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Startling findings unearthed from survey of MSMEs

15
Dec '08
Highlights:
-More than 97% acknowledge or choose to avoid giving direct answer on corruption & bribery
-70 to 80% MSMEs still not aware of various Govt. initiatives
-65% complain of infrastructure and 56% of raw material prices as main issues

The Study focused on the following Government initiatives:
-MSME-DO Facilities
-Credit Linked Capital Subsidy Scheme (CLCSS)
-ISO/HACCF Reimbursement Scheme
-Specialized Training Programs
-Entrepreneurship Development Institutes
-National Small Industries Commission (NSIC)
-National Commission for Enterprises in the Unorganized Sector (NCEUS)
-Apex Industry Bodies (e.g., FICCI, CII, ASSOCHAM)

Policies in place that provide infrastructure and taxation benefits to business engaged in IT and similar services, such as STPI and EXIM, are well known to be reserved for only those particular businesses. Manufacturing MSMEs are neglected by these policies. This study, hence, directed most efforts towards MSMEs in manufacturing.

Bribing and Corruption:
An overwhelming amount of participants, 75.4%, affirmed the existence of corruption and bribery, and 21.1% declined to comment. This leaves only 3.5% of respondents to have denied that bribery and corruption exists in India. Of the 75% who responded affirmatively, most said that bribery was “common knowledge”, or an “open secret” and “everyone knows.”

It is a conclusion of this study that bribery does indeed plague commerce at the lower levels of small business, especially in areas where government service is involved. Respondents referred to the process of obtaining licenses, loans, reduction in taxes, or the like. If we amalgamate the amount of respondents who did not say “no,” then 96.5% disagreed with their answer. This percentage is overwhelming, and certainly says something concrete about corruption.

Issues Concerning MSMEs:
-65% of MSMEs complain of infrastructural failures
-56% of MSMEs complain of price hikes of raw material as a major cause of concern
-51% are concerned with the negative effect of bribery and corruption to their businesses

Perception towards Govt. Initiatives varies with Size of Business:
Business size type did significantly affect perceptions toward government sponsorship of MSMEs. This reiterates the pronounced difference between small- and medium-sized business' satisfaction with government services, and is yet another testament to the possible preference to larger-sized businesses on the part of government officials at the lower levels of MSME initiatives.

Respondents, who believed that the government had not brought a positive influence to their businesses, number almost 65%, or two-thirds of respondents. If the perception of government service is too negative, MSMEs will be reluctant to take advantage of important initiatives.

This analysis suggests that small businesses are being neglected and are being impacted more negatively than medium-sized businesses. This juxtaposition may manifest itself in a variety of ways. Many respondents from small businesses claimed that financing was only easily available to the bigger players, or that industry and apex associations were only interested in dealing with larger companies.


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