As per latest data provided by the Ministry of MSMEs, investment in fixed capital of the small-scale industries (SSI) has gone up substantially during the ongoing decade. According to the third All India Census of SSI (2001-02), investment in fixed capital of registered small units stood at Rs 91,792.07 crore, while quick results of the fourth All India Census of MSMEs (2006-07) shows that investment in fixed capital of registered MSMEs has gone up to Rs 5,00,758.36 crore.

However, while these figures indicate a rise in capital investment in MSMEs, the sector still faces credit issues. In August 2005, the government introduced ‘Policy Package for Stepping up Credit to SMEs’, which was aimed at ensuring a minimum 20% annual credit growth by nationalised banks to the MSME sector. But unwillingness on part of some banks to lend to small and micro units as well as turmoil in the global financial markets took a toll on credit growth of MSMEs.

“MSMEs often complain that banks do not provide them with adequate financial support on various grounds like absence of credit rating in many cases. Now with the Union finance minister Pranab Mukherjee repeatedly reminding banks to focus on MSME lending, small players can expect some relief,” said Faisal Khan, an independent financial analyst in Bengaluru.

Task Force’s recommendation

As per a written reply to a question in the Lower House of the Parliament by Dinsha Patel, minister of state (independent charge) for MSMEs, based on the recommendations of the Prime Minister’s High Level Task Force on MSMEs, which was formed last year to look into issues faced by the sector, the Reserve Bank of India has asked banks to achieve the terms mentioned in the ‘Policy Package for Stepping up Credit to SMEs’. The only difference is that the apex bank has not restricted this advice only to nationalised banks, but has conveyed it to the entire banking sector.

Considering that last year the government had committed to double the credit flow to the MSME sector by March 2014, small Indian players can look forward to better days ahead.

Prasenjit Das