It has been more than 2 weeks since the announcement of the Union Budget 2011-12 by Finance minister Pranab Mukherjee. However, it is interesting and important to find out the impact it has left on MSMEs.
One of the important provisions given to small businesses in the recent Budget is allocation of Rs 5,000 crore to Small Industries Development Bank of India (SIDBI) for refinancing incremental lending by banks to MSMEs. In this context, Dinesh Agarwal, founder and CEO of IndiaMART.com said, “While we appreciate the allocation of this amount to SIDBI, which in turn would facilitate easier credit access for MSMEs, we expected better increase in the outlay to cover as many of these firms as possible.”
Considering that access to adequate credit is one of the prime issues faced by MSMEs, availability of the same holds a lot of importance for these small units. Moreover, a lot also depends on the time for the money to be passed to banks from SIDBI and subsequently to MSMEs.
Lending rates
One must also take into consideration the fact that the Reserve Bank of India (RBI) has been increasing its key policy rates often in recent times, which can be detrimental to MSMEs’ plans to avail loans from banks, as a high rate of interest would surely be a turn-off for them.
Incidentally, RBI hiked its key policy rates by 25 basis points on March 17, the seventh time in 2010-11. In this context, Shanu Goel, senior research analyst (Equity) at Bonanza Portfolio Limited Ltd, a financial services firm in Mumbai, said, “RBI has increased repo rate from 6.5% to 6.75% and reverse repo rate from 5.5% to 5.75%. The overall liquidity has been improving and RBI is currently comfortable with it.”
The apex bank may be satisfied with the present liquidity system in the country, but MSMEs would certainly be perturbed by the latest increase in RBI’s key policy rates, which is likely to result in hike in lending rates by banks.
Wednesday, March 23, 2011
Importance of Cash Budgeting for India SMEs - Small & Medium Industries
So when it comes to SMEs, how do they go about their budgeting? For very small companies, most dealings are in cash. Hence, it is important for them to do cash budgeting before going ahead with any business transaction at the beginning of a fiscal.
In this context, Firoz Akhtar Siddiqui, proprietor of ABCL Carpets, a small-sized carpet manufacturer and exporter in Bhadohi, Uttar Pradesh, says, “As far as cash budgeting for our company is concerned, our chartered accountant looks after such matters. Besides, in order to ensure that the company’s expenses are within its planned budget, we buy raw materials after comparing prices of different vendors and checking the discounts given by them.”
Relevance for SMEs
Bizxchange further spoke to Ashok Kumar Jaiswal, senior partner at Ramesh C. Gupta & Co., a chartered accountant firm in Kolkata, to understand more about cash budgeting for SMEs. According to Mr Jaiswal, “Cash budgeting helps to forecast the cash needs and sources for a company. This is very relevant for small businesses because most of them operate with limited funds. Hence, it is important for them to estimate the cash requirements for the year at the outset.”
With 2011-12 round the corner, it is time for SMEs to make the cash budgeting plan for the financial year.
WTO to protect Indian Small & Medium Entreprises
"The several GPA parties (which includes the major key exports destinations of India i.e US and Europe) will discuss the measures to protect and promote Small and Medium Enterprises," Anderson said at a FICCI-IIFT function.
He said that the discussion would depend on the content of the negotiations, which will be in terms of the market accession and safeguard mechanism, thereby promoting the SMEs.
The GPA is an effort by to liberalise access to billions of dollars worth of public procurement contracts among the WTO members, which are parties to the agreement. Since 1996, it has opened up access to several types of public tenders to companies from all participating countries. Talks on to update the agreement is likely to be held soon to resolve remaining political differences and also to discuss accession of new countries to the accord.
Anderson urged India to be a part of every GPA discussion as India is not a member of the WTO on government procurements; it will help India to get the insight on how the governments of the most developed countries actually places multi-billion procurement orders with the industry, he added.
While speaking at the event, Commerce Ministry official Amar Sinha underscored that the Prime Minister Manmohan Singh has constituted a committee that put in place different rules and regulation for applying the global best practices in government procurements.
“The committee will come up with suggestions which would bring rules, regulations and procedures... in terms of adopting best practices around the globe,” he said. “We have become an observer, we do not have a time line when we will become a member,” he added.
The global state procurements are estimated at a huge $1.6 trillion and are a big attraction for the multi-lateral corporations.
"There are opportunity costs for non-participation in GPA in terms of foreign trade opportunities...", Anderson pointed out.
For instance, he said, if India becomes a member of the GPA in WTO then it could protect India from protectionism measures, as in the year 2009 US “Buy American” measures concerning steel and manufactured products are not applicable to the several GPA member countries.
The recent 2 percent tax on certain US procurements are also not applicable to suppliers from GPA member countries. The GPA explicitly guarantees non-discriminatory treatment, Anderson added.
Currently, the GPA covers 41 WTO Members including the EC and its 27 member states and also most other developed countries (i.e. US, Canada, Japan; Norway and Switzerland). Also, Hong Kong, China, Iceland, Israel, Korea, Singapore, Chinese Taipei, and Aruba are parties to the GPA.
Some countries like Albania, Armenia, China, Georgia, Jordan, the Kyrgyz Republic, Moldova, Oman, Panama and Ukraine are seeking accession to the GPA. Four more countries that have commitments to join the GPA, as part of their WTO accession protocols include Croatia, the former Yugoslav Republic of Macedonia, Mongolia and Saudi Arabia.
Exhibition of electrical goods and energy equipments in Dhaka in May - SME India
The 3-day expo, named ‘India Investrade’, which is to commence from May 21, 2011 will be organised by Kolkata based Indian Chamber of Commerce (ICC), said Bodhisattwa Mukherjee, deputy director of ICC to the media.
Nakib Ahmed, adviser to the ICC, informed that India’s Commerce Ministry would support the exhibition. He added that Bangladeshi traders will also get the scope to display their energy and electrical equipment in the show.
About 60 large and small scale equipment manufacturers from both the countries will participate in the event which will provide a perfect forum to showcase their products.
India’s emergence as an economic giant in Asia will be helpful for Bangladesh. This sentiment was echoed by Asif Ibrahim, president of the Dhaka Chamber of Commerce and Industry. Speaking to reporters, he said that Bangladesh should utilise the economic potential of India.
Role of SMEs
SMEs play a key role in a nation’s economy and provide employment to a huge section of the population. Such exhibitions will bring the small players from the two sectors together where they will come across various dynamics of the market under the stated category. These also provide exposure to SMEs and give them opportunities to make the most of foreign capital and technology.
The expo will provide an opportunity to small and big entrepreneurs of both the countries to know each other which is important to know the power equipment requirement of Bangladesh, said Abdul Matlub Ahmed, president of the India-Bangladesh Chamber of Commerce and Industry.
The trade volume between India and Bangladesh, which is currently more than US$3 billion, may see a quantitative and qualitative boost post this exhibition. Moreover, the small and medium businesses in this domain will get an opportunity to foster ties and provide fresh impetus to their trade activities.
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