Information is the key to SME growth
This time's SME International Trade Forum focused on how Indian SMEs could work towards bridging this gap.
By TNN |
Over the last twenty five years, the India-US bilateral trade has grown ten fold - from $ 3 billion to almost $ 32 billion. Today, the USA is India's largest trading partner. The US exports to India registered a remarkable growth of 32.94% during Jan-May 2007 while India's exports in the same period registered a growth of 12.21%.
However, considering that US-China trade is over ten times that of Indo-US trade, clearly there is a long way to go. How to get there, is definitely the key question.
Both, India and the USA are keen to strengthen and deepen trade relations. Apart from the nuclear deal, although still in the formative stage, the two nations are also exploring various possibilities of a bilateral agreement that would help trade ties. Efforts are also on to prepare and execute a free trade agreement between India and the US. It is under this backdrop, that The Economic Times SME International Trade Forum series on Indo-US trade was recently held in association with HSBC.
Eminent members of the industry shared their perspective on the road ahead. Jairaj Purandare, Executive Director-in-charge, PriceWaterHouseCoopers, was the moderator of the event and the speakers were Puneet Chaddha, Head-Commercial Banking-India, HSBC; R K Chopra, Secretary General, Indo American Chamber of Commerce; Rajat Srivastava, Regional Director, Engineering Export Promotion Council; Amit Ruparelia, Vice Chairman, The Cotton Textiles Export Promotion Council; Michael Newbill, Consul, Political-Economic Affairs, Consulate General of the United States of America; and R P Kalyanpur, Executive Director, Plastic & Linoleum Export Promotion Council.
The discussion focused on the growth in trade, the specific regulations that help or hinder trade, the role of the government and international trade bodies and the kind of changes that need to be effected at the policy level among various other issues.
As one of the fastest growing economies of the world, there exists tremendous potential for bilateral trade between India and the US. "For US companies India is the place to be," said Mr Newbill. "The positive environment that exists today is great and business makes total sense. Though some American companies have had problems, but then that they should be able to find good partners and I think, this is a very exciting time," he added.
The panelists agreed that while the challenges are definitely there in terms of duties and non-trade barriers, the SMEs should focus increasingly on maintaining quality of products to get the competitive edge.
That can be brought about by more information dissemination. "More awareness needs to be created. The SMEs need to be informed about of what is available, they should be told of what successful SMEs are doing right by sharing the general trends in the industry," said Mr Chaddha.
He elaborated that it is processes like these which will enable financial services companies to partner more with the SMEs and alleviate the risks that the companies are likely to face in expanding their global footprint. According to the panellists, a strong focus also needs to built on encouraging more research activity in India. "There is a big opportunity for undertaking research in India with the growth in the manufacturing sector, pharmaceuticals and IT. We need to create the infrastructural set up for more R&D centres in India," said Mr Chopra.
This according to him was on account of the price offered, which tends to be very high, because of higher costs of production. Moreover, the trend in the January-July period has not been very encouraging for the sector, especially with a negative growth with US of about 21% with the maximum downtrend in the area of polyester.
Cost disadvantages, as it seems obvious, is holding things back for the SMEs. "We still have banks shying away from lending money for trade advances that adds significantly to cost disadvantages," said Mr Chaddha. The engineering products sector, for instance, has seen a phenomenal growth of 30% over last year.
But, the sector too is facing challenges in the form of non-trade barriers. "When there is growth, there are also constraints and the engineering products sector is witnessing some strains," said Mr Srivastava. "Only recently, almost 400 containers of goods were restricted from entering US on account of contamination issues. There needs to be a redressal system to address such policy problems, which are non existent today," he added.
However, considering that US-China trade is over ten times that of Indo-US trade, clearly there is a long way to go. How to get there, is definitely the key question.
Both, India and the USA are keen to strengthen and deepen trade relations. Apart from the nuclear deal, although still in the formative stage, the two nations are also exploring various possibilities of a bilateral agreement that would help trade ties. Efforts are also on to prepare and execute a free trade agreement between India and the US. It is under this backdrop, that The Economic Times SME International Trade Forum series on Indo-US trade was recently held in association with HSBC.
Eminent members of the industry shared their perspective on the road ahead. Jairaj Purandare, Executive Director-in-charge, PriceWaterHouseCoopers, was the moderator of the event and the speakers were Puneet Chaddha, Head-Commercial Banking-India, HSBC; R K Chopra, Secretary General, Indo American Chamber of Commerce; Rajat Srivastava, Regional Director, Engineering Export Promotion Council; Amit Ruparelia, Vice Chairman, The Cotton Textiles Export Promotion Council; Michael Newbill, Consul, Political-Economic Affairs, Consulate General of the United States of America; and R P Kalyanpur, Executive Director, Plastic & Linoleum Export Promotion Council.
The discussion focused on the growth in trade, the specific regulations that help or hinder trade, the role of the government and international trade bodies and the kind of changes that need to be effected at the policy level among various other issues.
As one of the fastest growing economies of the world, there exists tremendous potential for bilateral trade between India and the US. "For US companies India is the place to be," said Mr Newbill. "The positive environment that exists today is great and business makes total sense. Though some American companies have had problems, but then that they should be able to find good partners and I think, this is a very exciting time," he added.
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The panelists agreed that while the challenges are definitely there in terms of duties and non-trade barriers, the SMEs should focus increasingly on maintaining quality of products to get the competitive edge.
That can be brought about by more information dissemination. "More awareness needs to be created. The SMEs need to be informed about of what is available, they should be told of what successful SMEs are doing right by sharing the general trends in the industry," said Mr Chaddha.
He elaborated that it is processes like these which will enable financial services companies to partner more with the SMEs and alleviate the risks that the companies are likely to face in expanding their global footprint. According to the panellists, a strong focus also needs to built on encouraging more research activity in India. "There is a big opportunity for undertaking research in India with the growth in the manufacturing sector, pharmaceuticals and IT. We need to create the infrastructural set up for more R&D centres in India," said Mr Chopra.
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While the overall growth trends are visible, in certain sectors like plastics and textiles, there has been a slowdown. Concern on the same was aired by the speakers. "For the plastic industry the US is the largest trading partner," said Mr Kalyanpur, "However, India's exports of plastic does not account for even 1% of the total imports of the US." This according to him was on account of the price offered, which tends to be very high, because of higher costs of production. Moreover, the trend in the January-July period has not been very encouraging for the sector, especially with a negative growth with US of about 21% with the maximum downtrend in the area of polyester.
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"If we have a direct presence in the US then the business can be increased much more," added Mr Kalyanpur. A similar problem exists with the textiles sector. The overall exports to the US, which is the largest consumer market, has declined visibly in the last three to four years. "Everybody is talking about China and the China factor is certainly there," said Mr Ruparelia. "But, I think we should look at our own strengths and competencies," he added.Cost disadvantages, as it seems obvious, is holding things back for the SMEs. "We still have banks shying away from lending money for trade advances that adds significantly to cost disadvantages," said Mr Chaddha. The engineering products sector, for instance, has seen a phenomenal growth of 30% over last year.
But, the sector too is facing challenges in the form of non-trade barriers. "When there is growth, there are also constraints and the engineering products sector is witnessing some strains," said Mr Srivastava. "Only recently, almost 400 containers of goods were restricted from entering US on account of contamination issues. There needs to be a redressal system to address such policy problems, which are non existent today," he added.
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