Meanwhile, David Wittenberg, CEO, The Innovation Workgroup told SME Times that he senses that optimism is returning to the sector. There is tremendous interest in new venture formation, and venture capital is also flowing back into MSMEs.
The recent stimulus packages given by the Indian government has facilitated the flow of credit to MSMEs and the refinance facility of Rs 7000 crores given to SIDBI has encouraged banks also to lend to viable projects submitted by MSME entrepreneurs.
Many MSME units have been provided with collateral free lending. Pointing out this Sahai also said that as this facility is extended to the exporting MSME units, it has helped them to reduce their prices to some extent. But the stimulus that has been provided by the competing countries has given tough competition to Indian prices as countries abroad are providing rock bottom prices.
Sahai urged the government to introduce GST including State taxes at the earliest. It will be difficult and time consuming but it would certainly be ideal for the Indian manufacturing sector. There is an urgent need to increase the plant and investment limit for MSME units. Such limits should at least be doubled so that expansion and modernization of units take place.
When asked about how the US government is helping the US industries (especially the SMEs) at this critical juncture in the economy, Wittenberg clearly stated that India should not follow the same steps as the US. Till date, the US stimulus programme has had very little positive effect on MSMEs in that country.
"The recent economic slowdown in India seems to be self-correcting, so I do not believe that an exceptional intervention is called for at this moment." he added.
Suggesting measures to revive the growth of Indian SMEs, he said, "The best ways for the Government of India to promote SMEs are through reducing government inefficiencies, trade promotion and direct educational and technical support by the relevant ministries to equip small business leaders to manage effectively."
Sahai, expressing his views in this respect, recommended that the government should give special focus on SMEs for completing their export obligations. Many of them will default in fulfilling their commitments under EPCG scheme since they performed well in preceding years. However, the international situation has changed rapidly in 2008 and 2009.
Therefore, these units may be provided with reduced export obligation for maintenance of their average export commitment which used to be 100% of preceding three years average to 50% of the same, Sahai said.
"In fact, the marketing support has been increased in the Union Budget from Rs. 50 crore to Rs.124 crore but that is miniscule to support export of over US$ 168 billion. China provides marketing support of over US$ 12 billion which is within the public ambit," he said.
"More incentives needs to be provided in the Foreign Trade Policy for venturing into new and untapped areas," Sahai added.
