President wants adequate institutional credit for MSMEs

NEW DELHI, INDIA: President Pranab Mukherjee Wednesday said institutional credit should be made available to micro, small and medium enterprises (MSMEs) which are vital for India's economic growth.

"We must direct our efforts at increasing the competitiveness of this sector by enhancing the availability of institutional credit," the president said here after presenting National Awards to MSMEs and banks.

The MSME sector contributes about 8 percent of the country's gross domestic product(GDP), 45 percent of the manufactured output and 40 percent of the total exports.

Observing that the MSMEs are "perhaps the most crucial link between India's economic growth and socio-economic transformation", Mukherjee said the MSME units should not be impeded by lack of access to financial resources.

"We must direct our efforts at increasing the competitiveness of this sector by enhancing the availability of institutional credit, promoting innovation and technology, providing adequate industrial infrastructure, meeting the demands for skill development and capacity building, and strengthening market support," he said.

He said there was need to increase the reach and coverage of financial institutions by expanding branch network to locations near industrial clusters.

MSMEs have asked Finance Minister P Chidambaram to set up a committee to monitor whether they are benefitting from the RBI's periodic directives to banks to make available ample credit at moderate interest rates.

A recent study by the International Finance Corporation and the Japanese government, titled MSME Finance Market in India stated that the debt gap is Rs.2.3 trillion ($46 billion) for micro enterprises, Rs.0.5 trillion ($10 billion) for small enterprises, and Rs.0.1 trillion ($2 billion) for medium enterprises.

The report said the gap in debt finance is primarily due to unserved micro enterprises and under-served small enterprises.

The president said market development assistance - trade fairs, packaging technology, bar coding and standardization- should be strengthened through the joint efforts of the government and industry associations.

"The MSME units can prosper only if there is a concerted effort at widening the market for their products," he said, asking the the private sector to be active participants in the process of rejuvenating the MSMEs.