June 9th, 2009
01:36 AM GMT
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FARIDABAD, India — Power goes off as we drive into Harjit Singh's factory in this dusty industrial zone on the outskirts of India's capital New Delhi.
Singh, who makes fasteners and nuts for automobiles, turns to a heavy-duty generator lying in one corner of the factory floor as his workers struggles to switch it on. An elderly employee surrounded by idle machines continues his work with a handheld metal file.
In energy-deficit India, factory-owners like Singh – classified as micro and small enterprises – suffer routine power droughts like this. Still, these small companies manage to account for 39 percent of the manufacturing output and one-third of the country's total export.
The Indian government says this sector, spread over 12.8 million enterprises, employs an estimated 31 million people – a labor intensity four times higher than large enterprises.
But Singh says it is in a crisis now. "We are facing a business crunch, a major business crunch due to the economic slowdown," he laments as his machines rumble to life as power is restored.
He tells me that manufacturing activity has dropped considerably because of falling orders. Singh is caught in what he calls a "debt-trap" because costly banks loans to keep the business running.
His biggest worry is a permanent shutdown caused not by shoddy power, but by the financial crisis. In the past year he laid off 20 of the 38 workers. His sales are only one-fifth his 2007 volume. "I can’t help it, I can’t survive. I have to survive on the bare minimum," he remarks.
The trouble on Singh’s factory floor belies rosy headlines in the Indian press. "Get, set, grow," read a headline for the Hindustan Times. "Good news: At 6.7%, GDP grows more than expected," said a Times of India headline the same day.
But for Singh, it's unclear what lies ahead. He hopes the government will promote more bank loans for his ailing automobile sector, tax concessions and a curb on Chinese imports to keep his business from closure.

 "Something has to be done immediately; otherwise we’ve had it," he says.

soundoff (5 Responses)
  1. Tej Bains

    The report paints a grim but true picture at the ground level. The Indian government has to take effective steps to stem the rot at the earliest, rather than dish out platitudes about saving medium and small enterprises. The hopes of small entrepreneurs like Singh lie with the Indian government.

    June 11, 2009 at 9:52 am |
  2. Suresh Ruparel

    As long as we are ruled by bafoons as our leaders we do not expect anything from them other then they filing thier swiss banks accounts and working with vote bank policies.we indians very well know this so no use of saying anything to a wall of bafoons who do not even care for small people at all.I am sad we are even today suffering because of this non productive so call democratic rule which is not in right shape.It is rule of crime syndicates so please do not worry india can never be threat to anyone.

    June 13, 2009 at 4:09 am |
  3. Anunay Gupta

    Getting loans at reasonable interest rates for SME is almost impossible in India. Without a sufficient operating history, +ve cash flow, collaterals, etc, most banks refuse to lend. Interest rates for SME's have stayed flat over the past few years; despite a drastic cut in prime rates. Being a banker myself, I don't blame the banks as they are responsible for underwriting and carry the risk of default. But hoping that organisizations like CRISIL and CIBIL will take on the onus of creating information assets so as to enable banks to undertake responsible lending and thereby promoting economic growth at grassroots.

    June 15, 2009 at 4:21 am |
  4. vijay

    I agree with Suresh Ruparel's view.

    Indian policies are all Hippocratic!!!

    June 15, 2009 at 8:50 am |
  5. vaibhav Soni

    When you are in good times you should be prepared for your bad times and vice versa this Policy should be followed by all the individuals and businessman . No goverment policy will help for survival in global market. We have followed the west, west is facing recession, job loss, closures of business, companies etc, one day it will come to us. We cannot stop it. Hope for the revival in the nearest future.

    June 21, 2009 at 5:27 am |

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