Handholding MSMEs to be critical for government, financial institutions to revive them post pandemic

Updated: April 15, 2020 4:36 PM

Ease of Doing Business for MSMEs: Businesses will be required to rework their financial requirements and would need restructuring. Hence, financial institutions will have to play a big role here.

msme, relief package, nirmala sitharaman, finance minister, FM SitharamanThere has to be a strategic planning and proper management for MSMEs when the lockdown is lifted.
  • By Manguirish Pai Raikar

Ease of Doing Business for MSMEs: We are passing through a very critical phase of our life fighting an invisible and invincible enemy which has given us this pandemic. The extended lockdown announced by our Prime Minister is absolutely justified and required if we have to flatten the curve of growth and spread of this deadly disease. There are debates, discussions and opinions floating around from experts, seniors economists and others who have opinions on each and everything. It has been a hotly debated subject as to what is more important life or economy. Barring the most essential, all kinds of businesses have come to a standstill. In fact, even some of the essential businesses are not able to operate due to non-attendance of workers staying at their homes. While the work from home concept has been followed by the IT industry as well but barring BPOs, KPOs, software services, other businesses are not in a position to benefit from the same including manufacturers providing utility services, logistics etc.

While the government exempted the essential activities and workers engaged in them with precautionary measures in place but full manpower wasn’t available as many of them retreated to their hometowns while others had commuting or transport problems. Logistics has also not been in place as thousands of vehicles were abandoned on highways as borders got sealed. Agricultural products, which are perishable, were the major losers in the process. However, the government realized this quickly and made provisions for a smooth passage of food and food products. Simultaneously the essential commodities, raw materials were allowed to transport but with proper procedures.

Now the question arises how small businesses will come out of this. Most of them have their money locked with their existing business deals, which looks to be a distant dream currently as everyone is strapped of cash. While businesses are closed but they have to pay interest to the banks, pay for salaries, ESIC contribution, routine government revenues like GST, TDS, etc, electricity and water bills, telecom services besides a host of payments to be made to others including suppliers. Although the EMI payments have been deferred, the liability remains and the interest continues. The future looks gloomy. The businesses are seeking answers from creditors as to when they would get the money, whether goods manufactured as per the order would be lifted etc. It is an endless story of hardship faced by small businesses currently.

Also read: Growth in bank credit to small businesses fall; here’s what RBI data shows

There has to be a strategic planning and proper management when the lockdown is lifted. It will not be an easy task for entrepreneurs because things to fall in place will take their own time. Items of daily need would be immediately required but the main factor would remain capital. Any shortage at this stage will kill the business. It is anticipated that nearly one-third of small businesses in India would be unviable and would have to be closed. Unemployment would definitely be the outcome of this.

One suggestion made to the government earlier was to launch a ‘Stabilisation Fund’ through which money should be made available to the entrepreneurs over and above their regular borrowings without collaterals or guarantees. Businesses will be required to rework their financial requirements and would need restructuring. Hence, financial institutions will have to play a big role here and will have to work with an open mind. Moreover, the government will have to release the due payments of small businesses immediately while ensuring the same from large industries, PSUs. This would make small businesses to get back to their daily routine far easy. Small businesses’ needs are limited, their manpower is also within their ambit and they are far more resilient than large businesses. On the other hand, the government would have to cut red-tapism and control corruption at the lower level.

Manguirish Pai Raikar is the Chairman – MSME at Assocham National Council. Views expressed are the author’s own.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
13 key challenges for SMEs in making the most of their investment portfolios and how to address them
2How MSMEs can keep at bay latest jump in logistics cost that seems to be steady and long-term
3How fintechs, banks, govt can reduce lending cost to MSMEs, enhance credit accessibility