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Fresh Policies for MSME sector on the way
Priti Agarwal
Aug 2009
Aug 2009
Page 1 of 3
The various issues involving an-all important Small and Medium Enterprises (SMEs) sector in India were exhaustively discussed by experts in a two-day conference in New Delhi recently. The 'SMEs Global Summit, Business Partnership Meet 2009' came at a right time when the MSME sector is beset with problems mainly as a result of on-going economic slowdown in the country.
A large number of entrepreneurs representing a cross section of the sector, government officials and experts participated in the two-day event that spelled a 'useful learning exercise' for the entrepreneurs. The conference was a join initiative of Federation of Indian Chamber of Commerce and Industry (FICCI), Ministry of MSME and Federation of Small & Medium Enterprises (FISME).
SME WORLD was the Media Associate in the conference.
Small and Medium Enterprises (SME) sector in India is the key driver of the nation's economic growth with a contribution of over 40 per cent to the country's industrial output and around 35 per cent to direct exports. It accounts for over 90 per cent of the industrial units in the country. In terms of employment, this sector plays a very crucial role, being the second largest employer after agriculture.
In the current economic slowdown, SME sector has been hit very hard due to rising interest rates and financial crunch. As a result of this economic slowdown and global markets collapsing there is a decline in the cash reserve and the working capital becomes more difficult and has resulted in cut down on orders and piling up of pending payments. The severely affected sectors are Gems & Jewellery, textiles, auto parts and handicrafts. SMEs in the country are facing numerous problems relating to basic infrastructure facilities like uninterrupted power supply, efficient rail-road connectivity, etc. This vital sector needs Government support in terms of financial, regulatory, procedural reforms for sustaining its growth in the current economic slowdown.
Addressing the audience MSME Secretary Dinesh Rai revealed that a new Purchase Policy of the government for providing market support to the Micro, Small and Medium Enterprises (MSMEs) is in the offing. “We are trying to work out a new purchase policy for procurement of MSME products by the government and trying to convince major buyers and the railways of the need to adhere to such a step,”
Rai said that the Limited Liability Partnership Act would give more comfort to the MSME players and attract more capital into the MSME sector. He said that the government has also asked banks to set up 'care centres' in their banks to attend to the credit needs of the MSMEs. All unresolved issues, he said, could be taken up with his ministry for early resolution. Government was also setting up an MSME info call centre for giving hands-on service to entrepreneurs, he informed.
Rai shared with the audience that various initiatives by the government are proposed for the MSME sector. “MSME sector is an important segment of our national economy and has shown a promise in terms of growth, in number of enterprises, production, employment and their contribution to country manufacturing outlook and exports. MSME provides employment to 42 million people and contributes about 45 % of the industrial production and 40 % India's exports” and quipped, “Small is not small now, small is becoming bigger, bigger and bigger.”
To face the competition from cheap imports, the government had launched the National Manufacturing Competitiveness Programme (NNMCP) to equip the MSMEs.
FICCI Secretary General Dr. Amit Mitra, pointed out that timely availability of finance remained a major limiting factor for the growth of the SME sector. To enable SMEs to access capital at lower rates, he suggested that efforts should be made for earmarking priority sector lending for SMEs, enhancement of cash-credit limits and overdraft facilities, enhancement of working capital support from the banks and high working capital ratios with reduced margins.
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