SMEs contribute a huge chunk to the economic growth of any nation -- almost 97% of China’s business behemoth is built on SMEs alone. Similarly, SMEs have also contributed a great deal to India’s economy. Further validation of their importance arrived this week in the form of a report by NRI Consulting that said Indian MSMEs could create 1 crore jobs in the next five years. Credit growth has also maintained an upward track in the last five years, according to a new CIBIL report, although NPA build-ups remain a threat on the horizon. As the World Bank warns that excessive reliance on domestic demand may stunt India’s economic growth, exporters, particularly SME ones, will play a key role in the near future. The global economy may be on the downward track, but there are plenty of opportunities available for the intrepid exporter who can identify the right markets and segments to target. The future of the Indian -- and indeed the global -- economy looks set to be increasingly driven by small- and medium-sized businesses and the entrepreneurs at their helm.
Trade Update
13th April 2019
# 20
India is an attractive consumption-oriented market with a growing middle class and rising disposable income despite the recent sluggishness in demand, according to NRI Consulting, a Nomura Holdings affiliate. Micro, small and medium enterprises (MSMEs), if nurtured well, can bridge the employment gap and create 1 crore jobs in the next four to five years, it said. Only 15% of what is consumed in India is, however, made by the domestic manufacturing industry, limiting the country’s ability to create employment opportunities, the Japan-based firm said in a note on the Indian market.
The outstanding loans of Indian lenders to micro, small and medium enterprises (MSMEs) expanded two-and-a-half times in five years through 2018, credit information company TransUnion CIBIL said, while also warning about debt build-ups leading to possible stress in the quality of assets. While the outstanding credit to MSMEs grew to Rs. 25.2 lakh crore at the end of 2018 from Rs. 10.4 lakh crore in 2013 at a compound growth rate of 19.6%, the consolidated non-performing assets in the sector increased to 9% from 7.3%, CIBIL said in a report, published along with the Small Industries Development Bank of India (SIDBI).
India’s economic growth in recent years has been “too much” driven by domestic demand and its exports were about one-third of its potential, a World Bank official said, asserting that the next government needs to focus on export-led growth. Praising attempts to liberalize markets within India, Hans Timmer, World Bank Chief Economist for the South Asia Region, said “that is what is needed to become more competitive”.
The International Monetary Fund (IMF), on 9th April, released its latest take on the prospects for global economic growth. The highlight of its World Economic Outlook is that there is a slowdown in economic activity in 2019 for 70% of the world economy. The bad news is this includes India. Global growth is expected to drop 0.3% this year, to 3.3%. The main reason is trade friction between the world’s largest economies and its cascading impact on business sentiments.
India has become the world’s top remittance recipient country in 2018, with its diaspora sending $79 billion back home. “Remittances grew by more than 14% in India, where a flooding disaster in Kerala likely boosted the financial help that migrants sent to families,” added a World Bank report. India was followed by China ($67 billion), Mexico ($36 billion), the Philippines ($34 billion) and Egypt ($29 billion), according to the latest edition of the World Bank’s Migration and Development Brief released on 8th April.
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