Covid-19 impact: MSMEs require support to survive, says industry expert

Over 22% of the over 75 Million MSME's units in India will be shut if the lockdown in cities extends beyond 4 weeks and a staggering 43% will shut shop if the panic extends beyond 8 weeks

Micro, Small and Medium Entreprises (MSME) players in the country have called for urgent measures by the government, such as extension of deadline for filing GST, among others, to help the industry survive.

K E Raghunathan, past president of All-India Manufacturers Organisation and an MSME owner for the past 35 years, said that the sector had expected some steps to be announced in the Prime Minister's address last week. Pointing out that the corporate sector had received various tax benefits in recent times, he said the Ministry of Corporate Affairs (MCA) had even extended the deadline for them to hold board meetings. "MSME and traders are hand-to-mouth fellows, and there is no revival chance for us," Raghunanthan added.

"The last 10 days of the financial year are very crucial for any entrepreneur. Today is the last day for GST filing and we haven't got Form 2A uploaded by our suppliers. We have not been able to raise as many invoices as we should have. We were expecting the Prime Minister in his last week's address to offer some relief. At least all the EMIs should have been exempted for three months," he said.

"When the industry isn't even able to pay salaries, making PF, ESI, TDS contributions is out of the question. And failure to pay will invite penal action. During the last 10 days of the financial year, no bank will extend loans, jewellery loans are also not possible since gold prices have fallen, Raghunathan said. "There is no clarity on when the Finance Ministry's taskforce will be formed or how much time it would take to come out with its findings and implement remedies.

"Over and above, we are distressed that MSME Minister Nitin Gadkari has said in Parliament that the government will be announcing reclassification of MSME in this session itself. It is a major policy change from the investment-based classification to turnover-based classification and this is not the necessity at this point in time," he added.

Gadkari had said outstandings from government, government establishments and private large corporates to MSMEs were close to Rs 5 trillion.

The ground impact information gathered from various sources shows that over 22 per cent of the over 75 Million MSME units in India will be shut if the lock down in cities extends beyond four weeks and a staggering 43 per cent will close down if the panic extends beyond 8 weeks, he said.

Elaborating on the role of MSME’s in India, Raghunathan said “MSMEs are the backbone of the economy, employing over 114 million people and contributing to more than 30 per cent of GDP. As a perfect push up, in the last one year, the government supported large companies with relief in the areas of corporate tax and dividend distribution tax. Various Banks have also writing off a record $39 billion to large lenders. However, the schemes and benefits extended to MSME sector or to new start-ups are inadequate to bring them out of the woods.”

"MSMEs are also to be blamed for not modernising or economising, and have missed out on digitalisation and globalisation as well," he added.