The coronavirus pandemic has changed entire world and altered economy as we knew it. Nothing will be the same, even after the virus is gone. A global integrated world that was shaken up by a small bat in one city of the world, has even threatened the basic right to move freely. In such a situation, business will not be normal for a long time and a series of steps will be required by both local and federal governments to realise the ‘new normal’. A slew of measures has been announced, yet the industry is looking forward to much more from the government. A collected and concerted effort by all concerned is the only way for the economy, livelihoods and nation to come back to life again.
It has been repeatedly pointed out by experts and laymen alike that a demand stimulus needs to be created and putting money in the hands of people is absolutely essential. Unfortunately, states will not be in a position to accrue the same taxes including GST as earlier, making assistance from central government imperative. While the state governments too need help through measures like increase in overdraft facility for state governments from the Reserve Bank of India (RBI), assistance for the economic drivers like MSMEs should be the first priority. The stimulus package announced by the Prime Minister has concentrated on banks and loans, it has neglected to include that the banks need to extend credit to small businesses on the basis of invoices, whose genuineness could be ascertained through the GST framework. Alongside easy loans, cash flow problem, especially for MSMEs, needs be tackled and the simplest method for this is refund of GST, Income Tax and duty-drawback which should be released, as early as possible. In fact, one can argue that this is not a bailout but merely efficient administration which ensures the money due to people is released in time so that it can be used by the small businesses to create demand in the economy.
The state governments cannot ignore their own responsibility given the varying levels to which states have been affected and the differences in the economic structure and resources of states. Initiatives are needed to strengthen the fiscal stimulus package and to provide working capital support to businesses for losses incurred in the period of lockdown. This package may include cashflow or liquidity easing measures like tax rebate, tax holidays, allowing delayed payment, arranging extended credit limit, subsidised interest rates, extension of moratorium period, subsidised rent of government premises etc. The time period of these benefits could range from a few months to a couple of years. Similarly, support for most severely affected sectors needs to be considered acutely.
Also, no government or society can neglect the most vulnerable population of workers - the migrant workers, women workers and wage-earners. Both the central government and state governments have already enhanced expenditure on MGNREGA, the safety net in rural areas. However, the ambit needs to be increased substantially in numbers as well as days of employment as migrant workers experience a general reluctance to return to other states and the sentiment to reside with their families has become common. A related issue is wage payment by industries as many MSMEs require finance to pay salaries to their employees. Awareness for availing the benefits of ‘Emergency Funds’ through the banks, as central government has already notified all state-owned lenders to offer emergency credit to corporate borrowers and even to Self-help Groups (SHGs) and MSMEs are needed. As delayed payments from buyers remains a major challenge for the MSMEs, government may support the Micro, Small and Medium Enterprises Development (MSMED), Act 2006, whereby all buyers must make payments within 45 days. Specifically, governments may issue instructions to all Departments and PSUs to make all payments due for suppliers of MSMEs on immediate basis.
Lastly, industry and businesses themselves will have to adapt to the new normal. There is a substantial expenditure involved in maintaining norms of sanitisation, social distancing, safe traveling arrangements and others, which would be an added burden for the small units. Many units have already made the adjustment by shifting production lines to utilise the huge demand for masks, sanitisers, cleaning-agents etc. all over the world. Packaging material would be another line of products which may be explored by MSME players, as demand would be increase manifold due to isolated touch-less consumer behaviour pattern. In the same spirit, start-ups especially with digital platforms, should endeavour in collaborative approach through partnership with small production units to achieve greater economic activity and reach.
The only certainty in the present climate is uncertainty, especially regarding final disappearance of COVID-19. Already prophecies that infections like Covid-19 may recur repeatedly in coming years, are popular. The authorities will therefore need to ready a detailed plan along with an implementation framework to mitigate the adverse effect of such occurrences, well in advance by engaging policy makers in to ensure the present suffering of millions in not in vain.
The writer is a student of economics and a keen observer of politics, business and society.