Plight of MSME and Immediate Remedial Measure

Mr. Vijay Kalantri, President, All India Association of Industries said that AIAI is a premier Chamber of Commerce , an apex body  representing the trade, industry and employment since 1956 . It is a think tank established to suggest government about remedial measures in the changing economic scenario.

Mr. Kalantri further said that MSME has suffered terribly since the last decade majorly due to policy paralysis in every sector of the economy. The irrational implementation of reforms in direct and indirect taxes i.e GST ,  followed by demonetization led to further chaos in the system.

MSME sector once spearheaded contributing  45%of GDP prior and later to economic reforms and experienced a growth rate of 16% of turnover . The same declined later to13%  of turnover due to various reasons and GDP contribution falling to  40% GDP . The lending rate prescribed by RBI was around 12% of turnover during this time in the economy. Today in light of above factors funding has come down to 8.3% of turnover of MSME sector and  contribute 30% to GDP. Further it needs to be capped at 6% of the turnover for its survival and  revival to avoid job loss and loss of entrepreneurship.

The above figures represent the MSMEs registered for statistics . Apart from them there are many MSMEs and small businesses who are operating and paying taxes holding huge job and employment.For eg  clusters like Dharavi which contribute nearly Rs1 billion to the economy. Further such and many other clusters who not only add to the GDP also to government exchequer . They will be impacted in loss of adequate support at simple and lower interest rate of 6%.

As far as employment goes, at a time the MSME  employed 140 million nearly 15% of the workable population. However , today  the same has dropped down to  120million . The main reasons are that  various employment intensive sectors such as that of semiconductors , computer hardware, electronics parts assembling etc  are experiencing a heavy import above 90%. Moreover , inadequate infrastructure , timely and inadequate financial support has further weakened the MSME economy.

Multiplicity of laws is another such hurdle which has posed a challenge before the MSMEs which  continue on both state and central levels . The MSME are in turn just getting lip sympathy rather than any actual breath of respite.

Some policies are good but not implemented in letter and spirit at operating level.

Presently, in view of lockdown if structural reform on part of  various regressive laws is not simplified in direct and indirect taxes and  timely and adequate finance not given by banks and other financial organizations, MSME contribution to GDP will come down to 25% and jobs will reduce to 100 million.

One could see from the above the plight of MSME inspite of successive governments talking about support to MSME creating various committee, task force for RBI and Prime Minister have led to negative growth , export and employment in MSME.

The continuation of Lockdown 3.0 is scheduled   to close most of the MSME with wages lost, and loss of revenue from all corners. Entrepreneurs are no longer able to hold against the  prospective losses and are now considering close of shop as closing shop is better than trying to survive without support due to the mandate of provision of wages as per Factory Act irrespective of any loss to the entrepreneur .

Government machinery was supposed to fight the Lockdown  and were supposed to prepare since Lockdown 1.0  instead they want to continue the Lockdown and now start preparing for the Lockdown.

Thus need of the hour is government should work on all fronts,

1.     Simplifying and decriminalizing rules and regulations,

2.     Provide smooth and adequate flow of finance at reasonable rate of 6% to MSME and others at 8%

3.     Repeal FEMA and IBC Act retrospectively

We hope are suggestions are taken in good spirit of development of the economy in order to boost its growth said Mr. Kalantri