MSMEs Under Pressure in India with Minimal Relief Packages

Despite the Relief packages, MSMEs are crippling under pressure. This is mainly because the packages are brushing upon MSMEs needs rather than offering a comprehensive safety net.  

Prime Challenges of MSME Sector During Lockdown 

It is well known that the pandemic lockdown has halted the economic activities of the nation. Similarly, the initial lockdown phase shut many MSMEs across the country. Subsequently, the workers had to return home. However, considering the crippling economy and the significance of MSMEs, the government allowed necessities manufacture to operate.

Nonetheless, workers struggled to reach units due to the lack of transportation that led to no workforce. Further, the workers exhibited behavioral change upon return because of the Coronavirus panic. Additionally, they couldn’t function efficiently as there will be a shortage of raw materials until the supply chain regains its momentum.

Problems Faced by MSMEs Workers 

Considering the lack of liquidity, capital and halt in production, its workers are bound to have a negative impact. In one case, they will suffer from the non-payment of salaries. While in another case they are prone to lose their jobs.

Inadequate Relief Measures for MSME from Government 

Initially, the government’s relief was the moratorium extension. Also, it offered emergency loans at 5%. However, these are only for manufacturing, production, and delivery units of MSMEs. Meanwhile, these reliefs do not even begin to solve the problems faced by MSMEs. For instance, the lack of capital and liquidity, no raw materials for production and so on. Also, in this regard, the Coimbatore Industry association raised a call to the central government and demanded necessary attention.

Adarsh Gupta- A Proposal that Assists in MSMEs Sustenance 

The managing partner of Liberty Footwear gives recommendation for solution to the MSMEs during this crisis. In his letter to the PM and the Labour Minister he suggests that the EPFO fund must be utilized at this time of need. Subsequently, the fund must be distributed as loans to the sectors that in turn will be disbursed as salaries. Further, he highlights that this would benefit the employees suffering from untimely payments. Moreover, it will also benefit the employer facing a shortage of cash due to the COVID 19 effect of the business. Also, the government can gradually get back the returns after the no-interest period.

Few Restoration Steps Necessary from the Government 

MSMEs contribute to a large chunk of the Indian economy. Hence, the government must buckle up and provide them with relief. Following are few such measures that would aid their survival:

  1. All kinds of loans must follow abdication of loans for six months, both central and private banks
  2. Due to the lack of capital, increase the credit limit on the debits of working capital
  3. Abandon collecting GST on an accrual basis. Instead, issue GST payment via a receipt or cash basis.
  4. Discourage departmental politicking
  5. The government should facilitate a means to procure and distribute employee salaries
  6. The respective state governments must exempt basic electricity and water bills for such units.
MSMEs Sector Deserve Attention

The sector contributes significantly to the GDP of the country. Further, it employs millions of citizens. Also, MSME is the fastest growing sector in the country. Accordingly, it is governments sole responsibility to help in the survival of the sector during and after the lockdown.

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