Small and medium enterprises (SMEs) are optimistic about their business outlook in the October-December quarter on increased domestic demand coupled with improved prospects of credit availability, a Confederation of Indian Industry (CII) survey has said.
The Business Confidence Index of SMEs for the current quarter was estimated at 67 points on a scale of 0-100, an improvement of 1.4 points over the same period last year, CII said. Buoyancy in gross sales was backed by strong prospects of domestic demand than exports demand, the survey said.
Slow recovery in the western economies, along with an appreciating rupee against the US dollar, could be among the major reasons, it added. India’s SME sector was impacted due to the global economic downturn, leading to much job loss. The government has projected the gross domestic product (GDP) growth of 8.5-8.75 per cent in the financial year. The GDP recorded 8.8 per cent growth in the first quarter of the financial year.
The survey also reported an improved outlook on prospects of credit availability for SMEs, though it continues to be far below to be stated as ‘most favourable’. “With given upward pressure on interest rates, it may not be too long before credit cost starts adversely impacting the capacity expansion of this critical sector of the economy,” it said. While there is no separate data on SMEs, India’s micro, small and medium enterprises (MSMEs) sector contributes eight per cent of the country’s GDP, 45 per cent of the manufactured output and 40 per cent of its exports.
The MSMEs provide employment to about 60 million persons through 26 million enterprises. The survey also said the services sector, on average, was expecting to perform better than their industrial counterpart.