Sharing the results of a CII Northern Region survey on Impact of the Current Economic Crisis, Mr Salil Singhal Chairman CII Northern Region said that that the survey corroborated the harsh impact of the slowdown on MSMEs. The negative impact has been felt on all fronts – profitability, credit availability and longer payment cycles. 8.3% of the respondents (all SMEs) indicated possible closure if the situation did not improve in the next six months, underlying the need for measures specific to SMEs.
The other significant areas of policy intervention pointed out include easing of credit availability and the need for managing the foreign exchange fluctuations, added Mr Singhal. The period covered by the survey was April –November 2008.
Inspite of the various liquidity measures initiated by RBI, close to 16.5% of the respondents reported a decline in credit availability. This coupled with the delayed payments - 72% of the respondents reported longer payment cycles, slowdown in sales – 43.2% respondents reported slowdown in sales, have put immense pressure on the industry.
45.5% of the respondents reported decline in profit margins due to foreign exchange fluctuations, highlighting the importance of a stable foreign exchange rate. The industry does not seem to expect substantial recovery in 2009, with 78% of the respondents indicating an improvement in the situation only by December 2009 or later. In line with this expectation 43% of the respondents indicated a decline in capex for second half of 2009.
The respondents felt that while the government has been quick to act, there is much more that can be done. Some of the key suggestions include: lowering interest rates further, improving credit availability, special incentives including tax breaks for SMEs & the export sector, removing Fringe Benefit Tax (FBT), reduction in direct tax rates and fast tracking of infrastructure projects.
The survey also captured respondents’ views on the likely impact of the Mumbai terror attacks on Indian Industry. The view was quite divided with 52.3% not expecting much impact. However, the survey responses did emphasize the need for dealing firmly with such incidents to ensure that India is not perceived as a ‘soft target’ for terrorism. This was necessary to be able to continue attract investments into the country.
