Stagnant Credit Flow for consecutive years show that eco-system for manufacturing is absent in India
New Delhi, Nov 20 (KNN) The latest Reserve bank of India figure for credit offtake in the manufacturing shows a droopingly stagnant outstanding credit for the whole manufacturing sector.
The figures for end September 2017 shows a hopping 8% drop in the outstanding credit in the medium sector between September 2017 over September 2016.
There is an overall 0.4% drop in outstanding credit in the manufacturing sector including micro and small enterprises (MSEs).
As credit is called the blood of any business, the reason for the downfall in the manufacturing sector is evident.
While this can be always attributed to the effects of demonetisation and GST, the issue is much deep rooted.
In fact, during the year 2016 also there was 2.6% drop in total outstanding credit to the Medium sector over same period of 2015.
The drop in MSE loan was more than 1% while overall the growth was less than one per cent, due to higher credit offtake by the large enterprises.
In fact since 2014, when the credit growth in MSME sector as a whole was in the double digits, the credit flow to the sector is negative.
So what is happening?
Commenting on the situation Mr. Neeraj Kedia, a past President of FISME and an MSME of his own stature opined that the basic eco- system for manufacturing is becoming bad to worse over days.
He quipped that an entrepreneur will find it safer to import goods and trade them rather than venture in manufacturing.
The main reason for the difficult entrepreneurial ecosystem is the gradual hardening of stance of Banks and RBI to MSMEs, retorted Kedia.
With the ballooning of NPAs in the large sector, Banks became wary of loaning to MSMEs and started asking for more and more collaterals which an MSME can simply not provide.
And the sickness in the large sector played double whammy on the MSMEs. On the one hand they were burdened with huge unpaid Bills by the large sector including PSUs.
On the other hand Banks resorted to all sort of tools like impractical credit rating and branding of accounts as ‘SMA ( special mention account)’ at even a month’s default.
If they are really interested in Make in India, Government should replicate the approach of China in promoting MSMEs and invest a couple of lakh crores in MSME infrastructure, exclaimed Kedia.
Beyond road power and broadband, manufacturing need a factory site and with land price sky rocketing, Government should pitch in in providing cheaper land and ready - made modular factories.
Only then the real start - ups in manufacturing will spawn in India. (KNN/DB)