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MSMEs' share in exports, manufacturing to surge
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SME Times News Bureau | 11 Jun, 2010
With an increasing number of Indian micro, small and medium enterprises (MSMEs) embracing technology, the share of the sector to the nation's economy, exports and manufacturing set to surge in the coming years, according to a new report, which, however, has added that lack of credit availability still a concern for the sector.
According to the paper 'MSMEs-Cluster Development –Deepens Inclusive Growth' brought out by the Associated Chamber of Commerce and Industry (ASSOCHAM), the MSME sector, which has been growing at 35 percent over the last 2 years, will register a 40 percent growth which will be technologically driven and contribute to manufacturing outputs to an extent of 46 percent from the present 40-42 percent.
The paper adds that MSMEs including agriculture contribution to national GDP, is projected to go up to by a minimum of 5 percent and touch 55 percent share of India’s GDP by 2011, since over 55 percent of MSMEs are aggressively upgrading themselves technologically to reduce their input costs and increase production and exports
Currently, MSMEs including Agriculture ,share in national GDP is measured around 45 percent.
Releasing the paper, the ASSOCHAM Secretary General, D S Rawat also informed that MSMEs share to national exports currently is estimated at around 38 percent which will surge to over 45 percent in next 5 years as per the study.
"The main reason of MSMEs doing exceedingly well in next 4-5 years would be because over 55 percent of MSMEs would have absorbed technological upgradation to their units," he said.
According to the ASSOCHAM chief, the recent downturn has strengthened the MSME sector more specifically the SME segment which now supplies critical components and ancillary parts to a host of large Industries like Auto, Agro Implements, Construction Equipments, Electronics etc.
However, the ASSOCHAM paper points out that the main constraints which the MSME still face is the timely and affordable credit.
"This sector is still neglected by banks and financial institutions, mostly in the private sector domain," said Rawat, adding that the public sector banks in India are the only hopes for MSMEs as it is they who meet their mandatory requirement for lending to MSMEs.
The credit that MSMEs receive is at very high cost and therefore their margins are minimum and input costs increase vis-à-vis their counterparts, states the ASSOCHAM paper although it points out since over 55 percent of SMEs (Small and Medium Enterprises) have done technological tie-ups with their counterparts to upgrade their production facilities, their input costs would come down in future and supplies to their vendor be maintained at effective cost factor.
"The proposed SME Exchanges will provide opportunities to SMEs to raise capital for their capacity building as well as price preference," the ASSOCHAM chief viewed, adding that the recent High Power Committee's recommendations including procurement policy of the government to source at least 20 percent of its requirements of goods and services from MSE sector would be crucial for the growth of the sector .
Currently, the MSME sector in India accounts for 95 percent of industrial units and its contributing is about 40 percent on the value addition in the manufacturing sector. More than 60 lakh units, as per latest quick survey, are spread over the country producing about 7500 items and providing employment to more than 600 lakh people.
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