Sunday, 23 November 2008

The Assam Tribune on Nov 23, 2008 publishes an editorial article by RK Rishikesh Sinha

Small and medium enterprises
— RK Rishikesh Sinha
(This article was originally published in the editorial page of The Assam Tribune on November 23, 2008)

The Assam – Vision 2020 reads that the state will have one of the best infrastructures in Asia to facilitate the largest volume of ‘trade’ between India, China, Bangladesh and the ASEAN countries. To envision this, which unfortunately is seen as a distant dream in the state and in the northeastern states in general, it calls for creating a new ‘trade’ ecosystem, where buoyant business environment is given emphasis and it is nurtured.

To meet this objective the small and medium enterprises (SMEs) in the state must be seen in a different coloured glass. The ubiquitous looking SMEs must be invigorated, taken care of with robust state incentives and initiatives by financial institutions. In short, a new lease of life has to be infused in the state SMEs. The micro, small and medium enterprises are the growth engines and would work as a catalyst to give a shape to this vision.

Here, it is pertinent to mention that in India, the small and medium enterprises constitute a major bulk of the industrial base, almost 50 percent of industrial output and 42 percent of India’s total exports. Likewise, in UK, the SMEs represent 99.9% of the country’s 4.7 million private sector companies, and almost 60% of private sector employment. In China, the sector makes up almost 60 per cent of its Gross Domestic Product; 50 per cent of tax revenues, 68 per cent of exports and creates 75 per cent of new jobs every year.

Worldwide, the sector has been accepted as the engine of economic growth and for promoting equitable development. It constitutes an important segment to the industrial production, exports, employment and creation of an entrepreneurial base of any country. Hence, urgency on the part of the state is required to understand and gauge the potential of the SMEs and support them with adequate credit, funds for technology upgradation and modernisation; modern testing facilities and quality certification laboratories; assistance for better access to domestic and export markets etcetera.

It is unfortunate that the micro (enterprise standing on the infrastructural investment of 25 lakh in manufacturing, and 10 lakh in services), small (built on the investment of 25 lakh-5 crore in manufacturing, and 10 lakh-2 crore in services) and medium (investment up to 10 crore in manufacturing and 5 crore in services), has always remain in the receiving end of any micro and macro economic changes. And Assam SMEs are not the exception to the turbulent market that had changed the history of global finance forever. They have felt the tightening of the economy, bitterly.

Reports are pouring in that banks are not entertaining applications of loans or capital to the SMEs. Not hard to guess the move would have a detrimental effect on the functioning of an enterprise. And with the scaling up of the prices of the raw material, many of them had already winded up or vanished in ignominy. Reasons are many and contagious.


State’s 2511 registered factories and the teeming micro, small enterprises involved in tea, plywood, jute, foodgrains, handlooms and other essential items are the ones that had been hardly hit in the crest and trough of the economy.

In order to fructify in letter and spirit the Assam-Vision 2020, the state must be pro-active in creating an entrepreneur-friendly environment and place its natural resources, geographical, eco-tourism USPs in advantage, by working in tandem with banks and financial institutions. More so, with capacity building steps based on technology and resource management.

However, there are schemes like Prime Minister's Rojgar Yojana (PMRY), Chief Minister's Swaniyojan Yojana (CMSY), Central Assistance to State for Developing Export Infrastructure and other Allied Activities (ASIDE), Scheme for Promotion of Industrialization in North East (SPINE), Food Processing Industries Tenth Plan Schemes and Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) set up by Government of India and Small Industries Development Bank of India (SIDBI), that the entrepreneurs can avail to leverage their business potential.

To this context, a Micro and Small Enterprises (MSEs) Fund for North Eastern Region (NER) with an initial corpus of Rs.10 crore has been set up under the CGTMSE scheme. The corpus would be used by SIDBI to co-finance the project of MSEs in North Eastern Region (NER). It has been decided to extend coverage by CGTMSE in respect of the credit facility extended by SIDBI out of the MSE Fund for NER and the co-financing bank.

Moreover, in order to ensure that credit doesn’t come in the working of SMEs, the Reserve Bank of India has directed that 40 per cent of the total advances should go to micro and 20 per cent to small enterprises.

Among many aspects required in the strengthening of the state SMEs, which make up only three percent of the total SME in the country, it is the element of research. Research related to the emerging needs of SMEs and on markets or legislation affecting it.

In conclusion, if the state of Assam wishes to become the trade center, registering the highest volume of trade activities with its neighbouring countries and with the rest of the country, the vibrant and empowered SME sector comes as a panacea, in the fulfillment of the Assam Vision 2020.

The article has also been taken by HT syndication and published in Manufacturing and Business Technology.
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