The business cycles of micro and small enterprises (MSE) may not always coincide with the overall industry. Policies on credit and technology for the sector need to be customised to the nature of the their business cycle, nature of its product and markets it caters to, said a Reserve Bank of India (RBI) study released on Friday.
MSEs comprise the largest private sector in India after agriculture. It provides social succor and empowerment to the weaker sections of the society like women and backward classes. Adequate attention needs to be channeled into areas of finance, social security and marketing of goods for small industries, said the paper.
If the sector has to build resilience to global shocks and economic slowdown like the current one, such impediments have to be addressed on a war footing, said the study. .
The significance of credit at appropriate rates for the industry, is beyond debate. Financial support and propitious investment climate to encourage the growth of such institutions may go a long way in aiding their growth.
Innovative policy making is needed in order to tide over the risk averse behaviour of lending by banks and non-bank institutions towards MSEs during periods of crisis.