SME Times News Bureau | 21 Jun, 2010

High costs of credit and procurement of raw materials are the major factors inhibiting the growth of small and medium enterprises, a CII MSME survey has found.

Revealing the factors that inhibit growth and development of the micro, small and medium enterprises (MSMEs), the Confederation of Indian Industry (CII) MSME survey highlighted high cost of credit, procurement of raw material at a competitive cost and delayed payments, in decreasing order of importance.

As revealed by 79% of the MSME respondents, the CII survey ranks high cost of credit to be most important impediment to growth and development of MSMEs, followed by procurement of raw material at a competitive cost as revealed by 64% of MSMEs and lastly delayed payment along with lack of availability of credit, as revealed by 55% of MSME respondents, as the crucial factors that inhibit growth and development of MSMEs .

The MSME sector contributes 8 percent of the country's gross domestic product, 45 percent of the manufactured output and 40 percent of its exports. It provides employment to about 60 million people through around 26 million enterprises.

Though the government has offered assistance under schemes like the National Manufacturing Competitiveness Programmes, 60-70 percent of the respondents said they were not availing the benefits.

They said developing infrastructure like industrial estates, providing electricity and connectivity through roads should be the most important priorities for the development of the sector.

The sector is highly heterogeneous in terms of size of the enterprises, variety of products and services produced and the levels of technology employed.

While one end of the spectrum contains highly innovative and high growth enterprises, more than 94 percent of MSMEs are unregistered, with a large number of them in the informal or unorganised sector.

"The establishment of Prime Minister's council on MSME in his Office to oversee the implementation of the recommendations made by the high level task force on MSMEs on a half yearly basis reflects the importance of this sector in the Indian economy," said Ramesh Datla, chairman, CII National MSME Council.