Most of Micro and small enterprises (MSEs) are running at close to 70% capacity utilization due to paucity of funds, arising out of unduly delayed payment of their dues, resulting in serious suffocation and anemic conditions for them, says a Study on SMEs: Finance with Governance brought out by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).
The Study says that 74% of sick SMEs in India attribute their sickness and lower capacity utilization to the fact of low availability of fund as it is revealed that 92% of all SMEs remained dependent on personal and family savings and even borrow money from friends and relatives at higher rates of interest to ensure their survival.
The banking industry also becomes skeptical to fund MSEs against their receivables of their dues for no fault of theirs, adds the Study further pointing out that this has further widened apathy of institutional lending to MSEs.
Releasing its findings, Mr. D S Rawat, Secretary General ASSOCHAM said that if micro and small enterprises have to be taken to next level, a lot of ground needs to be covered.
Other than timely finance, there are issues such as limited access or knowledge of technology, not so great marketing skills and knowledge of the same, difficulties in scaling up and or diversifying and low production capacity, says the Study.
It further points out that the sector is labour intensive and thus suffers from gain of not having enough qualified personnel at an affordable price – most like to look at bigger companies.
Even the Task Force headed by Principal Secretary to the Prime Minister, Mr. T K Nair on micro, small and medium enterprises endorses what the ASSOCHAM Study says, felt Mr. Rawat.
According to ASSOCHAM Study, out of 13 million SMEs in India which provide employment to 42 million people can take it’s employment strength to 100 million provided their capacity utilization is enhanced to over 90% with sufficient availability of credit to them as also technological support.
The Study also highlights that India which is SME driven nation has denied mode of development to this sector as it did not pay effective attention to SMEs in last 6 decades or so. Even though, it has been able to maintain a robust growth momentum in the last couple of years and is expected to raise to double digit levels
It has recommended that the government should extend for a further period of 1 year the components of stimulus package for small and medium enterprises so that their contribution to exports in domestic production enhances as intended. Secondly, the government should also ensure strict adherence to the stipulated targets of commercial banks for micro enterprises.
The ASSOCHAM Study has also proposed for a separate fund for small and medium enterprises with Small Industrial Development Bank of India (SIDBI) using pitfalls if any against MSE targets set for commercial bank. This fund named “Special Fund for Micro Enterprises” should be utilized exclusively for lending to micro enterprises.
Source:http://www.assocham.org/prels/shownews.php?id=2387
