"The small scale is not a dying sector. The number of live SMEs have grown, so has their turnover, export and employment. But the credit flow to SMEs has declined," Union Finance Minister P Chidambaram said in Mumbai.
On the lines of thrust given to farm sector in the last fiscal, the government would set a target for SME credit, the Minister said.
Banking entities should work with Small Industrial Development Bank of India and the government to sharply increase credit flow to SME sector, he added. SIDBI's outstanding credit has grown from Rs 5,000 crore (Rs 50 billion) in 1991-92 to Rs 11,000 in 2004-05, which is a sedate pace of growth, he added.
Out of Rs 11,000 crore (Rs 110 billion), Rs 5,000 crore was an advance to the state finance corporations, most of whom are financially weak, Rs 2,800 crore (Rs 28 billion) to refinance commercial bank for SME lending and Rs 3,000 crore (Rs 30 billion) as direct lending, he said.
Referring to changes in SME sector, Chidambaram said small may be beautiful but not always an efficient way to do business and it is time that SSI units in the country graduate to medium size.
The scale and size add to efficiency and in the real world what counts is ability to compete and deliver better than rivals, he added.