Business Case Studies, Executive Interviews, Anil Bharadwaj on Managing Troubled Times

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Executive Interviews: Interview with Anil Bharadwaj on Managing Troubled Times
March 2009 - By Dr. Nagendra V Chowdary


Anil Bharadwaj
Anil Bharadwaj, Secretary General, Federation of Indian, Micro and Small & Medium Enterprises


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    But two developments proved spoiler. The subprime crisis in the US which later precipitated into a full-fledged financial crisis. And, high inflation, particularly in Indian context. In order to contain inflation, RBI continuously squeezed money supply and hiked interest rates during the last four years. The tipping point came in September this year when the tap on excess liquidity was suddenly got closed in the US markets with the fall of their top biggest investment bank.

    Panic spread across the financial markets in the world. Indian corporates and banks which generously tapped these financialmarkets for

    cheap short-term funds through ECBs and a wide range of new age financial instruments suddenly found the door firmly shut. They returned to Indian banks. Frightened, the Indian banks refused to partwith funds to all borrowers, big or small.

    Sectors that were leading growth and creating employment, started collapsing one after another: housing, auto, white goods. Exports started dwindling due to slump in major markets. The cascading impact of these sectors fell on long supply chains down the line. According to FISME’s study, there is already an employment loss to the tune of one million in these sectors alone. There is 30% rise in delinquent accounts. As per RB data, the rise in nonperforming Assets(NPAs) on-monthto- month basis has risen from1.6%to 7% among top Indian bankers. And it is just a beginning. With current dispensation the rise in NPAs is set to be alarming.

  • The Indian Prime Minister has announced a financial package to tide over the financial crisis. Do you think that would boost up the industry morale? What else do you think needs to be done to revive the business confidence and get the economy going again?
    The two growth stimulus packages which have been announced so far actually composed of steps by RBI and of Government. I think RBI’s steps have been more decisive than the Government. The first attack of the central bank was on tackling the liquidity crunch. By successively reducing Repo and Reverse Repo rates, CRRs and SLRs, it helped injectingmore than three lakh crore in the system since September last year. It has taken several steps to create conditions for banks to lend. The central Government initiated some tentative steps towards easing of problems in housing.

    From the perspective of SMEs, very little positive impact has been felt of these initiatives so far. During the meeting with the Prime Minister Dr. Manmohan Singh, FISME asked for the following:

  1. Special contra cyclical measures are required on NPA norms and clear guidelines on NPA norms need to be issued
  2. A moratorium on repayment of installments for units who are affected and special dispensation for SMEs affected by sudden reversals Immediate steps for ensuring timely payments fromlarge corporate buyers to small companies.
  3. Making the coverage of Credit Guarantee cover mandatory on loans upto Rs. 25 lac. Premium of the guarantee could be born for first year.
  4. To push banks for lending further reduction in reverse repo rate and also reduction in G-Sec 10 year benchmark yield by at least 200 basis point
  5. To augment demand for MSME products, immediate decision on 20-25% target of public procurement for all central government and central PSUs. The matter is pending for a long time
  6. Exports: Big push is needed for exposing SMEs to exports. Currently 0.5% of SMEs are engaged in exports and yet contribute to about 50% of our exports. There is critical need to look beyond Export Promotion Councils (EPCs) and leverage resources of private organizations and associations focusing on SMEs.
  7. While there is case for kickstarting regulatory reforms in number of areas which impede manufacturing, one immediate step could start the process of turning the tide in favor of manufacturing and also in its modernization. Income Tax rates on labor intensive MSMEs may be fixed at 50% of normal rate. This will help in capital formation and growth of this sector as has happened in IT sector.

1. Troubled Times Case Study
2. ICMR Case Collection
3. Case Study Volumes

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