High rates may hit productivity

Assocham fears 30 per cent drop on higher rates.

Owing to high interest rates, low levels of research and development and vagaries of the inspector raj, the productivity of small and medium enterprises (SMEs) may come down by 30 per cent.

This was stated by a survey, jointly done by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) and Tradeindia.com. The survey collated response from over 960 SME promoters. It further stated that, if the trends are not reversed, the contribution of SMEs to the total export proceeds of India could decline.

The industry chamber had, earlier, submitted a proposal to the Prime Minister requesting him to bring down the number of inspectors to 15 in the next two years and subsequently to less than 5 in another two years.

It also suggested that there should be only one inspector for examining the records of SMEs in excise, bonus and sales tax related issues, and called for making sectoral arrangements so that one inspector is put in charge of not more than five different functions of SMEs.

"Instead of the number of inspectors examining SMEs coming down, it has increased, and might exceed 45 with new services being brought into the tax net. Likewise, the rate of interest for SMEs which, ideally, should have been at 10 per cent, is 15 per cent, which is totally unserviceable," said Bikky Khosla, chairman, Assocham SME Committee, while releasing the survey.

Nearly, 85 per cent of the respondents expressed resentment towards banks at not being forthcoming in lending to SMEs at the desired rates and sought speedier liberalisation of SMEs from a plethora of rules and regulations.

Almost 75 per cent of them felt that the time taken by banks to process the request of loans was adversely affecting the growth in this sector.

On whether the Special Economic Zones can be of assistance to SMEs, 39 per cent of the responses went in favour of it while an equal percentage of respondents thought otherwise.

"Banks are not cooperative in promoting the new projects. Also the time taken to sanction loans and avoiding risks are major constraints in the development of SMEs" said D S Rawat, secretary general, Assocham.