What's important, all the three firms that went for IPOJustdial, Repco Home Finance and V-Mart Retailwere from the services sector and none from manufacturing. If India aspires to expand the share of manufacturing to 25% of GDP in a decade from the present 17%, it is expected that more manufacturers would want to raise capital to expand capacities. However, the ASI survey shows that, after the Lehman crisis, manufacturers have become more competitive as they weathered the cumulative impacts of rising costs of fuels, wages and interest payments to post 12-17% growth in profit but cut back investment. Not surprisingly, GDP growth plunged to 4.6% in H1 of FY14 from 9.3% in FY11.
There is one silver-lining around the cloudy economic scenariothere was a flurry of activity on the SME platform with 35 small companies listing shares to raise R335 crore in 2013 as against 14 such IPOs that mopped up R103 crore in 2012. The signal is clearmore smaller entities are aspiring to enter the big league. The government should redefine SMEs with a higher capital limit and ease labour laws to help SMEs grow faster.