'Global slowdown will fuel domestic consumption'

The global economic slowdown has squeezed the margins of export-oriented small and medium enterprises (SMEs). This has made them divert attention to the large untapped domestic market.

“This trend, which is likely to accelerate in the next two quarters, will fuel domestic consumption and also help these beleaguered SMEs stay afloat in these difficult times,” National Small Industries Corporation chairman and managing director HP Kumar told Business Standard.

Sectors such as leather, readymade garments, electronics, light engineering, automobiles ancillaries and other export-oriented units in the SME space are the worst hit by the current spate of recession in the US and European markets.

“The recession in foreign markets gives an opportunity to our industry to look at the domestic market for not only growth but broadbase the target-market as well,” he underlined.

He, however, admitted the Indian SMEs were hard pressed for credit, especially in the current scenario. These units are not only facing dried-up and shrinking demand in off-shore markets, but also payment delays, which is creating credit and cash-flow problems.

There are an estimated 50 million SME units in India collectively producing roughly Rs 600,000 crore worth of goods and services and accounting for exports worth over Rs 50,000 crore.