73% SMEs didn’t make any profit during FY21 amid Covid; majority insecure about future: CIA survey

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June 24, 2021 5:41 PM

Ease of Doing Business for MSMEs: The survey suggested the government to exempt SMBs from statutory compliances, penal actions, and litigation; protect them from the high-interest burden, price wars, high cost of raw materials, losing employees, penalties, and late fees; and support them by giving liberal loans, etc.

82 per cent survey respondents felt that the central and state governments weren't looking after their interests.

Ease of Doing Business for MSMEs: 73 per cent of Indian small and medium enterprises (SMEs) couldn’t make a profit during the last financial year (FY21) while only 13 per cent broke even amid Covid impact, a survey by Consortium of Indian Associations (CIA), which represents multiple trade associations in India, said on Thursday. SMEs in most of the sectors such as retail, travel and hospitality, aviation, automobile, real estate, etc., were crippled during the first wave of the pandemic last year and the second wave this year. The survey, which covered more than 81,000 self-employed individuals and SMEs in India through 40 partner SME associations of CIA earlier this month, also noted that 80 per cent entrepreneurs were insecure “about their future, with the double whammy of the pandemic crisis & economic implosion coupled with the lack of any support base.”

“Last year, the government performed surgery on MSMEs without any sedation. This time there should be sedation of moratorium, capital support to MSMEs who have lost revenue, postponing all payment collection like GST, PF, ESI, etc., by six months so that whatever money MSMEs have can be used for this emergency situation,” K.E. Raghunathan, Convenor, CIA and former National President, All India Manufacturers’ Organization told Financial Express Online.

Multiple surveys have been conducted by associations, trade bodies, and corporates over the past financial year to underscore the impact of the pandemic on small businesses and suggest measures to accelerate their recovery. While the government and the Reserve Bank of India announced steps to cushion Covid distress, the support had seemingly fallen short to help revive MSMEs as indicated by the survey.

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Among other key findings of the CIA survey included, 82 per cent respondents felt that the central and state governments weren’t looking after their interests, 42 per cent were unable to decide on retention of employees, 59 per cent reduced their staff or sacked or removed them in comparison to the pre-Covid period, 88 per cent were yet to avail any of the stimulus packages introduced by the government amid Covid. The respondents included 49 per cent manufacturers, 15 per cent service providers, and 14 per cent self-employed, consultants, startups, traders, etc.

To enhance the recovery of SMEs, the survey suggested the government to first, exempt SMEs from statutory compliances, penal actions, and litigation; second, protect them from the high-interest burden, price wars, high cost of raw materials, losing employees, penalties, and late fees; and third, support them by giving liberal loans, clearing off the pending dues, offering moratorium with interest waiver, and not declaring NPAs for a year. CIA also proposed the government to amend the Micro, Small and Medium Enterprises Development Act, 2006, to strengthen the state facilitation councils.

“Micro Small Enterprises Facilitation Centers should be given more power to conduct their proceedings in a transparent and time-bound manner and enforce payment of the specified interest to the aggrieved MSMEs. The government also needs to make changes in the GST Act to make it SMB friendly,” suggested Ravi Sood, General Secretary, Badli Industrial Estate Association.

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