Challenging year ahead for SMEs

BANGALORE, INDIA: The year 2011 is coming to an end and the new beginning is just few days away. So, how will be the year 2012 for SMEs? Though I am not a fortune teller, by the ongoing global trend, one can predict that the new year will be challenging for SMEs.

A major challenge for SMEs would be the gloomy global economics. Some European countries and the US are talking about recession, which may result in severe pricing pressure and also affect exports for Indian SMEs.

Back home, things are not so bright. Cash flow, inflation and access to credit sources are some of the challenges that SMEs are facing and it may take some time, perhaps till mid 2012, for things to ease.

The need of the hour is that the government helps SMEs. Government should strengthen monetary and fiscal policies to support SMEs. At least government should look at removing the barriers to growth created by tax and red-tapism. Also, banks should come forward and liberalise SME lending.

Also read: Financial discipline pays off in recession

Of course, not all sectors will face challenges. For instance, sectors like pharma, healthcare, retail and BFSI are doing pretty well and hope to do even better in 2012.

Also on the positive note, the long-awaited SME exchange meant to provide access to equity capital to small and medium enterprises would be launched in January 2012.

Listing on the exchange gives better valuation to SME companies, debt and equity ratios will improve and the balance sheet will look much healthier. From media reports I learnt that over 50 companies are looking at listing on the SME exchange in the next few months.

The SME sector is vital to Indian economy and it is one of the largest sectors in India providing employment opportunities with an entrepreneurial spirit. As this saying goes, “Opportunities to find deeper powers within ourselves come when life seems most challenging”, SMEs in India will look at this short term challenges as opportunities to take advantage and leap forward.

We at CIOL are part of this journey along with our SME friends in this challenging yet opportunistic New Year. Happy 2012!