Post-Covid – Challenges for the Indian MSME Market

Impact of pandemic – COVID – 19

·        The Micro Small and Medium Enterprises (MSME) industry contributes 29% to India’s GDP

·        From 2.1 million to 2.5 million units increment, i.e., 18.5% between 2019 – 2020

·        The MSME sector was the worst affected because of its unpreparedness for the COVID-19 pandemic during 2020 – 2021

·        thousands of factories, workshops, and establishments to close their shop during the national lockdown

·        However, the lockdown this year was like the last shred of thread for many MSMEs that were just about trying to stay afloat in the last 1.5 years

·        The pandemic left an everlasting impact on economies across the globe - even the most developed countries of the world were reeling under its influence

Centre and State Government Initiatives: 

·         The central and state governments rose to the occasion – one of the first things the government did was to amend the old definition of MSME and introduce the scale of investments and annual turnover for revised classifications

·          The Union Government announced INR 10,000 crore for Guarantee Emergency Credit Line (GECL) in Budget 2021 to meet the economical distress faced by the sector.

·        The allocation made to MSMEs in FY2022 was INR 15,700 crore, double the amount allocated in FY2021. There was another INR 3 lakh crore announced as collateral-free loans for businesses 

·        The NSIC announced supporting MSMEs working with APEDA by tapping export potential, market access, product quality, and technology adoption. Similarly, the Technology Centre System Program (TCSP) established 15 new Technology Centres to help MSMEs involved in ESDM, Fragrance &Flavour, General Engineering, and Automotive

·        Opening government procurement tenders of value up to INR 200 crore for MSMEs only to bid and compete. Global players are no longer allowed to bid for these. Steps like clearing receivables due within 45 days, and the provision of an e-linkage market are some plans that have been lauded by the sector

My viewpoints – what you say?

·         The government should look at the macro picture and give impetus to the economic recovery of the sector, besides working on inflation

·         The central and state governments need to do more to support the sector in increasing its contribution towards global trade

·         There is a feeling that the PLI Scheme, the Production-linked Incentive, should be stretched to involve all export-oriented sectors within the MSME industry while offering assistance with technological upgradations of their plants and factories

·         Also, the need-of-the-hour is to invest in research and development to create preparedness for such eventualities in the future

·         Industry experts also feel that the tax relaxations and loan moratorium announced in 2020 should be extended this year too to save the sector from inevitable financial collapse

·         Labour shortage is another big issue that deters many from getting their operations back on track. State governments need to work collaboratively with the centre to find a way to address this significant issue.

·         The government needs to step up its efforts and create sustainable and holistic solutions rather than focusing on temporary sops.