Economy

In the slow lane

Satyanarayan Iyer | Updated on October 27, 2013

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Just off the highway that connects Pune and Mumbai, a large red banner welcomes visitors to ‘India’s Largest SME Gathering’. A dusty path under the banner meanders around under-construction houses and leads to the auto cluster in Chinchwad, near Pune. Here, small and medium enterprises from across the country have hired space for four days to showcase their products.

Despite the banner’s promise, it is clear that this annual expo, which was on at the time of this writing, is shrinking in size. In 2011, it had 225 exhibitors and transacted Rs 81 crore worth of business. The number of exhibitors fell to 200 in 2012 and business declined to Rs 68 crore. This year only 148 exhibitors have showed up; the value of business transacted has not been totted up yet, but it will certainly be lower than last year, suggest organisers.

In many ways, the expo epitomises the extent of the crisis the SME segment confronts today.

Sayyed Yusuf, Director of the Latur, Maharashtra-based Sytco Engineers, a Rs 10-crore company that makes industrial clutches and brakes, says: “Last year there were about 300 interested visitors. In the first two days this time, only 50 visitors came to our stall.”

Vinod Patkotwar, CEO of the medium-sized Crown Rubber Products, says that about 7,000 SMEs are dependent on the auto sector in the Pune region alone. With the sector’s production down by 30-35 per cent, these SMEs are struggling to survive. According to the Society of Indian Automobile Manufacturers, sales of passenger vehicles dipped 5.1 per cent in the first six months of the current fiscal; commercial vehicles fell 15.3 per cent during the same period. With rising fuel prices putting off customers, only the two-wheeler segment has registered a semblance of growth.

Compounding the problems, exports have slowed on dwindling demand from Europe and the US. “Exports have fallen by more than 80 per cent,” says Yusuf, adding that some big domestic customers have delayed payments by more than a year.

The problems are being felt well beyond Pune. Pearlite Liners Private Limited, a Shimoga (Karnataka)-based manufacturer of castings for trucks, has been crippled by the fall in demand for commercial vehicles. The company invested in additional capacity about two years back. Today, however, its existing capacity remains under-utilised and many of its orders are “on hold”. It cannot scout for a new client in case an order is revived by the original client.

Unless the economic climate changes, some of these industrial units will find it very hard to survive. And ‘India’s Largest SME Gathering’ will become a very small affair.

>satyanarayan.iyer@thehindu.co.in

Published on October 27, 2013

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