Shri Montek Singh Ahluwalia, Dy. Chairman, Planning Commission, at India MSME Summit releasing FISME Policy Paper
Thousands of feedback received from SMEs and from 543 associations, and having to listen from policymakers, bankers and various stakeholders from one platform – the Summit has indeed cleared out the clutter existing in the sector.
What does the current economy crisis mean for the millions of Micro, Small and Medium Enterprises (MSMEs)? To answer this question, Federation of Indian Micro and Small & Medium Enterprises (FISME) in technical partnership with The Economic Times organised the India MSME Summit on February 13, 2009 in New Delhi. The Summit kicked off on a positive note with participants from policy, banking and SME spheres, all putting their weight behind the sector which has been hardly hit in the present crisis.
Mr Montek Singh Ahluwalia, Deputy Chairman, Planning Commission, speaking on the Inaugural Session said, "The impression I have got after talking to bankers and others is that in the last few weeks, availability of credit to SMEs is easing. There was a pick-up in January."
Emphasizing on the importance of the sector, which remains at the bottom of the pyramid of 13 million units, has with the vibrancy of the over all economy, Mr Ahluwalia said, “You cannot have a healthy industrial sector without a healthy MSME sector”. And Government in this regard is very aware, there is a need to strengthen and respond to their genuine needs, he said in his Key Note address.
He further added, the present crisis for MSMEs is a time “to rethink, restructure and reorganize” the units. MSMEs should take the period of the slowdown as an opportunity, Mr Ahluwalia said.
He invited the MSME components to come up with a list of measures that the sector urgently needs and how the government action could assuage their pain and help in this testing time. "We at the Planning Commission would love to receive such a list", he said.
The day-long Summit held deliberations on the three themes: MSME Finance and Credit Policies, Systematic Reforms for MSME Growth, and on Markets – Challenges and opportunities for MSME’s.
Mr Pawan Kumar Bansal, Hon’ble Minister of State for Finance, in his special address to audience said that the government understands the suffering of the MSMEs. There is a gap between what they expect from the banks and what is being delivered, he said.
“Five years back our government had taken a decision to double the year-on-year credit to SMEs…Banks credit to MSMEs increased from 84, 000 in March 2004 to 2 lakh 46 thousand in March 2008. This reflects an increase of 193 per cent and further to 2 lakh 84 thousand crores in December 2008”, Mr Bansal said.
The difficulties that the MSMEs are facing in extension of the credit from the banks, Mr Bansal said, “Instruction has been issued…(for the) special meeting of state level bankers, and the stipulation is that, one meeting in a month” should take place to apprise the extension of the credit to this sector. “Any grievance which the borrowers feel that has not been addressed in the meeting of the MSMEs they can make a reference to the special cell in the ministry.”
Mr Dinesh Rai, Secretary, Ministry of MSME in his Special Address as Chief Guest, said that the Government should take creation of fund for the unorganized sector as priority. “Planning Commission has already supported the proposal, and we are trying to get it done quickly” he said.
In his speech he highlighted the chronic problem that the country is facing on skill development. “We have to work out some new models, ..how we can come out with some packages” to fulfill the vision of 500 million skilled people by 2020, he said.
Supporting MSMEs to come out of any distress and help them to move on high growth trajectory, Mr Rajendra Mohan Malla, Chairman & Managing Director, SIDBI, referred to the measures undertaken by SIDBI encouraging banks to lend collateral free loans to micro and small enterprises, extending Credit Guarantee Cover to Rs 100 lakh, reducing lock-in period to 18 months, and guarantee cover for all fresh loans up to Rs 5 lakh enhanced to 85 per cent.
“MSMEs should tighten their belt, reduce costs, and continue with their production, …should continuously incorporate latest technology into their production process, engage efficiency as well as in their marketing and management function and improve upon their inventory management ”, Mr Malla said in the Summit.
Mr Anil Bhardwaj, Secretary General, FISME, dwelt on the various measures that the sector is demanding in the present tumultuous period. Mentioning about the most important and the pressing need that had appeared in the feedback, Mr Bhardwaj said, “There is a feel in the sector that we (MSMEs) need a separate, effective regulator for the banking industry…who could focus on the services aspect of the borrowers, whether it is the quality of the services and the co-services, outreach or greater competition”.
At the end of the inaugural session, in the presence of august delegates, Mr Ahluwalia released FISME Policy Paper – Towards Establishing Modern Insolvency and Bankruptcy Codes for Small Enterprises in India. Mr Mohan Suresh, President, FISME, gave thanks to The Economic Times, FISME, and other sponsors for being present in the MSME Summit.
Mr Gopal K. Pillai, Secretary, Ministry of Commerce, appearing as Chief Guest in the second session - MSME Outlook on Foreign Trade and Finance Policy session - warned private and foreign banks of tough action if they do not improve on lending to micro, small and medium enterprises, which are reeling under the impact of global downturn.
"If they don’t comply with RBI direction, at some point of time, the government will be forced to act," said Commerce Secretary G K Pillai.
In the same session, sharing his concern over MSMEs, in his concluding remarks Dr. K.C. Chakrabarty, Chairman & Managing Director, PNB, said MSMEs taking cues from the recent meltdown “must not take to do business whose risk (they) don’t understand ”.
“Those who deserve the credit, those who can afford the cost, absolutely availability of money is not the problem” he said.
In the commencement of the next session - Systemic Reforms for MSME Growth - Mr B.S. Bhasin, Chief General Manager, SME Market, SBI in his speech on “Role of Indian Banks in the growth of MSME’s in the current economic scenario” said, the role of banks are very important in the economy for the MSMEs, they are facing decrease in the order volume and delay in their payment.
In the session Markets – Challenges and Opportunities For MSMEs, Mr Dinesh Rai, Secretary, Ministry of MSME, spoke on “Policy initiatives”; Mr H.P Kumar, Chairman and Managing Director, NSIC, on “Procurement Issues for MSMEs”. Other speakers who addressed the audience were Mr Jagdish Khattar, Chairman and Managing Director, Carnation Auto; Mr Jasjit Sawhney, Managing Director, Net4; and Mr Dinesh Agarwal, CEO, Indiamart.
Claiming the Micro, Small and Medium sector is composed of distinct sub-sectors and it cannot be taken as a humongous sector, Mr V.K Agarwal, Sr. VP, FISME, speaking at the concluding session said, the three sectors (Micro, Small and Medium) have to be dealt and serviced separately on the access of credit issue.
“Innovations are required in the delivery mechanisms of all these three segments of the MSME”, he said. “Delivery of credit is very closely related to quality of credit and its efficacy” to this sector, Mr Agarwal said in his speech.