The Hindu : Andhra Pradesh News : Fall in SMEs contribution likely

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Sunday, Jan 04, 2009
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Andhra Pradesh

Andhra Pradesh

Fall in SMEs contribution likely

Special Correspondent

KOCHI: Small and medium enterprises (SMEs) is likely to be the most vulnerable one in 2009, as its contribution to manufacturing and employment generation is likely to slip by 5 per cent and 3 per cent respectively.

The SMEs sector has already plunged into deceleration because of its inability to absorb latest technologies, which eroded its competitiveness to a great extent, according to an assessment on ‘Prospects of SMEs in 2009’ as carried out by the Associated Chambers of Commerce and Industry of India (ASSOCHAM).

Cheaper imports

The assessment highlights that the large and medium industries are sourcing their inputs through cheaper imports that have endangered the existence of SMEs and the trend is unlikely to be arrested in 2009.

The input costs of SMEs have risen and their supplies got restricted to vendors as by and large, SMEs failed to absorb technologies since these called for higher investments in research and development which the sector could not generate.

This amounted to fizzling out of their competitiveness, the adverse impact of which would become more visible and pronounced from 2009.

The SMEs would encounter a gloom period as its contribution to manufacturing would come down to 35 per cent in 2008 as compared to 40 per cent in 2007 and over 45 per cent in preceding years until 2006-07. The number of SME units in 2007 was estimated at 44 lakhs.

Export potential

As a result of the deceleration the SMEs sector has been witnessing, the number of units in SMEs have come down to around 40 lakhs and employment generation has shrunk to 225 lakh workers and their output to manufacturing has come down to Rs.12 lakh crore.

Their export potential which used to be between 40-45 per cent for the last many years would decline by 7-8 per cent as the inputs being produced by entire SMEs sector are costing to their supplier higher by over 10 per cent.

The ASSOCHAM said that expansion in most of SME units had come to a virtual halt.

The credit extension was at very high cost and their delivery mechanism too was faulty.

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