Global Summit for SMEs : Business Partnership Meet - 2002
December 20-21, 2002, New Delhi

Theme Address by Dr A C Muthiah, President, FICCI

Respected Pradhan Mantriji,

Hon'ble Smt. Vasundhara Raje ji

Respected Ashok Pradhan ji

Shri P B Nimbalkar

Distinguished Delegates from all over the world and across the Country

Your Excellencies

Ladies and Gentlemen

It is a pleasure for me to join Secretary Shri Pradhan in cordially welcoming you this morning, to this Global Summit on SMEs. By his esteemed presence, the Honourable Prime Minister is strongly signaling to the nation that small is not just beautiful, but it is the dynamic, the innovative, and most importantly, the employer of first resort to millions of hard working men and women of our nation. FICCI believes that SMEs are, and must be, the real backbone of India's manufacturing matrix. Thus, we responded enthusiastically to the clarion call of your remarkable Minister, Srimati Vasundhaara Raje, and her determined secretary Shri Pradhan, to partner with the government, to launch together a national movement of SME ascendancy. With our 500 Chambers and Association spread across the country, bolstered by a huge SME membership, FICCI is uniquely placed to play a role in this great endeavor. We believe that the fruits of liberalisation will not reach the grassroots unless SMEs become the fulcrum of change. We believe that higher economic growth will not be accompanied by better distribution of income unless SMEs come to centre stage.

Sir, we were with the Japanese CEOs in Bangalore yesterday and they informed us that 90% of companies of Japan fall in the category of SMEs and 35% of GDP comes from them. The Germans post a figure of 70% companies and as much as 50% GDP. And they are the most efficient, the most nimble and the most innovative at the cutting edge. With your personal leadership today, India will boast of the same in the years ahead.

SMEs in India are already the second largest creator of employment, second only to agriculture. While employment in the large scale sector has remained stagnant, albeit fallen since 1991, the SMEs have recorded some growth in employment. But, with the advent of rapid globalisation and our WTO committments, the SME sector faces new challenges and new threats. But, such adversities can be converted to new opportunities, through fresh and innovative policy measures and internal regeneration of this vital sector. The SSI sector alone has garnered 34% of our exports in 2000-2001 and registered units have risen to 3.37 million from a paltry 0.42 in 1974. This Summit seeks fresh ideas from eminent global speakers and wise Indian panelists to take this sector to a new high.

May I raise a few issues at this point. Sir, the world over, the sector is called Small and Medium enterprises and covers services and business enterprises along with manufacturing - India is the only country which restricts the definition to Small Scale Industry only, and defines SSI by investment in plant and machinery and not by the number of employees or a combination of the two. Is it not time for us to change to global practices on this matter ?

Is it also not the time to look at SSI and SMEs as complimentary entities to the large, operating as ancillaries, as sub-contractors, as sub-assemblies while the large must be looked upon as providers of technology, marketing networks, raw materials etc to the small. Could our new vision be defined not by dividing sectors, but by integrating SMEs with the large, into a synergic whole, where government functions as a key facilitator ? Ofcourse, the large must desist from offering unfair terms of trade to the small and make payments quickly, aware of the credit constraints of their partners. There must be fundamental mind set change in India in the world of enterprise and government to adopt this synergic model.

May I express some concern about large foreign direct investors in manufacturing who are bringing their own SMEs from their own countries for ancillarisation. May I appeal to them to prefer Indian SMEs and build indigenous capabilities, difficult as it may seem in the short run, but immensely cost efficient in the long run - follow those MNCs who have, in fact, made history by deepening Indian capacities in a spirit of partnership and long term, profits.

May I conclude with a word of congratulations on a difficult political terrain? Now that all quantitative restrictions on imports have been dismantled, one can import directly many items reserved, ironically, for the SSI sector - an inherent contradiction which only prevents India's medium and large scale to invest while allowing a gigantic MNC to export to our market in an SSI reserved sector. Sir, Madam, you have taken a bold step in removing reservation in some of these contradiction ridden sectors where economy of scale defines business viability. Difficult as, it may, we urge you to deepen this process cautiously. We also urge you to focus on the cluster approach as you have begun to do in recent times to provide economy of scale to the small without becoming big and flabby. We urge you to offer greater financial leveraging for the small, as you have begun do more and more.

FICCI will partner your government in every manner to make SMEs the centre piece of our reforms and promote the synergic model of change in this great century. I urge you to form a Task Force drawing on the lessons from this Summit and giving the nation a new thrust and new vigour in this vital sector of our economy.

Thank you!