SMEs face dull business

By Our Special Correspondent

NEW DELHI, AUG. 17. The Confederation of Indian Industry (CII) says the scenario is ``dull'' for small and medium industry but is likely to improve somewhat over the next six months. This assessment is based on its latest business outlook survey that covers a broad spectrum of industry groups all over the country.

Contrary to expectations, the survey has found that most companies covered - about 60 per cent - have not faced any impact of the dismantling of quantitative restrictions on imports. About 20 per cent, however, feel their industries have been adversely affected by the flooding of the domestic market with cheaper products after lifting of QRs. Another 18 per cent say this measure has actually had a beneficial impact.

The survey, which covered performance of small and medium industries during January to June 2001, has found that the business outlook is expected to improve over the next six months. Industry expects an increase in turnover, production, profit margins, capacity utilisation and exports.

An equal number of companies surveyed reported an increase (35 per cent) and decrease in turnover over the last six months. On projections for turnover for the next six months, over 50 per cent of companies foresee an increase in turnover while about 28 percent expect a decrease. As for output, 46 per cent of companies predict an increase while 27 per cent expect a declining trend.

Over 50 per cent of the companies recorded a dip in profits over the period surveyed but another 20 per cent found profits goring up. About 35 per cent expect profit margins to fall in the coming months but 30 per cent have the opposite viewpoint.

Demand constraints

By Our Special Correspondent

CHENNAI, AUG. 17. Delayed payments by buyers (large industries) is considered the single most important financial obstacle to the operation and growth of small and medium enterprises (SMEs), according to a survey done by the Confederation of Indian Industry (CII).

The other financial constraints faced by SMEs are collateral requirements of banks, high interest rates, time taken by banks to clear loan applications, bank paperwork/bureaucracy and reluctance on the part of banks to lend money.

Analysis of responses from 352 SMEs covered by the 16th Business Outlook Survey conducted by the CII has revealed a dull industry scenario but expectations of improvement in the business situation over the next six months.

Releasing the results of the survey at a press conference here today on the occasion of a meeting of the CII Small Industry Council (National), Mr. C. P. Rangachar, Chairman of the council, said the survey revealed that the single most important limiting factor to growth is a slowdown in demand, whether it was from the private sector, government or exports. The major limiting factors to output were lack of orders, threat of competition from both domestic and international markets and cost of funds.

Mr. Rangachar said the CII's Council on SSIs at the national level had set up six core groups devoted to use of information technology for improving the profitability of SSIs, financing including non-conventional modes of finance, operating environment of SSIs, technology, globalisation and quality culture.

Mr. T. T. Ashok, Chairman of the SSI-Sub-committee of the CII- Southern Region said the core group on operating environment was engaged in an exercise, at the initiative of the Union government, to simplify and unify the 52 laws governing SSIs.

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