Indian SMEs Show Resilience Despite Depressed GDP Figures

According to the Am Ex Survey, Indian SMEs are More Bullish for Growth Than its Biggest Rival China

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Small-and-medium enterprises (SMEs), regarded as the backbone of Indian economy, have time and again proved their resilience even after being challenged by uncertain business rules and global adversities.


The sector, which can be credited for constantly strengthening the country's economy by contributing to its various aspects, is confident about its undeterred growth in the domestic market even though India has just lost the tag of fastest growing economy to its biggest rival China.

The central government has recently declared figures indicating the Q4 GDP growth rate, which has slipped to 6.1 per cent from its previous figure of 7.1 per cent in Fiscal Year 2016-17.

SMEs On Growth Trajectory

A recent survey by American multinational financial services corporation American Express lends credence to the fact that the SME sector has the potential to maintain a positive growth in domestic economy.

According to the American Express Global SME Pulse2 2017, Indian SMEs are hopeful about the local and global economy.

The global survey was carried out by the Oxford Economics along with other senior decision makers, wherein around 3,205 respondents participated across 15 countries. It covered around 300 Indian companies, whose revenues add up to $90 million.

The study has revealed that Indian SMEs are more positive about the domestic economy over the next 12 months than their Asian counterparts.

Seventy-one per cent Indians are optimistic about the domestic economy as compared to 62 per cent Japanese, 54 per cent Chinese and 26 per cent Singaporeans.

Asian Countries Happy with Their SMEs

Additionally, the survey has also stated that the Asian countries are confident about the growth of their respective SMEs.

According to the government of India estimates, the sector accounts for 45 per cent of the country's industrial output and 40 per cent of the country's global exports.

SMEs' Contribution to GDP and Economy

Despite the bad shape of India's economy following the demonetization move in 2016, 76 per cent of the Indian SMEs expect revenue growth of at least 4% in 2017.

The Micro Small and Medium Enterprise (MSME) sector contributes up to 7 per cent of the manufacturing GDP, 31 per cent of the GDP from service activities and 37 per cent of manufacturing output to the Indian economy, says a Confederation of Indian Industry (CII) report.

Government Initiative

From the start of Fiscal Year 2017-18, the focus of the central government has been towards the growth and development of Indian SMEs. A 5% cut in income tax, which was declared in the Union Budget 2017, is going to benefit the sector, encouraging its growth prospects with the overall presumptive tax reduction of two percentage point to 6%.

However, there are doubts among Indian SMEs over GST as the players are still trying to assess its impact on their general conduct of business.

The Silver Lining behind Depressed GDP Rates

Though, as per many economists, demonetization is the sole reason for the slowdown in GDP growth rates but the silver lining is that the Reserve Bank of India may cut the higher lending rates, a sort of balm to MSMEs, promoting their growth.

The black money crack-down has reduced the working capital availability and, in chain reaction, the demand in unorganized manufacturing sector owing to the cash crunch in the sector, stated a few of experts.

The cut in lending rates will encourage the Indian domestic market economy to spur the growth of SMEs.