Working capital for SMEs in IT space

By : |March 14, 2013 0

BANGALORE, INDIA: In an exclusive interview with Namrata Kath Hazarika for SME Times, Som Mittal, President, NASSCOM said that the RBI guidelines on access to working capital for the SMEs in the IT industry are not well implemented and there is a constant need for access to working capital finance from the banks.

Excerpts of the interview…

How much exports have picked up after the impact of the global meltdown in the Indian IT-space?
Som Mittal: The IT Services segment aggregated export revenues of USD 27.3 billion, accounting for 55 percent of total exports. The total Indian exports (merchandise plus services) increased from less than 4 percent in FY1998 to almost 26 percent in FY2010.

Can we expect the India’s IT industry growing in double-digit, when the country’s economy expects to touch 8 percent or more in future?
Som Mittal: The sector aggregated revenues of USD 73.1 billion in FY2010, a growth of 5.4 percent over FY2009, and generated direct employment for 2.3 million people. NASSCOM will continue to facilitate and collaborate to support the industry’s growth, as it embarks in the next decade.

Rural penetration can help IT stalwarts to increase profit margins, still things are dull in the Indian domestic IT market. Why?
Som Mittal: A key indicator for technology adoption is the penetration of PCs and internet subscribers in the country. Rural India has 19 million connections and 309 million users while Urban India has 195 million connections and 396 million users. 3G and WiMax license auctions will have significant potential in providing broadband access in rural India at a low cost.

IT modernization is the need of the hour both for SMEs and rural India. What is your opinion?
Som Mittal: With many millions of Indian Small and Medium-sized Enterprises (SME) struggling with low ICT penetration, it is imperative that suitable interventions are architected to remove the impediments which constrain SME firms to adopt ICT.

Bank finance is another major hurdle which SMEs in IT industry usually face. In fact, bank exposure is an immediate need to this sector. Isn’t it?
Som Mittal: While the IT industry does not have large requirements for funding as a start-up, there is constant need for access to working capital finance from the banks. There do exist RBI guidelines on access to working capital for SMEs, however these are not well implemented.

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