Google has a clear intention to help 500,000 Indian SMEs go online within three years with the ‘India Get Your Business Online’ program. Google has launched this program with support from HostGator. SMEs just require to log on to indiagetonline.in for a free website and web hosting facility that extends up-to a period of one year. Businesses are given customized domain, training and free tools so as to succeed online.

This initiative is going to help Indian SMEs find more customers in India as well as abroad. It is going to foster modernization of SMEs and make the most of opportunities for establishing presence on Internet. India being a potential internet market can derive the benefits of the internet economy with such catalyzing programs. It is going to bridge the information gap that exists and will help Indian SMEs come online. The Federation of Micro, Small and Medium Enterprise (FISME) also supports the ‘India Get Your Business Online’ program.

The establishment of Cowe is considered the first International European Union (EU) business centre in India and it is linked to central portal in London. Cowe is among 164 other centres from 22 countries. Initiatives like Cowe shall help solve women entrepreneur’s problems especially when it comes to marketing of products. The reason is such an initiative shall definitely provide an international platform to entrepreneurs.

The initiative is part of UEL’s network of SME Centres of Excellence in BRIC countries (Brazil, Russia, India and China). It will connect, empower and train women entrepreneurs within BRIC and EU. Female entrepreneurship hence shall be internationalized and the initiative shall create a gallery in-order to showcase and trade products globally. It will also support governance ability, leadership and growth of female entrepreneurship ventures.

In January 2011, Cowe will sign a MoU with CEL. A design studio hence will be established in India to enable the making of customized products with the help of designers and weavers. The end products shall be customized eyeing international buyers.

The portal will display handicrafts, jewellery, packaged foods, dress material and other Cowe’s Indian products. Total investment for the portal is Rs 50-55 lakh to be provided by the Union ministry of micro small and medium industries. Entrepreneurs can become a member with Rs 10,000 life membership fee. Initially only Cowe members will have an access to display products and later products shall be sourced from other states.

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Milton Friedman

Understanding Inflation

To put it simply, inflation is the overall increase in prices. This is not enough to understand this contagious problem which, thanks to global integration, affects not just one economy, but can also spread across quite easily. This is one economic variable that plays an important role in deciding the fates of governments as it affects the masses directly.

Annual growth rate of GDP deflator, the ratio of nominal to real GDP, is used to measure inflation for the entire economy. CPI and WPI also are two measures of inflation. Monetary inflation, caused due to increased money supply is the most difficult of all its kinds. Let us try to understand it and then its impact with special emphasis on SMEs.

Due to increase in money supply, nominal GDP increases, while real output is fixed, translating into higher price level. This implies that price level is directly proportional to money supply which has also been proved by the results of studies conducted by Milton Friedman and Anna J. Schwartz.

Factors that influence price level are:

a) Money supply controlled by central banks by means of monetary policy.

b) Shifts in money demand

c) Level of output in the economy determined by factors of production and technological progress.

Recent financial turmoil saw a tremendous increase in money supply by central banks.This provided purchasing power in the hands of common man, but could not increase production, leading to the problem of inflation in various countries.

An example here is Greece’s fiscal problems and the bailout package of e110 billion. It is now facing the problem of rising inflation which stood at 5.5% in July 2010, the highest figure in last three years.

When liquidity is injected in the economy, it is very important that the funds are used for production of goods. In the absence of which it will only fuel inflation because increased money in the hands of people will chase still the same number of goods, thus leading to increase in price level. Therefore, it is very important for government to see to it that productive activity in the economy is stimulated whenever money is injected.

Apart from above, we also have inflation caused due to shortages of goods and services sometimes due to natural disasters, due to artificial scarcity etc. Basis this we classify inflation as:

a) Demand-Pull inflation caused due to excessive demand

b) Cost-Push inflation caused to rise in cost of production

c) Oligopolistic inflation caused when, for example, OPEC nations increase oil prices to boost profits

d) Sectoral inflation caused when any of the three above hit a specific sector.

During the occasion, Dr. Singh said, “The Ministry of Micro, Small and Medium Enterprises (MSMEs) call centre will satisfy the need of a single point facility providing a wide range of information and accessibility of banks to such units. This initiative would help in expanding the outreach of support provided under the various schemes and programs of the government.”

Toll free number for ‘Udyami Helpline’ is 1800-180-6763 and the working hours of this Helpline shall be 6 am to 10 pm. Here, SMEs can find all required information and guidance on availing bank loans, setting up new units, project profiles and knowledge about other MSME schemes.

First generation entrepreneurs faced a lot of problems in finding credit, technology and even in marketing. But now the SME problems will be solved and they can even lodge complaints with Central and State Government agencies. The call centre facility is made available in both English and Hindi languages.

It is a Business initiative to improve quality, delivery and reduce cost of production. The scheme is a curb on waste that includes inventory, over-production, over-processing, transportation and defects. The Union government is slated to spend 80 % of the project cost. The development commissioner, MSME, will be responsible for execution of projects through a special purpose vehicle (SPV) established by SME clusters.

Presently, clusters have been formed by SMEs in Mohali and Baddi (Himachal Pradesh). In Mohali, SMEs manufacture bathroom fittings and accessories, and in Baddi engineering goods are being produced. Manish Trehan, manufacturing consultant for the Mohali and Baddi clusters, says, “The participating units will be assisted in becoming ‘lean’ through better planning, better manpower allocation, better space utilisation, scientific inventory management, improved process flows and reduced processing time with the application of lean manufacturing techniques.”

The programme has been initiated with a tri-partite agreement between PGSTE, the SPV formed by the cluster and National Productivity Council. It has been agreed upon that to reduce “waste” (“non-value added” activities) when it comes to manufacturing, is essential for sustainable growth and competiveness building.

In the pilot stage of the Lean manufacturing scheme initiated by MSME ministry, forming 100 mini clusters averaging 10 MSMEs per cluster have been targeted. After achieving this, another 1,000 MSME clusters in the entire country will be formed.

“Our research indicates confidence levels in the emerging markets are stable. SMEs in India are not changing their business strategy in the next six months, despite the global uncertainty. This bodes well for the Indian economy,” says Dheeraj Dikshit, SME Business Head, HSBC India.

The latest wave is a survey conducted on 6,300 SMEs whose annual sales turnover is US $10m. These SMEs are spread across 21 markets such as Middle East, Asia, North America, Latin America and Europe.

Confidence levels of Global markets

Confidence levels of developed markets increased 9 points from 106 to 115. Confidence level of the entire globe increased from 111 to 118. The emerging markets showed an index of 122 that is seven points higher in comparison to developed markets that showed 115.

Positive confidence levels in Asian Markets

Since the financial crisis, Asian markets have shown signs of positivity for the first time, according to the survey. The positive waves are in terms of their economic growth, recruitment and CAPEX plans. Among the most confident countries surveyed, Vietnam ranks first with 164 index mark, Singapore (136), mainland China (123) and India (121).

The focus of the IT policy 2010-15 is on start up companies, IT products, SMEs and women entrepreneurs. Promoting women’s participation in the ICT sector is also its objective. More e-governance projects in local languages are also on its agenda.

At present there are 1,200-odd IT and IT-enabled Service (ITeS) companies. Out of these, 70-75 percent belongs to the SME category earning annual revenues not exceeding Rs 100 crores. A company is considered a start up if its annual return is between 50 lakh and 10 crore, with 50 employees and operating for less than five years.

The government has made provisions to grant incentives in the form of 25 per cent power subsidy to start-up companies, 25 percent reimbursement for premises rental expenses and recruitment assistance of 2.5 lakh per 50 persons recruited.

L Suresh, president IT and IT-enabled Service Industry Association of Andhra Pradesh (ITsAP) says, “Usually, SMEs are good at executing projects. But because of their size, they are disqualified from participating in large projects. Earmarking about 10 per cent of e-governance tenders for SMEs will ensure that companies will have a level playing field.”

To market intelligence, prepare research reports & analysis for SMEs, understand new trends in technology, the Andhra Pradesh government will create libraries with support from NASSCOM, IT Exporters Association, Software Technology Parks of India, ITsAP and Institute of Electronic Governance. For the libraries, Rs 10 lakh fund will be facilitated so that the SME sector can grow. In order to evaluate the strengths of SMEs, the government shall tie up with business analyst firms. This will enable smaller ICTs to establish linkages with bigger firms and help SMEs to find international markets.

Andhra Pradesh has set a target to raise its export value to Rs 70,000 crore by 2015. The current value is 32,000 crore. The state provided 2.51 lakh employment in 2009. New employment for 125,000 people is being targeted. IT sector’s export is 50 percent of the total exports from other sectors in the state.

So far, SMEs of the country did not witness much support from private equity (PE) players because of a low capital base. Rajeev Krishnan, executive Vice President, SBI Capital Markets, says “The SME fund will be used to rope in private equity investment in SME, which otherwise is facing dearth of capital for furthering its business growth.”

FPOs (follow-on public offers) and financial services are also being guaranteed by SBI Capital Markets Ltd in this fiscal. This will definitely attract revenue growth as the PE funds are utilised to invest in the company’s growth phase. Krishnan says, “We expect to witness a 60 per cent rise in our revenue to Rs 1000 crore by end of this fiscal on the back of higher earnings from advisory services.”

Opportunity in the advisory space is further magnified by the central government’s disinvestment programme in public enterprises. $9 billion worth of proceeds is likely to be generated in the current financial year. A larger role is anticipated in ‘mergers and acquisitions’ from investment banks as it is going to leverage SBI’s banking relationship with other Indian corporates.

SBI caps in the last financial year had made loan arrangements of Rs 187,000 crore. In 2009, SBI caps concentrated in five major equity issues that generated Rs 136.5 billion. Mega issues like National Hydro Power Corporation (NHPC) Ltd raised $1.25 billion and Adani Power raised $630 million from the capital market.

Since the PMEGP launch in 2008, one lakh projects have been sanctioned and 10 lakh people employed. Out of the total loans sanctions, 15 percent is for SC, 7.5 per cent for ST, 27 per cent for OBCs, 5 percent for minorities and 30 percent for women. The general category entrepreneurs can find a subsidy of 15 percent and 25 percent on the project cost. The weaker sections of society can avail 25 per cent and 35 per cent subsidy.

Dinsha Patel, minister of state for MSME, has urged CMD of banks to issue policy circulars to all financing branches so as to fulfill the allocated targets. He said that the disbursements this year has been just 10 percent of the target. What is important now is that Khadi and Village Industries Commission (KVIC) should reach every village. The KVIC is the nodal agency for the implementation of PMEGP .

The Union Bank of India and KVIC signed an agreement for a ‘one bank, one nodal branch’ formula. This concept shall enable a single nodal branch to be used to coordinate with all other branches of the bank spread in the entire country.

Central Bank has already announced hikes of repo and reverse-repo rates by 25 and 50 basis points amounting to 5.75 and 4.50 respectively. Major banks have also raised deposits rates by nearly 100 points and the credit rate is also expected to increase in future. The large MSME base of Uttar Pradesh, estimated at 1.2 million, will be affected by these policy changes.

The Indian Industries Association (IIA) president, Anil Gupta said “it would be double whammy for the MSME sector, which was already operating under ‘wafer-thin’ margins with little support from the government.” He added that we should take lessons from China that provides incentives and funding for the growth of the industrial sector. He also informed that in Lucknow there is no land bank for industrial units.

IIA has recently nominated veteran professionals for the constitution of a ‘consultancy cell’ so as to promote MSME entrepreneurship. The cell would give advice on different subjects relevant to MSMEs that includes technical & financial project appraisal, rehabilitation of sick units and more.