Micro, Medium & Small Scale Industry
Sector Update

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CII Business Confidence Index for SMEs – Q2, 2011 – 12

JUL - SEP, 2011

 

  1. Highlights

·      The overall Business Confidence Index (BCI) of SMEs for quarter Jul –Sep, 2010 is estimated at 57.2 on a scale of 0-100 (from most unfavorable to the most favorable). This is a decline from the BCI of last quarter estimated at 62.1 and on a Year – on – Year basis decline from a value of 65.6.

 

·      Within SMEs, services Continue to expect bigger improvement compared to the industrial sector.

 

·      Gross sales, new orders and capacity utilization recorded a value of BCI in excess of 70, indicating these variables are going to have a favorable effect on Indian SMEs this quarter. The trend has been continuing from previous quarters.  

 

·      Remaining variables, except input costs, credit cost for capacity expansion and working capital have values of BCI in the range of 51-74, Input Costs has remained below 30 but this quarter has seen a decline on (Y-o-Y) basis with inflation expected to grow higher.

 

·      Much of the buoyancy in Gross sales is supported by strong domestic demand, as outlook on exports prospects for SMEs has come down significantly in the current quarter to 62.5 points from 70.1 points last quarter. Although increasing trade between Japan and Canada will help SME exporters. Rupee gaining against other major currencies has lead to decline in exports prospects.

 

·      Employment prospects in SMEs look good with BCI value estimated at 70.7 points. This is an increase from last quarter (70.4) but a decline from last year’s value of  (73.7)

 

·      The credit availability for SME sector seems to be declining, there seems to be Pessimism that the credit cost is not going to work in favour of the sector. With a decreasing value in the BCI. Relatively low and declining value of BCI for Cost of credit for capacity expansion is also a cause for concern. SMEs have had to pay higher interest rates because of a lot of fundamental issues and further increase in interest rates is only going to fuel the fire. The Economic Advisory Council (EAC) is also concerned the affect this is going to have on investment and its likely impact on future growth

 

·      SMEs in Services sector enjoy edge over their counterparts in Industrial sector, in all aspects apart from the input costs.



Gurpal Singh
[Principal Adviser]
Gulf and Middle East
Confederation of Indian Industry
CII Gurgaon Office
249-F , Sector 18
Udyog Vihar
Phase IV
Gurgaon
Haryana
India-122015
Phone : 91-124-4014060-67
Fax :91-124-4014080
Email : gurpal.singh@cii.in