Journalism of Courage
Indias exports may have increased in the last financial year despite the slowdown in the US and Europe,but a report by Export and Import Bank of India (EXIMS) has revealed that SSI sector which forms the backbone of country’s exports is struggling to do business in the wake of difficulties in availability of credit and access to technology.
The report on developmental strategies for MSME sector in different countries that was released earlier this month by the bank in Pune notes that one of the major challenges faced by the sector is inadequate access to credit. The report has called for bridging the gap through enabling policies stressing that this was necessary as the MSME borrowers especially the new generation entrepreneurs do not have collaterals to avail bank finance. It also observed that though the MSME sector faces deficit in manpower it is characterised by low technology levels and not many units have access to technological expertise to mobilise resources for in-house innovation.
Deputy general manager and regional head EXIMS,Pune,Sujeet Bhale,said,the report is part of the research activities by the bank for studying the MSME sector. The observations in the report are important as the MSME sector makes a major contribution to the exports of the country. The sector contributes 45 per cent of the manufacturing output and 40 per cent of the total exports of the country. During the year 2010-11 there were 312 lakh MSMEs in India contributing the production level of Rs 10.95 lakh crore and employing 70 million people.
Industry representatives in Pune said difficulties in the availability of credit and access to technology were also paramount here. Managing director of Praditi Pressparts,a small scale auto component manufacturing industry,Deepak Karandikar,said,”there are difficulties in accessing credits due to the high interest rates and the long time taken for processing the loans.”
As per the EXIMS bank report,alternate sources of capital like angel funds and risk capital are also not available to the Indian SMEs and it has also been suggested that fiscal and regulatory impediments in the usage of funds by the MSMEs be removed on priority. The report also said there is negligible flow of equity capital to the MSME sector which may pose a serious challenge to the development of knowledge-based industries. Other problems in the MSME sector are non-availability of power supply,shortage of raw materials,marketing challenges and inadequate infrastructure. The present exit mechanism available in India for the industry is ‘archiac’. As per the report,the MSME are either located in industrial estates set up many decades ago or have come up in an unorganised manner in areas which are short of necessary infrastructure.
Director general,MCCIA,Anant Sardeshmukh,said the availability of credit is a major problem that needs to be addressed by the government. He said that this is important as from a near Rs 2.5 lakh crore turnover of the industry in Pune,the contribution from the MSME sector is nearly Rs 1 lakh crore. As per the EXIMS report,the cap on plant and machinary for the purpose of classifying the units as MSEMs does not encourage the Indian MSMEs to move up the value chain. The industry with an investment in plant and machinery not exceeding Rs 25 lakh is classified as micro industry,with an investment between Rs 25 lakh to 5 crore is treated as a small enterprise and that in the range of Rs 5-10 crore is classified as medium enterprise.
