According to a recently carried out pre-budget ET FISME MSME Poll, 70 per cent said access to credit for MSMEs has not improved after the announcement of the two stimulus packages; however 81 per cent witnessed slump in their domestic sales in the last quarter of 2008-2009. At the export front, 74 per cent respondents accepted there has been drop in exports in the same duration. To the question: Do you expect the government to announce new packages for MSMEs? Out of 100 MSME participants, 78 per cent said they do expect the government will dole out special packages for them. Now with the announcement of the Union Budget 2009-2010, the million-dollar question is: Did it meet your expectations? Have your say, here
The recession has taught Jivrajbhai Surani, 60, a diamond exporter from Surat, some invaluable lessons. Joint sourcing, eschewing credit sales and localising assorting operations not only helped him survive these trying times but also saved his firm 10% in operating cost over the last three months. But the scars of the struggle aren’t going away soon. “I haven’t seen such a hard time during my four decades in this business. There is hardly any demand and we have had to lay-off 50% of our staff,” says Surani, a diamond worker-turned-entrepreneur. Varaccha Road, where his office is located, is home to around 8,000 diamond cutting and polishing units that employ over six lakh workers. Like him, every unit in the unorganised diamond industry—estimated at Rs 50,000 crore—has taken a hit due to the global economic meltdown.
ET FISME MSME POLL
While it all starts with lending issues, there are other problems that are unique to each sector and region. Ludhiana has had a fledgling industry dedicated to bicycles and bicycle parts. The installed capacity of 6,000-odd units here is around 50,000-60,000 cycles a day which accounts for Rs 100 crore worth of business daily. There is a similar amount of cycle parts sold everyday. The going has been good through the years, except for the last two years since steel prices started fluctuating more than ever. “This has increased import of bicycles from the cheaper China market,” explains Charanjit Vishivkarma, president of the United Cycle and Cycle Parts Manufacturers Association, and managing director of Vishivkarma Industries, which makes bicycle parts.
Last year, steel prices spiked 55% and with very small margins of around 5%, a quarter of the units in Ludhiana closed down. This increase also fuelled cheaper import of bicycles from China. Exports from India have declined from Rs 840 crore in 2007 to Rs 600 crore last fiscal. The consequent gain has been in imports from China which have grown from Rs 50 crore odd in 2007 to Rs 400 crore today. What this done to Ludhiana’s cycle industry is irreparable, says Vishivkarma: “Many companies closed offices here and setup shop in China to re-export directly from there to their clients.” Some of the major export markets for these bicycle and bicycle parts manufacturers are the Gulf countries, Latin America and Africa. The past 6-8 months have been a double whammy for these manufacturers as demand from these major markets has declined on account of the global slowdown. The only thing that is helping them sustain is demand from the domestic market. Apart from expecting a stability in steel pricing, at least on a quarterly basis, which will help in the short run, Vishivkarma says the government should develop a bicycle cluster in Ludhiana. With subsidy for automation and help from government run R&D centres, the units can become more competitive globally, he says.
Input costs determine the fortunes of most manufacturing-based businesses, and for the paints industry rising crude prices played havoc last year, particularly on the smaller players. The paints industry in India is valued at Rs 17,000 crore of which 40% is contributed by small and medium sized companies. During the period from October 2007-2008, when the world saw the biggest spike in crude prices, about 10-15% of the units closed down, says Indian Small Scale Paint Association president D Shivaram, who’s also owns Supercoat Paints.
As crude prices came down, recession set in reducing any chances of a recovery for the sector. “The entire industry is suffering. The paints industry is completely dependent on the health of other sectors,” says Shivaram. As the real estate sector tanked, so did the demand for decorative paints. The decorative segment shrank 15-20% in the third quarter of 2008-09 while the industrial sector is worse hit—down 20-30% month-on-month since September. The industry expects the government to increase the MRP abatement from 30% to at least 40-45%. Shivaram says the recent excise duty reduction from 14% to 8% has helped the industry offset its losses.
IT exports are also facing the heat of global recession. “Of India’s total IT exports last year, SMEs accounted for 40% of the total electronic hardware exports. In software they accounted for 30% of total exports,” says Sunil Vachani, vice-chairman of the Electronics and Computer Software Export Promotion Council of India. Mahendra Baid, AVP at Netcore Solutions, says that appreciation of the rupee hurts even more now that clients are much harder to come by. “The government must keep a tab on the rupee—too much rise hurts firms like us who export services. Clients are shying away from new investments, and that has made the work harder. So the tax breaks need to continue for sure and the fringe benefit tax needs to be withdrawn,” he says.
However, apparel exporters who are among the major sufferers sought a slew of sops including a Rs 5,000 crore market development fund besides expecting a complete exemption from fringe benefit tax, income tax and reduction in interest rates and service tax refunds. Most of the members expect a fresh investment of over Rs 1 lakh crore in the garment sector to revive it.
Newly appointed Minister of State for MSME, Dinsha Patel assured of prompt action to assuage the impacted sectors. “We are highly concerned about small players who have been consistently contributing towards economic growth. We are evaluating all the sectors independently and will try to provide support to all,” he says, hinting at the creation of a independent fund for enterprises in the unorganised sector to address the credit needs of the small enterprises that have often been marginalised under the existing institutional mechanism.
The recession has taught Jivrajbhai Surani, 60, a diamond exporter from Surat, some invaluable lessons. Joint sourcing, eschewing credit sales and localising assorting operations not only helped him survive these trying times but also saved his firm 10% in operating cost over the last three months. But the scars of the struggle aren’t going away soon. “I haven’t seen such a hard time during my four decades in this business. There is hardly any demand and we have had to lay-off 50% of our staff,” says Surani, a diamond worker-turned-entrepreneur. Varaccha Road, where his office is located, is home to around 8,000 diamond cutting and polishing units that employ over six lakh workers. Like him, every unit in the unorganised diamond industry—estimated at Rs 50,000 crore—has taken a hit due to the global economic meltdown.
ET FISME MSME POLL
While it all starts with lending issues, there are other problems that are unique to each sector and region. Ludhiana has had a fledgling industry dedicated to bicycles and bicycle parts. The installed capacity of 6,000-odd units here is around 50,000-60,000 cycles a day which accounts for Rs 100 crore worth of business daily. There is a similar amount of cycle parts sold everyday. The going has been good through the years, except for the last two years since steel prices started fluctuating more than ever. “This has increased import of bicycles from the cheaper China market,” explains Charanjit Vishivkarma, president of the United Cycle and Cycle Parts Manufacturers Association, and managing director of Vishivkarma Industries, which makes bicycle parts.
Last year, steel prices spiked 55% and with very small margins of around 5%, a quarter of the units in Ludhiana closed down. This increase also fuelled cheaper import of bicycles from China. Exports from India have declined from Rs 840 crore in 2007 to Rs 600 crore last fiscal. The consequent gain has been in imports from China which have grown from Rs 50 crore odd in 2007 to Rs 400 crore today. What this done to Ludhiana’s cycle industry is irreparable, says Vishivkarma: “Many companies closed offices here and setup shop in China to re-export directly from there to their clients.” Some of the major export markets for these bicycle and bicycle parts manufacturers are the Gulf countries, Latin America and Africa. The past 6-8 months have been a double whammy for these manufacturers as demand from these major markets has declined on account of the global slowdown. The only thing that is helping them sustain is demand from the domestic market. Apart from expecting a stability in steel pricing, at least on a quarterly basis, which will help in the short run, Vishivkarma says the government should develop a bicycle cluster in Ludhiana. With subsidy for automation and help from government run R&D centres, the units can become more competitive globally, he says.
Input costs determine the fortunes of most manufacturing-based businesses, and for the paints industry rising crude prices played havoc last year, particularly on the smaller players. The paints industry in India is valued at Rs 17,000 crore of which 40% is contributed by small and medium sized companies. During the period from October 2007-2008, when the world saw the biggest spike in crude prices, about 10-15% of the units closed down, says Indian Small Scale Paint Association president D Shivaram, who’s also owns Supercoat Paints.
As crude prices came down, recession set in reducing any chances of a recovery for the sector. “The entire industry is suffering. The paints industry is completely dependent on the health of other sectors,” says Shivaram. As the real estate sector tanked, so did the demand for decorative paints. The decorative segment shrank 15-20% in the third quarter of 2008-09 while the industrial sector is worse hit—down 20-30% month-on-month since September. The industry expects the government to increase the MRP abatement from 30% to at least 40-45%. Shivaram says the recent excise duty reduction from 14% to 8% has helped the industry offset its losses.
IT exports are also facing the heat of global recession. “Of India’s total IT exports last year, SMEs accounted for 40% of the total electronic hardware exports. In software they accounted for 30% of total exports,” says Sunil Vachani, vice-chairman of the Electronics and Computer Software Export Promotion Council of India. Mahendra Baid, AVP at Netcore Solutions, says that appreciation of the rupee hurts even more now that clients are much harder to come by. “The government must keep a tab on the rupee—too much rise hurts firms like us who export services. Clients are shying away from new investments, and that has made the work harder. So the tax breaks need to continue for sure and the fringe benefit tax needs to be withdrawn,” he says.
However, apparel exporters who are among the major sufferers sought a slew of sops including a Rs 5,000 crore market development fund besides expecting a complete exemption from fringe benefit tax, income tax and reduction in interest rates and service tax refunds. Most of the members expect a fresh investment of over Rs 1 lakh crore in the garment sector to revive it.
Newly appointed Minister of State for MSME, Dinsha Patel assured of prompt action to assuage the impacted sectors. “We are highly concerned about small players who have been consistently contributing towards economic growth. We are evaluating all the sectors independently and will try to provide support to all,” he says, hinting at the creation of a independent fund for enterprises in the unorganised sector to address the credit needs of the small enterprises that have often been marginalised under the existing institutional mechanism.
1 comment:
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