Viewpoint: Reviving MSMEs

11 MAY,2020 | MEDC

The need of the hour is for the government to swiftly come out with a rescue package for MSMEs. It is the small scale sector which is the worst affected by the prolonged lockdown. MSMEs have to keep paying wages, rent and interest on their loans. Government relief measures offered so far such as emergency credit lines provided by banks to the small scale sector, and concessional 5% interest for MSME loans under the SIDBI Assistance to facilitate emergency response against Covid-19 are welcome but not enough. Obviously, it may not be possible for a resource constrained government to do much more at this juncture, but the fact remains that a third of Indian MSMEs will not have the financial wherewithal to withstand the stress of the prolonged lockdown. As things stand, profit is not their objective – survival is. MSMEs need to begin by reducing their fixed costs, through a thorough examination of every item and ruthlessly eliminating expenditure wherever possible.The entire industrial supply chain needs revamping. Import substitution should occur to the extent possible as we cannot afford to be at the mercy of another country (or region), and, for that, supply chain indigenization will need to be speedily promoted. MSMEs will need to assess the impact of the new social distancing norms on the bottom-line of their business and initiate internal changes accordingly. The working model of MSMEs will need to change. MSMEs will need to adopt more dynamic operating procedures with a strong component of flexibility that would be compatible with the new post-Covid realities. An unintended consequence of Covid-19 is that it has provided a shot in the arm for digitization. The better equipped MSMEs could consider building digital clones of their businesses – to simulate different scenarios and develop alternative operational sequences for use in times of emergency situations.Throughout the world there is rising anti-China sentiment, and that could be viewed as a blessing in disguise for Indian industry. However, MSMEs need to firstly transform themselves to benefit from the several government incentives offered. Real time data availability and an inevitable fiscal rationalization will help them better plan their resources and transitions and enable them to move more easily from the informal into the formal sector of the economy. The MSME (and agricultural) sector forms the backbone of our economy, and the government is aware of it. Reviving MSMEs will help preserve livelihoods and bring relief to a large section of our working population. That is the need of the hour.

*Photo Credit: Google


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