 "SMEs feel lost in Make in India days")
Though optimistic that sentiment will improve over the next 18 months, many small business owners feel the "Make in India" programme did not highlight the contribution of small and medium enterprises (SMEs) in building the country's manufacturing prowess.
While efforts to improve the business environment did strike a chord, changes on the ground were still some time away, say many SME owners.
The proposal to roll out the goods and services tax in 2016 is making many SMEs apprehensive. Many feel the impact of the tax will be mixed, an opportunity for many, and a threat for some. "Many concerns of the sector are lost in the cacophony of big-ticket announcements by the government," says Anil Bhardwaj, secretary general of the Federation of Indian Micro and Small & Medium Enterprises (FISME).
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One reason, feel many, is the ministry of micro, small and medium enterprises does not find adequate weight in the government's scheme of things. "The ministry needs to be empowered, its efforts to bring in change are often stuck in other ministries," says an SME owner who closely interacts with the ministry as part of an industry body.
The last four years have been rough for the 60-year-old Meerut-based sports goods manufacturing company BDM. Sales are down 40 per cent with margins under pressure and competition eating away market share. Managing three rates of tax does not help matters. The company pays excise duty of 12 per cent on certain items, two per cent on others, and zero tax on a third category of goods.
"It means three invoices if all types of items are part of one order. It also means added training for employees. For a medium-sized company, it is a big task," says Rakesh Mahajan, director, BDM.
There has been very little improvement in the ease of doing business, say most entrepreneurs. Most feel much depends on action by state governments.
Rohit Kanthale, managing director of Varanasi-based Fibroin Weave, which clocked a turnover of Rs 5.5 crore last year selling saris and kurtis under the Bunkar and Plush brands, says he has expansion plans on hold.
"I know of many schemes launched by government. But I cannot take benefit of any one. Either the eligibility criteria are hard to meet or the schemes have little for companies like ours," he says.
He needs raw material, skilled manpower and credible sources to raise capital. "I have not seen any improvement on these fronts in the last one year," says Kanthale.
Small businesses appreciate transparency in clearances, but rising input cost is a big concern. "This is a hindrance when competing in the global market," says Gaurav Munjal, managing director of Ludhiana-based Hero Eco, which makes eco-friendly electric vehicles and bicycles.
Most SME owners that Business Standard spoke to are optimistic of improved sentiment. "We see light at end of the tunnel," says Annapoorni Muralidharan, executive director of Trichy-based GK Sons Engineering Enterprises, which makes components for thermal power plants. However, she expects it will not be till 2017 that her revenue will reach the 2013 level. "Year 2016-17 will be a year to watch out for," she adds.
"We will have to improve standards of our products and services in line with international benchmarks," says Praveen Toshniwal, chairman of Indore-based Nivo Controls, a process-control company. Any improvement in standards will help SMEs to stand up to the inflow of goods into the country, while improving their export potential, he adds.
Industry players, however, note any push to improve standards will have to occur in a phased manner over the next two-three years with help from the government.
While the GST is expected to help ease many tax issues faced by small businesses, its dual structure - with states and the Centre imposing a tax - raises too many concerns. "SME units that are part of a supply chain will benefit more," says Bhardwaj. Tax experts say this is also expected to curb cash dealings rampant among SMEs.
"SMEs are a crucial cog in the manufacturing story. It is time for the government to look inwards to re-energise this sector," says Bhardwaj.
MSME FACT SHEET
- Indian MSME sector consists of approximately 45 million units
- Produces more than 6,000 products, ranging from traditional to high-tech items
- High product diversification: 67% of its produce is from manufacturing goods, followed by 17% from services, and 16% from repairs and maintenance
- Employs around 101 million people
- Accounts for 45% of the manufacturing output
- Contributes 8-9% to the country's GDP
- Accounts for 40% of the country's exports