Low credit availability and offtake are turning out to be major dampeners.

INDUSTRIAL MSME (micro, small, medium enterprises) sector will continue to have a rough ride in the near future. Low credit availability and off take coupled with rising input costs and high cost of funds are turning out to be major dampeners.

CII Business Confidence Index (BCI) for MSMEs for the June quarter has estimated at 62.1 on an outlook scale of 0-100. Significantly, this outlook has declined over the last quarter by a significant 3.1 percentage points for the overall sector.

A CII survey that aims at gauging mood of MSMEs a quarter in advance, shows that services providers, on average are expected to perform better than their industry counterparts.

For services companies in small and medium range the BCI stood at 65 compared to 59.2 for industrial units. Services exuberance even in the previous quarter had surpassed the industrial sector.

Services sector is found to have outshined the in dustrial sector with regard to new orders and contracts, exports, capacity expansion and net profit margins. Industrial sector however has done well in gross sales and selling prices.

The survey also highlights that industrial MSMEs have less access to credit and cost of working capital as compared to their counterparts in services sector. This highlights the need for a policy intervention.

Rakesh Kapoor, MD of IFCI Factors said this is especially true for micro enterprises. "The sector is hit by problems like non-availability of structured information, lack of corporate governance guidelines," Kapoor said.

Ramesh Datla, chairman, CII National MSME Council said, "Budget initiatives included an allocation of Rs 5,000 crore to Sidbi for refinancing incremental lending by banks to these enterprises and Rs 3,000 crore to Nabard as support to handloom weaver cooperative societies that have become financially unviable. However it fell short on expectations."

"India's signing Comprehensive Economic Partnership Agreement (CEPA) with Japan and Comprehensive Economic Cooperation Agreement (CECA) with Malaysia will come into effect and that have a positive impact on MSMEs business sentiments, said Gurpal Singh, deputy director general, CII.