Nearly 40% Indian engineering exports driven by SMEs, says EEPC India

Indian SMEs are responsible for about 35-40% engineering exports, said Aman Chadha, chairman of EEPC India.
 

He also threw light on the poor conditions of the engineering players in India and also stressed on the importance of government initiatives to strengthen the presence of these firms at the global level.

 

 

 

What is the role that EEPC India aims to play in India's SME sector?
 

Aman Chadha:  60% of EEPC India’s constituents belong to the MSME sector, which is what the SME is called after the 2006 amendment. Hence, our activities are tailor made for the development of the MSME engineering sector of the country. We suggest progressive policy measures to the government, promote MSME products in exhibitions abroad, hold a wide range of developmental activities to enable our members to gather information on market developments, quality standards, regional trade agreements, publish various journals and information materials for both MSME as well as all our members so that India’s engineering industry and its exports thrive.

 

 

What are the current projects being undertaken by EEPC India?
 

Aman Chadha: EEPC India is participating in about 30 to 35 specific engineering exhibitions all over the world. These exhibitions cater to the 34 engineering segments that we cater to and directly benefit the MSME units belonging to these segments. This apart, we hosted over 80 companies at an India Show in Tokyo, Japan in June 2012 and will follow it up with another India Show at Brno, Czech Republic in September 2012. Over 120 companies are expected to participate at the September show.

 

 

In March 2012, we hosted the India Engineering Sourcing Show (IESS 2012) at Mumbai. This was a grand success and we will follow this up with the second edition of IESS, the IESS 2013 in March 2013, again at the Bombay Exhibition Centre, Mumbai.

 

 

How do you think that the Indian SMEs are performing in the engineering sector?
 

Aman Chadha: India’s SMEs account for about 45% of production and between 35 to 40% of engineering exports. Hence, they are an important component for the future progress of the engineering sector. Our focus is towards technological upgradation of the sector, enhancement of innovation at the work place and the ability to move up the value chain.

 

 

India's engineering exports declined by 10 per cent to $27.81 billion in the first half of the current fiscal. What’s your take on it?
 

Aman Chadha: We must remember that we are now globally integrated and hence if the rest of world, especially, the major markets, are facing acute recession, the impact is likely to be felt on our exports, particularly, engineering exports. So these are on expected lines. I also notice that our exports are suffering in regions like West Asia as also rest of Asia. It is quite possible that turmoil in West Asia is affecting our exports while we need to analysis the data for rest of Asia more closely.

 

 

What are the key challenges faced by the Indian SME sector?
 

Aman Chadha: There are two critical challenges - how to combat technological obsolescence by upgrading technology and access to credit, given the high cost of credit, be it for short term requirements, long term or export purposes.

 

 

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?
 

Aman Chadha: Given the wide dimensions and problems of the sector, we do believe that some more supportive measures, particularly, with respect to technology upgradation,  affordable credit structures, stable raw material prices and more promotional avenues abroad, can be taken both at the central and state levels.

 

 

What is the outlook for the SME sector in this year?
 

Aman Chadha: Well, as of now things are in the tough phase and hopefully we could be moving up the curve soon.

 

 

In the past, global ratings agencies have cut the outlook for India to negative. Do you think it will impact Indian MSMEs?
 

Aman Chadha: Let me say this that if look around the world, these credit rating agencies will need to downgrade every country, given that we are in the midst of a sharp slowdown. There is certainly a herd mentality among the rating agencies.

 

RBI's move to leave rates unchanged in the monetary policy review has been criticised by India Inc. How do you think it will impact the growth of SMEs?
 

Aman Chadha: I have already raised the issue of high cost as well the lack of access of credit for MSME units, particularly, the tiny units. So the high base rates will hamper the ability of MSMEs to invest, firm up working capital as well as export.

 

 

Kindly share the roadmap of EEPC for the ongoing financial year 2012-13.
 

Aman Chadha: As I mentioned, EEPC India will be participating in about 30 to 35 specific engineering exhibitions all over the world. We also hosted over 80 companies at an India Show in Tokyo, Japan in June 2012 followed by another India Show at Brno, Czech Republic in September 2012. This will be followed by the second edition of IESS, the IESS 2013, in March 2013, again at the Bombay Exhibition Centre, Mumbai.

EXIM Business: A rewarding & profitable opportunity

 Export-import (EXIM) business or international trade is considered as one of the successful commercial trends. This rewarding industry requires a thorough and better understanding of foreign market. Also, proper guidelines are indispensable to set up an import-export business. A well-organized head and a ceaseless attention towards market trend, documentation, foreign exchange aspects and a familiarity of the export policies of the government are quintessential for this business.  

Last month, the multi-lateral lending agency Asian Development Bank (ADB) had sanctioned a $100-million loan to the Export-Import Bank of India (Exim Bank) to fund small and mid-sized enterprises (SMEs) operating in some of the poorer Indian states. The move will not only elevate and boost smaller firms, but will also create thousands of jobs through increased trade. Being instituted in 1981, the state-owned EXIM Bank is involved in promoting India's foreign trade and channelising funds to SMEs or SME clusters to finance goods and services to and from ADB member countries. “Providing longer-term finance to small and mid-sized exporters in Assam, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh, and Uttarakhand should increase trade by $1 billion or more over 10 years and create jobs for at least 50,000 people,” Peter Marro, Principal Financial Sector Specialist of ADB's South Asia Department has said in a release. Before stepping into the EXIM business, an individual must get a better understanding of the commodity one wants to trade.

A thorough foreign market research for the product should be conducted. A mindful and proper consideration should be given to the demand of the product in the international market. The laws and regulations pertaining to International trade and foreign business vary from country to country. So it is also important that the beginner should be fully acquainted with state, federal, and international laws before embarking on an export business.

A. Profitable reasons of exporting   According to the Section 2 (e) of the India Foreign Trade Act (1992), the term export may be defined as 'an act of taking out of India any goods by land, sea or air and with proper transaction of money”.   Exporting not only expands the business penetration but it also reduces the product dependence in the domestic market. Besides, it also provides innovative ideas, enhances marketing proficiency, stirs management practices and instills zeal for global competition.   Forex earning - Foreign exchange (forex) earning is considered as the elementary reason for export as forex not only intensifies exporters' businesses but also improves country's economic conditions.   Reliability - The companies involved in the exporting business are considered as more reliable than their peers on the grounds that the product of exporting company is capable to meet the international standards.   Global trade opportunities – The exchange of ideas with global traders and a better perspective of global culture opens the door of new opportunities in the international arena.   Building new customers – The visit to other countries for selling goods offers an opportunity to the exporter to woo new customers, explore world-class machines and vendors there.  

B. Elementary planning   Ahead of starting an EXIM business, a businessman is required to develop a proper export strategy. Initially, it is required to adopt a simple, applicable and flexible plan of action of exporting which can be easily moulded as per region-specific business sentiments.  

C. International market research   Market research is an integral measure to be undertaken before initiating any new business. Overall, market evaluation process is a prerequisite in the EXIM business considering different political, geographical, economic, legal and cultural factors of the foreign market apart from market characteristics factors like market size, availability of domestic manufacturers among others.  

D. Registration formalities of exporters   A maiden exporter is mandated to be registered with the Director General of Foreign Trade (DGFT), Ministry of Commerce, Government of India. An exporter gets a unique Importer Exporter Code Number or IEC Number by DGFT. The IEC Number is a ten digits code required for the purpose of export as well as import.   In addition, the exporters are also required to get registered with Export Promotion Councils under Indian Company Act. Both Value Added Tax (VAT) and Central Sales Tax (CST) are exempted on the goods exported out of the country and in order to enjoy tax exemption benefit, an exporter is required to get registered with the Tax Authorities.   Similar to export business, import business is also very lucrative business, but it also demands right strategies and a lot of ground-level preparations. The entrepreneurs looking forward for setting up an import business should proceed with a better understanding and knowledge about the international market and foreign market analysis. The import business can be exceedingly fruitful during the periods of unsteady global economy. The merchants who are smart enough to utilize such periods could enjoy a long-term success and profitability from their import business.  

E. Organisations for exporters   There are various organisations and agencies in India working actively to support exporters by providing information on market research in foreign trade.   Export Promotion Councils (EPC) EPCs are non-profit organizations under the Indian Companies Act. Presently, there are twelve export promotion councils are under the administrative control of the Department of Commerce and nine export promotion councils related to textile sector are under the administrative control of Ministry of Textiles.   Commodity Boards Commodity Boards are registered bodies under Ministry of Commerce. The boards are responsible for production, development and export of tea, coffee, rubber, spices and tobacco.   Federation of Indian Export Organisations (FIEO) FIEO is an apex body of Indian export promotion organizations. It is a brainchild of Union Ministry of Commerce and the state industry department. The organization promotes the interests of the Indian exporting community in the international market.   Directorate General of Foreign Trade (DGFT) DGFT is a government organisation and is responsible for the formulation of guidelines and principles for importers and exporters of country.   Besides these prominent organisations, some other organisations are also providing assistance to exporters, namely Indian Institute of Foreign Trade, Indian Institution of Packaging, Export Inspection Council, Indian Council of Arbitration, India Trade Promotion Organisation, Chamber of Commerce & Industry, Federation of Indian Chamber of Commerce & Industry, Bureau of Indian Standards, Marine Products Export Development Authority, India Investment Centre, Director General of Commercial Intelligence Statistics.

Continuation of 2% interest subvention scheme on rupee export credit to benefit leather SMEs, says CLE

 In an exclusive interview, D Saalai Maraan, executive director of Council of Leather Exports (CLE), elaborated on the present status of leather industry, available government policies in the sector, challenges and opportunities for SME sector.  CLE is an apex trade promotion organization functioning under the aegis of Ministry of Commerce & Industry, Government of India.

What is the role that your organisation aims to play for the upliftment of the SME sector?

D Saalai Maraan: Council for Leather Exports has around 2800 manufacturer-exporters of leather and leather products as its members.  More than 80% of the members constitute the SME sector. Thus, CLE’s export promotional activities are being extensively catered to the SME sector.  In fact, CLE is implementing the Duty Free Import Scheme of the Government of India wherein manufacturer-exporters of leather products & footwear and manufacturer as well as merchant exporters of leather garments tied-up with a manufacturer are allowed to import essential inputs used in product manufacture to the extent of 3% of FOB value of their export realization in the previous year. CLE was also engaged as the Facilitating Agency for the Integrated Development of Leather Sector (IDLS) Scheme implemented in the XI plan by the Ministry of Commerce and Industry, Govt. of India which facilitated technological upgradation of the leather industry. IDLS Scheme is expected to be continued in XII plan also. CLE has also been implementing various infrastructure projects across the country with the Government support which includes establishment of testing centres, trade centres etc.   CLE has also been assisting the SME exporters to gain exposure in the global market by enabling their participation in events like international fairs, India Leather Shows/Buyer Seller Meets etc., carried out under marketing programmes namely Marketing Development Assistance (MDA) and Market Access Initiative Scheme (MAIS) of the Government of India. Thus, CLE has been playing an active role in the overall development of SME units, whether it is in the area of production, marketing, technological upgradation or infrastructure.



India's leather export revenues were up by 26.7% during Apr 2011-Feb 2012. Do you think the growth will be substantial for this fiscal (2012-13) as well?

D Saalai Maraan: According to the latest data, the export of Leather and Leather products for the financial year April-March 2011-12 touched US$ 4868.71 million as against the performance of US$ 3968.54 million in the corresponding period of last year, recording a positive growth of 22.68%. Thus, exports during 2011-12 have crossed the target of US $ 4725 million.  Though the leather industry has the potential to enhance its growth in the long run, with the prevailing Eurozone crisis and other challenges like price hike of raw materials etc., there are concerns about maintaining the same growth levels during 2012-13 also.



Could you highlight what benefits SMEs can avail with the 2% Interest Subvention Scheme announced in the Foreign Trade Policy 2009-14?

D Saalai Maraan: The 2% interest subvention scheme provides reduced interest rates for the leather sector on pre-shipment and post-shipment rupee export credit.  Though the 2% interest subvention scheme was initially extended to the entire leather sector, from the year 2010-11, this is extended only for the SMEs in the leather sector.  The Annual Supplement 2012-13 to the Foreign Trade Policy 2009-14 announced on June 05, 2012 extended the continuation of the 2% interest subvention scheme on rupee export credit for the year 2012-13 for the SMEs.   The Reserve Bank of India has also issued a Circular No.RBI/2011-12/608 dated June 19, 2012 informing about extension of interest subvention of 2% on rupee export credit with effect from April 1, 2012 to March 31, 2013 which includes the SME. The aforesaid RBI circular mentions that banks may reduce the interest rate chargeable to the exporters as per Base Rate system by the amount of subvention available subject to a floor rate of 7% and also states that Banks may ensure to pass on the benefit of 2% interest subvention completely to the eligible exporters.



Recently, a study by CRISIL said that SMEs exporters earn higher operating profit margins (OPM) than domestic peers. What is your take on this?

D Saalai Maraan: It is a well known fact that though there are greater risks involved in export trade and there is intense competition too, the returns are quite higher than in the domestic market. However, as far as leather sector is concerned, the returns for high branded items is higher even in the domestic market.



How can the Eurozone crisis take its toll on the revenues of Indian leather industry during current fiscal (2012-13)?

D Saalai Maraan: As mentioned above, there are concerns about maintaining the export growth levels during 2012-13 on account of the Euro Zone crisis, as Europe is the major market for the Indian leather industry accounting for 66% of the exports. However, we hope that with the assistance of Government, there will be resurgence in exports in the second half of the year.



In your opinion, what kind of initiative the government should take to promote India's exports aggressively?

D Saalai Maraan: As far as leather sector is concerned, the Government of India is already implementing major schemes for promotion of exports. Further, Leather Sector has been recognised as a Focus Sector in the Foreign Trade Policy 2009-14 too. However, we have sought additional support measures from the Government so as to help the product and market diversification efforts of the exporters and to enhance our market share in USA which is currently about 1.31% only.



In the 12th Five Year Plan (2012-2017), the government has approved Rs 600-crore mega leather cluster development scheme. Do you think the concept of mega leather clusters will address the constraint of large infrastructure with integrated production chains in the country?

D Saalai Maraan: The Government of India has already notified the Mega Leather Cluster Scheme as part of the Indian Leather Development Programme (ILDP) for implementation during the 12th Five Year Plan Period.  As per the scheme, it is proposed to develop Greenfield Mega Leather Clusters in the States having large concentration of leather units and also in states having potential for growth of the leather sector. These Mega Leather Clusters, which will have world class infrastructure and support services, will play a crucial role in enhancing capacity of the Indian leather industry in the next 5 years.



Trade fairs are considered as an excellent platform for fruitful and business-oriented interactions with domestic and global buyers. How, according to you, SME/MSMEs can enhance their businesses with the active trade fair participation?

D Saalai Maraan: CLE is undertaking aggressive marketing campaign by organizing India Pavilions in major leather & leather product fairs/exhibitions held across the world and also by conducting India Leather Shows/ Buyer Seller Meets in major importing countries as well as potential markets. Exporters who participate in CLE organized events under Marketing Development Assistance (MDA) can get reimbursement of part of their expenditure. The reimbursement is available to Individual Exporter/ Companies with FOB value of export from Rs.3 lakhs and upto Rs.15 crore per annum who are participating in CLE led  trade delegations / BSMs / Fairs / Exhibitions abroad to explore new markets for export of their specific product(s) and commodities from India.   Besides, several cluster based exhibitions are now held in India were SMEs of raw materials and inputs can participate and find buyers. CLE has entered into an agreement with Riva Del Garda Fiere Congressi, the organizer of the most popular Expo Riva Schuch Fair in Italy and  organised the first edition of Expo Riva Schuh India exhibition  successfully during July 2011. Thereafter, the second edition of the fair was also organised in July 2012 and this fair has become a regular event for value added leather products and footwear. This is yet another example of Indo - Italian collaboration. The India Trade Promotion Organisation (ITPO) is also organising international fairs in the country namely India International Leather Fair (held in Chennai from Jan. 31 - Feb. 3 every year) , IILF Delhi (held during July 2012) and International Leather Goods Fair (held in Kolkata during Feb. every year) wherein SME companies can participate.



What are the key priorities of your Council?

D Saalai Maraan: The Council's objective is to ensure substantial development of the leather industry in all core areas namely capacity modernization, upgradation and enhancement, human resources development, market expansion and diversification, product diversification, infrastructure development and environment management, in order to double the exports in the next 5 years.



Please share your roadmap for the current fiscal (2012-13).

D Saalai Maraan: As far as our traditional market of Europe is concerned, the leather industry needs to undertake aggressive marketing campaign and also maintain a very high level of price competitiveness so as to tackle the adverse impact  of recession as well as the intense competition. As far as USA is concerned, even while enhancing our exports of leather goods and leather footwear, we must concentrate on enhancing our export of non-leather/synthetic footwear to this market, as there is a very huge market for this item in the US market. During 2011-12, exports to countries like Russia and Japan have shown considerable growth. Hence, the exporters must focus more on these markets and further enhance their share in these potential markets. On CLE's part, we have planned a number of marketing activities in Europe which includes participation in fairs like Expo Riva Schuh (Garda, Italy), Mipel (Milan, Italy) and organisation of India Leather Shows in Spain, Germany, France etc., Besides, we will be organising fair participation/Buyer Seller Meets in countries like Canada, Turkey, South Africa , China, UAE, Australia, New Zealand etc., CLE has also organised  Reverse Buyer Seller Meet in Delhi  during July 2012 by inviting overseas buyers and similar such reverse BSMs are planned in Chennai and Kolkata also.

50% of total export credit should be earmarked for SME sector, says FIEO Director General

There are immense growth opportunities for SMEs and new entrepreneurs in the field of exports as Central government is aiming to achieve short term goal of US $500 billion of exports by 2013-14 and doubling country's share in world trade by 2020, shares Ajay Sahai, the Director General & CEO of Federation of Indian Export Organisations (FIEO) in an exclusive interview.

What is your opinion on the state of exports in the country? How is the current global market scenario for exports by SMEs?

Ajay Sahai: Exports have done reasonably well during the last decade showing a CARG of about 20%. We have already clocked over US$ 300 billion in the last fiscal. However, the last six months of the previous fiscal showed only 10% growth. The exports witnessed negative growth in April, 2012 and a very moderate growth in May, 2012. The slowdown in exports is on account of global slowdown, crisis in Eurozone and deceleration in domestic manufacturing. SMEs will also be impacted because of these developments.



What is the role that your organisation aims to play to uplift the SME sector?

Ajay Sahai: FIEO provides capacity building to the SME sector and addresses various concerns of the sector relating to finance, marketing and logistics. FIEO has already represented to RBI that 50% of the total export credit should be earmarked for SME sector. Our efforts have resulted in grant of 2% interest subvention for all SMEs in exports. We provide international exposure through participation in trade fairs and exhibitions all over the globe. FIEO Warehouse at Sharjah provides logistic support by giving them Warehousing and displaying facility not only for Middle East but to rest of the world.



What are the growth opportunities for the SMEs available in the export sector?

Ajay Sahai: Indian exports are witnessing rapid change both in terms of products and markets. The traditional sectors of exports are losing to new sectors such as engineering, pharmaceuticals, electronics, etc. which are dominated by SME segment. The traditional exports like gems & jewellery, apparel, handicrafts, marine, agro processing, etc. are heavily dominated by SME segment. Government is also providing support to traditional sectors of exports in view of their positive role in creation of employment. Exports are gradually moving from advance economies to developing and emerging economies. The share of Africa, Latin America and Asia has increased substantially in last one decade at the cost of Europe and North America. SMEs can take advantage of emerging situation.



Indian SMEs are often faced with a challenge of non availability of funds. What's your opinion on this?

Ajay Sahai: Lack of availability of credit and cost of credit are the biggest challenge for SME sector. Despite RBI guideline on collaterals, banks are little reluctant to provide collateral free loans even upto Rs 10 lakhs. The share of export credit in total banking credit is on decline and has touched to less than 4% in December, 2011 as against the stipulated target of 12% fixed by RBI. The cost of credit is also very high particularly after deregulation of export credit and switch over to the base rate. Indian  exporters are getting credit at 12-13% while their competitor in South East Asia get the same at less than 6%. The high rate of credit is making SMEs uncompetitive.



Are SMEs fully aware about the advantages of the EXIM business? What measures your organisation undertakes to make them aware?

Ajay Sahai: Lack of information is one of the biggest drawback for SMEs. FIEO organizes workshops, seminars and interactive sessions to rope SMEs in our export effort. Government of India is looking at short term goal of US$ 500 billion of exports by 2013-14 and doubling our share in world trade by 2020. These figures would require new entrepreneurs to enter the field of exports. We have tied up with leading management institutes to attract entrepreneurs through our short term courses in international trade so that various facets of exports and imports may be explained to them.



In its mid-term monetary policy review, RBI announced to enhance the export credit refinance (ECR) limit to 50 per cent for scheduled banks (excluding RRBs). How will the step be beneficiary to the export sector?

Ajay Sahai: RBI has announced increase in the refinance facility from 15% to 50% with a view to increase flow of credit. The RBI refinance is available at 8% which is much less than the cost of deposit of fund by any bank. This has resulted in reduction of export credit rate by SBI by 0.50% but we expect other banks to follow the suit with steeper reduction in export credit rate.



The sharp and continuous fall of rupee is hitting the interest of the exporters especially from MSME sectors. What according to you should be the steps that the government should take to overcome this problem?

Ajay Sahai: The volatility in exchange rate is primarily due to mismatch between demand and supply and therefore, we need to address our concern at both front. For augmenting the supply, the government needs to bring required legislation to open FDI in insurance, banking, civil aviation and multi-brand retail. The concern of FIIs  on tax front need to be addressed so that there is regular flow of dollar through FIIs route. For addressing the demand, we need to reduce our gold and silver imports which are going into unproductive assets. The domestic industry need to be given level playing field so as to discourage avoidable imports. The trade deficit needs to be curtailed and luckily the softening of crude prices and lesser imports of gold and silver in April and May, 2012 are good sign for the country.



The government recently announced the Foreign Trade Policy which includes a seven-point strategy to boost labour intensive export sector. According to you, how it can prove to be useful for exporters?

Ajay Sahai: Looking at fiscal situation, not many concessions were expected. However, the Government has done a good job to provide Interest Subvention on exports and promote exports through non-fiscal initiatives. The extension of Zero Duty EPCG Scheme would help in expansion and modernization of industry whereas encouragement given to domestic sourcing under various authorization will give a boost to manufacturing sector in the country. The Government has initiated various measures to reduce the transaction cost of exports, which as per their own estimate varies between 8-10% of FOB value of exports.



From past couple of months, some key industrial sectors dominated by small and medium enterprises (SMEs) like gems and jewellery, readymade garments, leather, electronics, plastics, etc, have been registering sluggish growth. How do you observe the scenario now?

Ajay Sahai: These sectors have shown sluggish growth as they are heavily dependent on advance economies particularly sectors such as gems & jewellery, garments, and leather. However, of late, we have seen that these sectors are also moving to new markets in Latin America, Africa and CIS countries, which will help in registering the slowdown. We also hope that situation in Europe will improve in the second half of the current fiscal, helping exports of these sectors.



Please share your roadmap for the current fiscal (2012-13).

Ajay Sahai: We expect exports to grow by 10% in first six months of the current fiscal and by 30% in the next six months. With these projections, we expect the exports to grow to US$ 360 billion by 2012-13. Imports may see a slowdown with reduction in crude prices and lesser import of Gold and Silver. We expect imports to be around US$ 510 billion with a manageable deficit of about US$ 150 billion in 2012-13.



What is the outlook for the sector, especially SMEs, in the next 6 months?

Ajay Sahai: The next six months are challenging as confusing and contradicting news may flow from Euro Zone. The bailout package given to Greece and Spain can add to positive climate but at the same time, if not accompanied by austerity measures, may lead to discouraging signs. SMEs should use the opportunity of  favourable exchange rate to add to their competitiveness but at the same time, they should explore the possibility of adding to their long term competitiveness by increasing productivity, adopting IT in various operations and curtailing the avoidable expenditure.

SMEs should leave comfort zone & identify new markets, says Chandrakant Salunkhe of SME Chamber of India

Small entrepreneurs should concentrate on the domestic market as the development of local market would help them buoy up the slowdown in the exports. Chandrakant Salunkhe, the president of SME Chamber of India, shared this while talking exclusively to SME News. He also shared that it is now more important for SMEs not to concentrate only on the exports, but also on the domestic market.

What is your opinion on the state of exports in the country? How is the current global market scenario for exports by SMEs?

Chandrakant Salunkhe: After registering a healthy growth of 21% in 2011-12; India's exports have declined consequently for last three months - by 15% in July 2012; by 5.5% in June 2012 and by 4.16% in May 2012. For the first 4 months of 2012-13, the total exports dropped by 5.06% compared to the same period during the last year. The decline has been mainly due to the lower global economic growth and ongoing euro zone debt crisis which has led to lower demand of goods and services in one of the largest markets. As far as the export market scenario for SMEs is concerned, the lower global economic growth coupled with worsening euro zone crisis has created market situation very tough for SME exports. The sectors that have been worse affected include engineering goods, petroleum products, gems and jewellery, fruit and vegetables and iron ore.



What support and subsidies are being given to them?

Chandrakant Salunkhe: SME Chamber of India has been assisting SMEs both in manufacturing and services sector to enhance their business, exports and trade, enable them obtain the bank finance, PE & VC; joint ventures and technology transfers, contract manufacturing tie-ups; and also assist them with marketing, branding and promotion of their products and services. Also resolve their problems and issues.



Current Challenges for SMEs: - High interest rates charged by banks
- High inflation rate leading to high cost of raw materials as a result high input costs.
- Inadequate source of funds due to risk averseness of banks
- Lack of availability of timely funds
- Financial Crisis giving rise to delayed receipts of payments from Corporate/Customers.



Subsidies and Support given to the SMEs:
- Scheme of Surveys, Studies and Policy Research
- Entrepreneurship Development Institution Scheme
- Marketing Assistance Scheme (Implemented through NSIC)
- Performance and Credit Rating Scheme (Implemented through NSIC)
- Product Development, Design Intervention and Packaging (PRODIP) (Implemented through KVIC)
- Interest Subsidy Eligibility Certification (ISEC)
- Other schemes introduced by NSIC comprise of bank credit facilitation, Export credit Insurance, SME Credit Rating, Bill discounting schemes, Government stores purchase programme, infomediary services, facilitating marketing support, technology support and other support services.



In India, the SME segment is a fragmented one. In how much time do you think it would become organised?

Chandrakant Salunkhe: Commenting on the time required to make the Indian SME sector organized is tough. However the efforts are being made to develop SME clusters and various incentives are provided for SME Cluster development programs as well as for the SMEs having their operations in those clusters. At the same time various SEZz are being promoted in order to make the SME sector organized and there is an all-round development of the sector.



What are the growth opportunities for the SMEs available in the export sector?

Chandrakant Salunkhe: Currently the export sector is subdued mainly due to the ongoing euro zone debt crisis and is expected to remain the same for another quarter. However the sector presents ample of opportunities for the SMEs mainly in the field of the engineering goods, textiles, gems and jewellery, pharmaceutical products, metals and metal products, iron ore and other raw materials.



Are Indian SMEs fully aware about the advantages of the export-import business? What measures your organisation undertakes to make them aware?

Chandrakant Salunkhe: SMEs in the manufacturing business are aware of the benefits of the export-import business. The extent of the awareness might vary. However in order to increase the awareness amongst the Indian SMEs, the Council is organizing various Seminars, Conferences, Summits as well as various training programs from which the SMEs get the first hand information from the industry experts and also provides them with opportunity to network.



India's trade deficit widened in July as exports recorded their sharpest fall since November 2011. What do you think, in such scenario can the government miss its export target for the ongoing fiscal and will this further hit Indian rupee?

Chandrakant Salunkhe: It is important to understand that as the exports have dropped in July so have the imports in the same month. How and when the export market will pick-up will totally depend on global economic situation and the States of Euro zone. Commenting on whether the government would be able to meet the export target in the ongoing fiscal would be too early. The rupee volatility is dependent on various reasons and not just the availability of foreign currency in the country. The current volatility is mainly due to the uncertainty over Euro and other major currencies resulting in strengthening of the US Dollar.



What measures should government take on export policies in the wake of deficient monsoons this year?

Chandrakant Salunkhe: In view of deficit monsoon, the Government of India has already started taking various initiatives in order to boost the exports.

Some of them include:

- 2% interest subsidy scheme extended till March 2013
- Incentives for exports from north-eastern states in order to boost their participation
- Single revolving bank guarantee for different export deals to reduce time
- Market linked focus product scheme extended till March’13 for apparel export to USA and EU
- Government to come out with new guidelines to promote SEZs
- Steps announced to reduce transaction cost of exports in order to increase efficiency
- Thirteen shows abroad to promote Brand India to boost demand of domestic products across different countries.



Other key initiatives taken
- Shipments from Delhi, Mumbai through post, courier or e-commerce to get export benefits
- Ahmedabad, Kolhapur and Shaharanpur new Towns of Export Excellence
- Focus on market diversification to continue



How do you see Indian SMEs in terms of their performances?

Chandrakant Salunkhe: SMEs have been playing a major role in economic growth of the nation. They have been outforming the Corporate, however their performance is marred by various glitches in the policies and other areas of their concern. Initiatives are being taken in order to develop the clusters so that it would enable the SMEs to achieve an all-round growth.



Please share your roadmap for the current fiscal (2012-13).

Chandrakant Salunkhe: We have been assisting SMEs for a very long time and would continue to do the same in the current fiscal year too. We plan to organize various events and training programs in order to make SMEs aware on various policy measures and other incentives available to them. These programs will also concentrate on various risk management strategies in order to enable to mitigate the risk arising due to currency fluctuations and uncertainty in the West. Also we are putting efforts for empowerment of SMEs so that India can achieve 7% growth in the current fiscal year.



What is the outlook for the sector, especially SMEs, in the next 6 months?

Chandrakant Salunkhe: It is important for SMEs not to concentrate only on the exports, but also concentrate on the domestic market. There is a vast scope in the domestic market and if SMEs develop this market completely it would help them buoy the slowdown in the exports. Also it is necessary for them to get out of the comfort zone and try and identify new markets as well as new and innovative products. The sector though affected by the slowdown will continue to grow and government is taking initiatives to provide adequate support to the sector.

Global uncertainties hitting demand in apparel sector, says AEPC Chairman

 In an exclusive interview, Dr A Sakthivel, Chairman of Apparel Export Promotion Council (AEPC) said that the profitability of SMEs in apparel sector is facing the heat of consistent decline in Indian rupee. He further conveyed that many SMEs are not able to fully use their installed capacity, which in turn is negatively impacting them.

What is the role that AEPC plays for the Indian SME sector?

Dr A Sakthivel: AEPC plays pivotal role in facilitating the trade to SME units of apparel exporters. We currently have 8000 exporters as our members and more than 85% of them are under SME category. Besides the day to day support in trade affairs, AEPC is also providing the SME's good platform to equip themselves with all modern way of supply chain management practices. There are various policies announced by the government in support of SME's of India which are regulated and facilitated through AEPC. To give them exposure of international marketing and to improve their business, AEPC organises exhibitions, fairs, and buyer seller meet in domestic and overseas markets. After, quota phase out, capacity building of SMEs in terms of handling demand and availability of work force has been taken very seriously. To accomplish the objective of capacity building, various ATDC centers have been opened all across the apparel clusters where workers are trained to handle modern machineries. Moreover, technical modernisation, supply chain management, to comply with the WTO regulations and spreading awareness about benefits of FTA/PTA among SME's have been taken onboard. AEPC keeps on organising workshop and seminars in apparel clusters across the country. We have gone beyond this by launching the DISHA project which is aimed at encouraging socially responsive business practices among the Indian apparel exporters.

What are the current projects being undertaken by AEPC?

Dr A Sakthivel: Currently, AEPC is engaged in the project of Knitwear Technology Mission, DISHA- a project on Capacity Development and awareness on Social and environmental Compliance of Indian apparel industry. Besides this fairs, exhibitions and buyer-seller meet at domestic and overseas market is our yearly feature. Since last three years, India is facing stiff competition in international market specifically from the South-Asian and Southeast Asian competitors. To understand the reason for India’s low performance and create a strategy which can help in increasing the Indian apparel export share in world trade, we have established sub-committee on competitiveness and on innovative garments which are doing fantastic job. Once the study is completed we would be in a position to understand the changing dynamics of competition and how Indian exporters can cope up with the pressure of competition. All these inputs and knowledge will add to our capacity which will be shared with the SME sector for their export promotion.

How do you feel the SMEs are performing in the apparel sector?

Dr A Sakthivel: In the current fiscal year, SMEs are facing problem in getting more orders as the rupee is falling and possibility of getting business from US and EU is little hazy. Some of the SMEs are not able to utilize the 60% of installed capacity, which in turn is affecting their profitability.

Do you feel that exports are placed aptly for these SMEs?

Dr A Sakthivel: Yes, apparel sectors are well suited for the SMEs. As a matter of fact, 85% of Indian apparel export to world is contributed by the SME sector alone.

About 45 lakh people in the textile sector have lost jobs in the last two years. How do you think the sector will perform during the present fiscal?

Dr A Sakthivel: The uncertainties in the western markets have impacted the demand position. If you look at the import of major markets, like US and EU which contributed 80% of our total export to world, registered decline in volume wise import which suggests that in term of quantity export are not increasing. However, with the focus given to textile and apparel sector in the recent Foreign Trade Policy (FTP) announced, we are hopeful of a speedy recovery.

How do you find the annual supplement to Foreign Trade Policy announced recently?

Dr A Sakthivel: I am thankful to the Hon'ble Textile, Commerce and Industry Minister for giving the industry such a wonderful package this year. With 2% Interest Subvention, 2% Market Linked Focus Product Scheme to US & EU and for giving a new post export EPCG Scheme, the exporters can improve their competitiveness. On behalf of the industry, I assure our Minister full support in trying to achieve the targets set for this sector. I hope we would be able to achieve the targets of $18 billion given by Ministry of Textiles for the FY 2012-13.

How is it likely to help apparel exports? Please share some benefits and outline what else could have been incorporated.

Dr A Sakthivel: This policy will support apparel industries in multiple ways. It will help exporters in terms of diversifying their market base, along with the modernisation of the units because EPCG and TUFS status holder schemes have been extended. Newly permitted utilisation of scrip's under FPS, FMS and MLFPS for payment of excise duty for domestic procurement would definitely help the apparel SME exporters. Simplification of export procedures like Advance authorisation at all EDI ports, export benefit to sample shipped from Delhi and Mumbai and single revolving bank guarantee for different transaction would definitely help in bringing down the transaction and would surely fasten the delivery time.

What are the main challenges the SMEs in the apparel sector are witnessing? D

Dr A Sakthivel: Underutilisation of installed capacity, increased wages, stringent labour laws and unstable world apparel demand are the major causes which are affecting the SMEs sector.

Do you feel that government policies are working in favour of the SMEs?

Dr A Sakthivel: Yes, if we look from the export policy point of view they are helping exporters to increase their exports. However, there are certain policies like labour laws which do not favour the apparel exporters as the apparel business has changed drastically in the global map. There are changes in demand patter like delivery schedules are becoming short, apparel export facing seasonality in demand for which Government is trying to find ways.

Kindly share the roadmap of your council for this fiscal.

Dr A Sakthivel: For this fiscal year ie. 2012-13 Ministry of Textile has set target of $18 billion. To resist the jolt of world economic crisis, we have made certain strategies wherein we are emphasising on the diversification of market base. To diversify the market this year, we are organising mega show in Tokyo, Japan which is the third largest importer in world and India's share in import is less than 1%. Success of this show may bring huge apparel business for India as it has already concluded India-Japan CEPA, which became effective since August 2011. Under the agreement, duty free apparel import has been allowed in Japan since August 2011. We are organising buyer’s seller meet in Tel Aviv, Israel; Barcelona and Madrid in Spain and New York in US. We have also planned mega apparel show called magic fair in US.

Export consortia: How SMEs can access global markets effectively

The small and medium enterprises (SMEs) today are considered as a vital segment of the Indian economy as they provide a significant contribution to the country's GDP. Today, the SME sector accounts for around 35 per cent of the gross value of output in the manufacturing sector and over 40 per cent of the total exports from the country.


SME players enjoy dominancy in some of India's major export sectors namely textiles and garments, sports goods, leather products, gems and jewelry, handicrafts to name a few. But still they are hesitant to step into global trade. In today's globalization and liberalization era, their penetration is confined with several factors and it is a herculean task for them to compete in a global environment. Some major restrictions faced by the SMEs include resource crunch, shortage of trained manpower, risks and complexities involved in exporting. They choose to compete across local areas, at the domestic level.


In order to assume centre-stage in India's trade policy and also to expand penetration in the global arena, SME owners should come together and form a confederation while complying with their own limits and boundaries. The formation of export consortia by SMEs is an effective way to live up their dream of becoming active players in the export game as it will help them to get over the barriers of costs and lack of skills.


Defining export consortium
A voluntary group formed by small and medium sized businesses which pool in their own expertise, experience, resources and business network is called an export consortium. While in the consortium, they still enjoy their legal, financial and managerial rights. Their objective is to boost the export of goods and services of its members through joint actions.
This group promotes different levels of strategic cooperation among enterprises with their collective activities and initiatives to reach out to overseas markets.


Generally, such consortiums are non-profit alliances, and the members do not have to transfer control of their business to others.


The benefits it offers
SMEs can efficiently make a way into and enhance their market share in foreign markets at reduced expenditure and risk with the formation of export consortia. Besides, it allows the affiliates to improve productivity, increase knowledge and gain a way into larger markets and contracts with joint efforts. By and large, the voluntary group of enterprises is from a same business stream and the collaboration is aimed to make these enterprises globally competitive.


Despite these benefits, export consortia are also faced with some impediments such as delays emerging from the process of looking for like-minded and appropriate business partners and ensuring a productive partnering which itself is a huge effort asking for cohered efforts, dedication and resources. These challenges of a collaborative venture, however, fall short in front of the benefits of an export consortium. Member SMEs must work cordially and efficiently for the consortium to bring them access to exports.
An export consortium allows the members to also opt for collective bidding. This enables them to cater to large orders from foreign buyers which may not have been possible for a single enterprise of a small size.


The way forward

SMEs are progressively focussing on improved production methods, penetrative marketing strategies and management capabilities with the help of their vigour, flexibility and innovative drive in order to uphold and strengthen their operations in the global market. However, when tried, unity and collaboration brings good results as it follows the old saying 'unity is strength and division is weakness'.