The Hindu Business Line : Doubling small units’ output is ambitious

“Exports during the first quarter of the current fiscal were down 31.3 per cent at $35.43 billion, against $51.55 billion in the corresponding quarter of 2008-09.”

Roudra Bhattacharya

New Delhi, Aug. 17

With exports falling in the backdrop of the global economic slowdown, the Government’s plans to meet its Eleventh Five-Year Plan (2007-12) production target for the micro, small and medium enterprises (MSMEs) sector could prove to be an uphill task.

According to a reply in Parliament by Mr Dinsha J. Patel, Minister of State for MSMEs, the Government plans to more than double the production of the sector to Rs 13,98,803 crore by 2011-12 from Rs 6,82,613 crore in 2007-08.

However, while it envisages a two-fold increase in production, it sees only a 21 per cent increase in employment in this period at 391.73 lakh persons up from 322.28 lakh in 2007-08.

employment over capacity

“I understand the desire to set such a target, which should help performance and boost sentiments. However, the target is certainly ambitious,” said Mr Salil Singhal, Chairman, CII - MSME Council.

He added that the sector is already burdened by employment over capacity and, hence, does not need to add a larger workforce to achieve the same target.

The boost has to come through more efficient methods of production, along with some cost cutting, he said.

Mr Singhal also added that the international market sentiment seems to be improving, so such a target may actually be feasible.

“We are on a positive trend of economic improvement, both in India and abroad. This would help the ailing industry,” he said.

Exports

While more than 30 per cent of the MSME produce was exported in 2006-07, the sector accounts for 40 per cent of the country’s total exports, according to the Annual Report (2008-09) released recently by the Ministry of MSMEs.

Export figures for 2007-08 were, however, not given in the Report.

Also, MSMEs employ around 42 million in over 13 million units all over the country.

According to the latest official data, exports during the first quarter of the current fiscal were down 31.3 per cent at $35.43 billion, against $51.55 billion in the corresponding quarter of 2008-09.

Govt initiatives

In June itself, exports saw a dip of 27.7 per cent, compared with the corresponding period last year.

This is the ninth consecutive month in which exports have been dipping.

For an industry dependent on exports, these numbers are obviously alarming.

The Government has launched various initiatives such as extending the Credit Guarantee scheme and reducing the interest rates for borrowing.

Moreover, the Reserve Bank of India has also provided a refinance limit of Rs 7,000 crore to the Small Industries Development Bank of India (SIDBI) for incremental on-lending to MSMEs.

“It will be a challenge to double the production, especially with exports fairing badly over the medium-term. However, it may still be possible,” said Mr Arvind Mahajan, Executive Director, KPMG.

He added that of late MSMEs have shifted from being an export-driven industry to cater to the growing Indian market.

This factor may support the growth target set by the Minister, he said.

Recently in Parliament, Mr Patel had further said that a fund of about Rs 1,000 crore for the unorganised sector is under consideration by the Government.