India among least friendly for small businesses

India among least friendly for small businesses


New Delhi: India may have entered into the top league of world economies on the back of robust economic growth and booming stock markets, but it ranks among the bottom ten when it comes to promoting small businesses.

The country has been ranked 46 among 53 countries in a list compiled by global media conglomerate CNN-Time Warner group’s Fortune Small Business (FSB) magazine for their friendliness to small businesses.

The less-friendly approach toward small businesses probably also reflected performance of small-size companies, whose financial progression pales in comparison to their blue-chip counterparts.

According to a PTI Research analysis of the performances of publicly-listed small and large-cap firms in India, the small-caps have posted a lower growth rate in their collective turnover in the latest fiscal than the blue-chip giants.

This is despite the fact smaller firms are considered to have better growth prospects due to a lower base.

The country’s 30 biggest blue chips, present on stock market’s benchmark index BSE Sensex, saw a 31% growth in their collective turnover for the latest fiscal, while their net profit has also grown at a similar rate.

However, the combined turnover growth rate of 488 companies on the BSE’s Small-Cap Index stands at 29%, even though their net profit growth has been relatively better at 41%.

Besides, while the annual turnover of all the 30 Sensex companies have grown in the latest fiscal year, as many as 57 small-cap companies (12%) saw their turnover declining and 112 companies (23%) recorded a dip in their net profit.

Only one Sensex company, Hero Honda, saw a decline in its net profit in its latest fiscal ended 31 March, 2007. A total of 31 small-caps posted a decline in both turnover and net profit in their latest annual results.

The poorer financial performance comes despite a stronger show put out by these small-cap companies on the bourses in comparison to their blue-chip counterparts.

While the Sensex index has given a return of 38% in the last 365 days, the Small-cap index has gained over 44% in the same period.

Besides, the list of biggest gainers is dominated by the small-cap stocks and none of the Sensex constituent figure in the top 300 performers in terms of gains in their share prices over the past one year.

In the FSB list, Indonesia, Greece, Philippines, Brazil, Ecuador, Uruguay and Jordan are the only seven countries doing worse than India in terms of friendliness to small businesses.

Besides, India is doing poorly than not only the giants like the US, UK, Singapore and Hong Kong, known for promoting businesses, but even countries like Iceland, Finland, Jamaica, Latvia, Peru and Uganda also enjoy higher positions.

The list has been published in current issue of FSB magazine, whose sister publications include Fortune, Money, Business 2.0 magazines, and is based on World Bank’s annual Doing Business Report and the Global Entrepreneurship Monitor (GEM), an annual study produced by Babson College and the London Business School.

“India, despite its move into the big leagues of global economies, lags far behind in entrepreneurship," FSB said.

Making it easy to launch a new enterprise is one of the many ways in which the US has led the world in fostering a dynamic entrepreneurial class, it noted.

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