Small Indian firms flourish with govt support

The Jakarta Post, Jakarta

With most of its 102 participants being small and medium enterprises (SMEs), the ongoing Indian engineering expo -- Indiatech 2005 -- proves that SMEs are big contributors to India's engineering exports.

"Small-scale industries have been the backbone of our manufacturing sector," the chairman of India's Engineering Export Promotion Council (EEPC), Rakesh Shah, told The Jakarta Post on Thursday.

He said that 60 percent of the council's members were SMEs, and that they contributed over 40 percent to the country's engineering exports.

India's engineering exports stood at US$10.7 billion in 2003/2004 and are expected to increase to $13 billion in 2004/2005.

Supported by the Indian government -- which reserves certain parts of the manufacturing sector for SMEs -- the engineering industry has grown very fast in the last 15 years, Shah said.

"They were given subsidies to set up manufacturing industries, even cash for capital," he said, adding that the government also provides sales tax holidays, cheaper power prices, and no excise duty for business units with a turnover of between 10 million rupees (US$215,285) and 10 billion rupees.

Shah explained that the government had taken measures to promote export-oriented units by setting up special economic zones (SEZ) that facilitated the establishment of businesses operating in the import-export sector.

India currently has eight SEZs located adjacent to major cities or ports, he said. The concept was developed 15 years ago and has boosted India's engineering exports from $893.88 million in 1985 to $10.7 billion in 2003/2004.

"People setting up business in the SEZs are even exempted from income tax for 10 years. That's why those fully involved in the export business choose this area," he said.

Shah said Indian businesses were looking at similar establishments in Indonesia as potential trading partners as both countries had cultural similarities and were at the same stage of development.

His statement was supported by one of the participants, Miki Steel Works Pvt. Ltd. -- a medium-scale carbon steel wire manufacturer based in Bangalore. The company supplies its products to the construction and automotive industries.

"We don't only want to export our products to Indonesia, but also want to import wire strand, which is much in demand, from this country," the company's executive director, M. Sarkar, said.

Shah added that the SMEs participating in the expo were looking forward to sealing trading partnerships with their Indonesian counterparts.

Indonesia's Central Statistics Agency has reported that there are more than 2.5 million SMEs operating in the country's manufacturing sector, with a gross output value of more than Rp 57 billion. (003)