SMEs bullish on business in Oct-Dec quarter: CII survey

NEW DELHI: Small and medium enterprises are optimistic about the business outlook in the October-December quarter on increased domestic activities coupled with improved prospects of credit availability, a CII survey said today.

The Business Confidence Index (BCI) of SMEs for the current quarter is estimated at 67, an improvement of 1.4 points over the July-September period, CII said.

"This is a positive sign of a sector emerging from the shock of the global economic meltdown, and having a huge employment potential," CII Director General Chandrajit Banerjee said.

India's SME sector was severely impacted due to the global economic downturn, leading to huge job losses.

The survey said much of the buoyancy in SMEs performance is on account of domestic demand rather than exports.

"Exports prospects for SMEs have come down significantly from the last quarter, which is not surprising given the slow and uncertain economic recovery in large part of the Western globe," CII said.

The government has projected GDP growth of 8.5 - 8.75 per cent this fiscal. The GDP recorded 8.8 per cent growth in the first quarter of this fiscal.

The survey also reported improved outlook on prospects of credit availability for SMEs, even though it continues to be far below to be stated as 'most favourable'.

"With given upward pressure on interest rates, it may not be too long before credit cost starts adversely impacting the capacity expansion of this critical sector of the economy," it said.

While there is no separate data on SMEs, India's micro, small and medium enterprises (MSMEs) sector contributes 8 per cent of the country's GDP, 45 per cent of the manufactured output and 40 per cent of its exports.

The MSMEs provide employment to about 6 crore persons through 2.6 crore enterprises.

Appreciating Indian rupee against the US dollar is further adding to the woes of SME exporters, CII said.

It also said the services sector on average are expecting to perform better than their industrial counterpart.