Red-tapism, high cap cost hinders SME productivity: Assocham

NEW DELHI: Higher cost of capital in India coupled with increased red-tapism have curtailed the productivity of small and medium enterprises (SME) in the country by 28 to 30 percent, an estimate by Industry body Assocham revealed.

SMEs contribute more than 60 percent in total export proceeds of India and if the trend continues, it would bring down the export targets of 160 billion dollar for 2007-08 fiscal by more than 20 billion dollar, the chamber said.

The number of inspectors have gone up to 40 from 35 and at the same time interest rate in the country have also doubled from 7.5 per cent to 15 per cent and both factors combined to make a serious impact on the productivity of SMEs in the country, the chamber said in a release.

The chamber had urged the Prime Minister to intervene in the matter to bring down the numbers of inspectors to 15 in next two years and subsequently reduce it to 5 in another two years.

"There should be one inspector for examining the records of SMEs in PF, excise, bonus, sales tax etc and likewise special arrangements should be made in a manner so that one inspector is made incharge of five different functions of SMEs," Assocham president Venugopal N Dhoot said in a statement.

Besides this, the procedural issues faced in raising loans includes lot of paper work, collateral security, high processing fee and pre-payment charges coupled with time taken by banks in processing the loans also adversely affects the growth in the sector, it added.

CIOL Bureau