G. Kalyan Kumar
The happy tidings of New Year are around us. The year 2019 will be very eventful and crucial for so many reasons. The country will go to the polling booths in another 5 months to choose a new government. So that can induce changes at the policy front.
At the global economic front, rumblings in the global trade space after the US-China competitive slapping of tariffs augmented concerns on adhering to rules of fair trade.
Global Economic growth and India’s GDP Growth
India’s gross domestic product is expected to grow at 7.3 percent in the fiscal year 2018-19, and 7.5 percent in the coming two years.
According to the World Bank, India’s impressive economic growth will be due to a surge in consumption and investment.
At the same time, China’s economic growth is projected to slow down to 6.2 each in 2019 and 2020 and 6 percent in 2021, according to the January 2019 Global Economic Prospects report of Word Bank.
In 2017, China’s 6.9 percent growth was marginally ahead of India’s 6.7 percent because of the slowdown caused by demonetization and implementation of the Goods and Services Tax (GST).
“India’s growth outlook is still robust. India is still the fastest-growing major economy,” World Bank Prospects Group Director Ayhan Kose said.
Kose noted that investment in India is picking up and consumption remaining strong and an average 7.5 percent growth in 2019 and 2020 is fairly sure. India improved rankings in ease of doing business.
Challenges Faced by SMEs
Small and medium enterprises (SMEs) in India provide jobs to 59 million personnel in more than 26 million units across the country and contribute 9% to India’s GDP.
Given the vagaries in the agricultural sector which is the largest employer in India, India’s job generation prospects can only be brightened with a special focus on the SME sector. In the sector, the biggest challenge is access to finance.
A global survey by American Express states that 42% of Indian respondents find access to finance difficult in ensuring seamless growth of SMEs. The majority (80%) rely on traditional bank loans to run businesses, compared to a third in other countries. The survey says all SMEs plan to use bank loans.
The rising borrowing costs have made Indian SMEs look at their finance options. Some 69% of the fast-growing units say they want to explore other funding options including public equity.
Of course, the Small Industries Development Bank of India (SIDBI) continues to provide loans to the SMEs.
Export Growth Must Intensify
Serious attention is needed at the export front. Rising protectionism and constraints in logistics are holding back India from realizing its rightful export growth, according to industry veterans.
Puneet Dalmia, the Dalmia Bharat Group Managing Director, noted that India is the 6th largest economy in the world but its share in global exports is a meager 1.7 percent. He noted the abysmal growth in exports from 1.5 percent share in 2013 to 1.7 percent in 2017.
Although growth is in the notice, on an absolute basis India’s share in global exports is still less than 2 percent. The bottom line is that industries need to explore avenues for sustained growth and make course corrections and stay with global trends while catering to the country’s demand for new jobs.