Strong infrastructural constraints in India have hit the SMEs as
they have not been able to perform as per their full potential causing
higher transaction costs and lowered competency, said Niranjan
Hiranandani, president of Indian Merchants' Chamber (IMC) while talking
exclusively to SME News. Moreover, various bottlenecks, such as
insufficient capital, investment and also policy paralysis, are also
impacting the profitability of the Indian SMEs.
What is the role that Indian Merchants' Chamber (IMC) aims to play in Indian SME sector? Niranjan Hiranandani:
IMC’s role is to facilitate promotion of business in general by
advocating the cause of trade, commerce and industry in general. Since
SME is an important segment of the economy and a large chunk of the IMC
members is from SME businesses, the sector becomes a focus for IMC. IMC
plans to systematically identify the issues faced by SMEs and to explain
to the sector how to equip itself to make the most of the changing
world. IMC seeks to develop a holistic policy approach towards building
sustainable capacities in the SME sector.
What are the current projects being undertaken by IMC? Niranjan Hiranandani:
The projects which are being undertaken by IMC this year include: -
India Calling China: IMC’s annual flagship event of business delegation
in other country. - Fusion: Entertainment Galore - This is a new
initiative by IMC. It is a conference covering sports, media and
entertainment industries. Mumbai Development: A seminar involving
leaders of political parties giving their vision about holistic
development of Mumbai. A compilation of opinions will be published
later. - 7th Finance & Banking Conference: IMC annual conference
featuring current trends and issues in banking sector. - RuDICON (Rural
Energy Security Through Distributed Clean Power Generation): This will
be for India to emerge as future economic power house on the global
firmament with adequate availability of energy to meet power shortages. -
BRICS Cities Conference: A conference where a chamber and municipal
authorities in each city of the BRIC countries are partners. It is going
to be held in Mumbai this year in November 2012 hosted by Mumbai
Municipal Corporation. - Skill Development Centres: IMC acts as a
catalyst and facilitator in setting up of skill development centers. The
first one was opened in Navi Mumbai recently. The aim is to facilitate
establishment of 100 such centers for diverse skill streams. - Economic
Research & Training Foundation (ERTF): Water, Education and
Healthcare: IMC-ERTF is the research wing of the Indian Merchants’
Chamber used to promote applied Economic Research and skill
dissemination through various training programmes. This year ERTF
department will be undertaking research in the following areas. a)
Water: ERTF is conducting research study on Investment Opportunities in
India’s water sector along with RIRA. In this publication we are
focusing on assessment to understand the water footprint and to identify
the gaps in water resources management. We are illustrating on
activities for creating a host of new investment opportunities for
investors. Amongst other, this book will also capture review of the
current regulatory policy, pricing mechanism, demand and supply usage of
water, pollution, water treatment, infrastructure, case studies on best
practices, investing opportunities across assets classes, evaluation of
financing mechanisms and lastly recommendations for an enabling
framework for investing in water project. b) Education: It is believed
that India's economic growth is not generating enough jobs or livelihood
opportunities. At the same time, many sectors face manpower shortages.
To address both, we need to improve our education and training systems
and create efficient and accessible labor markets for all skill
categories; and encourage the faster growth of small and micro
enterprises. To improve the education system it is necessary to identify
the skill set, skill gaps vis-à-vis employer needs, understand the
perception/attitude of the employers that will enhance the employability
and even there should be proper demarcation of the role of academia,
industries and policy makers in skill enhancement activities. Only
reforms in the education sector can play a role of game changer for
strengthening and sustaining Indian economy in the near future. c)
Healthcare: Healthcare in India should raise the level of physical,
economic and social access to balanced diet, clean drinking water, safe
environment, and health care (preventive and curative) for every
individual. For this both private and public health care organisations
should look forward for effective partnerships for improving safety and
outcomes of the common man by enhancing the healthcare infrastructure
like more hospitals and dispensaries to be set up for the common man at
affordable prices. - Arbitration & Mediation: IMC renders the
services of institutional arbitration and also mediation for resolving
commercial disputes expeditiously and economically. - Student’s Forum:
Bi-monthly Seminars for students with eminent speakers needs to take
place. The mentorship for students where each one of them will be placed
for a day with a successful leader in the area of student’s study.
How do you think that the Indian SMEs are performing in the present global scenario? Niranjan Hiranandani:
Their performance is mixed. On the one hand, competition brought about
by the globalisation of the economy leads to an improvement in the
quality of operations and products and services offered by the sector.
On the other hand, there are tremendous infrastructural constraints in
India leading to higher transaction costs and reduced competency, due to
which our SME sector is not able to perform at its full potential.
What are the key challenges faced by the Indian SME sector? Niranjan Hiranandani:
Our labour laws are terribly archaic, and until they are modernised, we
cannot hope to compete internationally in manufacturing, particularly
commodity manufacturing, which so many SMEs are engaged in. There is
also an issue of SMEs not having access to adequate finance for their
routine operations and growth. Introduction of new technology and
technology upgradation are yet another challenge being faced by the
SMEs. In the absence of these issues being not addressed adequately,
SMEs are not able to define their core competencies and chalk out a
competitive role for them.
Do you feel that government policies (both Centre and state) are
working in favour of the SMEs? Are they assisting these companies in
alleviating the pertinent issues? Niranjan Hiranandani: By
and large, government policies are directed to assist the working of
SMEs. However, more needs to be done. A major reason for it could be
that the SME sector is mostly unorganised. Also, government does not
seem serious about implementing labour reforms in the country, hence the
viability of SME businesses in India is jeopardised.
What is the outlook for the SME sector in this year? Niranjan Hiranandani:
The dependency of the SMEs on government policy is huge. If the policy
paralysis continues, then the SME sector will continue to be hit. High
interest rates prevailing in the economy are also deterrent to the
growth of the SME sector.
Analysts feel that technology adoption by SMEs and marketing are problems for SMEs. How far do you think it is correct? Niranjan Hiranandani:
India’s inadequate infrastructure and uncertain power situation
(shortage in supplies and unscheduled power cuts) have led to a very
limited technology adoption by SMEs. As far as marketing is concerned,
it needs to originate some new ideas, which could be executed
pragmatically, and be performed with the goal of achieving a healthy
return on investment. It is debatable whether all this is really
happening in India.
Recently, Indian government displayed its keenness to change SME
definition to facilitate investments from Swedish furniture giant IKEA.
What's your take on it? Niranjan Hiranandani: This kind of a
move displays shortsightedness and has a touch of favoritism to it.
Rather than changing definitions to benefit an individual company, it
would have been better if the government had focused on infrastructure
development, dispelling the notion of policy paralysis, beefing up the
quality of governance, and bringing about a business-friendly
environment all over the country.
Fitch downgraded the outlook for the domestic retail sector to
"negative" from "stable". In the past other global agencies cut the
outlook for India to negative. Do you think it will affect Indian MSMEs? Niranjan Hiranandani:
It will affect Indian MSMEs to the extent that it will be harder for
them to raise funds abroad. The downgrading of the country’s credit
rating by international global agencies does not bode well for the
domestic MSME sector.
RBI's move to leave rates unchanged for the second consecutive
policy review has been criticised by India Inc. How do you think it will
impact the growth of SMEs? Niranjan Hiranandani: Economic
activity and investment are adversely affected in a high interest rate
scenario. There is no doubt that higher interest rates are going to hurt
the bottomline of SMEs, thus hampering their growth prospects. However
RBI has expanded the availability of credit and hence there will be a
covering of interest rates in future.
Kindly share the roadmap of IMC for the ongoing financial year 2012-13. Niranjan Hiranandani:
The forthcoming events planned this year by IMC’s MSME committee are: -
SMEs: Alternate Funding strategy - Workshop on ‘Skill Development and
Enhancing Employability for the Youth - To promote Entrepreneurship
among MSMEs - SME Clinic
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