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Indian SMEs more bullish on growth prospects: Survey

Business Standard:  June 05, 2017

New Delhi: In spite of doubts over uncertain business rules following the goods and services tax (GST) rollout in July 1, small and medium enterprises (SMEs) are more bullish on growth prospects as compared to their global counterparts, according to a survey conducted by financial services giant American Express.

According to the American Express Global SME Pulse 2017, 71 per cent of the survyed SMEs in India expressed 'optimism in the economy'. Among other Asian countries included in the survey were China and Japan, where the percentage of firms having faith in the domestic economy stood at 54 per cent and 62 per cent.  

Conducted on companies across 15 nations, the survey looked at more than 300 medium-sized companies, out of which 76 per cent said they expected revenue growth of at least 4 per cent in 2017.

Firms remained positive about profitabiltiy with 45 per cent of the surveyed SMEs forecasting a profit of 8 percent by 2020. Globally, only 27 per cent of firms pegged the profit forecast at 8 per.

According to government estimates, the sector accounts for 45 per cent of the country's industrial output, while 40 per cent of the total exports come from SMEs in India. At presnet, it employs 60 million people and is responsible for creating 1.3 million jobs per year.

While SMEs in India are optimistic about the economy and their own business, they cite domestic policies, uncertain laws and regulations as major concerns over the next year. 

To streamline their future business financing options, Indian SMEs ranked flexible lending and repayment options (at 37%) as the most important factor affecting business. High interest rates of 49 per cent was another pain point while applying for business finance.

Lack of easy access to credit has, however, continued to dog such firms. "SMEs are consistently having diffculty in accessing short-term loans," sdaid Saru Kaushal, Vice President and General Manager of the Global Corporate Payments division at American Express India.

The survey has also revealed that 38 per cent of firms feel that expansion in new domestic market segments will be a top priority for their businesses over the next three years. They are also pushing for sales growth with over 35 per cent of the surveyed firms looking to grow their current market share.

Indian SMEs are still trying to assess the GST regime and its impact on their general conduct of business as crucial aspects of the new tax structure remains unclear. Also, the sector was disproportionately hit due to the government's demonetisation exercise since November last year, a senior official at industry body Fisme said. 

Although the government has unveiled GST rates for a significant number of items, a majority of companies in the sector remain anxious over the new accounting and taxation norms that need to be finalised soon.

These include the government's decision to reduce the tax exemption limit for small-scale industry units from Rs 1.5 crore to Rs 20 lakh and the phasing out of CENVAT credit from September onwards. The industry, which has raised several objections to these changes, is cuurently holding talks on the issue.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.