480,000 small and medium units shut shop in 5 years | business | Hindustan Times
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480,000 small and medium units shut shop in 5 years

The Indian economy apparently has a back problem: the micro, small and medium enterprises (MSME) sector, which employs 60 million-odd people, is struggling to stay upright.

business Updated: Nov 19, 2010 22:14 IST
Debobrat Ghose

The Indian economy apparently has a back problem: the micro, small and medium enterprises (MSME) sector, which employs 60 million-odd people, is struggling to stay upright.

The fourth all-India census of MSMEs (2006-07) reveals that as many as 480,946 units closed down over a five-year period, while another 77,723 micro and small enterprises (MSEs) were declared sick by March-end. A Reserve Bank of India report says the same.

The situation is actually a slight improvement on the previous census. The number of units closed has come down from 887,427 in the third census (2000-01) to 480,946, but the number of sick units has gone up marginally.

Tamil Nadu continues to have the highest number of closed units — 127,185 in the third census and 79,778 units now — while West Bengal leads in sick units, with 16,853.

The importance of the sector can be gauged from the fact that it contributes 8% to the nation’s gross domestic product, 45% to the manufacturing sector and 40% to exports. There are 2.5 crore units in the sector.

Though government sources attributed the malaise to inadequate and delayed credit to entrepreneurs by banks, obsolete technology, marketing problems and infrastructural constraints, entrepreneurs blame government apathy, complex laws and high cost of land.

"Absence of institutions dedicated for the development of MSMEs, and apathy and callousness on part of some state governments have caused sickness," said Anil Bhardwaj, secretary-general, Federation of Micro & Small and Medium Enterprises.

"We’re working on the sector by focussing on cluster approach and by increasing competitiveness through a national manufacturing scheme," secretary, MSME Ministry, Uday Kumar Varma told Hindustan Times.