The contribution of the Micro, Small and Medium Enterprises (MSME) to Indian export and GDP stands at around 50% and 40%, respectively. The growth curve of the Indian economy is largely controlled by this sector. The disruption of the global supply chain as well as the national lockdown due to the coronavirus pandemic is bound to impact the MSME sector in India.
Sudakshina Gupta, Professor, Department of Economics, University of Calcutta, told BE, “In the wake of the coronavirus outbreak in India, the MSME sector will be in great trouble. There will be a fall in demand from the people working in the informal sector due to a loss in their income. The supply from the MSME sector will remain unsold. The production will eventually fall as a result of the lockdown. This sector works with small capital and therefore they will have to be assisted in some way or the other. The government may provide them with financial grants and arrange for interest subsidy on loans. The loan repayment period may be made longer than usual. Direct credits may be disbursed on priority basis by nationalised commercial banks on government order. The loss incurred by the MSME sector due to fall in production and sale may be wiped out by government subsidies.”
Nitin Gadkari, Union Minister for Micro Small and Medium Enterprises, has recently stated that a proposal has been sent to the Indian finance ministry suggesting measures for providing relief to the MSME sector to face the effect of the coronavirus outbreak. The Confederation of Indian Industries (CII) has also initiated a programme for providing a rehabilitation and relief pool fund to help the MSME sector.
Dr Sourabh Khemani, Chairman, MSME Standing Committee, Bharat Chamber of Commerce, Kolkata, told BE, “The global shutdown has applied a brake on the supply chain. On top of that is the ever-increasing tax compliance hovering over the MSME sector. The problem can be somewhat addressed if the Reserve Bank of India could show a soft corner and instruct the entire banking sector to give a relief to the borrowers by way of interest remissions and by deferring the due dates of instalments. It would also be helpful if there is an ordinance - covering all taxation statues - which would ensure a relaxed moratorium on interest and penalties by extending due dates for filing returns and audit reports across the board until normalcy. Things will be better if the Indian government show empathy for the business community and grant the required time relief for the Vivaad se Vishwas Scheme at this tough hour.”
India has inherent economic problems such as poverty and unemployment. A global and nationwide economic shutdown will affect the country badly. A detailed, timely response based on strong governmental assistance is the need of the hour.