One out of every four small and medium enterprises (SMEs) in India have either shut shop or are struggling for survival plagued by a host of factors, according to a recent survey by the Associated Chambers of Commerce and Industry of India (Assocham). These include expensive credit, non-availability of funds, shortage of power and delays in payments by their customers, according to a recent survey by the Associated Chambers of Commerce and Industry of India (Assocham).
The survey which was conducted in 11 states including UP, Haryana, Punjab, West Bengal, Rajasthan, Madhya Pradesh, Bihar, Himachal Pradesh, J & K, Uttarakhand and Delhi found that the most important reason for sickness in the sector is the absence of time-bound programme for credit dispensation. About 71 per cent of the SMEs who participated in the survey said credit dispensation is a major cause of worry for them.
The other factors which are affecting the growth of the sectors are shortage of working capital (48 per cent), marketing problems (44 per cent), power shortage (21 per cent) and non-availability of raw material (15 per cent). About 10 per cent of the companies surveyed said equipment problem is a cause of concern apart from labour issues (7 per cent) and management problems (5 per cent).
Around 92 per cent of the surveyed member’s said, frequent reason for sickness is bunching of ownership and management functions which are controlled by one or selected few people. This limits their scope of efficiently managing the business in the changing economic environment.
Nearly 76 per cent of the respondents said that they do not have access to institutional credit. A similar per cent of the respondents said that since the banks insist for additional collaterals and guarantee for loans and the interest rates are generally higher than the base rate, they end up borrowing from informal sources.
Besides, the SMEs who rely on exports are much more susceptible to sickness with small changes in the exchange rate, the survey found.
“MSMEs should be incentivised to bring them under the organised sector and implement a monitoring system to check the performance of the sector as a whole. There needs to be a transparent and effective policy and open platform for handling sick industries where entrepreneurs and owners can educate themselves,” said D S Rawat, Secretary General of Assocham.
The SMEs account for about 45 per cent of the industrial output and 40 per cent of the exports in India. The sector provides employment to nearly 80 million people.
