The confusion surrounding the implementation of India’s biggest tax reform – the Goods and Services Tax (GST) – has not dimmed the optimism of Indian SMEs (Small and Medium Enterprises) about domestic economic growth.
A survey commissioned by American Express and carried out by Oxford Economics took responses from senior executives and decision-makers across 15 countries, revealed that Indian SMEs are overwhelmingly optimistic about the health of the world economy.
The inaugural survey titled, American Express Global SME Pulse2 2017, found that Indian SMEs are more positive about the domestic economy over the next 12 months than their Asian counterparts. Seventy-one percent Indians felt optimistic about domestic economy as compared to 62 per cent Japanese, 54 per cent Chinese and 26 per cent Singaporeans.
Taken together, the confidence of Asian countries was found to be substantially higher than the global average of 45 per cent. Besides domestic performance, Indians also had a higher confidence in the global economy at 65 per cent than their Asian counterparts with Japan at 58 per cent, China at 47 per cent, and Singapore at 20 per cent.
Healthy optimism about profitability
Providing a foundation to their optimism in the domestic economy is the belief of 76% of Indian SMEs in their abilities to deliver a minimum of 4 per cent growth in revenues in the current year. In terms of profitability, Indian SMEs are similarly upbeat with 45 per cent forecasting a profit of 8 per cent per annum by 2020. This is in excess of the global findings which show 27 per cent of SMEs forecasting net profits of 8 per cent over the same period.
“With SMEs focusing on expansion and investing in latest technologies, they need to manage their expenses effectively. Financial discipline can help companies tackle slower business growth even in a slackened economic environment. American Express here plays a crucial role by providing tailored expense management solutions that are designed to help mid-market organizations, including SMEs to drive purchase savings,” said Global Corporate Payments’ Vice President and General Manager at American Express India, Saru Kaushal in a statement.
Government laying down road to growth
73 per cent of Indian SMEs are enthused about the Indian government’s recent initiatives and see it in a positive light. As much as 69 per cent of those surveyed feel that barriers to entry are coming down, resulting in increased business opportunities.
“With a conducive policy framework and positive regulatory steps taken by the Government, the SME sector has seen substantial growth. This survey clearly highlights the optimism and confidence among SMEs; and businesses are deftly navigating through challenges to thrive in India,” said Kaushal in a statement.
Funding to support growth
To support their optimism, Indian SMEs are depending on existing working capital (at 88 per cent) and bank loans (at 77 per cent). Over the next year, 50 per cent of Indian SMEs plan to target equity markets to source funds and 46 per cent plan to go to banks for loans.
However, 37 per cent believe that flexible lending and repayment options are the most important factor in streamlining their future business financing options while 47 per cent marked high interest rates as the biggest obstacle.
Source: Economic Times
