The Hindu Business Line : Small industries realigning to market forces: Study

A SNAP poll of small and medium enterprises (SMEs) conducted by the Confederation of Indian Industry (CII) shows a competitive market scenario and the sector's gradual realignment to market forces.

While the sector foresees a positive shift in the domestic business situation in the next six months, it also sees domestic and international competition as major limiting factors for growth.

The snap poll aims at capturing the general prevailing mood of the sector, while attempting to analyse various factors their productivity and output.

Besides, it also attempts to compare the sector's performance with that of the previous year using benchmarks such as capital investment, capacity utilisation and inventory levels, among others.

An analysis of the poll findings shows that 69 per cent of the respondents are optimistic about the general business scenario.

On the other hand, 24 per cent expect the business situation to remain the same with a continued trend for low to moderate demand.

There is a minority (seven per cent) who are of the opinion that business prospects have dimmed in comparison with the previous year.

With profit margins of as many as half of the respondents registering a decline during the last six months, it would appear as if the competition brought on with the removal of quantitative restrictions is impacting the sector, the survey said.

The survey also said that the three important limiting factors to growth of the sector including threat from domestic and international competition and the decline in demand whether it is from the private sector, Government or exports.

Besides, the comparatively higher cost of funds, lack of working capital finance and in certain cases, plant capacity are seen as factors limiting growth.

The survey shows that the sector foresees a positive shift in the business situation in the country in the next six months in terms of an increase in production, capacity utilisation and turnover.

On the issue of employment, 73 per cent of the respondents envisage an increase in employment by their company, while only 27 per cent see a decline.

The survey covered a broad spectrum of industry groups and activities.

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