InvestorQ : In the Indian context, how do you see the impact of the COVID-19 pandemic on the health of Small and medium enterprises (SMEs and MSMEs)?
Sam Eswaran made post

In the Indian context, how do you see the impact of the COVID-19 pandemic on the health of Small and medium enterprises (SMEs and MSMEs)?

swati Bakhda answered.
1 year ago

MSMEs are always the most vulnerable in the Indian economy. Even in the midst of the not ban, they were the worst hit. They also got the biggest hit in the midst of the introduction of GST as they were just not prepared for such a shift. Now it is COVID-19. For millions of small businesses struggling with a slowing domestic demand over the last few quarters, the collapse of economic activities due to COVID-19 pandemic has raised existential questions. Small businesses now want the Government to implement relief measures and there is a growing chorus for the Government to come up with an assistance package for the SMEs and the MSMEs. Here is what you need to know.

· With situation changing by the day, much of the Indian economy has come to a grinding halt and businesses are now facing the brunt of a brutal slowdown that is ravaging nations across the world.

· From the third quarter of FY20, the business sentiment has been very bad for the MSMEs and the fourth quarter could be worse. The negative sentiment is likely to be extended to the first quarter of the new financial year FY21 too.

· The biggest demand MSMEs have from the government is that since there may be a delay in interest and instalment payments to the banks, banks should have the patience and not declare them NPAs. That is already been taken care of although it does not change the fundamental challenge of the sector.

· SME associations have protested that governments the world over had already taken drastic measures to keep businesses afloat but the Indian government had not done that much. This is more in terms of putting in funds, announcing a package, giving tax breaks etc. Most countries like the US, the UK and China have already billion dollar and trillion dollar plans for the small scale sector.

· SME associations want the Government to look at international best practices like Saudi Arabia. The kingdom had recently unveiled $13.3bn stimulus plan for small and medium sized businesses as the oil -rich Gulf States acts to support economies hit hard by Coronavirus. In the meanwhile, the UAE also launched a $27.2 billion economic support package to assist corporate and retail banking clients. India has been slow of the block.

With the lockdown being declared and now being extended, the SME associations want the Government to cover the salary cost of the workers, the way Canada has done. A lockdown can greatly hurt the country’s MSMEs and the economic and social impact on jobs could be visible soon.