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Home arrow News arrow Business News arrow Vibrancy in MSME growth prospects will support 8% plus GDP growth
Vibrancy in MSME growth prospects will support 8% plus GDP growth Print E-mail
Written by Anand   
Thursday, 21 August 2008
CII MSMES snap poll lists five major impediments to MSMES' growth

New Delhi: Increase in input and interest costs has not significantly impacted the vibrancy in the Indian MSME sector and the MSME growth prospects will support 8% plus GDP growth, said the CII MSME snap poll results release here today. This vital sector of the Indian economy has been consistently improving on its productivity and competitiveness in spite of the difficulties they face in staying competitive, CII said.

The increase in inputs costs is a global phenomenon and in India too this has had an impact on the cost structures of the MSMEs. The results of the CII poll revealed that 65% of the MSMEs expect increase in their inputs up to 20% during the current year. When polled on whether lack of adequate bulk procurement of inputs through NSIC, only 11% of the MSMEs found this to be a major constraint to the growth of their operations.

The recent hikes in interest rates have also had an impact on the cost structures of the MSMEs, reveals the CII Poll. However, the impact is not detrimental as 75% of the MSMEs revealed that their interest costs would be up by only upto 7.5% during the current year.

Assessing the impact of increase in inputs and interest costs on profitability, 76% of the MSMEs polled revealed that their profitability would be affected upto 10% during the current year. Assessing the growth prospects of the MSMEs, 71% of the MSMEs have revealed that the growth prospects during the current year would be affected and expect top line to shrink upto 15%. This is In spite of increase in cost pressures on the MSMEs, vibrancy in terms of increase in productivity and MSMEs' efforts to stay lean and competitive resulting in cost cutting has helped the MSMEs to sustain their profitability to a significant extent.

"The CII poll reveals the robustness of MSMEs in India and demonstrates their vibrancy in managing economic uncertainties", said Mr Chandrajit Banerjee, Director General, CII.

Revealing the factors that inhibit further growth prospects of MSMEs in India, the CII poll ranked the following factors as the major impediments to MSMEs growth;

    * Infrastructure bottlenecks
    * Shortage of Skills
    * Regulatory Burden
    * Lack of labour reforms
    * Access and cost of Capital

The CII poll ranks Infrastructure bottlenecks to be most important impediment to growth of MSMEs - as revealed by 73% of the MSME CEOs. The second major factor that inhibits growth of MSMEs is shortage of skills as revealed by 59% of the CEOs. Regulatory burden due to multiple compliance procedures including frequent inspection was revealed by 52% of the MSMEs as the next major inhibiting factor to their growth and development. Lack of labour reforms and availability of capital were the next two important factors that inhibit the growth of MSMEs, revealed the CII poll.

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