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CAD vs SME

1.S.AARTHEE 2.SARATHA PRIYA 3. POORNIMA
4. KISHOREKUMAR 5.VIGNESH 6. SETHUKUMAR

far above what the Reserve Bank of India considers to be a sustainable level viz.Current account deficit • A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services it exports. taking on liabilities to other countries.8 % of GDP.8% of GDP in 2012-13. • In order to try and boost its gross domestic production (GDP) and future growth. a country may go into debt. .4 to 2. ("net debtor“) • The deficit has widened to a record 4. CAD between 2.

Scenario of SME • SMEs play a significant role in the Indian economy as well as in the domestic economy. Capital investment on plant and machinery. • Parameters on which SME sector is generally defined are: • 1. Number of workers employed. particularly in emerging economies. with a high revenue and employment generation coming from them. Volume of production or turnover of business. • 2. and • 3. .

Current Account Deficit (CAD) reached 4.8% of GDP in 2012-13. • Indian exports recorded one of the highest export growths among the major trading nations of the world in 2011.9% during the financial year 2011-12.Export scenario • India was ranked as the 8th largest exporter with a share of 3. exports witnessed a considerable slowdown during 2012. However. • Declining exports has resulted in increasing trade deficit. • During 2012-13. Indian merchandise exports showed a negative growth rate of around 2% as compared to a positive growth of 21.3% of world exports. .

The share of the top six commodities which account for about 70% of total SME exports is as shown below .• The share of SMEs in India's total exports was estimated to be around 43 percent in 2011-12.

• But its competitiveness in areas like manufactured goods and readymade garments is being challenged. • • The solution lies in expanding the export pie. And to depend on short-term capital flows to address dollar needs makes India’s economic position quite vulnerable. India’s share of merchandise export in global trade is still below 2 percent and hence a lot needs to be achieved in this area.Reducing CAD • Reducing CAD by limiting imports is therefore not a judicious option. . Over the years India has made progress in both information technology and generic pharmaceutical exports. apart from its traditional gems and jewellery. natural fibers and garment sectors.

• Export of auto and auto components is on the rise and with supportive policy initiatives.• Government policy towards enhancing trade with existing partner countries and establishing new relationships with developing countries in Asia. . India could emerge as a regional hub for sourcing components for global automakers. Africa and US would also help promote exports to these regions. The country’s vast engineering talent pool could be put to better use in manufacturing than in the financial sector.

. • It is time the government comes out with a clear and concise trade policy with a roadmap for strengthening India’s global trade. enhancing trade finance. are other areas which need immediate attention.• Improving the infrastructure of existing Export Processing Zones. This is the way to address the current account deficit. facilitating small and medium enterprises (SMEs) to access global markets etc. simplifying procedures for interacting with government agencies.

SME Sector’s contribution towards Employment & GDP .

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which directly impacts their production cycle. as follows:• a. Limited access to equity capital for MSMEs. The major dependence for some sectors (eg. handicrafts) is for larger working capital requirement. Lack of availability of adequate and timely credit. . High cost of credit. they face some common problems. • b. with interest rates of 14-16%. Collateral requirements being insisted upon by banks • d.Major issues concerning the SME sector • Although Indian SMEs are a diverse and heterogeneous group. • c.

Gold imports • CAD can be controlled by improving the infrastructure of existing Export Processing Zones. facilitating small and medium enterprises (SMEs) to access global markets etc. Oil imports 2. simplifying procedures for interacting with government agencies.Widening of CAD • The major cause is 1. . are other areas which need immediate attention. enhancing trade finance.

Impact of the Crisis on Indian Services Sector SMEs • Depreciation of Rupee • Market Volatility • Credit Availability • Slowdown in the Manufacturing and Services sectors .

Development of SME • High contribution to domestic production • Significant export earnings • Low investment requirements • Operational flexibility • Location wise mobility • Low intensive imports • Capacities to develop appropriate indigenous technology • Import substitution • Technology – oriented industries • Competitiveness in domestic and export markets .

Revitalize and Reposition.commerce as an important tool. • To become global player SMEs need to Adopt. . • Access to markets and technologies in today’s globalized economy.Conclusion • SME’s the largest business community. • Adoption of e.

• Need for strategic approach for converting globalization challenges into opportunities. . • Identification of factors affecting international competitiveness in terms of quality and cost. • SMEs to reach International market potential for their goods and services.