SMEs pitch for brand-building fund

In the backdrop of the opening up of foreign direct investment (FDI) in multi-brand retail, small and medium enterprises (SMEs) have sought the government's help in setting up a branding and export marketing fund as part of the forthcoming Foreign Trade Policy 2009-2014, expected to be unveiled in April.

The primary objective of such a fund would be to promote and create awareness of Indian SME labels in markets overseas and within India, said Deep Kapuria, Chairman of CII's National MSME Council.

"The proposed fund could enable positioning of Indian MSME products and services and help create new market opportunities, as foreign retailers that invest in India are required to source at least 30 per cent of their goods from Indian SMEs," Kapuria said.

Going forward, SMEs supplying to global retail companies in India would need to focus on the quality standards set by these companies, gain a firm understanding of their complex vendor management systems, and scale up in accordance with the demands placed by those firms.

Last year, the Parliamentary Standing Committee on Commerce had suggested the setting up of an export marketing fund with a corpus of at least Rs 1,000 crore for MSMEs.

However, CII is of the view that branding is a bigger challenge for most MSMEs, given the investment requirement. Moreover, there are no funds available for brand-building activity from banks or the government. "Without proper brand-building, most SMEs find it difficult to create brand awareness or compete with high-visibility products from bigger rivals," Kapuria added.

With the opening up of FDI norms in multi-brand retailing, international furniture retailer IKEA plans to open 25 stores in India with an investment of around $2 billion over the next 15-20 years. The latest rules allow foreign retailers to meet the local 30 per cent sourcing norm over a five-year period. This is expected to increase business opportunities for SMEs.