1273525, CHANDANDEEP KAUR,F1,Q17, LENDING IN SMES?CURRENT SCENARIO?

                                                   INTRODUCTION                             

SMEs form the backbone of the Indian manufacturing sector and have become engine of economic growth in India. It is estimated that SMEs account for almost 90% of industrial units in India and 40% of value addition in the manufacturing sector. This paper closely analyses the growth and development of the Indian mall scale sector from opening of the economy in 1991. Third part looks into the present scenario of SMEs and the problems they phases like lending, marketing, license issues in detail. The Micro, Small and Medium Enterprises Act, 2006 is intended to boost the sector. The provisions of the Act are examined closely. The final part provides some future policy framework for the sustainability of the sector.

The Government of India enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 including definitions of micro, small and medium enterprises as follows:

(a) Enterprises engaged in the manufacture or production, processing or preservation of goods as specified below:

(i) A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh;

(ii) A small enterprise is an enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore; and

(iii) A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore.

In case of the above enterprises, investment in plant and machinery is the original cost excluding land and building and the items specified by the Ministry of Small Scale Industries vide its notification No.S.O.1722(E) dated October 5, 2006.

(b) Enterprises engaged in providing services are defined by their level of investment in equipment as follows:

(i) A micro enterprise is an enterprise where the investment in equipment does not exceed Rs. 10 lakh;

(ii) A small enterprise is an enterprise where the investment in equipment is more than Rs.10 lakh but does not exceed Rs. 2 crore.

                                    Current Scenario

Existing and newly created SMEs contribute to 28 % of India's GDP and up to 40 % of exports. Well thought SME network can take India to different level of progress. The SME sector is vital to Indian economy and it is one of the largest sectors in India providing employment opportunities with an entrepreneurial spirit.

SMEs - A World of Opportunities

The long-awaited SME exchange meant to provide access to equity capital to small and medium enterprises is due for launch in early 2012.

Listing on the exchange gives better valuation to SME companies, debt and equity ratios will improve and the balance sheet will look much healthier. From media reports it can be observed that over 50 companies are looking at listing on the SME exchange in the next few months. Some sectors like pharma, healthcare, retail and BFSI are doing pretty well and hope to do even better in 2012.

The private health sector is erse, and ranges from small-scale to large capital investments. Investors need to be able to segment the market. In recent years and across all regions and areas of healthcare provision, the sector is becoming more consolidated, organized, and corporate. Striking evidence of this trend is the recent rise in multinational health care companies that are based in emerging markets.

·       Health sector growth is driven by many parameters:

·       Economic growth

·       Rising consumer income and therefore ability to purchase health care

·       Population growth

·       Extended life expectancy

·       Shift in disease burden

·       Emergence of advanced medical treatments and technologies

Expansion into strong, high-growth market

The health sector presents a growing and untapped market opportunity for many investors. There is demand for financing by the full range of health care businesses–small and large in scale, local and regional in presence – signaling strong opportunities for investors of all sizes.

Emerging Trend

The Indian pharmaceutical industry is now discovering new opportunities of growth in clinical research, contract research, manufacturing and innovation opportunities. The excise structure changed so that companies now have to pay a 16 per cent tax on the maximum retail price of their products, as opposed to on the ex-factory price.

Consequently, larger companies are cutting back on outsourcing and what business is left is shifting to companies with facilities in the four tax-free states - Himachal Pradesh, Jammu & Kashmir, Uttaranchal and Jharkhand. SMEs have been finding it difficult to find the funds to upgrade their manufacturing plants, resulting in the closure of many facilities.

In case of diagnostic industry, there seems to be a consolidation drive happening, wherein local players are seen getting into alliance with leading national players. This move helps in standardization of services across, helps cut back on infrastructure cost and also helps improve the reach to the end consumer across tier-2 and tier-3 cities.

Challenges for Healthcare SMEs:

Over the years, most healthcare providers were developed keeping in mind the metro markets. However now, metros with developed healthcare infrastructure and rising competition have reached a saturation level serving a certain socio-economic segment of the population. The healthcare providers have now started realizing that they cannot serve all segments of population through high-cost structures. To serve different consumer segments such as lower middle income, urban poor and rural population, they need to develop low-cost healthcare delivery models which will aid wide penetration. Public private partnerships thus work to help improve reach to the masses.

Low capital intensive models will ensure viability of the project and expand the healthcare providers' reach in different geographies and consumer segments.

A major challenge for SMEs would be the unpredictable global economics. Some European countries and the US are talking about recession, which may result in severe pricing pressure and also affect exports for Indian SMEs.

Cash flow, inflation and access to credit sources are some of the challenges that SMEs are facing and it may take some time, perhaps till mid 2012, for things to ease. Small and Medium Enterprises (SMEs) SMEs have been largely unable to take advantage of IT systems and solutions due to the high up front costs of sourcing and deploying the same. Consequently, they are known to face issues in the management of their supply chains, financials, inventories, customer relationships, and human resources.

Key Barriers Facing Investors in the Health Sector are:

·       Lack of market information

·       Fragmented nature of the sector

·       Limited business and financial management capacity:

·       Long-term investments:

The need of the hour hence is that the government helps SMEs. Government can come forth to strengthen monetary and fiscal policies to support SMEs. Banking and financial institutions need to come forward and liberalize SME lending. Prospective health sector investors should understand their local market.  Well – defined local market characteristics determine the nature and scale of risks and opportunities in the private health sector.