (SME) for the whole bank, said there were a lot of processes involved in giving home loans and SME loans. The bank wanted to centralise these processes and establish a back office where skilled personnel could be deployed to process the applications.
The bank managers would have to just collect the loan applications and do minimum documentation and then forward the applications to the SME city centres for further processing.
The multi-product sales teams also have been vested with the responsibility of scouting for prospective loan applicants whose applications would be processed at these centres.
He said this has enabled the bank to bring in "much better standard of appraisal, risk management is much better." Since the branches are under core banking system, the customers would continue to do their business with the branches closer to them.
He said the SME CCCs would handle customers for up to a Rs 1-crore limit and branches would handle customers with limits higher than that, as needs of medium enterprises would be different.
Meanwhile he said the division of work has helped in hastening the turnaround time (TAT-processing of applications) - from four-six weeks earlier to less than ten days now. The customers are intimated of the bank's decision faster and there has been 'tremendous improvement' in the quality of appraisal after SME CCCs were launched.
This year, the Coimbatore SME CCC, to which 28 branches in and around Coimbatore were linked, has sanctioned Rs 120 crore so far. The sanctions have grown from Rs 58.5 crore in 2005-06 to Rs 106.57 crore in 2006-07 and Rs 180.88 crore in 2007-08.
Chandrasekaran said after SME CCCs were established across the country, "our growth has more than doubled." The growth was possible because of the performance of the branches, the special sales teams and the SME CCCs, which had increased the processing capability.
The bank has such SME centres in all major cities and has planned to replicate this model in a slightly different format in rural and semi-urban areas. In the current year, 15 rural centralised processing centres would come up in Tamil Nadu.
The bank, which launched the concept of SME City Credit Centres (SME CCCs) to quicken the process of loan processing from the SME sector, is planning to replicate the model in rural and semi-urban areas, he said.
Speaking to presspersons in Coimbatore on Friday, after inaugurating the renovated premises of SME CCC in Coimbatore main branch of the bank, J. Chandrasekaran, Chief General Manager, SBI (Chennai Circle), said the entire SME segment was undergoing a structural shift and it was not like earlier when they could be established on a stand-alone basis and survive.
SMEs could be successful and survive in two formats. They flourish when they are in clusters - several auto component and textile clusters were coming up - providing them economy of operation. The other model was SMEs functioning as dedicated ancillaries to big manufacturing units, as has been done by vendors of Hyundai Motors.
He said SMEs functioning on a stand-alone basis, supplying to diverse companies, would find the going tough. SMEs were getting into some sort of a value chain, entering into joint ventures with larger players.
Even foreign buyers were finding outsourcing from SMEs a cost-effective quality proposition. Chandrasekaran said, "SMEs can thrive, but they have to look at global markets now," become net savvy, look at multiple sources of raw material, etc. SMEs making generalised products in hopes of finding a market will die out, he added.
Chandrasekaran, who had earlier worked as CGM (SME) for the whole bank, said there were a lot of processes involved in giving home loans and SME loans. The bank wanted to centralise these processes and establish a back office where skilled personnel could be deployed to process the applications.
The bank managers would have to just collect the loan applications and do minimum documentation and then forward the applications to the SME city centres for further processing.
The multi-product sales teams also have been vested with the responsibility of scouting for prospective loan applicants whose applications would be processed at these centres.
He said this has enabled the bank to bring in "much better standard of appraisal, risk management is much better." Since the branches are under core banking system, the customers would continue to do their business with the branches closer to them.
He said the SME CCCs would handle customers for up to a Rs 1-crore limit and branches would handle customers with limits higher than that, as needs of medium enterprises would be different.
Meanwhile he said the division of work has helped in hastening the turnaround time (TAT-processing of applications) - from four-six weeks earlier to less than ten days now. The customers are intimated of the bank's decision faster and there has been 'tremendous improvement' in the quality of appraisal after SME CCCs were launched.
This year, the Coimbatore SME CCC, to which 28 branches in and around Coimbatore were linked, has sanctioned Rs 120 crore so far. The sanctions have grown from Rs 58.5 crore in 2005-06 to Rs 106.57 crore in 2006-07 and Rs 180.88 crore in 2007-08.
Chandrasekaran said after SME CCCs were established across the country, "our growth has more than doubled." The growth was possible because of the performance of the branches, the special sales teams and the SME CCCs, which had increased the processing capability.
The bank has such SME centres in all major cities and has planned to replicate this model in a slightly different format in rural and semi-urban areas. In the current year, 15 rural centralised processing centres would come up in Tamil Nadu.
Credit rating can help SMEs in more ways than one
While Small and Medium Enterprises (SMEs) are always irked by the fact that banks and financial institutions are not forthcoming in giving loans to them, I feel SMEs too should make some effort so that they are able to get loans easily without sweat. If figures are accurate, I'm told that of more than 14 lakh SMEs operating in the country, only a meager 8.5% of bank loans go to them. The basic reason for this low rate is that most SMEs being from the unorganised sector, their credibility is apparently questionable.
The best way to resolve the issue, I would say, is to get a credit rating. While the government insists that credit rating is not a necessary requirement for any Micro and Small Enterprises (MSEs) to get a loan, rating no doubt serves as a trusted third party opinion on the creditworthiness of SMEs.
The benefits of getting a credit rating are manifold because it makes banks comfortable while dealing with them and thus helps in reducing the interest rates. It is an accepted fact that a good rating helps SMEs in obtaining faster and concessional credit from banks. As such credit rating helps for the capital provisioning requirement for SMEs. So undertaking credit and performance rating from a reputed and accredited independent rating agency, I believe, is energy rightly spent.
Today the rating agencies approved for the purpose are ICRA, Crisil, Care and Fitch. In the first scheme there are four rating agencies that have been empanelled by RBI. Apart from these four, two others are SMERA and ONICRA.
In most cases SMEs shy away from getting themselves rated due to the fear that they may not get a good rating or probably because the financial statements that they have prepared to get rated do not reflect a true and fair picture of their performance. However, credit rating agencies are mainly interested in the qualitative parameters because financial statements in SMEs do not give much idea about their performance. So they mostly look at their management and how sound the promoter is, or how resilient the SME has been.
I think it's time that SMEs look from the point of view of the bank. For banks, lending to a rated SME would reduce their capital charge as against lending to an unrated SME. In addition, banks need to have a benchmark to compare their own credit assessment. So credit rating seems to be the only rational route.
Above that, whenever a client sees the credit rating of the company it wants to do business with, it gives him/ her a confidence because of the credibility one earns from getting itself rated. Do we agree on this? We would definitely want to know if any of our readers have ever got their company rated. Did getting a credit rating help you in getting loans easily? For readers who have not got their companies rated, tell us why you went against it.
The best way to resolve the issue, I would say, is to get a credit rating. While the government insists that credit rating is not a necessary requirement for any Micro and Small Enterprises (MSEs) to get a loan, rating no doubt serves as a trusted third party opinion on the creditworthiness of SMEs.
The benefits of getting a credit rating are manifold because it makes banks comfortable while dealing with them and thus helps in reducing the interest rates. It is an accepted fact that a good rating helps SMEs in obtaining faster and concessional credit from banks. As such credit rating helps for the capital provisioning requirement for SMEs. So undertaking credit and performance rating from a reputed and accredited independent rating agency, I believe, is energy rightly spent.
Today the rating agencies approved for the purpose are ICRA, Crisil, Care and Fitch. In the first scheme there are four rating agencies that have been empanelled by RBI. Apart from these four, two others are SMERA and ONICRA.
In most cases SMEs shy away from getting themselves rated due to the fear that they may not get a good rating or probably because the financial statements that they have prepared to get rated do not reflect a true and fair picture of their performance. However, credit rating agencies are mainly interested in the qualitative parameters because financial statements in SMEs do not give much idea about their performance. So they mostly look at their management and how sound the promoter is, or how resilient the SME has been.
I think it's time that SMEs look from the point of view of the bank. For banks, lending to a rated SME would reduce their capital charge as against lending to an unrated SME. In addition, banks need to have a benchmark to compare their own credit assessment. So credit rating seems to be the only rational route.
Above that, whenever a client sees the credit rating of the company it wants to do business with, it gives him/ her a confidence because of the credibility one earns from getting itself rated. Do we agree on this? We would definitely want to know if any of our readers have ever got their company rated. Did getting a credit rating help you in getting loans easily? For readers who have not got their companies rated, tell us why you went against it.
Gujarat venture fund raises Rs.600 mn for small firms
Gujarat Venture Fund Limited (GVFL) has raised Rs.600 million for its SME (small and medium enterprises) Technology Venture Fund.
"The fund would be used for investing in various projects of both small and medium technology companies. GVFL plans to invest this entire fund in six to eight projects in a time period of one year with an approximate investment amount per project anywhere between Rs.5 and 15 crore (Rs.50 million to 150 million)," said Vishnu Varshney, CEO of GVFL, in a statement here Friday.
GVFL plans to raise the entire corpus of its SME Technology Venture Fund to Rs.250 crore (Rs.2.5 billion) by 2009-10 from existing Rs.60 crore (Rs.600 million)," the statement said.
"Venture capitalists invested over $777 million in 57 deals in India during the first three quarters of 2007, as per the India Venture Capital Report as against $158 million in 2006.
"The booming market is providing many innovative investment opportunities. We are currently evaluating several exciting proposals, which we would soon be finalising for investment," said Varshney.
The venture capital fund has by now exited 53 of the 63 companies it had invested in. Seven divestments took place in the past year.
GVFL now plans to close two more funds that have been going on from 1995 and 1997 by March 2009, at a substantial internal rate of return.
GVFL was started by Gujarat Industrial and Investment Corporation at the initiative of the World Bank in July 1990. Over the past 18 years, it has managed over Rs.1.39 billion in five venture funds, including one for IT and one for biotechnology ventures.
"The fund would be used for investing in various projects of both small and medium technology companies. GVFL plans to invest this entire fund in six to eight projects in a time period of one year with an approximate investment amount per project anywhere between Rs.5 and 15 crore (Rs.50 million to 150 million)," said Vishnu Varshney, CEO of GVFL, in a statement here Friday.
GVFL plans to raise the entire corpus of its SME Technology Venture Fund to Rs.250 crore (Rs.2.5 billion) by 2009-10 from existing Rs.60 crore (Rs.600 million)," the statement said.
"Venture capitalists invested over $777 million in 57 deals in India during the first three quarters of 2007, as per the India Venture Capital Report as against $158 million in 2006.
"The booming market is providing many innovative investment opportunities. We are currently evaluating several exciting proposals, which we would soon be finalising for investment," said Varshney.
The venture capital fund has by now exited 53 of the 63 companies it had invested in. Seven divestments took place in the past year.
GVFL now plans to close two more funds that have been going on from 1995 and 1997 by March 2009, at a substantial internal rate of return.
GVFL was started by Gujarat Industrial and Investment Corporation at the initiative of the World Bank in July 1990. Over the past 18 years, it has managed over Rs.1.39 billion in five venture funds, including one for IT and one for biotechnology ventures.
Govt to ask SEBI to relax norms for SME Exchange
The government would ask market regulator SEBI to frame separate norms while setting up the exchange for SMEs so that small and medium enterprises do not have to spend high on advertising for their public issues, a recent media report said.
"While setting up exchange for SMEs, SEBI should come out with separate rules so that they do not have to incur high expenses on advertising for their public issues and reports to the investors," a senior official in the Ministry of Micro, Small and Medium Enterprises was quoted as saying.
He said the ministry would try to impress upon the Securities and Exchange Board of India (SEBI) to ensure that these units do not have spend too much while raising funds from the market. The ministry will also submit the views of the industry to the regulator, he added.
SEBI Chairman C V Bhave recently said initially only big investors may be allowed to invest in the SMEs.
He indicated that although there would be no compromise on accounting and reporting standards for them, there could be relaxations in rules related to rigorous compliance requirements that bigger companies have to.
In a discussion paper, SEBI has proposed to set up a separate SME exchange and has sought public comments.
Small Industries Development Bank of India (SIDBI), along with the National Stock Exchange and Infrastructure Leasing and Financial Services Limited (IL&FS), is expected to be the joint promoters of the SME exchange.
At present, the MSMEs constitute about 20 percent of total GDP, while employing over three crore persons, the media report published in a reputed national business daily newspaper added.
"While setting up exchange for SMEs, SEBI should come out with separate rules so that they do not have to incur high expenses on advertising for their public issues and reports to the investors," a senior official in the Ministry of Micro, Small and Medium Enterprises was quoted as saying.
He said the ministry would try to impress upon the Securities and Exchange Board of India (SEBI) to ensure that these units do not have spend too much while raising funds from the market. The ministry will also submit the views of the industry to the regulator, he added.
SEBI Chairman C V Bhave recently said initially only big investors may be allowed to invest in the SMEs.
He indicated that although there would be no compromise on accounting and reporting standards for them, there could be relaxations in rules related to rigorous compliance requirements that bigger companies have to.
In a discussion paper, SEBI has proposed to set up a separate SME exchange and has sought public comments.
Small Industries Development Bank of India (SIDBI), along with the National Stock Exchange and Infrastructure Leasing and Financial Services Limited (IL&FS), is expected to be the joint promoters of the SME exchange.
At present, the MSMEs constitute about 20 percent of total GDP, while employing over three crore persons, the media report published in a reputed national business daily newspaper added.
SME sector needs more recognition: Kamath
The SME sector needs more recognition and there is a need for revaluation of the sector. This was stated by Mr. K. V. Kamath, the newly elected president of CII & Managing Director & CEO, ICICI Bank Ltd. during a press conference in New Delhi.
"...I think there is a need for revaluation of this sector. The SMEs play a major role in the development of the Indian economy. More than a decade back, there were just 35,000 SMEs which gradually grew to 75,000. Last year it was 125,000 and this year our estimate is 200,000 SMEs. However there is a wide disparity in the official figures...it was only the three-fourth of the estimated figure. So this sector need more recognition," said the CII president.
He said, there is need to encourage the development of SMEs.
According to CII's annual report, the MSMEs are a vital part of the Indian economy contributing over 45% of the country's industrial production and around 40% of the total exports.
Thirteen million MSMEs in India employ over 31 million people. The government has identified three thrust areas for increasing competitiveness in this area: technology (including quality), skills development and finance, the report added.
Indian SMEs ready to play big in chemical industry
The Indian chemical industry, one of the fastest growing Industries worldwide, comprises both small and large scale units with nearly 6000 units many of them SMEs. The SME sector is commonly addressed as the engine of a train of economic growth and as the harbinger of innovation and entrepreneurship in the industrial space.
The chemical industry is poised to become the fastest growing industry in the world. The growth performance continues to impress and surge forward. The Indian chemical industry has been growing at the rate of 10-12 percent over the last couple of years.
The basic inorganic and organic chemicals produced provide building block for several down stream industries such as drugs, dyestuffs, paper, synthetic rubber, plastics, polyester, paints, pesticides and detergents.
"Today, India has emerged as a global supplier of dyestuffs and dye intermediates, particularly for reactive, acid, vat and direct dyes. India accounts for approximately 6 percent of the world production," Kamal Nath, the Union Minister for Commerce and Industry, had said this while addressing the members of the CHEMEXCIL at its 33rd and 34th annual export awards function held in Mumbai recently.
About the current year's performance, Mr Nath said, "...for the year 2007-08, we have set the target of Rs 13,100 crore for dyes and dye intermediates, Rs 10,900 crore for basic inorganic, organic and agrochemicals, Rs 2,850 crore for cosmetics, toiletries and agarbattis and Rs 1,250 crore for castor oil, which would register a growth rate of 20 percent over Rs 23,408 crore for 2006-07."
Speaking at a seminar on Chemical Industry for Global Inclusive Growth, organized by CII in November 2007, Arun Ramanathan, Secretary, Department of Chemicals & Petrochemicals, Government of India had observed, "Though we have a long way to go, India has registered a commendable progress in the field of chemicals despite various constraints. We have skilled manpower and good R&D setups to go ahead."
He suggested active involvement of small players in the new applications of chemicals and specifically nanotechnology.
"The chemical industry in India has to reposition accordingly over the next few years," said Alok Gupta, former chairman, CII on the same occasion.
India's chemical industry, valued at close to $ 30 billion, is an important constituent in the overall development of the country acting as the backbone of the manufacturing and agriculture growth.
The industry is one of the most diversified industrial sector covering more than 70,000 commercial products and is one of the significant contributors to this manufacturing growth that the country has been experiencing for the past few years.
The Indian chemical industry however faces several hurdles in the area of capital cost, feedstock prices, and cost of electricity, local taxes and tariffs as compared to the producers in other parts of Asia. Subsidies and other government benefits will encourage the entrepreneurs to join this growing sector specially from the SME sector.
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