The sharp fall in exports has severely hit the Micro, Small and Medium Enterprises (MSMEs), which account for about half the exports from the country. Though there is no specific data collected by the MSME ministry to gauge the pain of the sector, Secretary Dinesh Rai tells Vandana Gombar that he is yet to get any SOS messages from the sector, which accounts for about a tenth of the country’s GDP. Excerpts from the interview:
Exports have fallen by 33 per cent in April. The brunt of this fall is borne by MSMEs. Are they sending SOS messages to you?
There are some sectors which are hit — textiles, leather, gems and jewellery — but domestic demand has picked up. The growth rate will be good. However, we cannot create demand abroad.
How do you keep tabs on the health of MSMEs? Do you have any estimates of job losses or export losses in the sector which employs some 42 million people?
You will have to ask the labour ministry. Export data is collected by the commerce ministry. For the MSME industry, we do a census every 10 years. We also have annual reports.
What has been the impact of the stimulus packages on the sector?
The main problem of MSMEs is ensuring credit flow. The stimulus packages provided Rs 7,000 crore refinance to the Small Industries Development Bank of India (SIDBI) and also allowed for a one-time restructuring of loans while enhancing credit limits for companies with good track records. We have tried to create an overall atmosphere where banks feel more comfortable giving loans.
How has the MSME industry responded to these measures?
Industry is quite satisfied with the measures taken. The domestic market is doing very well. I have not received any SOS messages. I was getting SOS messages when steel prices were going up. Not now. They were facing credit problems, measures have been taken and it has helped them. We have also tried to ensure that the MSMEs get payments in time.
What is the one critical thing that still needs to be done to give a boost to this sector?
All the major things have been done, but we need to ensure timely credit. That is the main challenge. And we have to ensure money at the right rate.
There was a proposal to earmark some 15 per cent out of the priority sector lending for MSMEs?
That demand has not been accepted. We may have to modify the proposal, since it would leave very little for other sectors. If 18 per cent goes to agriculture and 15 per cent is earmarked for MSMEs, it would leave just 7 per cent for other sectors. There may be some earmarking for micro enterprises only. We are discussing it. Credit to the sector has been growing above the targeted 20 per cent year on year. RBI feels that there is enough credit flow.
There are also demands to enhance procurement from this sector, which enjoys a 15 per cent price preference, or is that preference only on paper?
The price preference is not very effective. Some departments don’t adhere to it. We are working on a new procurement policy which will be evolved through a consensus with the main buyers like railways and defence. The new policy would be more acceptable, practical and usable. Some price preference would be part of the policy.
You also have ambitious plans for skill development. Is that mission going to be managed by this ministry or the human resource development ministry?
There are 16-to-18 departments and ministries dealing with skill development. It is a large programme. We trained 180,000 last year. We plan to increase that to 300,000 annually and then ramp it up to 10 lakh in a few years.
Lastly, how many items are still reserved for production by the small scale sector?
The list has been pruned from some 800-odd to just 21 items now.
View from the ground
As per a survey done earlier this month by the Federation of Indian Micro and Small and Medium enterprises (FISME), about half of the 100-odd respondents said they had seen a dip in their export sales in the Jan-March quarter. About 70 said they had also seen a dip in their domestic sales. However, only 18 thought that access to credit had improved after the government announced the stimulus packages.
FISME is the largest sector association representing about 500,000 units through its 1,400 member-associations.
