High credit and raw material costs affecting small firms: CII

NEW DELHI - High costs of credit and procurement of raw materials are the major factors inhibiting the growth of small and medium enterprises, a survey has found.

The Confederation of Indian Industry (CII) said 79 percent of the micro, small and medium enterprises (MSMEs) surveyed said high cost of credit was a problem.

For 64 percent of respondents, it was the high cost of raw materials. Lack of credit and delayed payment were the factors affecting their growth, said 55 percent.

The MSME sector contributes 8 per cent of the country’s gross domestic product, 45 percent of the manufactured output and 40 percent of its exports. It provides employment to about 60 million people through around 26 million enterprises.

Though the government has offered assistance under schemes like the National Manufacturing Competitiveness Programmes, 60-70 percent of the respondents said they were not availing the benefits.

They said developing infrastructure like industrial estates, providing electricity and connectivity through roads should be the most important priorities for the development of the sector.

The sector is highly heterogeneous in terms of size of the enterprises, variety of products and services produced and the levels of technology employed.

While one end of the spectrum contains highly innovative and high growth enterprises, more than 94 percent of MSMEs are unregistered, with a large number of them in the informal or unorganized sector.

“The establishment of Prime Minister’s council on MSME in his Office to oversee the implementation of the recommendations made by the high level task force on MSMEs on a half yearly basis reflects the importance of this sector in the Indian economy,” said Ramesh Datla, chairman, CII National MSME Council.