Struggling MSME Sector in India Would Need Government Backing After Lockdown Ends

Among several parts of the economy that require immediate attention, are the MSMEs that have been adversely affected by the Coronavirus pandemic. Struggling MSME sector in India would need government backing after lockdown ends on 03 May 2020.

Efforts so far for MSMEs

Contributing 30% to the country’s GDP and about half of the exports, MSMEs play an essential role in the economy. As the economic activities come to halt due to the lockdown, MSMEs need a financial stimulus.

In response to the COVID-19 effects, SIDBI has announced 5% rate concession on all loans to MSMEs. These loans will be facilitated without any collaterals and minimum paperwork. However, only MSMEs engaged in producing items required to combat the pandemic are eligible for this loan. Also, the government has extended the dates for GST payments till June 2020.

Challenges of MSME Sector

Despite such measures, MSMEs are unable to pay creditors due to the freeze in production and slump in demand. The Confederation of Indian Industry (CII) has recommended the Centre for fiscal stimulus package to support MSMEs. It said that banks must provide an additional reconstruction loan as the country is not going to see end to the crisis soon. Further, it requested RBI to direct banks to provide additional working capital limits, equivalent to the April-June wage bill of the borrowers, backed by refinance guarantee of 4-5% by RBI. CII also advised the government for re-starting the enterprises involved in e-commerce and construction, logistics and transport first.  

Expectations for a Separate Package

Officials revealed that the Indian government could announce a separate package for MSMEs after assessing the extent of hit. The package may include hike in threshold limits availing of tax exemptions along with a focus on relaxations of tax rules.


Former president of the All India Manufacturers Association (AIMO) asked the government to clear their pending dues by state governments for the sale of their products.

Besides, RV Deshpande, a senior congress leader urged the finance minster to help out the small businesses. He suggested that ESI Corporation must pay 70% salaries to eligible employees of MSMEs. Further, he recommended charging no interest on loans availed by MSME units, considering this lockdown period as ‘zero period’.

In all, given the huge clampdown in the economy, MSMEs are choking and their sufferings may not end even after the lockdown.

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