The 19-day lockdown extension may choke hundreds of thousands of micro, small and medium businesses (MSMEs) that accounts for nearly a quarter of India’s $2.9 trillion economy and employ more than 50 crore workers. Experts warn that at least one fourth of the 6.9 crore MSMEs who are grappled with limited resources are set to perish, with exporters likely to be hit more in the absence of an effective and sizeable financial package as India enters Lockdown 2.0.
“MSME exporters have no liquidity to pay wages for the month of April. The start of selective manufacturing will also be a long drawn battle due to the unavailability of labour, raw material, transport etc. which will resume normalcy only after a few months of selective opening. The need of the hour is a survival plan,” Sharad Kumar Saraf, President, Federation of Indian Export Organisations (FIEO) said. FIEO has demanded a comprehensive economic package that will include interest free credit to cover six months of wages, rental, utilities along with a six-month loan moratorium for exporters. With cancellation of over 50 per cent of export orders in the last few weeks due to coronavirus disruptions worldwide there was a chance that there could be 15 million job losses in export units, FIEO warned.
Commerce minister Piyush Goyal is learnt to be in discussion with the finance and home ministries regarding injection of funds, through various measures to help these companies stabilise their operations over the next few months. The demand from industry bodies, however, is for a ₹9-10 lakh crore stimulus package worth 4-5 per cent of GDP with a special focus on small businesses to weather the crisis.
“MSMEs do not have the capacity to withstand massive shocks like Covid-19. In addition, many MSMEs are an important part of larger supply chains. The health of these MSMEs have a bearing on the entire supply chain, including the large corporates; therefore, special, immediate and substantive support measures are required to see the MSMEs through this crisis”, said Chandrajit Banerjee, Director-General, CII.
Lack of an immediate relief for the backbone of the manufacturing and export sectors, “we believe at least 25 per cent MSMEs will close permanently,” said DK Aggarwal, president, PHD Chamber of Commerce and Industry, which represents 1.3 lakh companies, most of which are MSMEs.