Ease of Doing Business for MSMEs: The business confidence of SMEs in India has improved with 80 per cent of enterprises expecting an increase in their domestic order books in the third quarter of 2022 with pick-up in demand, up 5 percentage points from the second quarter, resulting in the growth of sales revenue, sid Small Business Confidence Index survey released by industry body Associated Chambers of Commerce and Industry of India (Assocham) and analytics company D&B on Wednesday.
The index, which measures the level of optimism among SMEs on key business parameters, said small businesses with improved confidence are looking to enhance their capacity utilisation to 60 per cent in the third quarter vis-a-vis 55 per cent in the second quarter. However, SMEs’ optimism pertaining to new investments was largely intact with 75 per cent of respondents in the survey expecting a jump in their fixed capital investment in comparison to 77 per cent in Q2.
Even as the Reserve Bank of India (RBI) has been tightening the monetary policy compelled by inflation, SMEs do not find any concern with regard to the availability of credit, the survey noted. “Good thing is that the latest RBI credit policy statement gave an assurance that enough liquidity would remain in the system,” said Deepak Sood, Secretary General ASSOCHAM. He hoped banks would continue to meet the working capital needs of SMEs ahead of the festive season this year.
Importantly, the RBI has raised the repo rate by 1.4 per cent since May this year to control inflation. It had increased the rate by 0.4 per cent in May followed by 0.5 per cent each in June and August respectively, taking the policy repo rate to 5.40 per cent so far.
On the other hand, large companies in the private and public sectors should ensure SME vendors are paid well in time to ensure the payment and receipt cycle remain smooth and seamless, said Sood.
”This is critical for meeting the working capital requirements of the SMEs well in time, more so when the festive season holds promise for faster recovery and particularly for the SMEs, both in manufacturing and services,” he said.
The survey added that 79 per cent of the respondents expected credit access to be normal in Q3 — one percentage point higher than the trendline for the preceding quarter. This was despite an increase in interest rates in the recent months and the continuation of the same in the immediate future, it noted.