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Higher interest rates inhibiting investment in MSME sector

The micro small and medium enterprises (MSMEs) sector employs an estimated 59.7 million people spread over 26.1 million enterprises. Secretary, MSME, Uday Kumar Varma spoke to Debobrat Ghose.

business Updated: Sep 11, 2011 22:32 IST

The micro small and medium enterprises (MSMEs) sector employs an estimated 59.7 million people spread over 26.1 million enterprises. The sector accounts for about 45% of the manufacturing output and around 40% of the total export of the country. The MSME ministry is pushing hard to get the new public procurement policy (PPP) implemented this season. Secretary, MSME, Uday Kumar Varma spoke to Debobrat Ghose on various developments in the sector.

What is the status of the proposed new public procurement policy (PPP) and what would be its impact once implemented?
We have submitted the final note to the Cabinet Secretary and are waiting for the Cabinet's approval. The areas of concern have been duly addressed. The proposed PPP makes it mandatory for all the ministries and public sector undertakings (PSUs) to procure 20% of their total annual purchase volume from micro and small enterprises (MSEs) after a period of three years from the date of implementation. This policy will prove to be a big boost to the sector. This will give a scope for focussed production to MSEs.

Do you see any adverse effects of recession on MSME sector?
In the earlier instance of recession, inflation was not as high as it is at present. Now, higher interest rates have been inhibiting investment in the sector and manufacturing is likely to suffer.

The ministry is proactive in formulating policies for MSMEs. But the situation is different on ground. What steps are being taken to implement policies effectively?
The schemes have been widely circulated across the country and through information technology intervention, we are monitoring its implementation. To bring in greater transparency, we put the agenda and proposals sanctioned by the steering committee on our website. We have proposed to make applications online for government schemes.

What effort is the ministry making to improve infrastructure of those industrial areas where MSMEs are dominant?
We have identified 25 clusters across the country and are providing them credit through credit guarantee scheme, infrastructure support, marketing innovation, greater IT penetration and skill development support. Once these clusters get converted into successful models, we can replicate the same, say 100 clusters in the next five years.

Despite having a big demand for handloom and Khadi fabrics abroad, why has the Khadi and Village Industries Commission (KVIC) failed to tap the export market effectively?
A different kind of approach is needed to increase the export of KVIC products, especially the Khadi fabric. First, the right kind of product needs to be identified and then developed, catering to the demand of the foreign market. We are working towards it and it's in a nascent state. I'm sure this will increase KVIC's exports in the time to come.

First Published: Sep 11, 2011 22:30 IST