Research Study
SMEs' Contribution to Exceed 22% in GDP By 2012
SME's contribution to national GDP is projected to go upto by a minimum of 5% and touch 22% share of India's GDP by 2012, since over 60% of SMEs are aggressively upgrading themselves technologically to reduce their input costs and increase production and exports, says a Paper brought out by Assocham. Currently, SMEs share in national GDP is measured around 17% as in the last couple of years, the small scale part of small and medium enterprises have been facing not only recession but credit crunch and variety of regulations from Centre, States and local governments.
The scenario has started changing after enactment of Micro, Small & Medium Enterprises Development Act (MSME) 2006, the fruits of which will start flowing in near future as the sector now has been relaxed and liberalized to a large extent. The assessment incorporated in a Paper named SMEs “Tomorrow's Blue Chips” reveals that SMEs that have been growing @ 35% over the last 2 years will register a 40% growth rate which will be technologically driven and contribute to manufacturing outputs to an extent of 46%, their present manufacturing contribution is around 40-42%.
The Assocham Secretary General D S Rawat said that SMEs share to national exports currently is estimated at around 38% which will surge to over 44% in next 5 years. The main reason of SMEs doing exceedingly well in next 4-5 years would be because over 55% of SMEs would have absorbed technological upgradation to their units. Currently, this sector accounts for 95% of industrial units and its contributing about 40% on the value addition in the manufacturing sector. More than 32 lakh units are spread over the country producing about 7500 items and providing employment to more than 400 lakhs persons.
The Paper, however, points out that ever since MSME 2006 has been enacted, SMEs have been given two classifications, one is that of manufacturing and those industries that provide and render services have also been brought under the SMEs jurisdiction. As a result, the SMEs sector has been liberalized and deregulated to a large extent as earlier the small scale units were mostly governed under 60 central state and local laws. Such units were required to maintain as many as 116 registered forms required by various inspectors which include labour, factory maintenance, environment, municipal by laws, taxation, power etc. Now the scenario has changed a great deal and would uplift the entire SMEs not only technologically but otherwise too. This is other reason as to why the contribution of SMEs to overall GDP and production and exports would increase manifold.
The main constraints which the SME still face is the credit problem. This sector is still neglected by banks and financial institutions, mostly in the private sector domain. Since, banks, financial institutions, cooperatives still hesitate to lend money to SMEs as per their mandatory requirement of nearly 18-20% of their total lending. The public sector banks in India are the only hope for SMEs as it is they who meet their mandatory requirement for lending to SMEs, rest have ignored them. The credit that they receive is at very high cost and therefore their margins are minimum and input costs increase vis-à-vis their counterparts but the Assocham has pointed out that since over 65% of SMEs 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.
All these good factors would have spiraling impact on overall SMEs production facilities and their contribution naturally in every sphere would go up, concludes the research study.
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