Handhold MSMEs and Exporters to Manoeuvre the COVID-19 Crisis

Handhold MSMEs and Exporters to Manoeuvre the COVID-19 Crisis   

As the lockdown persists in India, several industries are finding it challenging to maintain their financial outgo in the absence of revenues. On the other hand, daily wage and migrant workers are unable to meet their day-to-day expenses. While the government is cautious about fiscal slippage and a ratings downgrade, and thereby emphasises on low borrowing and spending, it is likely that without infusing money in the hands of the people, demand and therefore, GDP growth will cripple.

Ms.Sangeeta Jain, Senior Director, All India Association of Industries said, Economies across the world, whether large or small, developed or developing, are trying to handhold their industries and MSMEs as these are the most significant contributors to their growth and employment. The deeper the fall in output, the longer will it take to come out of this crisis. With the extension of the lockdown and in the absence of livelihood opportunities, it is likely that the migrant workers will not be willing to return to work. 

The government should, therefore, consider a package for MSMEs in order to ensure continuity of work. The government should carry out interest rate subvention, increase  credit guarantee cover, defer taxes and dues payable by another six months, and rejig NPA classification norms among measures to uplift business sentiments of MSMEs in these difficult times.

Further, the government should enhance the role of private sector participants, such as fintech companies and trade receivable exchanges to enhance last-mile delivery of the credit offered by banks and ensure that the risks of non-payment that will be witnessed by MSMEs in the aftermath of this crisis are mitigated.

Since the COVID-19 crisis has affected trade and economic activities across many parts of the world, Indian exporters are facing the challenge of non-fulfilment of contractual obligations by importers. The NIRVIK scheme announced in the Budget aims to provide guaranteed insurance cover up to 90 per cent of the principal and interest on pre, as well as, post-shipment credit. 

This revision of guaranteed insurance cover offered by ECGC, from 60 to 90 per cent of the credit availed by exporters, is the most desirable to be implemented at this point of time. The government should also enhance the corpus of this fund in order to ensure that exporters sail through this crisis, relatively easily.

Private sector players such as factoring agents ensure that the working capital needs of MSMEs and exporters are met with by discounting their trade receivables. These firms help in improving the cash flows, lower bad debts and improve the commercial competence of MSMEs and exporters.

We need to ensure that innovative products, leveraging the use of technology, are promoted as these enhance the efficiencies of MSMEs, while also improve targeting of our scarce financial resources.

We hope our suggestions will be taken into consideration, added Ms.Jain