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It is indeed a fact that Indian Small and Medium Enterprises (SMEs) lose out on competitiveness due to various factors including, higher import duties, higher incidence of indirect taxes, lower operational efficiencies, higher transaction costs, lower labour productivity, higher cost of capital, inadequate infrastructure, etc.
It has become very essential in today's context to lower the cost of manufacturing and to improve the quality of products to provide a competitive edge. Several studies have indicated that retail prices of Chinese products are lower by almost 30 percent in comparison to Indian products in spite of similar labour and other input costs.
I strongly believe that Indian products would be competitive only when the cost of manufacturing is low. SMEs who are into manufacturing will readily agree that scaling up operations would be difficult to achieve without a strong demand. And a robust growth of domestic demand is essential for achieving the overall growth rates.
Having said this, we need to have policies for enhancing domestic demand. This would also drive an increase in the share of manufacturing in the Indian economy.
The tax regime needs whole-scale corrections — there is no doubt about that. The duty structure caused by Free Trade Agreements (FTAs) as well as in all cases even otherwise, need to be rectified. It goes without saying that domestic indirect taxes can be also singled out as a major reason why Indian products are uncompetitive. For instance the total taxes on manufactured goods are 25 to 30 percent of the retail price in India, compared to 15 percent in China.
And that's not all — figures tell me that indirect taxes in India contribute 50 percent to the difference in retail prices between India and other low-cost nations.
I feel lowering duties will boost not only domestic demand, but also go a long way in improving export competitiveness. Also procedures connected with export incentives and subsidies continue to be cumbersome. These need to be simplified on a priority basis. Lowering of cost of manufacturing and improving the quality of products are of high priority for SMEs. Let's hope the ears that matter are listening too!
Dear Mr. Khosla,
While rationalising the tax structure would certainly help exporters, our antiquated labour laws also need reconsideration.
With our labour laws being what they are, we can always hire workers but, except for theft, and a few major misdemeanors, we can not fire. This rewards inefficiency and low productivity in the Indian work force!
However, the low cost of Chinese products may not be as great an advantage to China as you fear, because Chinese products, although generally attractively packaged, are not of good quality.
In fact, we have completely stopped using Chinese chemicals, which, although cheaper than the equivalent Indian chemical, are of sub-standard purity. On the other hand, most Chinese ceramic products are both cheaper and of better quality than the equivalent Indian ceramic product.
B.S.Ganguli
Ganguli Ceramics.
Free Member, Joined :10/08/2005
No of Topics Posted : 0
Reply/Comments : 9
Dear Bikky,
Your observation regarding the Burden of indirect Taxes is good.
This needs one more addition as I have enumerated that out of the total Value addition on the scrap value around 80% goes to the government levies.
Best Regards
Rahul Goyal
Free Member, Joined :06/12/2002
No of Topics Posted : 0
Reply/Comments : 1
Dear Mr Bikky Khosla,
Your editorial on SME's path to success is very true. In addition to all commercial help by Govt, I would like to add the following:
Small scale industries are very much in a negative growth. Associations of Major industries can initiate to improve more export awareness to Small scale industries. Even today most of the small scale engineering industries in India depends on either major industries or job work. Talents of skilled workers are not used,the way the same can be used. Owners of SSIs are lacking awareness/interest of export potential. Skilled workers and Engineers are going away from SSI's to other better sectors.
Government or Industrial associations can create core groups which can educate awareness and requirement of global standards to SSIs. The groups should convene meeting with SSI in the tier 1 and tier 2 cities and conduct workshop and counseling, if required technical/management groups visit to few SSIs can be arranged. Also help them in identifying few global buyers.
As we all aware, Chinese SSI's are better placed in exporting their goods globally than ours.
More than supplying/exporting to MNCs directly or through major industries, survival of SSIs is depend on their individuality of export performance and this will heel them the local cost competition.
This will give an edge to India while competing with China in the years to come.
Regards
L.N.Raghavan.
Consultant Chennai
Better late than never, are we realising the fact or just trying to fill up the mental vacuum? Since Independence we have not been able to relieve the INDUSTRY FROM THE SHACKLES OF BUREAUCRACY OR IN RAW FORM OUR BABUDOM.
What are we trying to say, what kind of comparison we are addressing to? Few figures if we cite we feel literate and awakened. Whereas our illiterate farmer is committing suicide. On the other hand, our IIMS ARE CHURNING OUT BRIGHT FACES , GRINNING WITH appointment letters and are happy with the short lived joy, suggesting our vision less corporate sector to open SUBZI /VEGETABLE SHOPES and so are our LALAS who go ahead and when they get a kick on the bum they realise that oh what a blunder, millions who were hired are fired, shops are closed overnight, without thinking the future of those qualified and bright so called chaps.
In such a situation we can positively dream of a path that can lead to success. How positive it is, we will discuss again.........?
Pitching ourselves with CHINA why, why not with GERMANY OR JAPAN WHO WERE TARNISHED IN WORLD WAR TWO , WHY NOT HAVE OUR OWN SET OF SYSTEMS , AND RATIONAL LAWS TO FACILITATE THE WORKERS AND INVESTORS ALIKE, WHY NOT WE HAVE A FORUM TO ADDRESS THE ISSUES and conclude the matters expeditiously rather than contemplating in our 20 POINT PROGRAMMES FOR NEXT 20 YEARS BECAUSE I KNOW I may not be there or at least 70 percent idiots who might have read or believed in may have gone away to different world and its again election time let me find out a slogan for my countrymen as they do not want action they want intellectual talk.....
Thanks
Rajesh sharma
Free Member, Joined :12/22/2006
No of Topics Posted : 0
Reply/Comments : 3
I fully endorse Bikky Khosla views. unless we are competitive it is really difficult to enter the domestic market let alone competing with China and other countries.
The taxes would take away: from consumer - the luxury of having it and multiplicity of purchases; From the OEM - the profit margins and the country -- poorer by taxes and international trade and the reputation of not having market affordable commodities.
Shivakumar
Free Member, Joined :08/23/2007
No of Topics Posted : 0
Reply/Comments : 2
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