SMEs positive about growth despite slowing economy

SMEs positive about growth despite slowing economy

Bangalore: A large number of small and medium enterprises (SMEs), remain confident that their business will grow over the coming year despite a slowing Indian economy and tight credit markets, says a survey by Kadence Research India.

The research firm surveyed 300 SMEs across Delhi, Mumbai, Chennai and Kolkata that employed an average of 34 employees. The respondents were mostly their proprietors or managers.

Also See Growth Prospects? (Graphic)

While 65% of the firms polled said growth of the companies would accelerate, 11% foresaw a dip in growth and 14% expected no change. And 10% refused to respond.

As many as 73% of the respondents said India’s economy will grow and perform well in comparison with other developed economies this financial year.

Only 12% of those surveyed were pessimistic and foresaw a dip in growth while 6% expect it to remain stable; 9% refused to respond.

“SMEs view the economic slowdown as a challenge, but one that they are ready for," says Aman Makkar, managing director at Kadence Research India. SMEs account for almost 50% of industrial output in India and 42% of its exports.

One of the pain points for SMEs remains non-availability of funds from banks and financial institutions amid a global credit squeeze.

Around 45% of the respondents said they found it difficult or very difficult to access bank funding.

In spite of the Reserve Bank of India announcing measures to release funds and directing banks not to stop lending, many public sector lenders are denying working capital and rejecting overdrafts citing the liquidity crunch. This will surely hit SMEs, said the study.

Other hurdles to growth include weak marketing and distribution networks, taxes and duties and inflation of raw material costs.

Graphics by Paras Jain / Mint