MSMEs' manufacturing ability needs to improve: CII

Suggests higer value addition, skill devt, technological innovation, thrust on standardisation and quality, access to better credit

The key strategy to enhance the exports of micro, small and medium enterprises (MSMEs) is to improve the manufacturing ability of the MSME sector, which in turn is expected to improve the competitiveness of their products, according to a memorandum submitted by the Confederation of Indian Industry (CII) to the recently set up inter-ministerial group (IMG) on boosting MSME exports.

Higher value addition, skill development and training, thrust on standardisation and quality, access to affordable credit, impetus to technology upgradation and innovation, support for marketing and brand-building, and infrastructure development would be essential elements of the strategy, the memo said.

On access to finance, CII has suggested provision of pre- and post-shipment foreign currency credit to the MSME sector at a lower rate; a uniform credit rating format and process to bring about transparency and speed to this important issue; an interest rate subvention, to enhance the competitiveness of MSMEs; setting up of a nodal agency to borrow in foreign currency from abroad on a pool basis and further lend to MSME exporters at competitive rates, for technological innovation, upgrades and capacity expansion.

CII has also suggested a new scheme to supplement the promoter's equity contribution and facilitate the raising of additional debt, in cases where MSMEs are expanding; the launch of factoring services by all banks for MSMEs, to tackle the problem of delayed payments by customers; and securitisation of receivables owed to MSMEs for sales to large firms and their auction, with the proceeds paid out to small firms, which would consequently reduce MSMEs' investment in working capital and their need for finance.

On export promotion and marketing activities, the CII memo suggested creation of awareness about various schemes available for MSMEs so as to make companies utilise such schemes; as well as creation of a fund to subsidise MSMEs' marketing operations.