Slow investment a drag on MSMEs in engineering sector

CRISIL has analysed the performance of 2,185 micro, small and medium enterprises (MSMEs) in the manufacturing sector, which were rated on the basis of their financials in 2013-14 (financial year April 1 to March 31).

The study revealed that MSMEs in the engineering sector - i.e., auto ancillary and components, capital goods, machinery and machine tools, electrical and electronics components and equipment - registered lower growth as compared to other segments.

The average income of engineering-based MSMEs increased to Rs 16.89 crore in 2013-14, from Rs 14.33 crore in 2011-12, at a compound annual growth rate (CAGR) of 8.58 per cent. In comparison, the average income for the other manufacturing segments (i.e. excluding engineering) increased to Rs 26.50crore in 2013-14, from Rs 19.11 crore in 2011-12, at a CAGR of 17.74 per cent.

MSMEs in the engineering-based segment, manufacturing electrical and electronics components and equipment, grew at a CAGR of 9.18 per cent, followed by those manufacturing capital goods and machinery at 8.77 per cent, and those in auto ancillary and components at 7.64 per cent.

A slowdown of investment in infrastructure projects and capacity expansion in the manufacturing sector and a decline in automobile demand has impacted growth. For 2015-16, the Economic Survey expects a GDP growth of 8-8.15 per cent in 2015-16 and CRISIL expects improvement in prospects for MSMEs in this sector.