SMEs have to become more innovative to remain globally competitive, says A Ramesh Kumar, chairman, SME Chamber of India (Northern Region)

It is time for the Indian small and medium enterprises (SMEs) to opt for innovation to enhance competitiveness globally as they are facing various problems such as inadequate infrastructure, insufficient risk capital and high interest rates, said A Ramesh Kumar, chairman, SME Chamber of India (Northern Region) in an exclusive interview with SME News.

Among various challenges witnessed by SMEs, getting timely funding is a big problem. The small units mostly depend on banks for funds as private equity funding has not gained momentum in India.



What is the role that your Federation aims to play for the growth of the Indian SME sector?

A Ramesh Kumar: The SME chamber of India is a progressive platform for promoting and supporting the SME sector in India. The objective is to create an ecosystem for making the Indian SMEs innovative and globally competitive. The chamber organises several seminars, conferences, workshops, training projects, which creates growth opportunities for industry in various areas such as networking and knowledge migration. The chamber also plays active role in policy formulation in SME sector.



What are the current projects being undertaken by your Federation?
A Ramesh Kumar: SME chamber has lined up several initiatives. Some of the important forthcoming events are - SME National Banking Conclave, SME IT summit, SME Finance and investment summit, Young Entrepreneurs Award, Women Entrepreneurship Summit etc. The SME Chamber of India in association with the university of Wales and Asia Pragati Capfin Pvt Ltd launched a Wales-India SME Innovation Project, under which an open innovation centre and knowledge portal will be created in Mumbai for SMEs in India. Some prominent international activities are Ukraine Summit, World SME Ukraine summit, MBI Business summit, India-Europe business’s summit. The chamber also proposes to send business delegations to South Korea, UK and Wales etc. This will help in developing business relationship between SMEs of India and other foreign countries.



Can you throw some light on the current conditions of the SME sector in the state?

A Ramesh Kumar: While SMEs across the country are gearing up to face local and global competition, they are handicapped in various areas such as inadequate infrastructure, inadequate risk capital and high interest rates.



Are the exports placed aptly for the SMEs in India?

A Ramesh Kumar: SMEs are performing well in exports, contributing 40% of country’s out bound trade. Going forward to maintain this level, the SMEs have to become more innovative to remain globally competitive. Also, infrastructure inadequacy needs to be addressed.



Do you think the domestic market is boosting the growth of SME sector?

A Ramesh Kumar:High inflation has definitely affected domestic rates of SMEs. High interest rate has also affected their margins. Although, it is a difficult scenario to cope with, but over the medium term large domestic market will continue to support the demand for SME products.



What are the main challenges faced by the Indian SMEs?

A Ramesh Kumar: Getting timely funding remains the biggest challenge. Indian SMEs mostly depend on banks for funds while risk capital (equity) funding is yet to pick up in India. Some recent initiatives of government for increasing venture capital funding will be useful in future years. Besides funding, other challenges are collections of receivables, technological up gradation, trained man power, skill development and marketing etc.



Do you feel that government policies (both Centre and state) are working in favour of the MSMEs?

A Ramesh Kumar: I think there is a reasonably good appreciation at the central government level regarding problems faced by the SMEs. Some initiatives like Factoring Bill, SIDBI bill, India Opportunities Venture Capital funds etc are noteworthy. There are also ongoing dialogues between government and industry representatives. However, there is much to be done at implementation level. Some state governments have been able to put in place policies to encourage SMEs. However this cannot be said about all the states. While all parties conceptually support SMEs, the implementation of measures, reduction of red tape and provision of infrastructure is the differentiator.



Skill development has been observed as a key issue at the moment for SMEs. How do you view it and what are the solutions?

A Ramesh Kumar: As India aims to become a knowledge economy, there will be big need for skill development. Centre has started some initiatives for skill Development Corporation. Here the Industry chambers can also make excellent contribution. In fact, India needs to develop a knowledge network involving industries, government, industry chambers and academicians, which will ensure supply of skilled persons to SMEs.


Can you throw some light on the ICT (information and communication technology) used by SMEs?

A Ramesh Kumar: Many SMEs are using ICT. The SME chamber conducts many programmes to build awareness regarding ICT. We are planning to conduct a workshop in cloud competing for SMEs in September.



How do you think the FTP policy will help the Indian SME sector?

A Ramesh Kumar: FTP policy, which was formulated in 2009, needs to be relooked when new policy comes up in 2014. Wild fluctuation in rates is a big challenge for SMEs.



Kindly share the roadmap of your Federation for this fiscal.

A Ramesh Kumar: We have a very active schedule. We have many initiatives which will continue to be implemented. We have started a new research initiative in Innovation in association with UK Govt, Welsh universities. We hope this will help in making our SMEs more innovative and competitive.



S&P lowered the outlook for India to negative and also Fitch downgraded India's credit rating from stable to negative. Do you think it will affect Indian SMEs?

A Ramesh Kumar: While outlooks have been adversely affected India still remains investment grade, although the negative outlook will increase cost of external funds. This has no effect on SMSs in a big way. These ratings should be taken as working notes and necessary policies to be formulated to address concerns. Equity investment needs to be accelerated. Many projects which have been started need timely implementation. It will create new jobs and create a positive atmosphere which will attract new investment. All these will lead to outlook upgradation.

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.