With the key market indices recording the steepest jump in the last 17 years and the demand picking up in a few sectors, some economists and investment bankers anticipate substantial recovery between September and December, this year.

However, the economists at Moody's are of the opinion that Indian enterprises, including SMEs, which are hoping for an early economic revival following the resounding victory of Congress-led UPA government in the general elections, will have to wait a while longer.

Despite political stability and the resurgence in demand in a few sectors, the overall economic performance is not likely to pick up for the next few quarters.

Economic outlook to remain bleak

The analysts at Moody's Economy.com — the economic intelligence arm of global rating agency Moody's — have projected the outlook for the Indian economy to remain grim till 2010. According to experts, the woes of the SME segment are far from over. Given that major economies like the US and Europe are still reeling heavily under the recessionary pressures, resurgence on the domestic front would also take some time.

“Though marginal recovery was seen in the last few months of the current financial year, a complete market revival is unlikely to happen until next year. The positive market sentiments may also disappear soon if the global economy takes a negative turn,” commented D Dasgupta, financial analyst working with CMC in Kolkata.

Experts believe that the upbeat sentiment in the Indian SME segment post the victory of Congress in the parliamentary polls may fade after the release of the March quarter’s gross domestic product (GDP) figures. Moody's Economy.com expects the year-on-year GDP growth to decelerate for the March quarter from 5.3% recorded for the December quarter.

“India's GDP growth for 2009-2010 is likely to decelerate further as there has been a lull in investment activity in some key sectors like realty, construction and others for quite some time now. Small businesses in the manufacturing sector are also going through a rough phase as the overall industrial output contracted by 2.3% in March, this year,” commented K Nihalani, Director of Adelina Investments, a mid-sized investment consultancy firm in Kolkata.

Going by these projections, Indian SMEs are advised to revamp their strategies and brace up to meet greater challenges ahead. As it may take a while for the economy to recover fully, small firms are recommended to adopt a wait and watch policy till the crisis eases.

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