An increase in interest costs and availability of bank finance along with rising power costs is expected to impact the profitability of the Indian Micro Small and Medium Enterprises (MSME) sector significantly, according to snap poll conducted by the Confederation of Indian Industries (CII) of MSME’s chief executive officers (CEOs) in the country.
About 66 per cent of the MSME CEOs rank high interest rate to be most important obstacle to accessing finance for growth of MSMEs. Other major obstacles to access to finance of MSMEs are delayed suppliers’ payment as revealed by 46 per cent of the CEOs, cumbersome bank paperwork was revealed by 30 per cent of the MSMEs and reluctance to lend by banks and strict collateral requirements of banks were the next two obstacles for accessing finance for growth of MSMEs in India.
“Cutting interest rates is of paramount importance to enable MSME sector to borrow at competitive rates and hence cut in repo rates by 1 to 1.5 per cent will not only help MSMEs manage their increasing costs but also create investment demand in the economy”, said Chandrajit Banerjee, Director General, CII.
According to CII MSME CEO’s snap poll, 78 per cent of the surveyed respondents are using private equity for alternate source of finance for medium to long term funding, while 21 per cent of respondents are using venture capital funds as alternate source to bank finance.
Revealing the outlook for the next six months, majority of the CEOs polled do not expect production and exports to decline. On production front, 31 per cent of the CEOs polled expect production to increase, while an equal number of them expect production to be at the levels of 2007-08. On exports, only 24 per cent of them expects exports to decline during the current year and 29 per cent of them expect exports to increase which 47 per cent of the CEOs expect exports to be at be at the same level as in 2007-08.
