The top three/five best practices of State governments, which can be emulated by other States. Similarly, examples from around the world.

The stories of Maharashtra and Gujarat to nurture a significantly export-oriented SME sector deserve mention. Maharashtra has the advantage of 58 industrial clusters which act as an engine of growth. Tamil Nadu’s initiatives on the development of small-large linkage are commendable (example, auto components, hosiery/textiles). Kerala’s story, built on the cluster mode, is a success story as well, though the State is industrially backward.

The success stories around the world are many, some of which are:

South Africa — developing the sector successfully under a clear and unique competition policy;

The US — having a clear advocacy mechanism and public procurement policy;

The UK — having a significant decentralisation policy using SMEs as a major vehicle; and

The Netherlands — excellent success story in business development services system.

Any models from elsewhere for combating the economic crisis?

During this time of economic crisis, SMEs in India have a unique role to play. Unlike as in Europe and the US, SMEs in our country have a different operational content. The majority of SMEs in those countries are service sector dominant. India’s manufacturing system is highly distributed, with significant support from the small producers, who are more resistant to shocks in the economy.

Hence, what is required at this moment is to maintain the overall level of confidence in the sector, which can act as a bulwark against the crisis getting aggravated. Public policy should be carefully tuned to this. There are lessons from other countries, which need to be examined on a case-to-case basis.

Look at the initiatives from other countries:

UK:

• Banks using government capitalisation scheme are under a commitment to maintain the availability and the marketing of competitively-priced lending at 2007 levels.

• There is a commitment from the Government to promptly pay suppliers. National and regional government agencies have committed to pay all bills within 10 working days.

The Netherlands:

• Broadened guarantee scheme for SMEs.

• Increased amount of loan guaranteed per company from EUR 1 million to EUR 1.5 million.

• Bar raised for including companies with up to 250 employees, from 100 employees earlier.

• Amount guaranteed for starting companies doubled to EUR 200,000.

Turkey:

• In order to support exporting SMEs, interest-free credit with an upper limit of $100,000 will be provided to over 6,500 SMEs.

• Credit support programme for craftsmen and artisans; interest-free, cap of TRY 25K with maturity of 18 months, one-time repayment.

• Credit support for SME machinery equipment and investment.

Spain:

• Formal meeting among social partners, trade unions and industry chambers.

• Focus on internationalisation of SMEs, with a strategic plan being put in place.

• Government fund allocated for granting collaterals with guarantee of the State for SME financing.

• Special task force with the objective of reducing administrative charges for SMEs by 30 per cent.

• Gearing up to present a plan to set up ‘24 hour Company’ with limited liability to promote entrepreneurship.

Japan:

• Building up nation-wide consulting network about business revitalisation of damaged local SMEs.

• This network with branches in local prefecture consists of local banks, lawyers, accountants, tax experts and gives local SMEs consultancy for restructuring plan.

• Facilitate formation of networking surrounding SMEs – R&D network, marketing network, collaboration between SMEs, NGOs and universities.

France:

• Nomination of SME point of contact in each region; its role to monitor real-time expansion of credits to SMEs.

• Additional loan guarantee scheme for SMEs.

• Postponement of social charges for micro and small enterprises (value EUR 1.6 billion).

• Additional means in the field of energy efficiency and environment activities, for sustainable growth after the current slowdown.

China steps up its investments on roads and other infrastructure that are directly beneficial to the town and village enterprises (TVEs).

In India, reducing taxes on SME products can be a first step. While many of these products are mass consumption items, such a step may help to enhance demand. It would also be advisable to step up SME-specific public investment, such as on industrial parks, industrial estates, as also on industrial clusters.

Another area of focus could be a government intervention in all sectors to reduce panic among the SMEs. The crisis gives an opportunity of dealing with the woes of the SME sector, which is both politically and economically feasible.

Setting up of an SME Intelligence and Surveillance Unit at the national level, with counterparts at State and District levels, need to be an immediate step. This Unit should be a well-informed arm for quick policy decisions, including powers to monitor the performance of promotional agencies. It should retain the services of professional agencies/ institutions from time to time.

Retraining of labour is another critical area. While the IT boom has brought in the concept of ‘Finishing Schools’, re-skilling of labour to the requirements of local enterprises is an initiative which need to take place on a massive scale. A recessionary situation, where people are on the look out for jobs, is the right time to act upon.

The official SME strategy and public investments today are largely on the cluster mode. However, employment and balanced regional development yet remain to be unfulfilled objectives. An answer to the problems of massive unemployment and industrial sickness lies in using the cluster model as a component of a wider agenda of local economic development.

The concept of a ‘Cluster Hub’ can be a meaningful starting point of a local regeneration programme which can ensure three aspects of local economic development simultaneously: (a) local capacity building; (b) local infrastructure development; and (c) employment and income promotion.

While the Cluster Development Programme has only a limited purpose of development of a single sub-sector, a ‘Cluster Hub Model’ can ensure better co-ordination of similar development intervention in a locality to the common benefit of the region. Sub-sectors such as tourism have a significant role for acting as a viable ‘Hub’ in many parts of the country. This can be a viable strategy for rejuvenating the crisis clusters such as Moradabad and Tirupur.