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SMEs falter - no need to panic yet!
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Bikky Khosla | 12 Aug, 2008
As SMEs particularly the smaller enterprises are feeling the heat of slowdown, is it panic time again? I think not! The recession is a global phenomenon and the effects are likely to be seen in the profits of SMEs in the months to come. This may even stay for a year or so. Having said that we have scope to negate these effects and carry on.
The slowdown in the sector though more psychological, the negative impact is likely to be felt in the months to come. Already small industries' contribution to manufacturing has slipped and niche sectors like apparel and handicrafts are fast losing their cost competitiveness.
Due to economic slowdown combined with high inflation, the two areas where India had some cost advantage - labour and raw materials - both now seem to have diluted to some extent.
Being the chairman of the SME Expert Committee of ASSOCHAM, I tried to focus on the recent figures showing small industries' manufacturing slipping by 10 percent and was amazed to find that the sector was unable to keep up to the pressures of rising lending rates, inflation, skyrocketing input costs, etc. Most of SMEs were unable to deliver the goods to larger corporates at the existing rates, who thus had to resort to importing the same products which came a little cheaper.
SMEs unable to upgrade their operating systems, lack of information on key markets and lack of marketing skills, amongst other hindrances are likely to witness a downward trend if the much-needed corrections are not brought in before it's too late.
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SMEs falter - no need to panic yet!
Kailash Chander Vashist | Mon Aug 18 10:48:51 2008
Taiwan is minimum affected/has survived this time also like ten years back when all Asian Tigers had been affected terribly and IT WAS DUE TO TAIWANESE SMEs. In India, the main problem is, what I think, the large corporates have got finished all the facilities given to SMEs (by govt) before, in the name of competition and now they do not find themselves interested to compete against Chinese aggression/ dumping policies. Ten years back India was less affected during the recession period as then the SMEs were a little bit strong.
SMEs Falter
Louis Jordaan | Wed Aug 13 14:59:20 2008
It is not so much the market as it is the end-user/contractor or his clients that is causing a snowball efect in the market. We have lost a huge amount of money due to non-payment of acounts and this reflects in our profits. The general population were not ready for the impact of any market decline and price increases and carried on spending. The result, there is more than enough business out there, but because everyone is trying to to survive, no extra stock replenishments or replacements are being done. This should turn around by the end of 2008 or early 2009, but not before then. Enterprises are closing down that have opened up earlier this year. In our region the average closures are about 10 - 15 per month. Unfortunately, no matter what type of financial advisor, or how much cash or credit you have available, if you do not have the foresight to read the market or plan ahead, the only way you will go is down. New manufacturers are the hardest hit. They have yet to establish markets. Where do they go to? It is fairly easy to answer that. The future looks bleek at this stage, but hang in there, it will come right.
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