SMEs term RBI's monetary policy ‘unjustified’

SMEs demand immediate interest rate cut ranging b/w 100-150 basis pts.

A whopping 93 per cent of industries in the SME sector opine that the Reserve Bank of India’s (RBI) decision to keep the interest rate unchanged was completely out of line, according to a quick poll conducted by the apex industry body ASSOCHAM.

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) conducted a telephonic interview with about 100 small and medium enterprises (SMEs) across India during the last fortnight to ascertain their views on RBI’s decision of not to change the interest rates in its mid-quarter monetary policy review on June 18.

Besides, about 86 per cent of the respondents said that high rate of interests is having a negative impact on their business as their organizations droop under the burden of ever-rising lending rates and rest of them said this move will not impact their trade much as they are not heavily dependent upon bank finances, highlights the survey conducted by the ASSOCHAM Research Bureau (ARB).

“The SME sector had already been grappling with macro-economic slowdown together with global uncertainty and rising interest rates put an extra burden on these small capital organizations which are heavily dependent upon the banks for their finance requirements,” said D.S. Rawat, secretary general of ASSOCHAM while releasing the findings of the survey.

The ASSOCHAM representatives also tried to ascertain the impact of high costs of borrowing on the firms’ business to which about 43 per cent respondents said their cost of credit had increased by about 5-10 per cent while about 32 per cent respondents said their cost of credit soared by up to five per cent. While about 18 per cent did not respond, of the remaining about three per cent said their cost of credit has increased by about 10-15 per cent and four per cent respondents said cost of credit increased by over 15 per cent.

ASSOCHAM also sought the firms’ views on their investment decisions considering the decelerating industrial performance and drying investments to which about 79 per cent of respondents said their investment plans had been adversely impacted by RBI’s current move.
Apart from this, about half of the overall respondents also reckoned that investments had declined by about 5-10 per cent, while 21 per cent did not respond to this about 11 per cent said investments declined by about 10-15 per cent and an equal number of respondents said it had declined by up to five per cent. A meager seven per cent respondents felt that investments had declined by over 15 per cent.

ASSOCHAM sought the feedback of the SME industry as to how much they wanted the RBI to interest rates to help revive the growth of the industry. About 39 per cent of respondents reckoned that the apex bank should immediately cut down the interest rates by 150 basis points, while about 36 per cent said the interest rates should be brought down by 100 basis points.
According to ASSOCHAM, there are about 31.1 million MSMEs across India employing over 73 million people and produce over 6,000 different products. Besides, the sector contributes about 40 per cent of India’s gross exports and 45 per cent of country’s manufacturing output.

Auto Components and Machine Tools Engineering Exhibition in Chennai from June 14

Noida: The Small and Medium Enterprises (SMEs) in the interlinked and interdependent sectors of machine tools and auto components are poised to soar higher with the introduction of neo and cutting-edge technologies at the upcoming Auto Components and Machine Tools Engineering Exhibition (ACMEE) 2012 for the Indian markets.

The biennial event is scheduled to hit the ground in Chennai on 14th June, 2012 till 18th June, 2012, with its 10th edition of International Machine Tools & Auto Components Exhibition.

IndiaMART.com, India's largest B2B marketplace, has joined hands with the organisers Ambattur Industrial Estate Manufacturers Association (AIEMA) & AIEMA Technology Centre (Chennai) for this renowned trade show. As the title sponsor, IndiaMART.com moves an inch closer to realising its aim to create synergies between buyers and suppliers across sectors, and also bring diverse product information and technological innovations closer to them for their business growth.

Over 440 companies, including more than 125 overseas exhibitors, will display a plethora of technologically advanced products for the domain buyers at Chennai Trade & Convention Centre (Chennai). The five day fiesta of technology and innovation is also expected to receive a staggering foot fall crossing 25,000 this year.
Invited as the guest of honour at this coveted trade exposition, Brijesh Agrawal, COO, IndiaMART.com, said, "Technology is the backbone of the machine tools and auto components sectors. When used aptly, it can bring exponential growth for these sectors. Moreover, it can help the SMEs in these sectors to satiate the ever growing demand effectively. We are honoured to associate with ACMEE 2012, which we believe will prove to be a perfect platform for companies in these sectors to be, collaborate and gain new understandings of the business and technologies alike."

ACMEE 2012 will also facilitate duty free import and display of exhibits by participants from abroad subject to normal customs rules and regulations. This will further encourage the exhibitors to show more products and innovations made in automobile and engineering industries. Already, participants from more than 25 significant nations such as USA, UK, Germany, Russia, France, Australia, Singapore, India, Canada, China, among others will showcase their expertise in the field of manufacturing technology. Taiwan and Korea will hold their exclusive pavilions at the venue showcasing their array of products and services.

ASSOCHAM predicts Balance of Trade to shoot up to $262 bn in FY 2012-13

Due to high crude prices and rising gold and silver imports coupled with week Rupee value, India’s balance of trade (BoT) is projected to shoot up between USD 262-280 billion in the fiscal 2012-13, exerting further pressure on the country’s current account deficit (CAD), according to an ASSOCHAM study.
 
In the fiscal 2011-12, the country’s merchandise imports was at USD 488 billion against exports of USD 303 billion leaving balance of trade (BoT) of USD 185 billion.  Against the backdrop of weak recovery in the US economy and continuing troubles in the European markets, export shipments were up 21 per cent as there was some good performance in the initial months of the 2011-12 fiscal. 

But, imports shot up by 32 per cent thanks to high crude prices and rising gold and silver imports.  Import on these two counts  itself was a whopping USD 217 billion, accounting for  over 44 per cent of the country’s total import bill of USD 489 billion, said Associated Chambers of Commerce and Industry of India (ASSOCHAM).

“Out of the three likely scenario plotted by the ASSOCHAM study, the most likely seems to be the one where imports would grow by about 25 per cent in dollar terms and exports increasing by about 15 per cent. This would leave the country with a BoT gap of USD 262 billion,” said  Rajkumar Dhoot, MP and President, ASSOCHAM while releasing the findings of the study.

“In such a scenario, exports would grow up to USD 348 billion but import shipments would increase to USD 610 billion. Even assuming the moderate GDP expansion of 7 per cent, the crude oil imports would remain the biggest import item, as the economic activity would be required to be fuelled by the conventional sources of energy,” said Dhoot.

Despite the Budget proposal of doubling the customs duty to four per cent on gold, imports under this head would continue to exert pressure on the country’s bill.  The country’s social habit in terms of gold being one of the biggest purchases during the marriages is not going to change over night, even though the middle class families find it hard to manage.

The problem in terms of rising imports in dollar terms is expected to be worsened by the continuing pressure on rupee, which has lost well over 15 per cent in value since September. Rupee would remain weak, if efforts on war-footing are not taken to make India an attractive investment destination both for the foreign direct investment (FDI) as also for the portfolio investment through the foreign institutional investors (FII) route, highlighted the ASSOCHAM study.

Unfortunately, the events beginning to unveil after the Budget seemed to be pulling the country in the reverse direction. The FIIs have pulled out Rs 777 crore in April after staying bullish on India for the first few months of 2012. They were disappointed by several events and policy issues, including the General Anti-Avoidance Rules (GAAR) and the retro-active tax proposals. Thankfully, as suggested by ASSOCHAM, Finance Minister Mr Pranab Mukherjee has deferred the GAAR implementation by a year.

On the other hand, while the foreign direct investment (FDI) figures might look attractive in terms of growth, the base is so low that they do not mean much. In all, India attracted FDI of about USD 28.5 billion during April-February period of 2011-12 fiscal. The year-end figure could be in the range of USD 30 billion.

“Here too, potential areas which can catapult global investor confidence in India have remained on the backburner due to lack of political consensus,” said the ASSOCHAM chief.

That leaves the country look up to the services exports for retrieving the Balance of Payment (BoP) situation. The services exports largely generate business from the US economy, which is not showing definite signs of pick-up. Moreover, there are issues like protectionism and more and more road blocks being created in the export of Indian IT services to the US – be it visa fee hike or difficulties being faced by the Indian firms in getting short-term visas for their staff.
ASSOCHAM president has suggested the government to go for all out domestic policy reforms.  Whether it is Goods and Services Tax (GST), or Direct Tax Code (DTC) or banking sector reforms, not much time can be lost. These measures will boost confidence both in the domestic market as also for exporters as their transactions costs would come down making them competitive.

• Speed up Free Trade Agreement with the European Union. Exports of merchandise will get a boost in terms of getting improved  market access in products like textiles, engineering, gems and jewellery.
• Give concessional credit to exporters
• Improve the drawback rates so that taxes on raw material are not exported
• Improve trade and political relations with the neighbouring countries like Pakistan and Bangladesh. India can get increased market access at a lesser cost in terms of proximity of destinations.
• Support industry initiatives for aggressive marketing and organizing of trade and industrial exhibitions abroad.
   

Timely approvals may bring down housing costs by 25 to 40 per cent: Selja

 

"The government has formed a committee to evolve a workable strategy for reducing the time taken in approval of real estate projects which could ultimately reduce the cost of houses by 25 to 40 per cent," minister of housing and urban poverty alleviation Kumari Selja said.

It seems the prayers of the real estate bodies in India, including CREDAI and NAREDCO, have finally been heard as the government today announced formation of a committee which will formulate measures to bring down time taken in approval of real estate projects thereby envisaging price reversal by upto 40 per cent. 
 
The committee under the chairmanship of Dhanendra Kumar, former chairman of the Competition Commission of India, will submit its report in four months, she said while addressing a conference on affordable housing organised by Associated Chambers of Commerce and Industry of India (ASSOCHAM).

“It is estimated that the cost to ultimate consumer could be 25 to 40 per cent lesser if the time of granting approval is reduced to six to eight weeks, which is quite achievable in the present day and age,” said Selja.

Leading real estate developers say about 70 approvals are required for a typical housing project which take nearly three years. The lack of coordination among multiple government agencies and delays result in higher costs which are passed on to the consumer.

The minister said the government has formulated a draft Real Estate Regulation and Development Bill for orderly growth of the sector. Besides, the recently-established Credit Risk Guarantee Fund Trust is coming up with a scheme to provide loans up to Rs five lakh for low income housing.

“The initial corpus of this fund will be Rs 1,000 crore and we hope it will catalyse about Rs 20,000 crore of affordable housing credit,” said Selja. The Union Budget for 2012-13 has allowed external commercial borrowings which will lower interest cost for developers and ensure better capital availability for low-cost housing, she said.

Arun Kumar Misra, secretary at the ministry of housing and urban poverty alleviation, said private sector can a crucial role to play in expanding the concept of affordable housing. There are, however, demand-side and supply-side constraints at present due to lack of bank credit.

Naveen Raheja, chairman of ASSOCHAM real estate committee, said the shortage of dwellings in urban India is estimated to be 25.5 million units. The poor form 90 per cent of this shortage.
“For affordable housing, partnerships may be forged among the central government, state governments, urban local bodies, people’s cooperatives and the private sector,” he said adding the definition of affordable housing should be clearly defined.

Affordable housing is generally defined as a dwelling unit of 300 square feet for economically weaker sections with annual income level of Rs 1.5 lakh and 300 to 600 square feet for lower income group with annual income of Rs 1.5 lakh to Rs 3 lakh.

ASSOCHAM secretary general D.S. Rawat said housing for all remains a key priority in India’s development agenda. “Low-cost housing offers a world of opportunities to the real estate development business that can bring in much-needed resilience to the sector.”

Others present were Susheel Kumar, joint secretary at the ministry of housing and urban poverty alleviation, R.V. Verma, chairman and managing director of National Housing Bank, Ashok Khurana, engineer member at the Delhi Development Authority, and Mr Sunil Dahiya, co-chairman of the ASSOCHAM real estate committee.

They said urban infrastructure is coming under tremendous pressure with rapid economic and industrial development across the country. While some of these are gradually being mitigated, concerted efforts are required by multiple institutions to facilitate mass development in the sector.

According to 2011 census, the country had a population of 1.21 billion of which 377 million or 31.16 per cent lived in urban areas.

Punjab can emerge as land of opportunities with private Investments : ASSOCHAM

New Delhi: Leading industry body ASSOCHAM has proposed 30-point growth strategy  to the new Government of Punjab with a view to give thrust to the small scale enterprises (SMEs) and food processing sector and achieve double digit growth in the decade.

The ASSOCHAM delegation comprising Ravi Wig, Chairman, ASSOCHAM Punjab Development Council, Ashok Khanna, Chairman, ASSOCHAM National Council on Environment & Safety and TQM and D.S. Rawat, Secretary General, ASSOCHAM met Prakash Singh Badal on Tuesday and suggested setting up of industiral clusters in Punjab  for small and medium enterprises (SMEs) involved in food processing, handicrafts, renewable energy and information technology to generate three lakh direct and indirect jobs over the next three years and help inclusive growth.

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) recently signed a memorandum of understanding with the United Nations Industrial Development Organisation (UNIDO) to assist in establishing clusters of small and medium enterprises in two districts of potential states across the country.

The strategy paper on all-round Punjab development is a ready-reckoner for investors, the Centre and state governments to make it as one of the most attractive investment destinations in India with double digit SGDP growth, said Wig.  The chamber has also set up a dedicated Foundation for Development of Micro Industries and Clusterisation to promote micro, small and medium enterprises.

They said Punjab should rejuvenate agriculture, create manufacturing hubs and accelerate growth in services sector to emerge as land of opportunities. The agenda of new state government should be to prioritise building social and physical infrastructure and define role of all stakeholders and cover short-term and long-term goals to ensure speedy development.

The state may not have enough finances to develop infrastructure on its own which builds a good case for public private partnership (PPP) type of initiatives involving multilateral institutions like the World Bank and the Asian Development Bank. “The challenge before state government is to address the issue from a holistic perspective keeping in balance between agriculture and industry,” said Rawat.

To encourage effective distribution of agro-commodities, initiatives should be taken to create hub-and-spoke model under which districts and towns identified act as a hub and villages surrounding them act as spokes. This will ensure efficient distribution, reduce transportation costs, increase competition and real price discovery, benefiting the farmers.

Farmers need technology upgradation, logistic support, market intelligence and should be able to compete in international markets. The industry looks forward to stable, transparent and responsive state government so that more investments can pour in, he said.

“We would also like the state government to promote irrigation, rural connectivity, health, education and non-farm rural activities. With rich natural resources and traditional industries, however, the state holds enormous unrealised growth potential,” said Khanna.
At the same time, industries clusters can be created for micro, small and medium enterprises to ensure common facilities, thus reducing operating costs and increasing competitiveness and skill development around that sector.

The state government must facilitate contract farming by attracting investments from the private sector. Irrigation systems can be improved by employing modern technologies which are a must to boost productivity.

Special economic zones (SEZs) can be created with organic farms for herbal and medicinal plantation. A definite roadmap needs to be drafted to improve storage facilities, transport infrastructure and marketing network so that food processing industries can develop value-added products for domestic and foreign markets.

Industry-specific SEZs for information technology, biotechnology, pharmaceuticals, textiles, gems and jewellery besides manufacturing of sports goods also hold potential for growth and employment generation, said ASSOCHAM.

State-level development finance institutes like erstwhile industrial development corporations should be revived to support long-term financial needs of small and medium enterprises. Developing strategic business services like IT, IT-enabled services, finance and insurance can be catalysts of growth and enhance the share of services in gross state domestic product (GSDP).

The private sector can contribute by promoting such projects to provide industry-relevant skills to rural youth. ASSOCHAM also called for creating an enabling policy framework to rejuvenate economic activity in the state.

The state government should spell out a clear land acquisition policy with sufficient room for buyers and sellers to negotiate directly with minimal government role for attracting fresh investments from the private sector.

Consumer electronics & durables to reach Rs 52K crore by 2015: ASSOCHAM

Growing at a compounded annual growth rate (CAGR) of about 15 per cent, the consumer electronics and durables sector in India is likely to reach Rs 52,000 crore by 2015, apex industry body ASSOCHAM said today.

The consumer electronics and durables industry is currently poised at about Rs 34,000 crore according to a study titled ‘Emerging trends in Consumer Electronics and Durables Industry,’ released by The Associated Chamber of Commerce and Industry of India (ASSOCHAM).

While, global consumer electronics and durables industry is growing at about 10 per cent CAGR and is currently estimated at about Rs 16 lakh crore and is likely to cross Rs 21 lakh crore mark by 2015, according to the ASSOCHAM study.

“Demand for consumer electronics and durables is driven by a young demographic population, coupled with rising disposable incomes amid skilled and highly educated workforce,” said Mr D.S. Rawat, secretary general, ASSOCHAM while releasing the findings of the study.
“Besides, low penetration levels, easy availability of finance options, growing prominence of consumer electronics’ retail stores, online retail industry and a robust 400 million plus Indian middle class with a comprehensive rise in level of affluence is also fuelling the demand in this industry,” said Rawat.

Multi-national companies (MNCs) with superior technology and better quality control account for a market share about 70 per cent of the overall consumer electronics and durables market in India and maintain a strong hold on the urban middle class segement growing at about 12 to 15 per cent, according to the ASSOCHAM study.

The consumer durables and electronics market in rural and semi-urban areas account for about 40 per cent of the overall market and is growing at about 30 per cent CAGR.
Consumer electronics and durables market in India is divided into three segements namely – white goods, brown goods and consumer electronics.

Air-conditioners, refrigerators, washing machines and other domestic appliances fall in the white goods’ category, while microwaves, chimneys, fans, irons, juicers, mixers and grinders fall in the category of brown goods. Television sets, audio and video players, personal computers, laptops, cell phones, digital cameras, camcorders and other electronic accessories fall in the category of consumer electronics.

Rising technological innovations and the decrease in import duty on flat panel LCDs/LEDs television sets in the budget is also likely to fuel demand in the industry.

Rail Budget: Railway minister announces 75 new express trains, 21 passenger trains

 Railway minister Dinesh Trivedi has announced several new trains in his maiden budget speech. Presenting the rail budget, railway minister announced 75 new express trains and 21 passenger trains. He  also announced Guru Parikrama trains to be run to Amritsar, Patna and Nanded. Two double-decker trains and a Shatabdi train are among the new express trains announced in the Rail Budget 2012-13.

Key highlights of Railway Budget 2012:

• 50% concession in fare in AC-2, AC-3, Chair Car & Sleeper classes to patients suffering from ‘Aplastic Anaemia’ and ‘Sickle Cell Anaemia’.

• Extending the facility of travel by Rajdhani and Shatabdi trains to Arjuna Awardees.

• Travel distance under ‘Izzat Scheme’ to increase from 100 kms to 150 kms.

• SMS on passenger mobile phone in case of e-ticket to be accepted as proof of valid reservation.

• Introduction of satellite based real time train information system (SIMRAN) to provide train running information to passengers through SMS, internet, etc.

• On board passenger displays indicating next halt station and expected arrival time to be introduced.

• Installation of 321 escalators at important stations of which 50 will be commissioned in 2012-13.

• Introduction of regional cuisine at affordable rates; launching of Book-a-meal scheme to provide multiple choice of meals through SMS or email.

• Introduction of coin/currency operated ticket vending machines.

• Upgradation of 929 stations as Adarsh Stations including 84 stations proposed in 2012-13; 490 stations have been completed so far.

• Specially designed coaches for differently-abled persons to be provided in each Mail/Express trains.

• Introduction of Rail Bandhu on-board magazines on Rajdhanis, Shatabdis and Duronto trains.

• Setting up of AC Executive lounges at important stations

• 75 new Express trains to be introduced.

• 21 new passenger services, 9 DEMU services and 8 MEMU services to be introduced.

• Run of 39 trains to be extended.

• Frequency of 23 trains to be increased.

• 75 additional services to run in Mumbai suburban; 44 new suburban services to be introduced in Kolkata area, 50 new services to be introduced in Kolkata Metro; 18 additional services in Chennai area.

• 725 km new lines, 700 km doubling, 800 km gauge conversion and 1,100 km electrification targeted in 2012-13.

• Rs 6,872 cr provided for new lines, Rs 3,393 cr for doubling, Rs 1,950 cr for gauge conversation, Rs 828 cr for electrification

• Highest ever plan outlay of Rs. 60,100 cr

• Rae Bareli coach factory manufactured 10 coaches in 2011-12; phase-II of the factory would be commissioned in 2012-13.

• A wagon factory to be set up at Sitapali (Ganjam District of Odisha)

• A rail coach factory with the support of Government of Kerala to be set up at Palakkad; two additional new manufacturing units for coaches to be established in the Kutch area in Gujarat and at Kolar in Karnataka with active participation of the State Governments.

• Setting up of a factory at Shyamnagar in West Bengal to manufacture next generation technology propulsion system for use in high power electric locomotives.

• Creating Missions as recommended by Pitroda Committee to implement the modernization programme.

• Setting up of Railway Tariff Regulatory Authority to be considered.

• New Board Members for Safety/Research and PPP/Marketing to be inducted.

• Rail-Road Grade Separation Corporation to be set up to eliminate level crossings.

• Indian Railway Station Development Corporation to be set up to redevelop stations through PPP mode.

• Logistics Corporation to be set up for development & management of existing railway goods sheds and multi-modal logistics parks.

• National High Speed Rail Authority to be set-up.

• Pre-feasibility studies on six high speed corridors already completed; study on Delhi-Jaipur-Ajmer-Jodhpur to be taken up in 2012-13.

• Introduction of a ‘Green Train’ to run through the pristine forests of North Bengal.

• Setting up of 200 remote railway stations as ‘green energy stations’ powered entirely by solar energy.

• Providing solar lighting system at 1,000 manned level crossing gates.

• 2,500 coaches to be equipped with bio toilets.

• Setting up of 72 MW capacity windmill plants in Andhra Pradesh, Karnataka, Kerala, Tamil Nadu and West Bengal.

• Installation of Integrated Security System at all 202 identified stations to be completed in 2012-13.

• Escorting of trains by RPF/GRP extended to 3,500 trains.

• Integration of RPF helpline with the All India Passenger Helpline.

• Setting up of a Railway Safety Authority as a statutory regulatory body as recommended by Kakodkar Committee

• . Three ‘Safety Villages’ to be set up at Bengaluru, Kharagpur and Lucknow for skill development for disaster management.

• Over one lakh persons to be recruited in 2012-13 – backlog of SC/ST/OBC and other categories to be wiped off.

• Introduction of a wellness programme for railway staff at their work places.

• Ensuring proper rest for skilled and technical staff including the running crew.

• Institution of ‘Rail Khel Ratna’ Award for 10 rail sports-persons every year.

• New coaching terminal at Naihati, the birth place of Rishi Bankim Chandra Chattopadhyay commemorating him on 175th Birth Anniversary.

• .Project to connect Agartala with Akhaura in Bangladesh to be taken up in 2012-13.

• Freight loading of 1,025 MT targeted; 55 MT more than 2011-12

• Passenger growth targeted at 5.4 %.