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Focus

Most SMEs Unaware of Government Schemes: FICCI survey

Aug 2009

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A survey conducted by FICCI amongst small and medium enterprises in the country reveals that 94% of the small and medium enterprises (SMEs) catering to the export market have been 'severely to moderately' hit by the current economic slowdown.

However, units are showing some resilience and are hopeful of recovery, their single point demand is for better financial accommodation by the banks at lower interest rates. It has been reported that the interest subvention announced for SME exporters is not reaching the intended beneficiaries at the ground level. The survey finds out that a major chunk of the enterprises have been found to be unaware of the incentive schemes announced by the government and calls for an action programme for better communication of government initiatives for the SME sector.

The survey drew responses from SMEs which are spread across different sectors and regions. According to the survey, global economic slowdown and flagging demand in both the domestic and the global markets have affected Indian companies adversely. Small and Medium Enterprises (SMEs), in particular, have received a hard knock. These enterprises are struggling to stay afloat, buffeted as they are with several challenges.

The survey results say that 94% of the respondents reported that their overall business has been affected 'severely or moderately' due to the current economic slowdown, while just 5% of the respondents said that they were not at all affected by the present turbulent situation. The participating companies indicated that they have lost most of their major markets primarily in Europe and United States and are struggling to find new markets for their products.

In order to provide some immediate respite for the SME sector, which is facing a lot of problems, the participating companies felt that lowering cost of financing and having additional fiscal support from the government is the need of the hour.

Some other suggestions indicated by the respondents to further strengthen the base of the sector include:-

• Faster processing of loan applications

• Support from government for technical up gradation

• Setting up of more training institutes to provide skilled manpower for the sector

• Availability of quality control facilities close to the clusters

• Improved information dissemination about schemes and incentives at ground level

• Increase in DEPB rates

• Easy reimbursement of VAT

• Easier availability of packing credit at better rates

• Better marketing support like participation in fairs abroad for buyer seller meets. Holding awareness programmes / seminars for SMEs and educating them on how to increase productivity, target new markets and make products commercially viable.

• SMEs have to bear undue delay in receiving payments from other companies and public enterprises. This leads to blocking of funds for SMEs which affects their day-to-day operations. Hence it should be made sure that SMEs receive payments on time.The Survey received responses from 116 SMEs manufacturing a diverse range of products from 20 locations across the country.

With a large proportion of enterprises facing the brunt of the slowdown, what is actually surprising is the fact that majority of the respondents said that they are not really aware of the steps being taken by the government to help SMEs weather the crisis. Out of the total participating companies, 73% of the respondents said that they do not know of any steps that have been announced under the stimulus packages to support their sector.

Further out of those who were aware of the incentives announced, a majority of them indicated that these measures have not really enabled them to regain the business momentum. This is a cause of real concern as it seems the benefits of the stimulus packages are not percolating and these enterprises are receiving only limited benefit from the government.

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