CYCLICAL SLOWDOWN:THE WAY FORWARD

In any economy small business are the real drivers, they generate employment and distribute wealth widely. All governments recognise this fact and implement policies that encourage entrepreneurship. In the US, by statute, percentage of the government orders are allocated to the SME segment (though findings revealed that orders were being cornered by large Corporations through front businesses). Coming back to the SMEs, the way forward from the Global meltdown could be by providing 'real' impetus to the SME workings.

Lets take India as a case point. The Indian business economy is well characterised by Micro, Small and Medium Enterprises (MSME). The sector provides employment to 42 million people and contributes 45% of total manufactured output and 40% of the total exports. The sector has consistently registered higher growth rates. But the policy makers are underestimating the collateral damage of global economic crisis on the MSME sector. To counetr the Global crisis, the government has provided two stimulus packages having thrust in fiscal measures and an additional plan expenditure of Rs. 200 billion. Along side the Central Bank has taken measures to pump liquidity into the system and assist MSME in meeting their immediate need.

On the face of it the stimulus provided has helped the financial sector but the real economy of Infrastructure and MSME are still lagging behind. The reasons are simple, first the institutional funds are bypassing majority of the small units and secondly, there is no 'real' demand. What is required is to provide greater purchasing power to a larger section of people by stepping up the public expenditure that is targetted specifically at the MSME sector. Similarly in the US, the government is providing bail out packages to the perpetrators of the great economic slide. But that wouldn't stimulate demand.

As President Obama says "It's about time.....It's about change". Governments needs to change too- their outlook....from Large Corporates to Small Enterprises. Thats the way forward.

We need voices in support of the SME segment that reach out to the policy makers and bring about this change.