MSMEs show the way in a sluggish economy

CRISIL has analysed the sales performance of 8,500 micro, small, and medium enterprises (MSMEs) from 2009-10 to 2011-12 (refers to financial year, April 1 to March 31). The average sales per enterprise grew by 14.43 per cent to Rs 2,068.89 lakh in 2010-11 over the previous year, but sales growth declined marginally to 13.74 per cent. Though the economic environment in the last couple of years remained subdued, owing to concerns about high inflation and interest rates, MSMEs have coped well due to their flexibility, strong cost-control, and their ability to adjust faster to the evolving business environment.

Growth in index of industrial production (IIP; base year 2004-05) declined sharply to 2.9 per cent in 2011-12 from 8.2 per cent 2010-11, while gross domestic product (GDP) at factor cost at constant prices registered a growth of 6.2 per cent in 2011-12 (revised estimate), as against a growth of 9.3 per cent in 2010-11. Despite a sharp decline in both IIP and GDP, the sales growth of MSMEs declined by less than one per cent between 2010-11 and 2011-12. This truly underlines the fact that MSMEs are engines of growth in India. If supported well by easing regulatory constraints and world-class infrastructure, MSMEs can play a pivotal role in addressing the unemployment issues of a young country like India.

Note: The statistics are based on the latest audited financials made available by CRISIL-rated MSMEs. Most enterprises finalise their audited financials by the end of the second quarter, post closure of the financial year.