The Budget 2013-14 may have done its bit to incentivise the medium, small and micro enterprises (MSMEs), but business confidence in the sector is still quite low, says a CII survey.
The CII’s overall Business Confidence Index of MSMEs for the fourth quarter of fiscal 2012-13 was estimated at 52.9 on a scale of 0-100 (from most unfavourable to the most favourable).
The number 50 is the dividing line for the index and the value represents the index being just favourable, says the countrywide survey of 180 SMEs in the manufacturing and services sector conducted by the Confederation of Indian Industry (CII).
The sector, which employs the largest number of people in the country, continues to grapple with concerns such as high interest rates, rising input costs and credit flow.
Rate cut hopes
While there is room for optimism, especially in the services sector, a real push is required in the manufacturing sector, which is banking on a rate cut by the Reserve Bank in its monetary policy review on March 19.
“What should help the MSMEs is the RBI’s decision to cut the cash reserve ratio by 25 basis points to 4.0 per cent to inject Rs 18,000-crore liquidity into the system, the benefit of it will only be felt if a majority of this amount can reach the grass roots level of the sector,” says the survey.
The highest value registered among all the variables was for ‘new orders and contracts’ at 66.7 per cent.
Export prospects
Export prospects were slightly above average at 60.7 per cent. But employment prospects in the sector registered 54.2 percentage points, which is a worrying statistics given how close the variable is to being unfavourable, says the survey.
Deep Kapuria, Chairman, CII National MSME Council, said the council was pleased with the Budget, but few areas needed the attention of the policy maker, such as synergising the relationship between small, medium and the large industry and implementation of the public procurement policy, besides promoting foreign direct investment by non-resident Indians.