Concern expressed by the USA's Federal Reserve chief Ben S.Bernanke and other economists was that the lending to small businesses contracted substantially over the last two years. Small businesses -- those having fewer than 500 employees – employ half of all Americans and account for about 60 per cent of gross job creation. Lending to such companies fell to below $670 billion in the first quarter of this year from more than $710 billion in the second quarter of 2008. Many entrepreneurs say the bankers are wary of financing and denying loans to creditworthy borrowers as part of an overreaction to the bad loans of the last economic expansion and heightened scrutiny by regulators. A collapse in the value of real estate and other collateral used to secure loans posed a ‘particularly severe challenge’ to small businesses, Mr. Bernanke said.
We can expect a similar situation in India too where the role of small scale ventures/businesses is equally important from the point of view of its contribution to employment and value of production and exports vis-a-vis the medium and large-scale sectors. But the fate of its existence as well as its access to credit from financial institutions is less said the better. The governments in India both at the central level and state level are unfortunately found wanting in encouraging their manufacturing and marketing of their products unlike in developed nations like USA.
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