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The Small and Medium Business Development Chamber of India is not looking very optimistic about sector's projection in the future. According to chamber, the sector will witness a slowdown of 35% in the next six months as a combined effect of ongoing recession and the upcoming elections next year. Also, the current loan default for the sector is 4% and is set to cross 6% in the next few months.
Chandrakant Salunkhe, founder president of the Chamber said that the recession has already slowed down production in the sector by 12%. He was speaking to media in Pune at Small and Medium Enterprise (SME) manufacturing summit.
"The SME sector is going through a rough phase. Due to recession, non-performing default assets of small scale industry is expected to be reach 6 to 6.5% from the existing 4%. Over 20,000 manufacturing units are registered in Maharashtra and almost 1.30 lakh people are employed in the small scale sector. Many trade unions lead political campaigns and this is likely to impact operation in the small and medium scale industry. There are more than 12 lakh SMEs in the country, which contribute 8.3% of the national GDP. Around 65% of the set-ups cater to the manufacturing sector, which have been badly hit due to the recession. More than 7 crore people find employment in the sector across the country", said Salunke.
According to Salunke, due to repressive tax structure, over 500 companies have shifted from Sangli, Kolhapur, Nashik to Gujarat, Karnataka and Madhya Pradesh. Small scale industry in Gujarat has seen growth with help of state infrastructure unlike SME sector in Maharashtra which can witness growth.
He added, "However, Maharashtra and Gujarat are the states which has the most conducive environment for the sector and other states like Karnataka, Andhra Pradesh and Harayana needs to review their policies for SMEs."
Ministry of Small and Medium Industries is taking efforts to to increase limit of collatoral free loan limit provided to SME's. Currently, the manufacturing units can avail loan facility of Rs 1 crore could be increased to Rs 2.5 crore.
